The Navigator

Don Forgeron is no stranger to turbulent and uncertain times in the insurance industry. Having spent 15 years as vice president of the Insurance Bureau of Canada (IBC)’s Atlantic region, he has negotiated the East Coast insurance industry through rocky times associated with various auto reforms throughout the mid-2000s. He believes the agreements reached in each province laid the foundation for vibrant and healthy insurance industries in each of the respective jurisdictions.

This experience will serve him well, no doubt, as he takes the helm as the vice president of IBC’s Ontario region. The province’s auto insurance segment is at a crossroads: claims costs have increased beyond the rate of inflation, trial lawyers want to go after cost containment deductibles and thresholds established by the province during the last round of auto insurance reforms and the provincial government is about to undertake its mandatory, five-year review of Bill 198. Forgeron’s first task as IBC’s Ontario rep was to develop a set of recommendations for auto insurance reform to the Financial Services Commission of Ontario (FSCO). Having accepted his post in May, and with recommendations due by July 14, some might say that Forgeron was ushered in at the final hour.

CURVE BALLS AND GOOD CATCHES

Forgeron’s career in the insurance industry was founded in happenstance. A native Maritimer, he was born, raised and schooled in Cape Breton, eventually graduating with a degree in chemistry. Shortly after graduation, he heeded the call of an Alberta oil boom, packed up and headed west.

“I hadn’t intended to get into insurance,” Forgeron chuckles. “Life is funny. I certainly didn’t come out of school thinking the insurance industry was a place that I would wind up. But, I guess that life throws us some curve balls sometimes and we just roll with them.”

While living in Alberta, he worked for the provincial department of the environment for a few years before moving back to Halifax in 1987. He remained there until accepting his current role as IBC’s Ontario representative, which took him to Toronto. Upon his return to Nova Scotia in 1987, Forgeron made his foray into the insurance industry, accepting a position as regional manager for a personal insurance company (now a part of the Desjardins Group). He remained with the insurance company until 1993, when he accepted his role as vice president of IBC’s Atlantic section.

“It’s been interesting seeing [the industry] from both sides — from the [individual] insurer’s side, and the challenges [individual] insurers face, and from the association side and the challenges that the trade faces,” he says.

His father was a full-fledged politico, exposing Forgeron throughout his entire life to the nuances of the political arena. “I’ve always been around [politics], but I’ve preferred to be involved in politics from the perspective where [the IBC] is, which is sort of on the periphery,” he says. “I don’t know that I have the stomach to experience it from the inside.”

Although he won’t be running for office any time soon, Forgeron does not shy away from addressing sticky government issues related to auto insurance reform. The Maritimes, like Ontario, is no stranger to such issues.

“There are a lot of similarities between the Atlantic market and Ontario,” he says. “And certainly in terms of government relations, the needs and desires of elected officials don’t differ much when you go from jurisdiction to jurisdiction,” he adds.

AFFORDABILITY IS KEY CONCERN

“While the Ontario auto insurance product is one of the most complicated pieces of legislation that I’ve ever seen — I think it makes the equalization formula look simple by comparison — there are a lot of similarities in terms of what constitutes a healthy and vibrant insurance system, which I think is in the Maritimes right now, and I think we in Ontario can have too.”

From province to province, the basic principles of auto reform remain the same, Forgeron says. It’s the product that changes from jurisdiction to jurisdiction.

“At a high level, the issues at play are pretty much the same. Key stakeholder groups have viewpoints they are going to try to advance. But in the end, elected officials are trying to strike a balance. They all acknowledge that we need a strong and vibrant insurance industry.”

Forgeron believes the Maritimes provinces achieved such a balance, and he’s hoping the experience he gained during those sets of reforms will aid his efforts in Ontario.

“There’s a focus on making people well in the Maritimes, and that the product is affordable,” he observes. “In fact, rates in the Maritimes today are some of the lowest in the country.”

Based on his perspective and past experiences, Forgeron believes the IBC needs to approach the government with fact-based arguments that clearly identify and illustrate the problem areas. The Ontario government, he notes, established during the review process that its Number 1 goal is to have an affordable product.

IBC has filed its recommendations with FSCO, but as of press time, they were not yet made public. Forgeron indicated the IBC’s recommendations identified affordability as a key goal as well.

When describing the lay of the land in the Ontario market, Forgeron notes Ontario’s auto insurance market last year crossed the break-even threshold into negative territory in terms of profitability. At the same time, he says, as the industry loses ground on profitability, “Ontario has a compensation program with levels well beyond community standards as measured by either the public health system or the Workplace Safety and Insurance Board, or any other insurance system in North America.”

As a result of the frequent use of Ontario’s rich system of benefits, the industry is facing increased financial pressure related to the payouts of tort and accident benefits. “The last series of reforms in Ontario have only resulted in temporary relief on the claims side,” he says. “So, we see a very short-term and modest drop in claims costs before we’ve returned to a period of rising claims costs.”

Forgeron notes Ontario consumers today spend roughly 5% of disposable income on auto insurance premiums — a figure 25% higher than that of the next-highest jurisdiction in the country. He references a May 22, 2008 speech by Superintendent of Financial Institutions Julie Dickson to the Langdon Hall Property and Casualty Insurance Industry Forum. In it, Dickson notes Ontario “accident benefits have deteriorated badly” and the 2008 Q1 auto results were “less than positive.”

“We’re already at a stage where affordability is going to be called into question by many consumers,” Forgeron says. “We’re faced with the situation described by the federal superintendent, so we really need to be focused on solutions that address some of these key problems.”

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While the Ontario auto insurance product is one of the most complicated pieces of legislation I’ve ever seen — I think it makes the equalization formula look simple by comparison — there are a lot of similarities [with the Maritimes] in terms of what constitutes a healthy and vibrant insurance system.