Then and Now

The year 2014 is a big year for Insurance Bureau of Canada (IBC) – it is the bureau’s 50th anniversary. Anniversaries are often times to reflect and to celebrate, so this being a special year, the association is doing a bit of both.

First, some reflections. It is worth looking back at why IBC was formed in the first place if only to recognize how far it has come both as a trade association and insurance has come as an industry.

DEALING WITH THE CHAOS

In 1963, the business climate was difficult for the general insurance industry. Poor data, misinterpretation of that data and improperly priced products led to underwriting losses of almost $74 million – or more than $560 million in 2014 dollars. Kenneth MacGregor, federal Superintendent of Insurance at the time, expressed concern about the solvency of some companies and the lack of industry-wide statistics.

That warning spurred a group of insurance chief executive officers to create IBC in 1964. At the inaugural meeting held April 8, 1964, at the King Edward Hotel in downtown Toronto, chairman William Spry did not mince words about the need for a new organization to “relieve the chaotic conditions” in the industry. With prodding from regulators, IBC began with the narrowly focused mission to provide industry-wide statistics and information about economic trends that would allow companies to make sounder rate decisions.

Eventually, that mission became broader. Within about 20 years, the association had become the major voice of general insurance companies in Canada. Today, IBC represents 90% of the property and casualty insurance market in Canada and is influential with all levels of government on the most important challenges facing both the industry and all Canadians.

While its mission is now broader, it is a point of pride that IBC has never lost sight of its core purpose. One of the trademarks of a good association is that it makes it easy for members to have a voice. In 1964, the association began serving as the voice of members on the issues of the day and continues to be that voice today.

An insurance CEO said to me shortly after I became president in 2009: “If you do nothing else, please look at the issues through our lens.” It was great advice.

It is gratifying to talk to CEOs and see that IBC’s work is aligned with the issues that are priorities for our members and, indeed, the industry at large. Whether it is climate change adaptation, earthquake preparedness, Ontario auto or the complexity of modern regulatory compliance, the association has a clear role to play on the issues that matter most to our members.

DEALING WITH THE ISSUES

In this milestone year, there is certainly cause for celebration – IBC has had some major wins for our members and for Canadians as a whole over the last five decades. For instance, it has contributed greatly to improvements in road safety, leading the charge on the mandatory use of seatbelts and the introduction of graduated licensing. In the last few years, IBC has also worked to put distracted driving on the public agenda.

As an industry, insurance should be proud of this record; these initiatives have considerably decreased the numbers of injuries and fatalities on our roads.

Another more recent positive outcome has been the solid run IBC has had with auto insurance reform in the provinces where insurance is administered through the private-sector only: the Atlantic provinces, Ontario and Alberta. The association played a significant role during the reform process.

One need only look back to the early 2000s to see how these markets represented a major challenge. With the minor injury caps in New Brunswick, Prince Edward Island, Nova Scotia and Alberta, there has been premium affordability and product stability, as well as solid industry earnings. In Ontario auto, the 2010 reforms stand as a major achievement for the insurance industry.

IBC believes the road to a sustainable product, until such time as the political environment stabilizes, is through incremental change. Some of that change was seen in the reforms announced late in 2013 and with the recent bill introduced by the provincial government.

Recently, the IBC Board of Directors has challenged the organization to take a national leadership role on files affecting not just the industry, but the country at large. This has resulted in a fundamental shift in how the association has approached some of the more serious issues facing Canadians.

On earthquake preparedness, IBC has put this issue on the map and continues to lead the discussion; on severe weather, this issue was on the association’s agenda well before the record losses of 2013.

The p&c insurance industry has responded not only by identifying the problem, but by coming forward with solutions. Severe weather and the cost of responding to it are now also some of the key priorities for the federal government and Public Safety Canada.

Embracing this national leadership role has also involved a major shift in how IBC sees itself.

Yes, it has multiple mandates: fraud reduction, data collection and IT services, to name a few. But, fundamentally, the association adds the greatest value in the area of government relations on behalf of its members, having aligned our resources to accomplish this.

DEALING WITH THE CHALLENGES

That is not to say there are not challenges. Regulation is a big one. IBC takes the view that it must anticipate issues and respond with real solutions – before the government steps in.

When politicians get involved in the insurance industry and products, it rarely ends well, demonstrated most recently in Ontario auto insurance with the arbitrary rate reduction measure.

Without looking at the cost structure of the product, this kind of price manipulation provides a superficial response and does not address underlying problems. It is not in the long-term interests of either consumers or the insurance industry.

There is also a key problem looming on the personal property front. It looks so much like the auto crisis in the early 2000s; it has many of the same characteristics.

But back then, the solution was for government to do something about the cost of the product. Unfortunately, in this case, unless governments can do something about the weather, there is not a lot that insurers can do about the cost of the product.

The solution will be much more difficult this time and the industry has to be prepared for that. How does it offer an affordable product that provides an appropriate level of protection?

The answer to this question lies with all stakeholders – including consumers, governments and industry – playing their respective roles.

IBC’s job is not simply to articulate the problem. To add value, the association must develop solutions and then identify what role it can play in bringing those solutions forward.

These are complicated and multifaceted challenges; they require comprehensive solutions that involve IBC and other groups, such as regulators, brokers, consumers, reinsurers and adjusters.

The cost of the insurance product is something that is dealt with on a day-to-day basis. The fact is that for a typical family with two cars and a house, their general insurance premiums represent a significant portion of disposable income. Should the insurance industry expect people to be happy writing that cheque? Likely not.

But if and when policyholders have claims, they will see the responsiveness of this industry and understand the value of insurance.

Those in insurance should be proud of the industry and the work it does. Today, the industry is providing leadership to Canadians to better prepare them for serious risks, something that should be remembered when someone asks what value the industry generates for Canadians.

Fifty years is a significant accomplishment for any industry association. IBC is still relevant today, likely more than it has ever been. The sharp alignment of its focus with important national and industry issues will continue with the hope of seeing more positive results in future.