Top Ten Issues 2009/2010:
Dominique Labelle, vice president Corporate Solutions, BFL Canada
December 11, 2009
Dominique Labelle is the vice president of Corporate Solutions at BFL CANADA, an owner-operated company that offers a complete range of commercial insurance products, risk management and risk control services to all industries, national and international organizations, groups and associations. When asked what the top issues that shaped 2009 and would impact 2010, Labelle quickly responded.
“Your request was simple but tricky,” she said. Labelle’s Top Ten list, in no particular order are as follows:
2009
1. Real or perceived weakness in the financial services sectors.
Reckless/unethical/illegal schemes/products created or supported by the financial services industry and the weakness of regulatory systems to prevent any of it.
Everyone was impacted by the fallout from the financial industry fiasco, which unraveled in late 2008, and the ensuing recession; during the same time frauds were uncovered locally and around the world [which further impacted domestic and international confidence in the financial sector].
[Now,] Canadian Governments are hurting and are forecasting deficits for a few years to come; add to this taxpayers, many of whom lost savings in the financial services downfall and many of whom face job loss, higher taxes, higher food bills, and higher personal insurance premiums.
2. Succession planning.
This issue is central to the future of the brokerage community. Many brokerages could disappear upon retirement of their current principals without successful succession planning. In the end, it is the consumer (personal lines or commercial) that will be penalized due to a shortage of competition and a lack of innovation.
3. The abundance of capacity and the never-ending commercial insurance soft market.
Broker revenues are down and underwriting profits almost non existant – yet there is no indication of hardening of the market with respect to commercial insurance (personal lines is another story altogether). Insurers are still slashing rates when going after new business. A welcome surprise for commercial clients some of whom are struggling to stay afloat.
4. “Cool-hand” Julie [Dickson].
Julie Dickson, superintendent at the Office of the Superintendent of Financial Institutions (OSFI), navigated the financial crisis with a very steady hand. In a time of turmoil, Dickson brought calm and reassurance to a lot of nervous parties, relying on the strengths of the Canadian system. While there is still a need to further strengthen our regulatory system, OSFI is working closely and openly with industry players in order to bring about effective change.
5. Credit scores for home and auto insurance.
As a consumer, I don’t like the idea that insurers require my credit score to rate my policies.
My claims history should be driving [policy pricing] not my credit score.
Using credit scores will penalize people hurt by the recession or temporarily going through bad luck—people that may not present any claim [risks]. Maybe insurers are not charging enough for insureds with a bad claims history, not imposing large enough deductibles, or maybe they don’t have the fortitude to rate the risks honestly and stand by the rightful premium—attempting, instead, to recoup these losses by making poor credit score people pay.
The long and the short is that unless the bad risks (loss history) are charged what they should really be paying, we will continue to see prices go up for everyone.
This is also another area where provincial regulators are inconsistent. And that needs to change.
2010 and Beyond
6. Standardized national insurance system
There is a need for a standard insurance regulation system across Canada, managed in its region by each provincial jurisdiction.
Without reform in this area, brokers will continue to experience one of the largest domestic trade barriers!
Brokerages are having a hard time navigating the different requirements from the various jurisdictions—it is an administrative nightmare, especially for the average size brokerage, i.e. all but a few brokerages.
All the while, provincial regulators are being much more vigilant. Although the Ontario-Québec Trade and Cooperation Agreement, signed in September 2009, lists this topic as one to be reviewed in the next couple of years, this is insufficient.
All jurisdictions need to get on board and agree on standard regulation and a broker’s license needs to be valid across the country. The federal government certainly wants to harmonize securities regulation—why not insurance?
7. The shortage of competent insurance personnel; and
8. The inevitability of new financial expectations for the industry.
Succession planning was an issue in 2009, but will only be worse in 2010 and in subsequent years.
Companies sometimes have to keep less than competent people in place because of demographic constraints, and many companies have not yet found the key to mobilizing young workers to follow in the footsteps of the exiting generation.
Financial expectations will also play a role in this demographic shift. The younger generation, having entered the job market while in economic turmoil, may desire lower but more stable returns and opportunities—and this may be the case for all industries.
9. Pension plans.
The solvency/capitalization of pension plans has already received a lot of attention, more so because of the financial crisis.
This is because this issue is a real problem and there does not seem to be an effective solution, in terms of the extreme volatility of the markets.
Add to this the trend of more and more people beginning to question the validity of public service pension plans—asking why taxpayers should foot the bill to provide public sector employees with a benefit many taxpayers (if not most) do not have for themselves.
10. Climate change.
The damage caused by climate change is mounting, yet there is hardly any concrete action taken by our governments. Should we wait for action or should the business world take ownership of this issue and contribute to building a new green economy? What can or should the insurance industry do about it and how could it profit from it? These are the questions that will need to be addressed, both in the insurance sector and in business sectors at large. |
