Reform or the Road to Government Insurance?. Reforms Across The Country All province except Quebec have initiated reforms in response to the hard market.

Slides:



Advertisements
Similar presentations
1 Private Insurance: What State Advocates Need to Know Cheryl Fish-Parcham Families USA January 25, 2007.
Advertisements

Area Agencies on Aging Insurance and Risk Management Issues by Jeff Cole McNeary Consulting Services.
Presented by the Illinois Department of Insurance Andrew Boron, Director November 2012.
Auto Insurance. Insurance Basics Insurance is a way of planning for the unknown Why do we need auto insurance? Accidents can be VERY expensive.
Baron Automobile Insurance Reform Is public auto inevitable?
Challenges and Opportunities for Small Business in Nova Scotia Pre-Budget Meeting with the Honourable Diana Whalen, Minister of Finance Corinne.
Massachusetts Personal Auto The Road to a Free Market.
The Affordable Care Act Reduces Premium Cost Growth and Increases Access to Affordable Care Before ACA, Small Employers Faced Many Obstacles to Covering.
From Thatcher to Blair: employee choice, union decline and the revival of the UK Economy … and are there lessons for Canada? Professor Len Shackleton Dean,
Auto Damage Claims: Replacement Parts and Repair Shops Significance of issue Auto replacement parts State Farm case Insurance companies and repair shops.
Health insurance bills spark fight Sofia Kosmetatos / The Detroit News
Automobile Insurance Deregulation Martin F. Grace Richard D. Phillips Department of Risk Management and Insurance Robinson.
Health Insurance October 19, 2006 Insurance is defined as a means of protecting against risk. Risk is a state in which multiple outcomes are possible and.
ILLINOIS COVERED CHOICE Reinsurance Institute Washington, D.C. July 19, 2007.
The Economics of Health Care Reform Allen C. Goodman Wayne State University Presented to Adult Learning Institute October 25, 2011
Comparing Health Insurance Reform Models Cliff Gagnier June 6, 2007.
The American Problem: Health Insurance Jennifer Bernstein Michael Berry Tom Chiang Ryan Lubitz Leanne Lundby.
Taxes October 22, “ In this world nothing can be said to be certain, except death and taxes. ” Benjamin Franklin, 1789.
Chapter 11. Learning Objectives (part 1 of 3) Describe when a person should and should not have life insurance Describe the basic differences between.
Experience, Commitment, Results. Federal Health Care Reform The impact on individuals, employers, and our health insurance coverage… National Worksite.
THE SPANISH INSURANCE MARKET 2004/2005 January 2005.
+ You Bet We Still Care! The “A” Word Conference, Ryerson University March 1, 2013.
CONSTRUCTION & THE FOOD INDUSTRY The Insurance Industry View Steve Exwood & Jon Miller.
T6.1 H&N, Ch. 6 Chapter Outline 6.1Insurance Costs and Fair Premiums 6.2Expected Claim Costs Homogeneous buyers Heterogeneous buyers Competition, Risk.
Demand Modeling to Price Optimization
1 Benefits in Health Insurance: Calculating the Costs and Premiums Alliance for Health Reform October 10, 2008 John Bertko, FSA, MAAA.
Managing Your Personal Finance UNIT 3:3 GETTING YOR FIRST CAR Topic: CAR INSURANCE.
Workers’ Compensation in Texas A Brief History. International Development 18 th Century Pirates 1 If you survived the injury (no death benefits) Loss.
Do Now 1.List 5 risks that a typical person faces everyday. 2.List 3 kinds of insurance you have heard of.
Using life insurance for charitable donation Give more, pay less!
L.L.L. Inc. Employee Benefits Consulting & Insurance Brokerage Servicing New York, New Jersey & Pennsylvania Introduction to: SELF FUNDED PLANS PLANS.
+ The Affordable Care Act. + Outcomes Participants will: Gain knowledge of the history of the Affordable Care Act; Understand the benefits for children.
Chapter 8 Insurance Pricing.
The Insurance Crisis – How To Achieve Sustainable Premiums By Rod Hughes Australian Yachting Federation Insurance & Risk Management Seminar 8 th June 2002.
An Introduction to Insurance. What is Insurance?  Insurance is a means of guaranteeing you financial protection against various risks.  In exchange.
Insurance. 9-1 Life Insurance  Main purpose: to prevent financial hardship by providing income to people who are dependent when one dies  How important.
Finance 431: Property-Liability Insurance Lecture 6: Ratemaking.
26 November 2002 Stephen Lowe Terrorism Risk Act of 2002 Briefing for Consultants.
Chapter Outline 16.1Overview Of Workers’ Compensation Laws 16.2.Workers’ Compensation Benefits Medical Benefits Disability Benefits Total Disability Benefits.
Capital Hill Briefing January 24, 2011 How the ACA impacts the
0 HARDY UNDERWRITING GROUP PLC INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2002 ANALYST PRESENTATION 25 SEPTEMBER 2002.
Roumen Galabinov Chairman. Currently about 8% of the 3.6 million homes in Bulgaria are insured against natural disasters as earthquakes and floods. Although.
The Best of the Second Best: Using Tax Breaks to Manipulate Health Insurance Mark V. Pauly, Ph.D. ARIA Meeting August 7, 2006.
Auto Damage Claims: Replacement Parts and Repair Shops Significance of issue Auto replacement parts State Farm case Insurance companies and repair shops.
History of Canada Notes Part II: Canada’s Independence.
Modeling Health Reform in Massachusetts John Holahan June 4, 2008 THE URBAN INSTITUTE.
Manitoba Public Insurance Working with Manitobans to Reduce Risk on the Road Quebec City June 2008 CAS Spring Meeting.
Legislative Reform: Reform or Be Reformed 2003 CAS ANNUAL MEETING Presented by Steven G. Lehmann, FCAS, FSA, FCIA, MAAA Pinnacle Actuarial Resources, Inc.
By: Aakash Mishra, General Manager Island Life Assurance Co Ltd Mauritius at OESAI LIFE INSURANCE TECHNICAL TRAINING, TANZANIA - 11 th Nov 2015 Pricing.
Ab Rate Monitoring Steven Petlick CAS Underwriting Cycle Seminar October 5, 2009.
Actuarial Research Corporation1 Inside the Black Box: Adjustments and Considerations for Public Policy Proposals AcademyHealth Annual Research Meeting:
SOCIAL HEALTH INSURANCE POLICY Presentation to Health Portfolio Committee 7 June 2005.
Terrorism Risk Insurance Act (TRIA) of 2002 Casualty Actuaries of Greater New York June 11, 2003 Samir Shah, FSA, FRM, MAAA.
Unit 8: INSURANCE. 1. According to the Unit 8 reading: Risk is defined as ….. Chance of loss from some type of danger.
Kpmg Automobile Insurance and Tort Reform Jacqueline Friedland November 27, 2003.
MITIGATING THE FINANCIAL IMPACT OF THE CALIFORNIA WORKERS’ COMPENSATION MARKET FEBRUARY 13, 2013 Steve Flynn Managing Director Marc Urias Senior Vice President.
Ratemaking Actuarial functions Ratemaking Loss reserving Data collection and analysis Profitability analysis Competitive analysis Prepare statistical reports.
Insurance Accounting Overview
Using life insurance for charitable donation
Ratemaking Actuarial functions Ratemaking Loss reserving
«Water Sector Reform in Kenya »
Insurance and Risk Management Issues
History of Canada Notes
Credit Union Tax Issues
Newfoundland and Labrador’s Foodservice Industry
Insurance and Risk Management Issues
… and are there lessons for Canada? Professor Len Shackleton
Preparing for NFIP Reauthorization Washington, D.C.  September, 2016
Automobile Insurance: The Basics
Presentation transcript:

Reform or the Road to Government Insurance?

Reforms Across The Country All province except Quebec have initiated reforms in response to the hard market All province except Quebec have initiated reforms in response to the hard market All were designed to lower rates, some voluntarily, some by decree All were designed to lower rates, some voluntarily, some by decree All promised some claims relief in return for lower rates All promised some claims relief in return for lower rates Some were tweaks, other complete re-writes Some were tweaks, other complete re-writes

Have they been successful? Depends on your point of view and your timeframe Depends on your point of view and your timeframe Consumers have seen lower rates – both governments and clients would see this as success Consumers have seen lower rates – both governments and clients would see this as success There should be a reduction in BI costs – if the caps are effective – success from an insurer’s perspective There should be a reduction in BI costs – if the caps are effective – success from an insurer’s perspective

Have they been successful? Over long term, success – healthy, competitive market where product is available and affordable – everybody wins Over long term, success – healthy, competitive market where product is available and affordable – everybody wins Current set of reforms may lead away from this goal – everybody loses Current set of reforms may lead away from this goal – everybody loses

Most Likely to End Up with Government Run Insurance Alberta Alberta Newfoundland & Labrador Newfoundland & Labrador Nova Scotia Nova Scotia New Brunswick New Brunswick PEI PEI Ontario Ontario Quebec Quebec

Alberta Product Reform Product Reform October 1, 2004 October 1, 2004 Cap on pain and suffering for minor injuries of $4,000Cap on pain and suffering for minor injuries of $4,000 Increase limit for med/rehab benefits from $10,000 to $50,000Increase limit for med/rehab benefits from $10,000 to $50,000 January 1, 2005 January 1, 2005 Consideration of collateral sourcesConsideration of collateral sources Determination of wage losses using net rather than gross incomeDetermination of wage losses using net rather than gross income

Alberta Premium Reform Premium Reform October 30, 2003 October 30, 2003 Premiums frozenPremiums frozen October 30, 2004 October 30, 2004 Grid rates introduced as cap on premiums that could be charged for TPL & ABGrid rates introduced as cap on premiums that could be charged for TPL & AB 5% reduction in premium for the remainder of the policy term for non-grid risks5% reduction in premium for the remainder of the policy term for non-grid risks Take-all comers ruleTake-all comers rule Two risk sharing pools – one for grid risks, the other for non-grid risksTwo risk sharing pools – one for grid risks, the other for non-grid risks

Alberta July 1, 2005 July 1, % mandated premium reduction for TPL & AB6% mandated premium reduction for TPL & AB November 1, 2005 November 1, 2005 Further premium reductions for TPL & AB, hearings to be held at the end of June, MOW report recommends a further 8.2% decrease in addition to the 6% noted aboveFurther premium reductions for TPL & AB, hearings to be held at the end of June, MOW report recommends a further 8.2% decrease in addition to the 6% noted above

Alberta Have the reforms been effective? Have the reforms been effective? NO IDEA. IT IS TOO EARLY TO TELL. NO IDEA. IT IS TOO EARLY TO TELL.

Alberta Is the system sustainable? Is the system sustainable? NO IDEA. TOO EARLY TO TELL. NO IDEA. TOO EARLY TO TELL.

Alberta What we do know: What we do know: The premiums collected by the industry will decrease due to capping effect of grid – estimated impact – 7.8% to 8.3%.The premiums collected by the industry will decrease due to capping effect of grid – estimated impact – 7.8% to 8.3%. The premiums collected by the industry will decrease due to mandatory 5% reduction for non-grid risks – estimated impact 4.1% to 3.6%The premiums collected by the industry will decrease due to mandatory 5% reduction for non-grid risks – estimated impact 4.1% to 3.6% Loss costs will decrease due to product reform – estimated impact -12.9% to -16.3%Loss costs will decrease due to product reform – estimated impact -12.9% to -16.3%

Alberta What we do know: What we do know: Non-grid risks will have to subsidize grid risks – estimated subsidy 10.1% to 10.8% per non-grid riskNon-grid risks will have to subsidize grid risks – estimated subsidy 10.1% to 10.8% per non-grid risk Likely understates as does not include the impact of bad actors re-entering system now that they can afford insurance againLikely understates as does not include the impact of bad actors re-entering system now that they can afford insurance again

Alberta Auto insurance market was $2.5 billion in 2004 Auto insurance market was $2.5 billion in insurers actively write Alberta auto 68 insurers actively write Alberta auto Top 5 have 46% of the market Top 5 have 46% of the market Top 10 have 65% of the market Top 10 have 65% of the market

Alberta Strategy 1 – Become a niche writer Strategy 1 – Become a niche writer Sub-standard – There is no more substandard marketSub-standard – There is no more substandard market Group – groups have not historically been profitable in Alberta – groups are most profitable with there are significant premiums in first party coverages - will be forced to write non-group risks using group ratesGroup – groups have not historically been profitable in Alberta – groups are most profitable with there are significant premiums in first party coverages - will be forced to write non-group risks using group rates Strategy 2 – Write everything Strategy 2 – Write everything Will give insurer large share of sharing pool losses without sufficient control over rates to generate sufficient profit to cover lossesWill give insurer large share of sharing pool losses without sufficient control over rates to generate sufficient profit to cover losses

Alberta Strategy 3: Creaming Strategy 3: Creaming Write with a loyal broker force in more adequately rated risk areasWrite with a loyal broker force in more adequately rated risk areas To the extent it is possible, write only full coverage – all mandatory coverage only risks in the poolTo the extent it is possible, write only full coverage – all mandatory coverage only risks in the pool

Alberta Strategy 3 – Likely outcome Strategy 3 – Likely outcome Brokers with historically higher loss ratios or high percentage of insureds with mandatory coverages only will have great difficulty keeping marketsBrokers with historically higher loss ratios or high percentage of insureds with mandatory coverages only will have great difficulty keeping markets Pool for non-grid risks will grow - subsidy required from non-grid risks outside pools will increasePool for non-grid risks will grow - subsidy required from non-grid risks outside pools will increase Insurers who can not cream or for whom Alberta is not an important market will leave increasing availability problemsInsurers who can not cream or for whom Alberta is not an important market will leave increasing availability problems Government reacts – sees no solutions and sets up Government owned insurerGovernment reacts – sees no solutions and sets up Government owned insurer

Alberta Factors For Government Insurance Factors For Government Insurance Auto Insurers have poor image with both the Government and the publicAuto Insurers have poor image with both the Government and the public Government has excess cash that can be used for establishing a government run insurerGovernment has excess cash that can be used for establishing a government run insurer Are surrounded by relatively successful Government-run insurance companiesAre surrounded by relatively successful Government-run insurance companies The industry is not a significant employer outside of brokerages – could still use brokers as the distribution network.The industry is not a significant employer outside of brokerages – could still use brokers as the distribution network.

Alberta Factors Against Factors Against Sends wrong message to industry about Alberta being ‘open for business’Sends wrong message to industry about Alberta being ‘open for business’ Uncertain of costs under NAFTA – re confiscation of business more than $300 million written by companies with US parentsUncertain of costs under NAFTA – re confiscation of business more than $300 million written by companies with US parents

Importance of Alberta Auto Market to Individual Insurers # of Companies Premium >12%28%47% >25%4%4% >50%2%3%

Newfoundland & Labrador Product Reform Product Reform All injuries have a $2,500 deductible on pain and sufferingAll injuries have a $2,500 deductible on pain and suffering Other minor tort reformsOther minor tort reforms

Newfoundland & Labrador Price Reform Price Reform Varied by coverage & territory – as per Bill 30Varied by coverage & territory – as per Bill 30 Goal was 15% overall decrease – loss reforms worth less than 5%Goal was 15% overall decrease – loss reforms worth less than 5% Effective August 1, 2005 insurers must reduce their approved rates by 5% (including FA)Effective August 1, 2005 insurers must reduce their approved rates by 5% (including FA) Elimination of rating by age, sex, marital status – must refund difference for those whose rates are lessElimination of rating by age, sex, marital status – must refund difference for those whose rates are less Group insurance ban to be repealedGroup insurance ban to be repealed Move from benchmark to full prior approvalMove from benchmark to full prior approval

Newfoundland & Labrador Market had written premiums of $246 million in 2004 Market had written premiums of $246 million in active writers 52 active writers Top 10 – 83% of market Top 10 – 83% of market Top 5 – 59% of market Top 5 – 59% of market

Importance of N&L Auto Market to Individual Insurers # of Companies Premium >12%6%39% >25%4%18% >50%4%18%

Factors in Favour of Establishing Government Insurance Government and public are very unhappy with P&C insurers Government and public are very unhappy with P&C insurers Political issue Political issue May be facing significant availability issues of insurers who have declared they are pulling out actually do – 23% of market has declared that they will leave – more may leave if they carry through with the regulation of homeowner’s rates May be facing significant availability issues of insurers who have declared they are pulling out actually do – 23% of market has declared that they will leave – more may leave if they carry through with the regulation of homeowner’s rates

Factors Against N&L government has no money – establishing a new insurer would be expensive N&L government has no money – establishing a new insurer would be expensive There are no nearby precedence for moving to government run insurance There are no nearby precedence for moving to government run insurance Are in negotiation with other Atlantic provinces to unify regulatory structures Are in negotiation with other Atlantic provinces to unify regulatory structures Have writers with a significant stake in the market that may be willing to suffer short term losses to gain market control Have writers with a significant stake in the market that may be willing to suffer short term losses to gain market control

Conclusion Insurers in Alberta and N&L are largely in a lose- lose situation – there are few strategies for success Insurers in Alberta and N&L are largely in a lose- lose situation – there are few strategies for success Loss of the Alberta automobile insurance market is a real possibility Loss of the Alberta automobile insurance market is a real possibility Alberta auto represents 14.5% of the Canadian auto market, 6.9% of the total market Alberta auto represents 14.5% of the Canadian auto market, 6.9% of the total market Loss of the N&L also possible but less likely – less than 2% of the auto market, 0.7% of total market Loss of the N&L also possible but less likely – less than 2% of the auto market, 0.7% of total market

Conclusion Governments can not treat an industry with 50+ players like a monopoly and not expect availability issues Governments can not treat an industry with 50+ players like a monopoly and not expect availability issues What strategy would you recommend to your company? What strategy would you recommend to your company?