I help set rates for a Major Canadian Insurance Company! Some thoughts . . .

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VifferFun said:
Before you go making uninformed posts such as this, please at least take the time to read the content of the thread. As I have already explained, Insurance profitability goes in cycles of good profit to really bad profit (or loss). The Insurance Industry is just coming out of its "good cycle" of profit, and is entering into the bad cycle. Many insurance companies right now are being hammered with losses. If Insurance Companies are the blood-sucking vampires you speak of with astronomical profit margins, then why not invest your life savings in the Insurance Industry? I am sure that if the Insurance Industry is as profitable as you say it is, then the capital gains on your investment would pay for your car, home, bike insurance, and retirement fund. Why is it that Financial Consultants not recommend that everyone do this, if huge profits in the Insurance Industry are sure thing? Perhaps it is because this low-risk-high-profit insurance industry that you speak of simply doesn't exist?
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For insurance to be a good investment the wealth would have to be distributed to shareholders. There is a lot of money going in, but to be sure there is also a lot blown on rediculous salaries and boondoogle projects.

If you want to get rich investing in insurance become a consultant. :)

That said, 11.7% profit (looking at ManuLife - Canada's biggest insurer) in a mature industry is HUGE. In '07 they had 28.91 Billion Revenue 3.41 Billion Profit. This is a mature industry, with as you suggest 'lots of competition'. If that where true, profitability with competition should approach nil.

In a truly free market your company would be crushed under it's own weight.
From where I sit, no offense, insurers (Ontario style) are part of a problem (one of many) that suck on the teet of the consumer - hurting our economy and in turn taking away from all of us.

Give me true free market, or just federalize the whole system. The inbetween is a swampy breeding ground for leeches.
 
VifferFun said:
NOTE: A ratio above 100% means the insurance industry is having an underwriting LOSS
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Can you still say that we are price gouging?
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OMG! I had no idea!

They look like they are in business and LOSE MONEY most years.

They must be very very stupid (or brave) to stay in business when losing money endlessly. It's a great public service that they continue to stick it through.

I do wonder aloud though. Your graph was graciously provided by the "Insurance Bureau of Canada". How impartial are they?

One has to think if is a money losing proposition, why would there be so many people in the market place?
 
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Biggsy said:
For insurance to be a good investment the wealth would have to be distributed to shareholders. There is a lot of money going in, but to be sure there is also a lot blown on rediculous salaries and boondoogle projects.

If you want to get rich investing in insurance become a consultant. :)

That said, 11.7% profit (looking at ManuLife - Canada's biggest insurer) in a mature industry is HUGE. In '07 they had 28.91 Billion Revenue 3.41 Billion Profit. This is a mature industry, with as you suggest 'lots of competition'. If that where true, profitability with competition should approach nil.

In a truly free market your company would be crushed under it's own weight.
From where I sit, no offense, insurers (Ontario style) are part of a problem (one of many) that suck on the teet of the consumer - hurting our economy and in turn taking away from all of us.

Give me true free market, or just federalize the whole system. The inbetween is a swampy breeding ground for leeches.
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I'm sorry, but your example is irrelevant; Manulife is a company that provides LIFE insurance financial services (such as annuities, motrgages, etc.) and has absolutely nothing to do with the Ontario roadways. Yes, Life Insurance is well established and does quite well. Guess what? Life Insurance is not regulated, nor is it mandatory in Canada. People purchase Life Insurance because they choose to. And I would not hesititate to say that there are plenty of Life Insurance companies out there competing for your business. Also, profitability will not approach nil in a competitive marketplace. If you were to take an introductory economics course, you would know that it would be irrational for a company to invest money and not expect at least the risk-free rate in return. The additional 5-7% that Manulife has made is payment for the risk it has endured for operating its business, and for just smart business tactics in general.
 
Biggsy said:
OMG! I had no idea!

They look like they are in business and LOSE MONEY most years.

They must be very very stupid (or brave) to stay in business when losing money endlessly. It's a great public service that they continue to stick it through.

I do wonder aloud though. Your graph was graciously provided by the "Insurance Bureau of Canada". How impartial are they?

One has to think if is a money losing proposition, why would there be so many people in the market place?
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Please actually read my posts, as I am pretty sure that I already explained that this graph describes underwriting losses. The Insurance Industry was still able to profit in some of these bad years by making wise and sound investments. I never once said that we are in the business of giving money away.

It is a good thing that you question any source of data, and I invite you to look up the Insurance Bureau of Canada's website. Do you know what the IBC is? They are the regulators themselves. These are the people who have the power to say no even to an insurance company who wants to take a valid rate increase. It is the goal of IBC to see the premiums come down, and they have nothing to gain by publishing such data.

If you have read my prior posts, you should be able to tell that I am not trying to defend the insurance industry, but merely explain it as simple as I can so that everyone can understand. If you raise a problem that I cannot explain, then I will either try and find the answer for you or agree with you that it is a problem. The sarcastic nature of your post (and the posts of others) leads me to believe that you think I am some idiot who is the cause of all your insurance problems. I'm using my personal time to try and help out the biking community; consider me as a resource rather than the object of your frustration.

Cheers!
 
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Just in case anyone is interested, here are the Insurance Industry Results for 2008:

http://www.msaresearch.com/uploads/...an_filename=MSA_CobyCo08Results_March1609.pdf

Just FYI, the "Combined Ratio" is the ratio of dollars spent to premiums received. If a combined ratio is greater than 100%, then the insurance company is paying out more in claims than it is receiving in premiums. Overall, the industry paid out $1.02 for every $1.00 received in 2008. Most companies rely on investments in order to make a profit, and guess what happened in 2008? The markets tanked. This had a really negative impact on the insurance industry in 2008, but some companies who had an investment portfolio weighted more heavily in bonds, were still able to do well.

Have a look where your insurance company stands. If their Combined Ratio is over 100%, then you will likely see a rate increase in the near future, if you have not seen one already. Even if the Combined Ratio is under 100%, you might still see an increase, because the ratio is for the company's overall business. It could be that Autos had a Combined Ratio of 98%, but motorcycles had a Combined Ratio of 130%. I'm sure that you get the point.

Here are the Combined Ratios for some of the major players in motorcycle insurance:

State Farm: 122.82%
Kingsway: 138.39%
Jevco: 102.53%
Echelon: 99.42%
TD: 106.10%
Wawanesa: 105.09%
Co-operators: 105.50%

It should come as no surprise that State Farm and Kingsway will be increasing rates. Also, as I previously mentioned, these are the Combined Ratios for the entire business . . . so the Combined Ratio for motorcycles could be better or worse.

When all is said and done, an insurance company will pay about $1.00 for every $1.00 it receives. We try to have a Combined Ratio that is around 85% to 90%. Our profit is made mostly from investing the premium dollars we receive.
 
you need to ask yourself what the insurance is really covering
there owe jobs
I pay and pay and pay for what because its law thats why

17 years of driving not one claim not one ticket not one accident

and the cost just goes up and up
sometimes i just think about canceling it all and saying screw it
 
if you help set rates, why dont you set a special rate for gtam as being a group, like i recall premium did for certain motorcycle related associations.

Granted there needs to be a base guideline for all this, but with the insurance rates here in ontario, its getting way out of control, and honestly no one is willing to step up and do something about it.

Step up and make every rider out there believe that the insurance industry isnt a bunch of snakes....
 
so if all of this is approved by the gov
what department approves it and what elected official does that department fall under
Is it the minister of finance or who do we complain to in the gov
what elected official do we as tax payers blame

who in the gov approved the increase

off with their heads or at least we can remember at election time
 
The Financial Services Commission of Ontario (FSCO) regulates the insurance industry
Ministry for the Government of Ontario, the Ministry of Finance is responsible for managing the Province's regulatory affairs. One Commission they look after is FSCO.
The elected official that look after the Ministry of Finance are:
The Honourable Dwight Duncan
Minister of Finance, Minister of Revenue and Chair of Treasury Board/Management Board of Cabinet

Dwight Duncan, M.P.P.
(Windsor – Tecumseh)

salary 125,641.23

Wayne Arthurs
Parliamentary Assistant to the Minister of Finance

Wayne Arthurs, M.P.P.
(Pickering-Ajax-Uxbridge)
salary 100,918.92
Peter Wallace
Deputy Minister of Finance and Secretary of Treasury Board

I don't believe he was elected just appointed by Dalton McGuinty
Salary 234,744.53
 
kneedraggin101 said:
if you help set rates, why dont you set a special rate for gtam as being a group, like i recall premium did for certain motorcycle related associations.
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Because based on the posts in this forum, the "special rate" for GTAM members would have to be higher than the normal rate, because I think there might be more idiots on this board than there are in the general population. :rolleyes:
 
yellowracer said:
you need to ask yourself what the insurance is really covering
there owe jobs
I pay and pay and pay for what because its law thats why

17 years of driving not one claim not one ticket not one accident

and the cost just goes up and up
sometimes i just think about canceling it all and saying screw it
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Yup, insurance companies exist for the sole purpose of creating jobs. Come on now, we're not General Motors!

Your rate goes "up and up" due to rising claim costs and just inflation in general. Did you look at the 2008 insurance industry results that I posted?

And rates can increase even when insurance companies are making profit because we are pricing for expected *future* claims, not expected *past* claims. If a legislative change occurs that forces us to increase rates, we will do so.

And if you are concerned about rising rates, you are complaining to the wrong people. You need to complain to the courts who are awarding ridiculously-large settlements where they are not due.
 
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well it should be the perks of joining a motorcycle club, if other insurance companies offer this sorta rate then the ppl on this fourm should get a special one as well, seeing that to everyone on this site, riding is a lifestyle which we would all like to keep
 
So if the investment side is short and the ratios are high.....do you expect post claim underwriting to increase in this segment?
 
stevie t said:
So if the investment side is short and the ratios are high.....do you expect post claim underwriting to increase in this segment?
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I'm not really sure what you are asking; underwriting is the selection of risks.

Are you asking whether or not I expect claims to be investigated more for fraud and legitimacy?
 
kneedraggin101 said:
well it should be the perks of joining a motorcycle club, if other insurance companies offer this sorta rate then the ppl on this fourm should get a special one as well, seeing that to everyone on this site, riding is a lifestyle which we would all like to keep
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No, it shouldn't. The only way a discount can be offered is if the members of the club in question has a better-performing claims history than the general population.

If a bunch of street racers formed a club, why would I offer them a discount if their probability of making a claim is significantly higher than the general population?

Likewise, if GTAM formed a club, why should I offer a discount? After reading some posts here about people fighting tickets, riding without insurance, pulling wheelies, etc., what makes GTAM riders any more safe than the rest of the population?

The affinity insurance groups work when the group performs better. If TD thinks that University of Waterloo grads are better drivers than your average Joe, then they may/may not offer a group discount.
 
It is my understanding that 'post claim underwriting' allows for reduced payouts by insurance companies due to contractual language in the original policy.
 
stevie t said:
It is my understanding that 'post claim underwriting' allows for reduced payouts by insurance companies due to contractual language in the original policy.
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I wasn't aware of this term. Here is a definition I found online:

Post insurance underwriting occurs when an insurance company refuses to pay your claim for a loss that should have been covered on the grounds that you were a bad risk and the policy should never have been issued, then cancels or rescinds the policy.

When you apply for insurance, your application is underwritten by the insurance company. Underwriting is the practice of determining, based on your application and other information the underwriter may obtain regarding your health and background, whether the insurance company should make you an offer of insurance and, if so, on what terms and for what premium. All of this underwriting work is normally completed before your insurance policy is issued. Post claim underwriting is a practice whereby an insurance company, which has reason to know or suspect adverse prior medical history for you, waits until you file a claim before spending money to confirm its suspicion and then asserts that no coverage exists; therefore no claim can be paid.

An Auto Insurance Company would never write a risk knowing that the person is misrepresenting themselves. If someone does knowingly misrepresent themselves when applying for insurance (i.e. by lying on the application to try and reduce their rate), I have absolutely no problem with an insurance company denying their claim. This helps keep the rates down for the honest people.
 
ok, from what I understand it is more a case of the insurance company misrepresenting the policy and coverage.

The example that comes to mind is when an annual doctor's check up is considered a 'seeking medical attention for a prior existing medical condition' .

If it saves cost/make more then how long before the model is extended to other products? The company saves the cost of underwriting (which would make premiums on no claim accounts more profitable) and gives an opportunity to disallow claims, which would decrease their ratios.....statisticly speaking....of course.

But anyway, totally off topic, why won't insurance companies allow for mulitple bikes under one policy, they insure the rider....and you can only ride one at a time....
 
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