State Farm Loses $1billion in Ontario in 2010

The raw number ($951 million in the black) doesn't mean all that much.

They sold $32.4 billion in insurance policy premiums. That 951 million profit represents less than 3% in profit margin on the policies sold, which is minimally sustainable for a commercial business venture. That less than 3% profit on sales is also well below the 15% to 20% or so that the other pillar of the financial industry (banks) typically enjoy in a given year.

You or I could have done just as well simply putting our money in a high interest ING savings account.


Begin rant.
And the pillars of our community, the small independent business owners and their employees, are suffering every day from the current economic conditions. Don't lose sight of what really keeps a country like Canada and the USA alive - it isn't big business. For the past decade our manufacturing sector has been taking a beating. Coined phrases like 'new normal', 'work share program' and 'the not so slow boat from China' are being touted every day. Costs of living increases are hurting the vast majority with no real recovery in sight. I cannot concern myself with a company that still generates a profit regardless of the percentage they are used to enjoying. Sustainability? Profit equals sustainability be it 3% or 300%. It is a snapshot in time for the large venture capitalists. Not so much for the real people that keep the country running.

We are all feeling the pinch and the companies that provide the service at a profit cry about how meager their profits are? So many independents are putting their old earned money back into their company to support their current losses (some putting their personal property on the line) - to keep their feet on the ground and their employees working. So forgive me if I have a hard time caring too greatly about a 3% (nearly $1 billion) gain. That buys a lot of Kraft Dinner.

Regardless if my rant sounds socialist, I am a capitalist at heart. I want big, medium and small business to prosper. While the going is tough, I expect big business to ride it out with the people they serve. Profit is not a bad word, modest isn't either.

I would be happy with a modest net profit. A modest net profit given the current situation means that I may have less money to invest in my future but it also means that I am doing something right. Again, a snapshot in time. In a couple of years I hope to look back and say 'phew what a ride' with a smile on my face and pride in my heart for keeping the people that sweat employed and their families safe.

When that happens, State Farm will still be there - how they get there is another thing.

End rant.

Begin rationality

State Farm has the right to increase the premiums to bring the division out of the red. The policy holders have the right to stay or leave State Farm as a result. I will not deny that the numbers look crappy on the insurance side. I am sure they are asking themselves how to correct it.

End rationality
 
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I happen to work in the industry that, that article is referring to. Insurance companies have been bilked billions of dollars in false health claims. Not to mention fighting fraud costs have sky rocketed. Insurance companies got a small reprieve after September 1st, 2010 with the new changes. There are some big time scammer clinics in Toronto and GTA. They submit false documentments, forge attendance records (saying the client attended when they didn't) and innondate adjusters with paperwork so we fall behind and things get "deemed" approved after a certain time line. So aside from paying clinics billions of dollars they don't deserve, we also have to spend money fighting fraud with pricey insurer examinations and paying investagators large sums of money to investagater suspicious activity.

Insurance companies were literally going broke paying out health claims and expensive (often not necessary) assessments. All the while YOU (the victim) is completely unaware this is going on in the backround. All because you happened to walked into the wrong clinic and signed some papers. I see it all the time where the client calls me fustrated (often ****** off) because they don't understand what's going on.

Is there a way to fight this? Not usually. Even if we prove outright they committed insurance fraud the claim often just gets closed and we never get our money back. Insurance companies like Economical have resort to suing in small claim courts to re-coup their money. However the clinics will just claim bankruptcy and open under a new name and a new manager. Then the cycle continues.

I've been handling accident injury claims for 5 years now and I have yet to see it get any better. I feel bad for the consumer caught in the cross fire. The way the legislation is worded it ties the adjusters hands to help people rightfully injured and needing help; and it opens the door for shady clinics and scammers to profit. Sorry about the rant but it pisses me off some days. All of our time is spent fighting fraud and stopping clinics from raping and pilligaging. Meanwhile; people who could use our attention and extra TLC get an all of 5 minutes of our actual attention.
 
^^^ thanks for your insight. There is always a story and it is good to understand yours. Sounds frustrating. Do you think the claims are tied into the economic conditions or is this a new trend regardless?
 
This trend has been going on for years. Clinics have been exploiting loop holes in the legislation for years. When the government created "no-fault" insurance, they created a whole new industry. Before that people just used to sue the at fault driver for damages. Now everyone goes back to their own insurer for customer service. This trend is irregarless of current economics of our province (Every province has their own legislation with regards to injuries as a result of MVA's IE Alberta is $3,000 take or leave it) Because insurance fraud is rampant, you as the consumer is suffering. Your ability to collect benefits and recieve treatment has been made tougher. You're benefits have been lowered from what they were and certain benefits have been nixed all together. So unless you ASK for them, you won't get them in basic coverage.

So to answer your question:
This is a new trend regardless, however the insurance industry is now getting tougher on insurance fraud because they see how much money they've been hemmoraging over the past 10 years or so.
 
I'm confused. I'm with Statefarm. I don't see them listed. My rate on my car increased by 28% but bike stayed the same. Just trying to understand the increase.

These are the Overall Rate Changes. In a simple example, if you have two people currently paying $1000/yr and one person's premium increases to $1050 and the other decreases to $950, the overall premium change is 0%, although there are premium changes at the individual level.
 
To Viffer. I have seen you claim that rate decreases do happen and I understand that there's always someone somewhere who gets one (without much of sensible logic applied). Well as you might guess, in the last 10 years, I've had none. So therefore I'd believe that rates only can go up ... LOL (would you blame me?)

Rate decreases occur, although they have been less common in the last 5 years. Even if overall rates don't change at all with your insurer, you could see a premium decrease as your insurer adjusts factors in order to attract more profitable business (for example, decreasing rates for Peterborough residents by 5%).
 
How well do you think the Mom and Pop shops would function without insurance? A 3% return is not much at all -- you can't look at profit in absolute dollars. I'm sure that a privately-owned convenience store is making a heck of a lot more than 3 cents on the $1.00 chocolate bars that they sell.

And just FYI, guess who owns State Farm? Could it be the policyholders themselves?



Begin rant.
And the pillars of our community, the small independent business owners and their employees, are suffering every day from the current economic conditions. Don't lose sight of what really keeps a country like Canada and the USA alive - it isn't big business. For the past decade our manufacturing sector has been taking a beating. Coined phrases like 'new normal', 'work share program' and 'the not so slow boat from China' are being touted every day. Costs of living increases are hurting the vast majority with no real recovery in sight. I cannot concern myself with a company that still generates a profit regardless of the percentage they are used to enjoying. Sustainability? Profit equals sustainability be it 3% or 300%. It is a snapshot in time for the large venture capitalists. Not so much for the real people that keep the country running.

We are all feeling the pinch and the companies that provide the service at a profit cry about how meager their profits are? So many independents are putting their old earned money back into their company to support their current losses (some putting their personal property on the line) - to keep their feet on the ground and their employees working. So forgive me if I have a hard time caring too greatly about a 3% (nearly $1 billion) gain. That buys a lot of Kraft Dinner.

Regardless if my rant sounds socialist, I am a capitalist at heart. I want big, medium and small business to prosper. While the going is tough, I expect big business to ride it out with the people they serve. Profit is not a bad word, modest isn't either.

I would be happy with a modest net profit. A modest net profit given the current situation means that I may have less money to invest in my future but it also means that I am doing something right. Again, a snapshot in time. In a couple of years I hope to look back and say 'phew what a ride' with a smile on my face and pride in my heart for keeping the people that sweat employed and their families safe.

When that happens, State Farm will still be there - how they get there is another thing.

End rant.

Begin rationality

State Farm has the right to increase the premiums to bring the division out of the red. The policy holders have the right to stay or leave State Farm as a result. I will not deny that the numbers look crappy on the insurance side. I am sure they are asking themselves how to correct it.

End rationality
 
Rate decreases occur, although they have been less common in the last 5 years. Even if overall rates don't change at all with your insurer, you could see a premium decrease as your insurer adjusts factors in order to attract more profitable business (for example, decreasing rates for Peterborough residents by 5%).

My rates going down is as probable as Toronto's premium soccer or hockey club making playoffs. Yes, I feel good about my chances ... LOL Like gasoline, it will only go up and up, with more people riding and driving in the future, with our roads and driver/rider training not getting much better (rather getting worse) than it is today, the likelihood of accidents will be going up, therefore rates will be going up.

I'll buy you a cheap beer if my rates go down, deal?
 
Congrats a couple people here have actually hit the nail on the head.

Usually people take threads like this as a way of slamming the insurance companies and the thread just disintegrates into a hundred different reasons for people to hate insurance companies.

Yes... the poor poor insurance companies :rolleyes:

Why don't they get out of that line of business?

PS: Most don't need an internet thread to "hate on" insurance vultures.
 
How well do you think the Mom and Pop shops would function without insurance? A 3% return is not much at all -- you can't look at profit in absolute dollars. I'm sure that a privately-owned convenience store is making a heck of a lot more than 3 cents on the $1.00 chocolate bars that they sell.

And just FYI, guess who owns State Farm? Could it be the policyholders themselves?

It was a rant Vifferfun, don't get too worked up about it.
 
My rates going down is as probable as Toronto's premium soccer or hockey club making playoffs. Yes, I feel good about my chances ... LOL Like gasoline, it will only go up and up, with more people riding and driving in the future, with our roads and driver/rider training not getting much better (rather getting worse) than it is today, the likelihood of accidents will be going up, therefore rates will be going up.

I'll buy you a cheap beer if my rates go down, deal?

I've posted a link to the quarterly rate changes, and there are plenty of examples of rate decreases. The situation in Ontario over the last few years is unique, and premium decreases aren't likely until some big legislative or social changes occur.
 
The situation in Ontario over the last few years is unique, and premium decreases aren't likely until some big legislative or social changes occur.

Last few years??? LOL ... it's been going on for over a decade.
 
Looks like insurance fraud business is booming.
 
......

The only thing putting them into the black was investment income. Coincidentally, their increase in net income from 2009 to 2010 was due almost entirely due to an increase in investment income.

and investment income is what the insurance business is all about. They basically get free money from you (your premium) and invest it till they have to pay out. This is a great business model, and this is what insurance is all about. So even if they paid out every cent they took from premiums they would still typically be profitable.

Also many businesses thrive on very low net margins. For example, the food business operates successfully on less than 3% net, I think.

In other words, it's not clear whether or not they are in as rough shape as they say.
 
In other words, it's not clear whether or not they are in as rough shape as they say.

They are in rough shape, from time to time, in regards to auto insurance. It's a fact. Their financial records are public record. You can go look them up if you want. They are entitled to make a profit. Who is in business to break even?? They don't make a huge profit by business standards as a percentage. Banks make 6-7%..a fairly similar business. If you want insurance on a break-even basis, you're looking at government run insurance. Is that a good alternative? BC has it. They pay less..they also get less coverage. Are you willing to put up with that? What if you only get half of your normal income if you are unable to work after being hit by a car? What if you only get 1 week's pay? It's a difficult issue. Generally, governments screw financial things up..not sure I want them running car insurance. I'm not sure what a good answer is..
 
Yes... the poor poor insurance companies :rolleyes:

Why don't they get out of that line of business?

PS: Most don't need an internet thread to "hate on" insurance vultures.

Some do get out..how many insurance companies write motorcycle insurance anymore?
 
and investment income is what the insurance business is all about. They basically get free money from you (your premium) and invest it till they have to pay out. This is a great business model, and this is what insurance is all about. So even if they paid out every cent they took from premiums they would still typically be profitable.

Also many businesses thrive on very low net margins. For example, the food business operates successfully on less than 3% net, I think.

In other words, it's not clear whether or not they are in as rough shape as they say.

Investment income must be considered when setting rates. For example, since Liability payments generally take longer to settle, we must consider that we will earn more investment income when setting rates. This isn't optional, but required by the regulator. If it weren't for investment income, you would be paying a lot more for insurance than you already do.

Yes, we can be profitable even if we pay out $1.00 on every $1.00 received; however, there is a risk that we could pay out $1.30 on every $1.00 received, in which case we lose a lot of money. This happened to Kingsway just over a year ago (which is why they were taken over by Jevco, their subsidiary).
 
Looks like insurance fraud business is booming.

Yes it is. The worst part is, the punishment for the crime is nothing compared to the what the fraudsters bring in. Fighting insurance fraud is next to impossible. You need a mountain of evidence and often the people in question already have a list of responses that get them out of hot water.
 
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