Insurance Industry wants to raise rates

[jydk]

There was recently a thread about banks and how they rip people off with all their fees. What was weird was almost every post was defending the banks. I guess people understand capitalism when it comes to banking but not insurance. The insurance companies make money by investing your premiums. If you take just the premiums collected for insurance contracts and claims paid out, most years the insurance companies are at a loss. (That’s not even accounting for all the staff that has to be paid) When the government stepped in (2004) and placed a cap on soft tissue injuries this lowered claim payouts and therefore lowered most peoples premiums, makes sense right? But then people (lawyers in particular) argued this is not fair to claimants with soft tissue injuries. So now this cap has been removed and when the insurance companies want to increase premiums to adjust for larger claims. People complain again. You can't have your cake and eat it too hey!

[macker]

Originally Posted by jydk

There was recently a thread about banks and how they rip people off with all their fees. What was weird was almost every post was defending the banks. I guess people understand capitalism when it comes to banking but not insurance. The insurance companies make money by investing your premiums. If you take just the premiums collected for insurance contracts and claims paid out, most years the insurance companies are at a loss. (That’s not even accounting for all the staff that has to be paid) When the government stepped in (2004) and placed a cap on soft tissue injuries this lowered claim payouts and therefore lowered most peoples premiums, makes sense right? But then people (lawyers in particular) argued this is not fair to claimants with soft tissue injuries. So now this cap has been removed and when the insurance companies want to increase premiums to adjust for larger claims. People complain again. You can't have your cake and eat it too hey!

Very accurate depiction of what is happening here! The money to pay out the soft tissue claims has to come from somewhere? The 2004 reforms were good for consumers in the short term but now we are seeing the results of what happens when governments interfere with business. The lawyers are making out ok with this confusion also. Oh well, likely just result in more people shopping and that is always good for business, if you can fill the need....AIG (worlds largest insurance company) would sure love some of these excessive Insurance company profits right about now after their most recent quarter where they posted a 7.81 BILLION loss.... the largest 1/4 loss in the companies 89 year history.....

[troutman]

Today State Farm tried to get a Stay of the QB dismissal of the Cap until the Appeal is decided. They failed.

Other scuttlebutt:

In the discoveries on the Cap challenge, Dennis Gartner (the province's superintendent of insurance), advised Rob Graesser that the Insurance Bureau of Canada had dropped its demand for a cap more than a year before the reforms were passed. In fact, on October 29, 2003, the Insurance Bureau sent a letter to every MLA saying it no longer wanted a cap.

So one has to ask – if they didn't need it then (when the investment climate was so bad), why do they need it now, and why would there be a need to increase premiums for the loss of something they didn't need in the first place?

[fredr123]

Originally Posted by macker

Very accurate depiction of what is happening here! The money to pay out the soft tissue claims has to come from somewhere? The 2004 reforms were good for consumers in the short term but now we are seeing the results of what happens when governments interfere with business. The lawyers are making out ok with this confusion also. Oh well, likely just result in more people shopping and that is always good for business, if you can fill the need....AIG (worlds largest insurance company) would sure love some of these excessive Insurance company profits right about now after their most recent quarter where they posted a 7.81 BILLION loss.... the largest 1/4 loss in the companies 89 year history.....

I was under the impression a lot of personal injury firms took a big hit when the caps came in. Instead of taking a chunk of a person's large settlement on contingency pre-cap, the limit on recovery meant it wasn't financially feasible to proceed with a lot of injury cases with a lawyer.

On the other hand, there were a few lawyers who spent considerable time and effort in order to fight what has turned out (so far) to be an illegal law.

[fredr123]

Originally Posted by fotze

English please

Insurance company asked the court to keep the cap on soft tissue injuries still in place until the Court of Appeal makes their decision on the issue. Insurance company's request was denied.

[macker]

Originally Posted by fredr123

I was under the impression a lot of personal injury firms took a big hit when the caps came in. Instead of taking a chunk of a person's large settlement on contingency pre-cap, the limit on recovery meant it wasn't financially feasible to proceed with a lot of injury cases with a lawyer.

On the other hand, there were a few lawyers who spent considerable time and effort in order to fight what has turned out (so far) to be an illegal law.

It is the later that I was referring to. This could go on for sometime and the insurance companies are trying to follow business plans that may or not represent the risk that they are taking on.....Likely see some companies pull out of the Alberta market again like we did a few years back if they don't get something concrete in place....

[fredr123]

Originally Posted by macker

It is the later that I was referring to. This could go on for sometime and the insurance companies are trying to follow business plans that may or not represent the risk that they are taking on.....Likely see some companies pull out of the Alberta market again like we did a few years back if they don't get something concrete in place....

I'm not privy to all of the dealings with the lawyers who launched challenges to the cap, but those in the Zhang and Morrow case relied heavily upon organizations like the Alberta Civil Trial Lawyers' Association. Public advocacy like that may get you lots of attention and the ladies will be all over you but it certainly doesn't pay well.

[macker]

Originally Posted by fredr123

I was under the impression a lot of personal injury firms took a big hit when the caps came in. Instead of taking a chunk of a person's large settlement on contingency pre-cap, the limit on recovery meant it wasn't financially feasible to proceed with a lot of injury cases with a lawyer.

On the other hand, there were a few lawyers who spent considerable time and effort in order to fight what has turned out (so far) to be an illegal law.

Originally Posted by fredr123

I'm not privy to all of the dealings with the lawyers who launched challenges to the cap, but those in the Zhang and Morrow case relied heavily upon organizations like the Alberta Civil Trial Lawyers' Association. Public advocacy like that may get you lots of attention and the ladies will be all over you but it certainly doesn't pay well.

Fair enough. I hear things from a different spin and what you are saying seems logical to me. Who knew the ladies love the cap fighters!

[Slava]

Originally Posted by macker

Compare the largest Life insurance company in Canada vs the largest general insurance company in Canada.....
most recent quarter.....

Manulife (largest life) earnings 1.14 Billion
ING (largest general) earnings 95.8 Million


Not even in the same ball park. I deal with all of these companies and you can't even compare the profits being generated by the big life/wealth companies such as Manulife, Sunlife, and Great West Life to their poor cousins ING, Aviva, Royal SunAlliance etc. etc. They don't just raise the rates arbitrarily they are set by actuaries and they have to back up any reason for any rate increase. If you don't like your rate in Alberta you are able to shop around : www.kanetix.ca or call your broker directly and make them work for you. The government insurance system may seem like the answer but if you do your home work you can save yourself money without involving the government. They are in our pockets enough as it is already.....

This is comparing apples and oranges though. On one hand you have a compulsory product (auto insurance) and the other is totally voluntary (life insurance). Further, while companies like Manulife are doing well he fact is that their insurance products are also rated by actuaties in the same fashion you describe here.

Manulife and the others you quote here are making huge money on the investment side of things (ie. by managing other peoples money).

Basically just because they are both insurers is where the similarities end in terms of both business structure and where the profits are derived from.

[macker]

Originally Posted by Slava

This is comparing apples and oranges though. On one hand you have a compulsory product (auto insurance) and the other is totally voluntary (life insurance). Further, while companies like Manulife are doing well he fact is that their insurance products are also rated by actuaties in the same fashion you describe here.

Manulife and the others you quote here are making huge money on the investment side of things (ie. by managing other peoples money).

Basically just because they are both insurers is where the similarities end in terms of both business structure and where the profits are derived from.

Your right....That's what I was getting at and it is not a fair comparison. There were a few posts in this thread that were stating things very broadly by saying such things as "the Alberta insurance industry" and stating that "they were making billions of profits" and I was just trying to seperate the apples and the oranges by using an example of two very well known prominent insurance companies. Manulife (TSX : MFC) and ING (TSX : IIC) both publically traded companies, both industry leaders, and as such anyone can examine their earnings to see what these companies are actually making and this will clearly show that the big money in the insurance industry is on the Life/Wealth side of things and not the P&C side as many people think. It is comparing billion dollar quarters to million dollar quaters. You can't fairly state the general insurance companies operating in Alberta are raking in billions as this is simply not the case. As an investor I bought MFC years ago and wouldn't even think of selling this stock wheras I wouldn't even touch IIC as it is way too cyclical. They are definitely Apples and Oranges no matter how you slice them!

[troutman]

Originally Posted by macker

Your right....That's what I was getting at and it is not a fair comparison. There were a few posts in this thread that were stating things very broadly by saying such things as "the Alberta insurance industry" and stating that "they were making billions of profits" and I was just trying to seperate the apples and the oranges by using an example of two very well known prominent insurance companies. Manulife (TSX : MFC) and ING (TSX : IIC) both publically traded companies, both industry leaders, and as such anyone can examine their earnings to see what these companies are actually making and this will clearly show that the big money in the insurance industry is on the Life/Wealth side of things and not the P&C side as many people think. It is comparing billion dollar quarters to million dollar quaters. You can't fairly state the general insurance companies operating in Alberta are raking in billions as this is simply not the case. As an investor I bought MFC years ago and wouldn't even think of selling this stock wheras I wouldn't even touch IIC as it is way too cyclical. They are definitely Apples and Oranges no matter how you slice them!

Do you have any comment on the CBA report I linked earlier? It seems to indicate insurers will do just fine in Alberta on auto insurance, without a cap, and without an increase in rates.

[macker]

Originally Posted by troutman

Do you have any comment on the CBA report I linked earlier? It seems to indicate insurers will do just fine in Alberta on auto insurance, without a cap, and without an increase in rates.

I don't as I haven't had time to read through the report. Thanks for posting that as it is reading that I otherwise wouldn't have been able to come up with. I think the p&c insurers in Alberta can make Millions (not Billions) with or without a cap. They just need adequate time to adapt things to the new risk that they would be taking on. I personally don't like the cap as I have been hit by two drunk drivers prior to the cap and I don't like the meat chart approach to things that we see currently. I am just a casual observer to most of this and I can understand both sides but my overall point was that there is a gross misunderstanding about the profits that most people think are being generated by p&c companies in Alberta vs what profits these companies are actually seeing after paying out all of the claims.

[fredr123]

http://www.canada.com/calgaryherald/...6-1a5925d1b395

Update from the first day of AIRB hearings. IBC is calling for a 37% increase to premiums. An actuary contracted by the AIRB said even if there is no cap in place and insurance companies have to pay out thousands more in individual claims, Albertans' mandatory insurance rates should go down by 3.2 per cent.

[Flame On]

Originally Posted by fredr123

http://www.canada.com/calgaryherald/...6-1a5925d1b395

Update from the first day of AIRB hearings. IBC is calling for a 37% increase to premiums. An actuary contracted by the AIRB said even if there is no cap in place and insurance companies have to pay out thousands more in individual claims, Albertans' mandatory insurance rates should go down by 3.2 per cent.

Great news, though we'll see how it plays out.
Really annoying that at a time when most are feeling the pinch; and around the world in a more desperate way, companies aren't being forced to feel the effects, because they can just pass costs on. I don't see why they can't take a dip in profit while the markets or economies are dipped too? Naive I know.