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Government Auto, Online Competition, Run for Childhood Cancer

Posted By Thom Young, August 17, 2016

Is It Just Me, or Does Everyone Else also See Our New Government Moving on an Imaginary Mandate of Change?

You know, I do my best to remain apolitical in these little stories that I write, but it’s often difficult when commenting on things the government does that may affect our industry. Certainly, the adjustment in perspective necessary to understand the actions of this philosophically different government is readily apparent. Take its initial swift move to implement action on the labour-standards obligations for family farms with Bill 6. This resulted in the agricultural community rolling machinery and people up to the legislature to express disapproval for the impact it would have on their business operations. Traditionally, the family farm has been insulated from the normal stringent labour standard legislation.  Previously exempt from coverage and costs of participation in Workman’s Compensation insurance, the small family farmers saw this new legislation as an expensive intrusion into their traditional operations.  Family farms had exceptions for certain classes of employees in addition to exclusions under labour standards legislation for family workers. Their political response appeared to catch off-guard the new government that believed this new legislation would be welcomed by farmers.  It is understandable with a new government, particularly one imbued with youth and inexperience, that this type of change would be unfamiliar territory to the electorate. However, one might reason that the public reaction would prompt the government to ponder the public expectations of their mandate.

Recently, the government announced its decision to review automobile insurance regulations in the province. Many in our industry have been quite concerned that this review might be the first step towards a government-run automobile insurance scheme. When our previous superintendent of insurance was seconded to Finance to work on a “new” project, the new government’s interaction with the industry  sprouted rumours: would the legacy of the NDP Provincial Government in Alberta be a public automobile insurance plan?

Facts make little difference when measured against political ideology. Counting our three provincial auto-insurance schemes, only a half dozen government automobile insurance programs exist in the world. In most cases, they have resulted from a lack of competition in an extremely small market, allowing insurers to impose severe underwriting restrictions and unfettered, uncompetitive pricing on those who need mandatory coverage. In each jurisdiction that has experimented with a public automobile scheme, underwriting limitations and pricing increases brought about political pressure to ensure that coverage would be available to all at a fair price. Those who have been around the business long enough to remember the auto reforms imposed upon our industry by the former government may recall that, at that time, a hard market left insurers trying to reduce their market participation to meet their reserves and struggling to deal with reinsurance treaty limitations. At one point, for over 90 days, the only market accepting “new” automobile insurance applications was the Facility Association. Regular markets were flagging clients for non-renewal for any dumb thing they could imagine. When the public is disrupted in any way, their frustrations are quickly heard by their elected representatives. Thankfully, the auto reforms proved to be adaptable to the needs of the public and the insurance industry. What could have happened then should not be lost on anyone. Market realities can spur action by governments to limit the impact of any business on their constituents.  In British Columbia though, a new dimension was introduced to the equation. The change came about through the election of a government with a new political ideology. Government auto insurance was one of the mandates it was elected upon, and the government moved quickly to fulfill that mandate.  Will this election be seen as a mandate for our new government to follow a new ideology? Perhaps in the next election auto insurance will be a focus of the platform, potentially determining the future of our industry.

One way or the other, this topic will be up for much discussion in the coming years.

More Competition or Less?

I was reading an article in Insurance Business magazine about the withdrawal of Google Compare from the U.S. internet insurance marketplace. Google Compare provided a price-comparison shopping point for insurance customers and was supported by charging a fee for directing clients to specific insurers. Google pulled the plug on the product in the spring of this year, apparently because the insurers were not that enthused with the results. Brokers in the U.S. were happy to see Google leave the marketplace. They claimed the withdrawal was a win for the independent-broker approach to marketing. The focus of the article seemed to be that brokers shouldn’t be claiming the withdrawal as a victory because online competition for insurance is still ubiquitous, and we shouldn’t drop our guard.

Rating engines have been around forever. In Canada, an interactive internet-rating company has been around since the beginning of the online information age. In the U.S., many companies such as Progressive and State Farm use their own in-house rating engines to give clients not only their quote but also their competitors’. Certainly, large brokers who write for many different companies are already competing in this process since they check several companies to find the best rate for a call-in customer. Of course, the questions asked by the brokers are the same as the filters used by the rating engines, but the broker’s experience in interpreting those filters gives the customer’s quote validity and is a better assurance that the policy will be issued at the rate quoted. Frequently, online clients think they have a lower quote than they really do until an answer on the application changes the response. Unfortunately, clients don’t always get the difference between marketing and reality.

Is calling around for quotes any different from doing an online survey? Online is faster, but discussing your circumstances with a professional insurance adviser leads to better accuracy. The review of coverage needs is definitely better in an in-person setting with a professional. How many of you have ever had the discussion with a call-in client that begins, “Do you write for this company or that company?” Often they’ve already got a quote or have been told by a friend how low company A’s price is. These callers are looking to find an adviser to validate the information, and look after them at the point of sale and when they have a claim. I don’t really mind if the customer shops around and then looks for a trusted adviser to respond to these items. Even the least-proficient insurance broker should have little difficulty doing a better job for the customer than a computer. Some might cite an exception here or there, but in truth I’ll stand by that statement.

The more complicated the product, the less it lends itself to successful comparison shopping. Even a very well-designed computer application cannot assure a correct answer to the question “what does that mean?” when the applicant is interacting with it. No matter how many “click here if you’re confused” buttons there are, the reassurance of another human being when you don’t understand is unbeatable. Now don’t get all smug about this limiting factor. New computer interaction programs bring the human dimension into the process with the “click here to chat with a real person” button. However, when the little box pops up and informs you that “all our advisors are busy right now, please be patient, the approximate wait time before we get around to you is 20 minutes,” you can understand the limitations in the service level of this online medium. When you then pick up the phone, call the company, and hear the identical message, you know how important the call really is to the company. After that frustration, why not call a broker a shop rule that when the phone rings the third time, anybody who isn’t with a customer better answer it? Are you getting the picture of the service commitment of these alternate providers now? Don’t let anyone tell you that brokers compete on price. Brokers compete on service. So long as we remain dedicated to providing superior service, our future in the insurance business is assured! Of course, “your mileage may vary,” but then again I’m a half-full kind of guy. While things change, I still believe that cars don’t take a different route to the same destination just because they go faster. My conclusion is that the broker service model will remain strong through the technological evolution we continue to experience.

Run for Childhood Cancer

I occasionally use this medium to promote or endorse a good cause, and I hope you will indulge me with one here. Recently, I was approached to help out an old friend who is the new director of a fundraising program to assist families coping with kids who have cancer and to further the researchers in finding a cure for kids with cancer. Many of you may recall Rob Siroishka from his time working in our industry. He is now active in a number of different projects, the most importance of which I think is the "Run for Childhood Cancer” fundraiser that takes place in September of each year. This charity had been receiving terrific support from the oil and gas industry until the industry’s realignment last year. Since then, the charity has suffered a decline of about a third of their support. Rob reached out to his friends and a number of us stepped up to help them recover from the loss of funding, but more can still be done.

Recently, I toured the research facility of Dr. Mahoney at the Children’s Hospital Research Institute that is the recipient of the funds raised through the Believe in the Gold efforts. Believe in the Gold is the charitable organization that hosts the run and manages the fundraising. These funds provide assistance to families who are struggling with the challenges of a child fighting cancer. They also provide funds for the ground-breaking research into immunotherapy treatments configured uniquely for children’s cancers that has had some promising results. While immunotherapy has had tremendous success in treating many kinds of adult cancers, the unique physiology of growing children presents many challenges in order to achieve the same success rates as in adults. Even small successes here will produce life-changing results for many of these children and their families.

If you’re a runner or even enjoy just a stroll along the Bow River pathways, find some sponsors to raise some money for this good cause. If you’re a business owner looking to get behind a charity that can make a real difference in the world, you might want to look into this a little further too. Personal donations are also appreciated. To find out how to join and sponsor, go to the Believe in the Gold website: http://believeinthegold.ca/campaigns/run-for-childhood-cancer, or get in contact with Rob at 403-542-2660 / email robsiro@shaw.ca.

The opinions expressed in this blog are not necessarily those of IBAA.
Comment on this post below or email Thom Young privately. Thom also encourages suggestions for topics.

 

Tags:  competiton  government auto insurance  NDP and insurance  online insurance  Run for Childhood Cancer 

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