No quick fix for P&C industry’s negative public image

By Donna Glasgow | March 19 2005 04:06PM

When even the capitalist-friendly Globe & Mail’s headlines scream of consumer “outrage” because your industry’s shown a profit, you know you’ve got a serious image problem.

Of this, Robert Carter, chief executive officer of the Insurance Brokers Association of Ontario (IBAO) is well aware. But, during an exclusive interview at IBAO’s Toronto headquarters, he told The Insurance Journal that the public’s negative perception of the industry goes back farther than February’s announcement that the Canadian home and auto insurers recorded an estimated annual profit of $4.2 billion in 2004.

“The damage was done in ‘02/‘03. It’s nothing to do with profits. It has to do with how we treated people in buying their insurance and how we treated them at claim time.”

The impact on the entire industry’s image has been profound, he says. “The insurance industry had a reasonably good image for what we are until 2001 and 2002. They’re only starting to fix the image that they ruined.”

Elaborating on this statement, he explains that those years were tough times for insurers, and there were market shortages as a result. Rates increased and companies scrutinized claims more carefully than consumers were used to.

“It’s like any business, if you’re making a lot of money, you don’t look at the small things...when you’re losing money then you become more difficult to deal with because you’re looking at every penny.” This doesn’t mean the companies’ increased scrutiny is unreasonable, adds Mr. Carter. “They’re doing a better job of determining whether it’s a valid claim or not.”

But as a result of such factors, undeniably the image of the entire industry, including the brokers “who had an excellent image with the public and the government up to that point” has taken a major hit.

Now that rates are going down, the property and casualty insurance industry has a chance to begin repairing its shattered reputation.

Pricing fluctuations

Mr. Carter says that one of the most effective ways to accomplish this would be succeeding, as an industry, to even out pricing fluctuations. “I think long-term, and it’s almost an impossible task, we have to take the huge peaks and valleys out of what we do.”

In Ontario, as a result of Bill 59 introduced in 1996, insurance rates went down for a couple of years. Then in the last few years, consumers saw spectacular rate increases. Overall, since 1996 the average increases were not far off the Consumer Price Index over the last 10 years. “But no one remembers they got a rate reduction in ‘96, but they remember they got a huge increase in 2003.” Smoothing out these market swings so the changes are not so dramatic would go a long way to improving the industry’s image, he contends.

“I think what we have to achieve over time is product and price stability,” explains Mr. Carter.

Another factor that would help the industry reclaim its reputation in Ontario would be the re-introduction of accident forgiveness which was commonly available up until 2001. “The one thing we’re working on with the government now is to bring some form of accident forgiveness back on automobile insurance because it’s the biggest complaint we get, ‘I pay insurance for 20 years, have one claim and my rates go way up,’” he recounts.

The industry will also have to find a way to educate the public about the underlying reasons behind the market swings they’ve been experiencing with respect to insurance rates.

One of the issues that the Ontario public should be educated about is how insurance companies are affected by the clash between the federal government that wants insurers to maintain specific levels of surpluses to ensure solvency, and provincial governments pressuring for competitive rates.

“In 2001 and 2002, the majority of insurance companies were under watch by OSFI (Office of the Superintendent of Financial Institutions) and what that caused is companies to say, ‘I can’t write anymore business or I can’t write as much as I have’ which created a market shortage and the prices, for those willing to write it, went up...that is something we have to get out to the public, that there are two forces.”

One problem with auto insurance in Ontario, he adds, is that many consumers don’t seem to understand that it is a government regulated product. “We sell the only product where our price is controlled, our product is controlled and our expenses on health care, auto repair or even buying a car are not controlled.”

Losing money

Another point the public doesn’t seem to be aware of is that there are still insurance companies losing money in Ontario, he continues. And, the public has to know that financially healthy companies are good for them too. “I think we have to do a better job of saying, ‘We’re there when you need us, for that we need to be financially sound’ and I don’t think we’ve done a very good job of that.”

However, the industry can’t rely on the general news media to explain its point of view better. “Let’s be honest. The press is in the business of selling papers. If the public is not happy with the insurance industry, they don’t want to see their papers saying ‘these are really good guys and they should be allowed to make a lot of money.’”

So it will be up to the industry to get the word out in other ways. “We have to do a better job of telling the public what we do...We have to show people what we did during the ice storm, what we did during the Kelowna Ontario what we did years ago when the tornado went through Barrie.”

One measure the IBAO took was sending its broker members a three page document to provide them with answers for customers complaining about the industry’s financial results. “I anticipate brokers will be getting a lot of calls.”

Consumer testimonials

Also, through its national association and in conjunction with the Insurance Bureau of Canada, the IBAO is changing its commercials to be more consumer friendly. The new commercials will include testimonials from consumers who are grateful for their brokers’ assistance that came when disaster struck, for example, a house fire. The commercials will highlight “what did the broker do? how did the broker do it? how did they help the consumer?...all commercials are going to be about how we’ve helped the consumer in time of need.”

Despite this initiative, improving the public’s perception about the industry will be a long-term project. “Everybody’s looking for an instant answer. It takes time to recover after things have gone wrong. The objective is to improve our image solidly, a little bit at a time.”