The world around us is changing rapidly. We live in an era of ride-sharing services, connected homes, biometric smartphone security, and self-driving vehicles. Despite this progress, the regulations that govern the Canadian insurance industry haven’t changed much or, in some cases, at all. According to the Insurance Bureau of Canada (IBC), stringent regulation is hindering technological progress and preventing insurers from meeting consumers’ expectations. The national industry association argues that while insurance should continue to be a regulated industry, regulators need to get with the times.
Presenting on ‘Innovation, Regulation and Change in the Insurance Industry’ at the RIMS Canada conference in Edmonton, Celyeste Power, vice president, western region, at the Insurance Bureau of Canada, said: “Our customers want new solutions. How do we deliver? To understand how to best prepare for tomorrow, we need a clear understanding of where we stand today. In a time of rapid change, it’s more important than ever to understand our consumers and their attitudes towards the insurance industry. So, we conducted public opinion research, and what we found was interesting, relevant, and, in some cases, surprising.
“What do people want from us? They want more choice and customization, just like they get from other companies in other aspects of their lives. They want the way in which we communicate to evolve over time. Let’s face it, in the time of one-click satisfaction, we must seem like dinosaurs to most. They want fresh thinking from all parties – from our industry, but also from our government and from our regulators. Consumers want to be protected from risk, but they don’t want to be protected from change.”
Canadians do not deny the importance of insurance in protecting their financial security. However, according to IBC research, that’s often the extent of the average consumer’s insurance literacy. The association conducted some research, which found that the average Canadian thinks 34% of their payment goes to premiums. As Power pointed out, that would be “quite a healthy margin - not one that the insurance industry has seen for many years”.
In reality, the Canadian insurance industry has had a difficult time over the past few years. In 2018, the industry’s net income declined by $1.3 billion compared to the prior year, and the industry’s combined loss ratio increased from just over 95% in 2017 to 101.4% in 2018. There are two main culprits for these difficulties, according to the IBC – troubled auto insurance systems nationwide, and adverse weather losses.
“The thing is, customers don’t care about these problems,” Power told the audience. “They don’t care that we’re drowning in red tape, and nor should they because they’re our problems. However, I do think we get people to care if they could see that the upshot is better for them - that with less red tape and better rules, they would have more choice, more innovation, and an important piece to everyone, more affordable premiums. That’s the kind of change consumers can get behind.
“The best designed, most convenient, and most affordable services these days are the ones that are rigorously tailored to individual needs and circumstance. That’s true in transportation, hospitality, banking, media, telecom, and so on. Consumers don’t like to think about insurance. It’s a purchase usually that they have to make, and if they do end up needing it, it’s because something bad has happened. However, we do need their help in pushing us and our regulators into the 21st century. If Canadian consumers saw what was possible, they might want to talk about [insurance] a little bit more, helping us to make more convenient insurance products a reality.”
It would be unfair to suggest the insurance industry does not want to innovate. In fact, there’s an eagerness to provide the products, services, and innovations that consumers really want. However, Power stressed that insurers are essentially “fighting the battle with one hand tied behind [their] backs”. She blamed “outdated regulatory restrictions” for supporting the status quo rather than cultivating innovation.
“Regulation supports the status quo,” she said. “It’s a disincentive to progress, or better ways of doing business and serving our customers. To paraphrase what our own customers are telling us, good regulation protects people from risk, not from change.”