Working together key for Ontario mutuals

THE INCREASING pace of change makes it more important than ever for Ontario mutuals to stick together, the incoming chair of their association said.
“For us to continue to grow and expand our mutuality to our policyholders, now and in the future, we must present a united front against our much larger competitors by keeping our system together,” Robert Pearson said at the recent annual convention of the Ontario Mutual Insurance Association in Toronto.
“We need to be aware of who our competitor is and not compete against each other.”
Mr. Pearson, president and ceo of Town and Country Mutual Insurance in Strathroy, Ont., said that despite the rapidly changing times, the values of mutual insurers remain the same.
“In today’s digital age with insurers looking for new innovative ways to interact with customers, it’s a challenge to keep up,” he said.
“Technology is changing and improving but the fact is that people still want to feel connected to a community and we are very well positioned to offer that system, so our advantage will always be the human touch that we bring.”
Mr. Pearson noted that the mutual insurance business model has proven its strength over time but remaining financially strong is key.
Mutual insurers never had a roadmap to success, he said, and the system has been built on the common goal of wanting the best for everyone and figuring out how to work together.
“Working together has enabled us to have a very strong place within the industry and we should not do anything to weaken it or take any aspect of it for granted.”
OMIA members collectively posted their seventh straight year of profitability in 2015 despite a significant drop in investment gains compared to the year before.
That figure fell to $21m from $84m in 2014, but overall underwriting gains doubled to $38m from $19m and they posted net income of $47m, which was down from $82m the year before.
Ontario mutuals’ direct written premiums grew to $697m from $670m in 2014 and its surplus increased from $1bn to $1.14bn.
John Taylor, president and ceo of OMIA, said at the annual general meeting that the investment climate in 2015 was difficult and 2016 promises more of the same.
“(There were) unsettled markets in both fixed incomes and equities, our investment return is interest-rate-sensitive and interest rate settings continues to dominate how Ottawa manages the economy,” he said.
“While recent Canadian budgets have included significant spending stimulus, the actual economic effects remain to be seen. The degree to which government spending spurs the economy and allows interest rates to rise will probably tell the tale in 2016.”
Mr. Taylor noted that the Canadian p&c insurance market remains extremely competitive and growth is a challenge for the entire sector.
“In this environment, effective underwriting and superior service to policyholders — from point of sale, to loss prevention, to claims — will continue to be critical in maintaining stable and sustainable results.”
He also noted that their surpluses are an integral part of the mutuals’ promise to policyholders, guaranteeing claims and helping the communities they serve.
“It means over $1bn at work in small town and rural economies in Ontario through jobs, investment, taxes and community support,” Mr. Taylor said.
“It means that the mutual system continues to provide diversity, competition and one of the safest insurance networks in the world for policyholders.”
Meanwhile, addressing regulatory compliance matters, Mr. Taylor said OMIA has been working on helping its members meet new reporting requirements.
“We developed a program to assist mutuals in moving through the enterprise risk management and own risk solvency assessment requirements,” he said.
“Throughout the latter part of 2015, (OMIA’s) financial review committee hosted regional workshops and developed reference material and an ERM tool kit was developed and distributed.
“Today each mutual is at a different stage of ERM and I’m pleased to report that (members) have been receptive to the process.”
He noted that more work needs to be done in particular surrounding the ORSA filings that will continue throughout this year.
OMIA also worked on ensuring mutuals have the necessary information on the auto insurance reforms coming into effect in June, providing training on how to implement the required changes.
“With the auto changes there is zero tolerance for not meeting the mandated steps so this has been a major undertaking this year,” Mr. Taylor said.