Phil Cook, CEO at Omega Insurance Holdings, spoke at Insurance Institute's Annual Industry Trends Breakfast on January 12, 2012 in Toronto.
12 industry predictions for 2012
Phil Cook discusses industry trends including consolidation, market cycles and natural disasters at the annual Insurance Institute breakfast.
Suzanne Sharma on January 12, 2012
It will be business as usual in 2012, according to Phil Cook, CEO of Omega Insurance Holdings. Cook spoke at the Insurance Institute’s Annual Industry Trends Breakfast on January 12, 2012 at the National Club in Toronto. He discussed significant events in 2011, and revealed his industry predictions for the coming year.
While many companies are still in the process of filing their loss ratio reports for year-end 2011, he said based on third quarter 2011 results he expected a combined ratio of 100.7%, a loss ratio of 71.3% and an expense ratio of 29.4%. This compares to a 2010 combined ratio of 101.5%, so while the industry is still losing money it’s not at the same rate, according to Cook.
“If I had to write an epitaph for 2011, I think the headline would be ‘It could’ve been much worse,’ ” he said.
Cook used a recent reader letter to the Toronto Star as an example of consumer needs and wants for insurance. In the letter, a Gen Y male discussed his frustration about being categorized due to his age and gender when shopping for auto insurance, and due to this he was hit with high rates.
Cook said this was an example of the typical consumer so the industry message to consumers should no longer be producing products that consumers need at a price they can afford. Instead it should be producing products that consumers need at a price they can understand.
“I think that’s the key thing that we’re all going to have to address going forward, explaining how we arrive at those pricings,” he said. “The consumer will accept them if they understand them. It’s not any longer a matter of whether they can afford them because nobody can afford our prices (which are needed in order for us to get back towards profitability).”
Additionally, with broker market share dropping in personal lines (69% in 2010, 50% in 2011), the role for brokers this year should be showing consumers their value and marketing.
Cook’s industry predictions for 2012 are:
1) No significant hard market (the soft market could end, but the market cycle will be flat for the next 2-3 years before rising to a hard market again)
2) Another 12 – 12 months at the bottom of the cycle
3) There will be selected rate increases, but they should be viewed as corrections and not turns in the market
4) The continuation of natural disasters, and very soon we will agree that natural disasters are just the norm
5) Atlantic storms will continue at a very high rate, but how many will make landfall is hard to guess
6) Companies will concentrate on capital preservation
7) Regulatory tests will place pressures on capital ratios
8) The economy in general will not change very much
9) Companies will have a chance to evaluate themselves and improve processes
10) Consolidation will continue to take place in various forms—mergers and withdrawals
11) Ontario auto results will become more credible as we move to the second anniversary of changes
12) Corporate governance will continue to be critical
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