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Performance Goes Beyond Pricing: OMIA Panel

Higher auto insurance rates are likely on the horizon, but Ontario’s mutual insurers will have to look to other areas-like service-to boost performance in the near future, according to panelists at the Ontario Mutual Insurance Association’s annual conference.

“Market issues are not all financial,” Rob Pearson, manager of Town and Country Mutual, said during Thursday’s discussion on current market issues in Toronto. “They are anything that affects our ability to compete profitably.” Although Pearson and his fellow panelists-Catherine MacLellan, of OMIA’s financial review committee, and Pat Ryan, underwriting manager at Farmers Mutual-agreed that auto rates would likely go up incrementally over the next two years, Pearson stressed that service, especially in the claims area, would be a key tool for mutual insurers recovering from an economic slump. “We going to do these [service] things because if one thing falls down, you’ve lost customers, and you’re not going to get them back on price.”

The provinces’ farm mutual insurance companies had a challenging 2008, ending the year with a net loss of $24.3 million and $44 million in underwriting losses. Their collective combined ratio was 111%. Compared to the rest of the industry, the farm mutuals “did not do well,” MacLellan said. She cited MSA Research figures showing that Ontario insurers finished 2008 with a net income of $1.73 billion and a combined ratio of 102%. The farm mutuals’ performance was hindered by higher claims on both the property and auto fronts, as well as investment losses.

Along with weather risks-like the late December windstorm–rising claims and pricing segmentation strategies for some risks, the province’s mutuals are also contending with shrinking markets as brokers consolidate over large geographic areas, Ryan said, noting that brokers are also seeking alliances with insurers with progressive technology capabilities.

Pearson urged the mutuals to do a “diagnostic scan” of their competitors and customers to determine how their products and services compare, noting, “we’re competing for the same business other insurers are.”

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