Co-operators (Q&A (Current consideration for individuals with semi-AV?…
no major resource constraints
it's a very competitive market => closely watch margins
profitability is most important
Regulation to focus on?
focus on them all
Ontario is the biggest market, but recommendation needs to consider all markets that Co-operators offers
Influence on legislation?
government relations team
no point of considering this
Name one major partner related to auto-insurance?
warranty provider who provides warranty products to car buyers through dealerships
What processes have you engaged to educate yourself?
org is immersed in this topic, but won't go further than that: issue has been on strategic agenda for a couple years
Do you think there will be a level 3 autonomous vehicle?
my personal opinion: there will be commercial vehicles that are >3
Importance of auto insurance gateway?
Solution for 2019-2022?
looking for a
solution beyond that, by the end of 2022, we've already started advancing it and making waves
Assumptions surrounding legislation?
it is a concern, but I'm not convinced it's a barrier
technology changes faster than legislation can keep up with => legislation will catch up at some point: Ontario is one of the province that's put in some regulation in place (i.e. there is an initial framework in place)
preference to lower regulation, and letting market drive the product
we have a cyber security office that looks at the cyber security of a product
Adopters of AV?
demographics, generic information beyond first adopters
How comfortable at introducing new insur. policy?
comfort is one thing (very comfortable), and speed is another
speed is heavily influenced by regulation
return on shareholder equity isn't necessarily a first concern
what's the appropriate level of return? if we're making 18-20%, then we're probably charging too much for our products
consider decision making
auto insurance is one of the most competitive products out there
Time to market
end of 2022 (conception -> market) if jurisdiction allows it
Who are the main purchasers of demographics - in terms of age/income?
good mix, distribute a lot of diff channels: direct, group infinity, capital advisor force
L1 L2 AV, what sort of data can you gather from the different stakeholders involved
not sure: data is property of the manufacturer => it is their discretion if they want to share <=> there hasn't been many cases where it was shared with insurance companies
Forecast of declining customers:
they have done modelling work
How would premiums price changes?
no idea, downward pressure => lot of uncertainty, largely due to regulation => sometimes competitors will drop prices in a certain region to gain market share
What level of risk is acceptable?
risk appetite statement <-> tied to levels of capital and maintaining ratings and maintaining level of profitability in the long-term
profit creates freedom => freedom to fulfill the social purpose of the organization
brand is very important, leader in client engagement, WON'T DO ANYTHING THAT DOESN'T ALIGN WITH OUR PRINCIPLES
Not an auto-policy insurance?
yes, we would like to see that
Are you in the process of developing for shared car owners?
we do have an offering that responds to certain jurisdictions
different offerings in different provinces => complicated offering
sharing is on the agenda =>
need to consider the sharing economy in the strategic agenda
customer service, responding to the client and taking care of the clients
Other factors affecting auto-insurance, aside from AV?
new vehicles have sensors => a small bump no longer occurs, cost repairing vehicles is going up
Auto-insurance have reinsurance?
reinsurance common: quota share (50/50) goes to re-insurer, excess share (primary takes first 1M, re-insurer takes remaining)
reinsurance is viable
reinsurance is a global business: at a forefront of all of these issues
Manufacturer defect => payout?
currently: there is the opportunity to segregate among the manufacturers
future: ? idk
Current consideration for individuals with semi-AV?
insurers have safety ratings for each vehicle in their table of parameters, certain companies offer discounting for safety features, cost of repair also goes into table
less accidents, but if minor accidents cost a lot (that has to go into their pricing)
Existing B2B partnerships?
owned by 44; motor car share partnerships
Client concerns with AV?
would anticipate that clients will be concerned
mission is to provide financial security for customers
current exist in certain car jurisdictions
not aware of any acquisition of data
data is used for risk assessment, pricing, client identification, segmentation
also a client service tool to see their own behaviour
assumed: taking on insurance from other people
ceding: taking on reinsurance
Actuary risk assessments, how to accurately forecast financials?
put models around it ~ variations in predictions ~ use certain ranges
weather affects in auto insurance are disruptive
At fault vs no-fault offering right now?
jurisdiction based and legislation driven
you can work in writing either one if the rules are clear
equally challenging to work on
What are the main factors being used to calculate premiums?
~50 variables to predict risk: (IV) - wont tell you anymore
Commercial (B2B) liability presence?
commercial business could be important going forward
it's an area they currently focus on
Ontario 10-year auto pilot vehicle program in 2016?
look publicly (idk), don't know who's insuring them
Pricing - generic or something different?
priced adequeatly to provide target return on target
we need to do what we need to do to meet our mandate organizationally
Current customer acquistion?
largest advisor network
Risk: what other risks are priorities for mitigating?
interest of clients
risk management framework: financial risk, insurance risk, operational risk,
risk appetite tied to earnings
influence over legislation:
4 in market share, 1st in market share has 17%
tend to take a long-term view of the marketplace
regulators will come to ask co-operators on a neutral basis
digital movement in 2022 - impact on adviser network?
adviser are independent contractors, not allowed to sell to other organizations, they're independent business people => always looking to grow and adapt to the future/environment
Timeline 2022: insuring data?
cyber security issue with autonomous vehicles
other avenues to make up for losses of auto insurance
Can you price the risk of software?
no development of algorithm insurance
Breakdown of margins
some years you're profitable, some years you're not
a lot of interesting data could be used to making assumptions
fizral shifting mandates?
industry leading tech supporting insurance backend
public info on spending
Biggest mistake in next 4 years?
changes don't want to impact business model
long runway for change to come into place
AV impact on claims:
if you turn off AV, where's the liability given?
Growth in multi-modal transportation?
anything could work - umbrella policy maybe
Cybersecurity - data onboard the car?
data being hacked => needs type A coverage
data being hacked leading to catastrophe => needs type B coverage
Fraud and increased claims?
industry efforts strive to reduce claims
Current marketing strategy?
tactics vary base on distribution channel
exclusive advisor force: forced on brand, local advertising, digital banners
credit unions: specific credit union membership advertising
group affinity: employer associations pull
high net-promoter scores
marketing tends to be channel focused
brand new product => top-down
existing tweak => granular bottom-up
Combined ratio in underwriting business?
in the financial statements
driverless cars (coming soon) would likely have a disruptive effect on the automobile insurance business
impact of car autonomous cars was yet to be fully understood
no jurisdiction had authorized them for general consumer use so far <=> no clear consumer policies established
need a strategic plan for 2019, 2020, 2021, 2022:
product changes, policy changes, marketing changes, operational changes
what should the firm do to prepare for the arrival of autonomous cars <=>
how to adapt their auto insurance business to the new reality
verbatim case questions to be answered:
would she be driving an autonomous car to work by then?
would her customers? if so, how many?
what reasonable assumptions could be made from external research?
what logical conclusions could be drawn from available info?
what should firm do to
for the 2019-2022 period to thrive in long-run?
whats the net effect on industry if both premiums and payouts declined significantly at the same time?
opportunity (new product or service)
could help offset the loss of their liability business?
how could firm influence Canadian autonomous car policy that would shape the rest of the 21st century and possibly beyond (CONSIDER STAKEHOLDERS, ETHICS, AND SOCIAL ORG)?
autonomous could disrupt other insurance lines without consumers buying auto insurance first
need to a new structure & price policy for mixed ownership model
in the long-run, autonomous cars could bring about a
in accident frequency, reducing payouts so thus premiums will face tremendous downward pressure => consumers main beneficiaries, firm loses out => to get existing consumers to buy into some other form of insurance (product development)?
firm wants to know what young people care enough to the extent that they would spend money to insure?
Much work remains to be done to improve our scenario modelling so that we can increase our confidence level as to the depth and velocity of the change. By being proactive, we are well positioned to mitigate the risks and take advantage of opportunities as they appear
current core expectation of customers to provide auto insurance to the extent they needed it => what will their future expectation be?
experts argued that adopting autonomous vehicles was a moral as well as a business choice - because there would be a huge potential reduction in human mortality and morbidity
some industry observers argued that - in the short term - autonomous cars could be a boon for insurers since lower accident rates meant lower claim costs, but once premiums drop they're screwed
others argued hat the near elimination of accidents would make automobile insurance industry
in the insurance industry agrees that autonomous cars would
require new legislation
to establish the legal uses of the vehicle and to determine how liability would be assigned when accidents did occur
Ontario regulation classified autonomous vehicles on a continuum, but this only pertained to
not for consumer use
autonomous cars represented:
65B in potential savings (= 37.4B in avoided collision costs, 20B in time saved, 2.6B in fuel efficiency, 5B in congestion avoidance)
Morgan Stanley: 2018-2022 would bring complete autonomous capability, two decades later would bring 100% autonomous penetration
before AV hit the road
, driver/passenger licensing, car licensing, vehicle type approval, roadworthiness, and insurance/liability need to be clarified - if not outright updated!!
new legal framework is needed - revamp of entire insurance underwriting process, with liability shifting from individual car owner/users to manufacturers, software suppliers, and possibly even those running the roads or merging traffic
Anticipated changes include:
a risk shift from drivers to manufacturers
risk slicing between drivers and manufacturers (depending on whether the vehicle is being operated by the system or the human driver)
risk slicing between different drivers in the case of car sharing; and
an overall risk reduction
autonomous car owners would still require auto insurance for non-liability related losses
autonomous vehicle revolution will be about a change so pervasive it will significantly alter the world => WHAT OTHER CHANGES CREATE AN OPPORTUNITY?
converting an entire car fleet to electric ~ 20 years (that's how long cars last), but with AV, you need much less vehicles out there to service people's transportation needs since cars are only driven ~3% of the time (they're usually being parked) => the utilization of the car would be much higher, allowing for less cars on the road and quicker conversion to electric cars
5k employees, 2.7k licensed insurance representatives, 300 credit unions in Canada
brokerage business line
: focused on the distribution of specialized insurance products
investment management business line
: consisted of institutional asset management services
: 9th largest market share, 629k lives, 175k employees with group benefit plans
: property & casualty (P&C) which provided home, auto, farm, and commercial insurance through an exclusive advisor network across Canada;
consolidated operations into four distinct insurance companies:
- case (2/3 of group revenue)
= fourth largest market share in P&C market, approximately 5.1%
=> 805k homes, 1.3M vehicles, 38k farms, 295k businesses
2017: 237M net income, 4136M TR, 3568 TE
, accumulated awards:
Aon Best Employers (Platinum)
Corporate Knights best 50 Corporate Citizens in Canada
Excellence Canada Mental Health at Work - Gold
Workplace Benefits Award - Mental Health
: "provide financial security for Canadians and their communities over the long-term"
as a profit-oriented socially minded organizations:
made community investments of 8.34M (2017), 4.8% of pre-tax profits
currently testing driverless cars in many US states
=> reduction in frequency of accidents
=> transform transportation from a task that consumed time to one that could be completed while multi-tasking
be shared more easily than conventional ones: car
be busy serving other people until you needed it => costs of car ownership to be shared
=> better traffic flow, saved time for passengers, fewer major accidents, lower health care costs, independence for those who cannot drive, shared vehicle ownership or service only, better fuel economy, lower air pollution
Case given alternative: umbrella policy
- since manufacturers control customer data in sales process => manufacturer bundle insurance with car sales, much like many car manufacturers had already done with car financing, warranty, and maintenance business => insurance would be purchased from the manufacturer and it would cover liability or any accidents caused by the car or its OS
i.e. car manuf. and software providers insured their products => such manufacturer policy would likely be offered by large global insurance companies, although governments could dictate specific requirements for cars operating on a particular country's roads
who would be liable for an accident if the owner failed to properly maintain OS, or if vehicle was operated outside of recommended conditions?
what if occupant chose to override autonomous system, perhaps in the event of an emergency?
how would the administration of claims between owners and manuf. be managed?
what policies and standards would be set internationally and which ones nationally?
what autonomous car insurance remain a provincial responsibility, or would the coordination required across between nations prompt a national strategy?
planes are essentially self-driving, but pilots are still there to drive them (pilots also carry insurance)
consumer expectations of tech
: what people expect from driverless cars? is it reasonable to expect them to know
failure to warn
: with AV, auto pilot prompt shows up => eventually perhaps
: should someone still be paying attention during autonomous driving - manufacture(yes, you should since we warned you), consumers(no, we feel entitled to rely on it)
represented 49% of revenues of P&C revenues, 49% of automotive NEP came from Ontario
Auto-insurance was the
that consumers bought before later buying other products like home insurance
insured 1.3 million vehicles, including:
regular cars, trucks, and vans
+ specialized vehicles like
commercial vehicles, farm vehicles, recreational vehicles like motorcycles
: network of insurance advisers (or agents) who operated out of brick and mortor storefronts
1250M NEP (net earned premium): accounting top-line metric (after reinsurance)
1200M DWP (direct written premium): face value of insurnace premium prior to ceding anything to reinsurers = sales top-line metric (before reinsurance)
high frequency of accidents in ON => 2017 auto loss ratio had deteriorated from 2016
high consumer satisfaction => 97% retention rate & 76% had at least one other line of insurance, 51% of new clients were multi-line, 63% of new clients were gen X or Y (obviously cause they have the income to buy stuff that needs to be insured)
alignment with pro-social mission to provide financial security to Canadian
Co-operators recognizes important benefits of increased vehicle autonomy: low-emission mobility, social cohesion, increased transport efficiency, improved safety, competitiveness, economic growth, employment
but now - how to prepare for the impact this would have on their business
does not offer ride-sharing insurance yet
AV were expected to be >> expensive than conventional ones (in the short-term), these cars would often be purchased on a shared basis AND AV could be purchased by a large number of owners who might not live in the same area and who might not be related to one another =>
insurance providers would soon have to determine how to structure price and policies for that kind of ownership model
: autonomous cars would come with
insurance pacakges from the
- eliminates the need for consumer auto insurance policies
law requires vehicle owner's purchase mandatory (i.e.
) insurance to use a vehicle:
premiums depended on the characteristics of the primary driver and of the vehicle, as well as how the vehicle was used and the province where it was licensed
considered a commodity product (=> price takers) because rates were so closely regulated
value added coverage
could be bought to cover other perils to varying degrees (specified, comprehensive, all):
loss of use
legal liability for damage to non-owned automobiles
limited waiver of depreciation
premiums set by firms and influenced by individual customer's selected deductible level, and whether the customer qualified for multi-product or group insurance discounts
auto was 40% of P&C industry, valued at 22.65B
: fraud and rising cost of claims => prompted several provinces to conduct reviews of sector, partly in response to consumer pressure =>
consumer pressure is capable of shifting existing regulations
so far, industry has embraced technology to increase safety and reduce claims:
driver assist tech (automatic emergency braking) has already provided owners in UK with a premium reduction