Property and Casualty Claim Costs Rising Out of Control

June 14th 2001 by CollisionWeek.

With the property and casualty insurance industry experiencing its lowest return on equity on record - 3.8 per cent over the last four quarters - insurers must find the secret to regain control over rising claims costs, according to the latest issue of Perspective: A Quarterly Analysis of the Financial Performance of Canada's P&C Insurance Industry.

"Although the industry's capitalization is very strong, and the risk of insolvency has never been lower, the 18 per cent increase in claims over the last four quarters is driving down earnings," says the report's author, Insurance Bureau of Canada chief economist Paul Kovacs. "This is most evident in the 13 to 30 per cent increase in auto claims in Ontario, Alberta and the Atlantic provinces."

The report also shows that personal property claims are rising even more alarmingly across most of the country, with only the Quebec and British Columbia markets showing sustained improvement.

According to the report, the property and casualty insurance industry suffered a severe blow to its bottom line in the first quarter of 2001, with after tax income plunging by 95 per cent from the first quarter of 2000, to just $22 million. "Weak underwriting results and waning investment results were to blame for the severity of the decline," says Mr. Kovacs.

Loss ratios in both the auto and personal property markets also continued to rise in all regions except Quebec. "The Atlantic auto market is particularly unsettling, as the loss ratio has risen to more than 100 per cent," adds Mr. Kovacs.

On the investment side, the report shows realized gains dropped by 64 per cent from the first quarter last year, producing a reduction in overall investment earnings of $178 million. "Clearly, weakness in the stock market and falling interest rates are making it increasingly difficult for insurance companies to rely on investment income to offset underwriting shortfalls," says Mr. Kovacs.

Perspective, which is published four times a year, analyses the financial performance of Canada's property and casualty insurance industry. The report is prepared by Paul Kovacs and Christy Gaetz, policy analyst, and is based on a survey of the member companies of the Insurance Bureau of Canada and data from the Insurance Information Centre of Canada and A.M. Best Canada's WinTRAC. The publication is available on the Insurance Bureau of Canada's Web site at www.ibc.ca.

The Insurance Bureau of Canada is the national trade association of the private property and casualty insurance industry.

Tool Tax Legislation For Apprentice Technicians To Be Tabled This Fall

June 13th 2001

Legislation is to be tabled this fall which will provide apprentice technicians with a degree of tax relief against their tool purchases. The move, confirmed by the Automotive Industries Association of Canada (AIA), says that The Minister of Finance and the Department of Finance will be working closely with AIA over the summer and will introduce legislation when the House resumes sitting in the fall. According to Lise Newton, manager public relations at the association, "What we know right now is that will probably be tax relief over three years, which will work out to $1,500 total." The expenditures that would be covered would be up to about 5% of gross income, or about $4,000 maximum. While much detail still needs to be worked out, the association says that it has been assured by the Minister's office and Liberal Caucus Members that tax relief for automotive apprentices technicians will be tabled this fall.

The following is a brief history of events leading up to this government relations victory: 1990- 2000 - Backgrounder For at least a decade, AIA and a number of other automotive associations have been lobbying the government for deductibility of tools on income tax for automotive service technicians. During the 1990's AIA joined forces with the Canadian Automobile Dealers Association, the Canadian Automotive Repair and Service Council, the Association of International Automobile Manufacturers of Canada, the Canadian Vehicle Manufacturers Association, the Canadian Association of Motive Power Educators, and the National Automotive Trades Association of Canada. In 1997 a position paper on the deductibility of tools for automotive service technicians was prepared by the automotive coalition and sent to the Minister of Finance for his consideration. This issue became known as the tool tax issue.

September 2000 -- House of Commons Standing Committee on Finance On September 1, 2000, AIA submitted it's brief to the House of Commons Standing Committee on Finance. Contained in the document under the second section, entitled targeted tax relief, was information on the impact of the high cost of tools, the impact of technology, and the shortages of skilled labour.

On September 12, 2000, AIA and CARS met with Maurizio Bevilacqua, MP, Chairman of the House of Commons Standing Committee on Finance to discuss the Tool Tax issue, and the status of C-205, a private members bill that called for the deduction of expenses incurred by a mechanic for tools required in employment. Mr. Bevilacqua was very supportive of the industry's position and agreed to sponsor an Industry Parliamentary Reception on February 13, 2001.

February 2001 - Heart of the Industry Reception and Lobby Day On February 13, AIA held its first Annual Industry Lobby Day on Parliament Hill. AIA's Board of Directors met with 26 Members of Parliament, including the Minister of HRDC, the Honourable Jane Stewart, as well as senior ministerial staff. The purpose of the meetings were to brief Members of Parliament on the increasing shortages of skilled labour; the need to update Canada's income tax laws to take into account the impact of the high cost of tools, and the impact of technology.

February 2001 - Strategic Meetings with Finance On February 23, representatives from AIA met with Karl Littler, a senior tax advisor with the Honourable Paul Martin's office, and discussed the need for AIA and government to work together to find solutions to the problems facing the skilled trades. On February 24, AIA wrote to the Minister of Finance requesting that the government provide tax relief on the purchase of tools for young people who wish to become automotive service technicians. Following AIA's letter, Karl Littler, Minister Martin's senior tax advisor, met with the Department of Finance and AIA Canada to develop a plan of action.

February 2001 - Critical shortage of skilled automotive technicians On February 28, the Honourable Jane Stewart, Minister of HRDC, publicly acknowledged that there was a shortage in all the skilled labour trades and in particular the automotive aftermarket. Other Ministers and Members of Parliament from both sides of the House of Commons also acknowledged the crises and began to work with Industry to find solutions. Over the winter and early spring, AIA worked with Human Resource Development Canada (HRDC), the Department of Finance, and the Chairman of the House of Commons Standing Committee on Finance to assess the growing shortage of licensed automotive technicians in Canada and to develop a plan that would attract new prospects to the industry.

CISCO PRESIDENT RECIEVES PRIDE AWARD

June 11th, 2001

A Dundas area collision repair shop owner has become the only Canadian winner this year of the annual National Auto Body Council's PRIDE Award.

Started in 1995, the PRIDE Award program is designed to recognize auto body businesses, individuals and groups who distinguish themselves and the industry by performing humanitarian and/or service deeds outside of their normal job responsibilities.

Alex Szabo, owner/operator of Dundas Valley Collision in Dundas, Ontario and President of the Collision Industry Standards Council of Ontario (CISCO) was awarded the special plaque and certificate in a presentation at his shop last week. Marco Grossi, President of the National Auto Body Council drove from St. Charles, Illinois along with the NABC Executive Director, Mark Claypool, to make the award.

Mr. Szabo has been an active member in his local auto body association, and served for two years as the Chairman of the Chamber of Commerce. He is an award wining member of the Dundas Rotary Club and a member of the Salvation Army Citizen's Advisory Board and for four years served as founding chairman of the Dundas Food Drive for the Needy. He is a past Board member of the Industry-Education Council Advisory Board and his shop has previously been awarded the Province of Ontario Pollution Prevention certificate.

There were four award winners this year and Mr. Szabo was the only Canadian to be chosen by an independent panel of judges representing a cross section of the various industry segments and appointed by the NABC Board of Directors. The 2001 National PRIDE Award winners were presented with their awards at PRIDE Night, sponsored by the Society of Collision Repair Specialists (SCRS), earlier in Minneapolis. Mr. Szabo is the current President of the Dundas Valley Golf and Curling Club.

The only previous PRIDE Award winner in Canada has been Mr. Sam Mercanti, Chief Executive Officer of CARSTAR Automotive Canada. Both Mr. Szabo and Mr. Mercanti have served as Past Presidents of the Hamilton District Autobody Repair Association (HARA)

The collision repair and auto refinish industry has been very active in lowering shop emissions in Canada. For more information on our activities please access the following reports on some of our work. They are available at no charge:

Roundtable on Self-Regulation, Voluntary Compliance and Environmental Protection

(www.eco.on.ca/english/publicat/rndtb11.pdf)

Ontario Initiatives in Pollution Prevention 2001

(www.ene.gov.on.ca/envision/techdocs/355101e.pdf)

Management of End-of Life Vehicles

(www.rco.on.ca/research/proceedings/elv.htm)

Managing the Environment -A Review of Best practices ( The Val Gibbons Report)

(www.ene.gov.on.ca/envision/ergreport/index.htm)

Swiss Re: Auto Insurance in Ontario Once Again a Hot Topic in Canada

June 8th, 2001

NEW YORK -- After a quiet past couple of years in Canada's auto insurance industry, the Ontario auto market is once again in the forefront.

In Canadian Underwriter's 2001 Statistical Issue, Glenn McGillivray, assistant vice president for Swiss Reinsurance Company Canada, and author of the commentary article, concludes that after a few years absence, once again the hot button topic for the Canadian p&c market is Ontario auto.

Last year, he notes, auto markets across Canada varied. In Atlantic Canada, the loss ratio rose by just over four points while in Quebec, an already improved loss ratio shed an additional point. The Prairies and British Columbia showed marked deterioration, with the loss ratio jumping almost six points and 25 points respectively. But once again, all eyes are on Ontario.

In the province, the loss ratio for auto increased by more than eight points in 2000, coming in at 82.21 (from 74.20 in 1999). The metric is significant, as the Ontario auto product represents a quarter of all private direct written p&c premiums put on the books in the country last year -- about CAD$5.65 billion (personal and commercial) of the CAD$22.2 billion, slightly more than half of all private auto insurance written in the country.

Canadian Underwriter's Annual Statistical Issue contains a comprehensive review of insurance companies' performance including: financial performance; market breakdown; individual company results; and, summary tables.

Swiss Re is one of the world's leading reinsurers with over 70 offices in more than 30 countries. In the 2000 financial year, gross premium volume amounted to CHF 26.1 billion (USD 16.1 billion) and the net income after tax reached CHF 3 billion (USD 1.8 billion).

TRADES LICENSE UPDATE TRAINING START DELAYED UNTIL JUNE 11

Exam pass level going up to 70% in September

June 5, 2001

Always wanted to be legally trades licensed in Ontario ? Need to meet legal requirements for skills trade certificate ?

All technicians working in the auto body and collision repair industry MUST hold a trades license/certificate to work in Ontario. The trades certificate states that the technician has passed the provincial qualification exam that has assessed their knowledge.

Many workers in the trade have put in the required number of hours or completed apprenticeship but never taken the provincial exam that permits them to work legally in their trade. The successful completion of the exam also allows the technician to work legally in all other provinces in Canada under a "Red Seal" program. Also, a number of programs including the Toronto shop accreditation program, the proposed CISCO program and the Ministry of Transportation's Salvage Vehicle Inspection Program require the shop to have a trades licensed technician to qualify the shop to participate.

Just announced today, the exam pass level for the provincial exam will be raised to 70% from the current 60%, starting September 1 rather than the announced July1 start, meaning that obtaining the Certificate of Qualification is going to be more difficult.

Mohawk College, Stoney Creek campus is offering a special pre-license training course to assist those workers to obtain their Certificate of Qualification.

Classes are: Monday, Tuesday and Wednesday all day programs starting Monday June 11 for two weeks THIS IS A ONE WEEK DELAY FROM EARLIER NOTICE

Students can register in person at any Mohawk College campus. By mail with cheque or money order with a completed registration form or information sheet to: Mohawk College, Continuing Education registration, PO Box 2034, Hamilton, Ontario, L8N 3T2 (905) 385-HAWK or by faxing a visa number and completed registration form to (905) 575-2348.

A course outline and registration form is available by calling the Association office at 1-800-318-DENT.

The day time Pre-license auto body course number is SAM 67-S2

Cost for the training course is $174.96 (GST exempt)

APPRENTICESHIP RETENTION STUDY UPDATE

June 4, 2001

Between April 3rd and April 12th of this year, a survey and discussion groups information was gathered from over 300 apprentices from the Hamilton area. The Apprenticeship Retention Study has been developed in response to a call to action from the March 2000 Skilled Trades Summit organized by the Industry Education Council in the Hamilton area.

The motivation behind the study was the employers' fear of losing trained workers, pariculary recent apprentices. The Industry Education Council of Hamilton, ABCetc., and Humans Resources Development Canada in co-operation with a consulting team from Sir Wilfred Laurier University have been working since January developing this project.

Only 200 apprentices were targeted, with the survey surpassing expectations by obtaining survey and meeting results from over 350 apprentices.

"This will greatly increase the validity of our study and make it much more representative of Hamilton apprentices. We are all very excited to see how the results pan out" says Reg Russwurm, a consultant working on the project.

Once the results have been synthesized they will be able to provide employers with valuable information around apprentice retention. It is hoped that as employers understand more about how to attract and retain quality apprentices that they will be less hesitant to take on an apprentice in the first place. The final report will be made available no later that the end of July 2001.

Special thanks to Bob Nelson at Mohawk College and John Norris at HARA for the time and effort they put in and all the instructors and apprentices from Mohawk College that participated in the study. Questions? Please contact Stefan Eberspaecher at (905) 529-4483 or email se_iec@yahoo.com

Vehicle with Booby-Trapped Airbag

June 2001

The National Insurance Crime Bureau (NICB) has received information regarding a booby-trapped airbag compartment in a Ford Taurus that was linked to a narcotics investigation. Nothing was found during the initial vehicle search, but a police department K-9 unit alerted the officers to the front passenger side of the vehicle. A subsequent search found wiring as well as other indications of a hidden compartment. An attempt to short-circuit the wires to activate the compartment resulted in an explosion of the booby-trap, which damaged the interior panel of the front passenger side door.

A police explosives unit responded to the scene and was able to activate the hidden compartment that was located inside the passenger airbag area. A further examination indicated that the passenger airbag was removed and the compartment modified. In addition, the carbon dioxide (Co2) canister that is usually associated with the airbag was also modified and rewired to the passenger door. It was learned that should the compartment be opened in any manner other than the designated way, the Co2 canister would be activated causing the passenger side door panels to explode. In addition, NICB has received information indicating that a drug smuggling organization is removing airbags and replacing them with the pouches filled with nails, bolts, and other small metal objects. Bundles of drugs are reportedly placed into a hidden compartment located in another area of the dashboard. These bundles are then connected to the triggering device of the airbag mechanism via a trip wire. Upon removal of the drug bundle (from the concealed compartment) the airbag mechanism device is activated resulting in an explosive release of nails, bolts, etc.

Individuals should exercise extreme caution when examining the passenger airbag area to determine if a concealed compartment is present. In addition, precaution should be taken so as not to position oneself directly in front of the airbag compartment.

HARA
Hamilton District Autobody Repair Association
"To represent the best interests of the industry, providing opportunities for growth for environmentally sound, profitable businesses having competent and trained professionals serving the public."

WE'VE MOVED (as of February 1, 2001)

HARA's new office address is: