August 23, 2002

Financial services giant ING Group reports that its Canadian operations were a "solid performer" in the second quarter of 2002. Overall, the Amsterdam-based company reported net operating profit is down for the period ending June 30, 2002 to Cdn$3.5 billion, a drop of 2% from the same period a year earlier. Per share operational net profit also dropped 2.1%, to $1.83. But total net profit was up 4% to $4.3 billion for the period, due to cost controls and restructuring.
In Canada, which falls under the mantle of ING Americas, the group's p&c business reports operating profit of $69.9 million for the quarter, versus $56.8 million during the same period last year. This growth is largely the result of strong underwriting results, the group reports.
Other factors contributing to the Canadian operation's strong showing were a growth in customer retention with the integration of Zurich Canada's personal lines and small commercial books, and cost savings from integration of Zurich operations into ING.
Further consolidation added cost savings as several companies were brought under the mantle of ING Insurance Company of Canada.
"Our results for the first six months of this year show that we stepped up to the challenges brought on by difficult market conditions in our hemisphere," says Glenn Hilliard, chairman and CEO of ING Americas. "We are pleased with our six-month results but it is clear that the sluggish U.S. market recovery is affecting us and others in financial services so we continue to be cautious about prospects for the second half."

(courtesy of Canadian Underwriter)

(see headlines)

The company's decision to close was supposed to conserve enough capital to pay all loss claims and leave enough money to pay refunds on policies terminated early.

That has not happened. About 1,000 refund cheques for an average of $300 each have bounced. A few thousand more refunds are still left owing.

An industry-sponsored protection fund will step in, but will only pay 70 per cent of what's owing to a maximum of $700 per refund.

Nor does Markham have enough money to pay all loss claims. The protection fund will cover losses up to $250,000, but that won't be enough for a few businesses such as restaurants who had losses.

Finally, settlement of claims for statutory accident benefits for motor vehicle injuries has been hampered because Ontario legislators never fixed a problem identified when Maplex General Insurance Co. failed in 1995.

No clear mechanism is in place for dividing the cost of paying victims these benefits among all insurers in Ontario, where Markham obtained most of its sales.

"This is messy," says Alex Kennedy, president of the Property and Casualty Insurance Compensation Corp., or PACICC. "It's something, that by this time, should have been handled."

Repeatedly after Maplex failed, Kennedy warned Ontario ministers and parliamentary assistants responsible for insurance that the government would face embarrassment if a sharing mechanism was not put in place before the next insolvency.

Markham General grew rapidly in the past two years, spurred by low premiums and the endorsement that hockey commentator Don Cherry gave to Markham's largest broker, Believer Plus Insurance Brokers Ltd. of Hamilton.

But when Markham could not find additional capital to fund its growth and deal with the need to raise its low premiums, regulators nudged the insurer to close as of June 15.

The Financial Services Commission of Ontario had to go further on July 24. It went to court to enforce an orderly wind-up of the business, and name Deloitte and Touche Inc. as the liquidator.

It is too early to estimate the size of shortfall at Markham, which relied heavily on international reinsurers to support its business, said John Whitehead of Deloitte. "If the reinsurance holds good, there is a chance we will have a good deal of money to pay to policyholders and (reimburse the compensation fund), but probably not enough to supplement partial refunds of unearned premiums."

The liquidator has the money and authority to continue paying accident benefits to victims of motor vehicle injuries until mid-September. At that point, the liquidator and PACICC will need guidance from a judge on how to pass on any shortfall in future benefits to other insurers — to individual companies where the victims may also have coverage or on a fairer basis to the entire industry.

Industry executives have been critical of the Financial Services Commission for not acting sooner to avert a train wreck at Markham. They noted in April that Markham's premiums were so low that many of its dislodged policyholders could see increases of more than 20 per cent when they switched companies.

In a few cases, policyholders never received notice or read press reports to learn that their policies were about to be cancelled. "One gentleman was horrified to learn he had been driving for a month without coverage," Kennedy said in an interview.

Mutual fund returns: Most investors in well diversified Canadian equity funds have not been hit as hard as the Toronto stock market, as I wrote last Tuesday. But, due to an error loading software, I reported March figures instead of July's as intended. So here is an update.

To the end of July, not one in eight funds had dropped as much as the over-all market, which was down 36 per cent in a two-year period. The weighted average loss for investors was 10.6 per cent, and only 5.2 per cent for those invested in funds with more than $1 billion in assets.

Only a fifth of funds made money, though, compared with a half to the end of March. Large funds like CI Harbour had an average annual gain of 7.5 per cent, Trimark Canadian Endeavour 7.4 per cent, Investors Canadian Large Cap Value 5.2 per cent and Trimark Canadian 1.6 per cent.

Among global funds — the ones that many hapless investors were urged to buy with borrowed money — the results were worse by July than in the March figures. Half of funds lost more than a third of their value in a two-year period, while the average investor lost 14.7 per cent.

Results will be different again when fund holders get their end-of-August figures. The Toronto market peaked during that month two years ago.

Thanks to the Toronto Star www.thestar.com

(see headlines)

LIQUIDATOR APPOINTED FOR MARKHAM GENERAL INSURANCE

FSCO SEIZES ASSETS OF INSURER, WIND-UP ORDER ISSUED

The Financial Services Commission of Ontario (FSCO) has issued notice that the regulator will take possession of the assets of the troubled insurer, Markham General Insurance Co.

FSCO says its action against Markham had followed close monitoring of the company’s financial affairs and after having been supplied by financial records from the Board of Directors. The Superintendent took this action to protect policyholders because Markham General Insurance Co., could no longer meet its obligations.

On July 24, 2002, the Ontario Superior Court of Justice on the application of the Superintendent of Financial Services at the Financial Services Commission of Ontario, ordered Markham General Insurance Company to be wound-up under the Winding-up and Restructuring Act. Deloitte and Touche have been appointed as provisional liquidators.

INFORMATION FOR SHOPS
(provided by the Property and Casualty Insurance Compensation Corporation- PACICC)

If my insurer fails, how do I submit a claim?

When a company is declared insolvent, a liquidator “winds up” its affairs, including the processing of claims. The liquidator will write to all policyholders and claimants concerning claim procedures. Bear in mind, however, that the liquidator will need some time to examine the insolvent insurer’s records to gather the necessary information.

Does PACICC determine the value of my claim?
No. The liquidator determines the value of your claim, but PACICC will want assurance that the amount is reasonable.

What happens if I disagree with the amount offered ?
If you disagree with the amount offered and you cannot resolve the matter with the liquidator, you can try to bring an action in court; to do this you will need the court’s prior approval.

(see headlines)

INSURANCE INDUSTRY COMPENSATION PROGRAM

Questions & Answers

Which insurers are members of PACICC and who funds PACICC?

Unless they are covered by another authorized plan, all property and casualty insurers licensed in a province or territory of Canada are required to be members of PACICC. The exceptions include insurers licensed to sell only one or more of the following - automobile insurance in Manitoba, Saskatchewan or British Columbia and speciality lines of insurance such as surety, fidelity, marine or aviation. All participating P&C insurance companies pay a small levy to PACICC to cover its running costs. Should an insolvency occur, PACICC responds to valid claims and participating insurance companies are assessed for their share of the cost involved.

If my insurer fails, how do I submit a claim?

Contact your broker as soon as possible following the date of the court order declaring the company insolvent. When a company is declared insolvent, a liquidator "winds up" its affairs, including the processing of claims. The liquidator will write to all policyholders and claimants concerning claim procedures. Bear in mind, however, that the liquidator will need some time to examine the insolvent insurer's records to gather the necessary information. If you have purchased your insurance directly from the insolvent insurer without assistance from a broker, notify your insurer's head office of the claim.

Does PACICC determine the value of my claim?

No, the liquidator determines the value of your claim, but PACICC will want assurance that the amount is reasonable.

What happens if I disagree with the amount offered?

If you disagree with the amount offered and you cannot resolve the matter with the liquidator, you can try to bring an action in court; to do this, you will need the court's prior approval.

What happens if I am liable for a claim against me and the claimant doesn't accept the settlement; can I be sued for the full amount? Who will defend me?

Someone having a claim against you has the right to sue for the full amount and is likely to sue you rather than your insurer. You should direct your inquiry to the liquidator of the insolvent insurer. PACICC is involved only with payment of claims where agreement has been reached on the amounts payable.

What happens if an insurer cancels its membership in PACICC?

The companies which are members of PACICC can terminate their membership only if they cease to be licensed everywhere in Canada for the types of insurance covered by PACICC.

(see headlines)

8/12/2002

British Columbia's public insurer is reporting increased profits for the quarter ending June 30, 2002, largely the result of changes to its investment portfolio. The Insurance Corporation of B.C. (ICBC) saw a net profit of $39.6 million for the second quarter of this year, compared to $8.5 million profit for the same period in 2001. The result is net income for the first six months of the year of $9.2 million, versus a net loss of $30.6 million at the same point last year.
Total premiums written were up 12% to $730 million for the most recent quarter, from $651 million for the second quarter of 2001. However, insurance operations saw an underwriting loss of $67 million, against a loss of $75 million last year during the same time.
Claims costs continue to rise, the corporation reports, up to $632 million for the quarter, from $571 million in Q-2 2001. "The rising trend in claims continues to be a major concern for the Corporation," states a release. "This year has seen a continuing increase in both the frequency and severity of crashes and at the same time, car thefts have increased 14% over last year."
Gains came from the investment side, with investment income up to $129 million versus $107 million for the second quarter last year. ICBC outsourced the management of its Canadian equities portfolio, and linked that portfolio to the S&P/TSX Composite Index during this most recent quarter. "The adjustment of the portfolio to the Index resulted in the disposition of a number of holdings and was responsible for most of the exceptionally high gains on sale of investments in the quarter."
As a result, about $30 million of the gains budgeted to be achieved in the second half of 2002 have already occurred.

(Thanks to CanadianUnderwriter)

(see headlines)

IBC WORRIED ABOUT INCREASED TOW CHARGES

The Insurance Bureau of Canada (IBC) is the national trade association representing property and casualty (P&C) insurance companies in Canada. Although a voluntary association, our member companies account for nearly 90% of all private P&C insurance premiums in Canada.

IBC has serious concerns with the proposed increase in towing fees. A 53.8% increase to $200 above the current Toronto street rate of $130 would have significant impact on Ontario drivers who are already facing increased renewal premiums. The proposed rates far exceed normal inflation and will cause upward pressure on premiums.

Towing costs are incurred in about 20% of all automobile physical damage claims paid by auto insurers. There were almost 190,000 reported collision claims in the Toronto area in 2001.The average claim for towing and storage in the insurance industry now stands at approximately $450 in Ontario and is likely higher in Toronto itself. This amount is greater than the salvage value of many vehicles made before 1993.

No documentation has been provided to justify the proposes towing charge increase, other than matching the excessive $200.00 tow rate now used in Mississauga and Brampton. In our view, given that any increased costs will ultimately be borne by all auto insurance policyholders, it is essential that any increased fees be supported by real increases in operating costs by tow truck providers.

It is reported that City of Toronto staff had suggested that a 20% fee increase would be more appropriate based on increased expenses.
Any increase in towing charges cannot be considered in isolation. The City of Toronto must also review the following related issues before making any decisions in this regard:

1) CONTROL OF TOWING FEES ON ALL TOWS AND RELATED COSTS
In addition to basic towing charges, insurers are encountering excessive storage levies and fees on secondary towing which can add enormously to the total bill paid on behalf of policyholders. These related charges must also be regulated including charges for hazardous waste and administrative expenses.

2) ENFORCEMENT OF MANDATORY DROP
Under Toronto's by-law vehicles towed to a Collision Reporting Centre (CRC) must be dropped before being towed to another location. Unfortunately insurers have many examples where the vehicle has not been dropped at the CRC but has been driven straight away to a secondary location. This situation removes the opportunity for a claimant to seek proper information before deciding where his/her vehicle should be repaired. The City must strictly enforce the existing by-law in this respect.

3) BAN ON INVOLVEMENT BY PARALEGALS IN TOW TRUCK OPERATION
Insurers have discovered a number of cases where some tow truck operators are also operating as paralegals. This is a clear conflict of interest and it is essential that this practice be banned. In addition, some tow operators have been found to sell the personal information of accident victims to paralegals and others involved in accident benefit claims. These forms of kick-backs or finder's fees on the part of tow truck operators must be prohibited in order to assist in controlling the spiraling costs of accident benefits claims. Auto insurers are encountering huge increases in accident benefits payments because of such inflated or fraudulent claims. The industry paid over $1 billion in medical and rehabilitation costs in Ontario in the year 2000 alone, putting enormous pressure on auto insurance premiums for all policyholders.

4) INCREASE IN THE NUMBER OF CARS TOWED THAT SHOULD NOT BE TOWED
Insurance companies are encountering al least 5% of towed vehicles that were safe to drive away from the accident scene. Sanctions need to be in place to deter tow truck operators from needlessly towing vehicles.

5) CUSTOMER EDUCATION
Motorists involved in accidents are often not in a position to make informed choices about towing and storage arrangements. Nor is there any opportunity for ordinary market forces to come into play to regulate prices. Our customers are at the mercy of tow truck operators who are left largely unaccountable for their service. We would appreciate working with the City of Toronto to draw up a pamphlet or other educational materials to better inform motorists.

IBC has established a recent sub-committee to study current Ontario towing practices and report its findings and recommendations. A more cost-effective system which benefits consumers and is fair to all stakeholders is sorely needed.

In summary, we would like to see justification for any increased towing fees as well the establishment of maximum fees for storage, secondary towing and other fees related to vehicles that have been in accident before any change to the current fee limits are approved. As well, we urge you to address the other related issues we have raised in order to help control the insurance costs faced by all Toronto drivers.

(see headlines)

July 24, 2002

The Ontario Superior Court of Justice today issued a wind up order for Markham General Insurance Co. This move follows application earlier this week by the Financial Services Commission of Ontario (FSCO) to seize the assets of the insurer.
The court has appointed Deloitte and Touche Inc. as the provisional liquidator. Markham General was licensed to conduct business in Ontario, British Columbia and Alberta. The bulk of business written by the company was Ontario auto. The insurer ceased writing business mid-June of this year, when existing policies were also cancelled. The Property and Casualty Insurance Compensation Corp.'s (PACICC) president Alex Kennedy says claims will be considered relating to events that happened on or before the date of cancellation of Markham General policies.

from Canadian Underwriter www.canadianunderwriter.ca

(see headlines)

July 22, 2002

The Financial Services Commission of Ontario (FSCO) has issued notice that the regulator will take possession of the assets of troubled insurer, Markham General Insurance Co. The insurer recently cancelled active policies and ceased writing new business.
FSCO says its action against Markham had followed close monitoring of the company's financial affairs, and after having been supplied by financial records from the board of directors, it became apparent that the assets were insufficient to warrant the insurer remaining in business. "The superintendent took this action to protect policyholders because Markham General Insurance Co. could no longer meet its obligations." FSCO observes that policyholders will receive some protection of their interests through the insurance industry's Property and Casualty Insurance Compensation Corp. (PACICC).

from Canadian Underwriter www.canadianunderwriter.ca

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CO-OPERATORS GENERAL INSURANCE NEWS RELEASE

May 24, 2002

Higher premiums helped Co-Operators General Insurance Co. cut its losses sharpely in the first quarter, the personal and property insurer said today.

Co-Operators General said it lost $2.2 million or 18 cents a share, in the three months ended March 31, compared with a loss of $20 million, or $1.07 per share , for the year-ago period.

The company, a major auto insurer, reported generated premiums of $336 million, up from $321 million in the first quarter of 2001.

"Although far from satisfactory, these results are a welcome improvement over the devastating loss incurred during the first quarter of 2001, " said chief executive Kathy Bardswick.

Co-Operators had requested a 6.92% increase in its premiums for the last quarter of 2001 from the Ontario Financial Services Commission.

Shares of Co-Operators General closed unchanged at $2.40 on the Toronto stock market.

(see headlines)

In the wake of industry speculation on the fate of Internet-based insurer Markham General, the company has told its brokers that all existing policies will be cancelled as of 12:01 a.m. on June 15.

In a letter to brokers approved by Financial Services Commission of Ontario (FSCO) Superintendent Philip Howell, and dated April 12, the company says that notices of cancellation will be sent to all policyholders, likely in about two weeks. Cancellation credits will be calculated on a pro-rata basis, the letter states, and refunds issued following the notice to policyholders.

Rumors had been circulating in the industry that such a move might be taken, after Markham General's financial woes came to light just weeks ago. The company was suffering a capital crunch, having written large amounts of business, specifically in Ontario auto, where losses have been heavy.

The privately-held company, started in 1999, was a virtual operation, intended to use the Internet to write business more cost-effectively through independent brokers. Just weeks ago, the company admitted that it had fallen below FSCO minimum capital requirements, and instructed brokers to stop writing new business.

Brokers, who may have hoped the company would sell its book of business to another insurer, will now be scrambling to place the business elsewhere before policies are cancelled mid-June. However, the future of the company's operations has not yet been divulged.

In an interview last Friday, the date of the letter sent to brokers instructing them that existing policies would be cancelled mid-term, Markham founder Brian Johnston refused to comment on the situation.(courtesy of Canadian Underwriter)

(see headlines)

Steve Arnold
The Hamilton Spectator

More than 12,000 Hamilton residents are scrambling to find new car and business insurance after the provincial regulator asked their company to cancel all outstanding policies. Policies of Markham General Insurance Co. were sold by a number of brokers, including the much-advertised Believer Plus. Markham General was asked to go out of business by the Financial Services Commission of Ontario because its cash reserves fell below legal requirements.
Across the province, as many as 80,000 policyholders could be affected.

Industry watchers warn that other insurers may also go under, victims of a wave of turmoil in the insurance business.

Hardest hit by the Markham General decision is Hamilton-based Believer Plus, a company pitched in a series of radio advertisements by colourful hockey commentator Don Cherry. It has 10,000 customers who must now be placed with new insurers, most at higher premiums.

"It's a real problem, but it isn't a problem that we won't be able to overcome," said John Mitchell, of Mitchell and Abbott Group of brokers which includes Believer Plus. "This is something we may see in the industry again before the end of the year."

Markham sold policies through a network of 80 brokers across Ontario, including Mitchell's groups, Dalton Timmis Insurance of Hamilton and Tripemco Insurance of Burlington. Among them, they sold more than 12,000 of the company's low-priced auto policies targeted to good drivers.

Those policies will stay in effect until June 15. Policyholders will have to find new insurance, which shouldn't be a problem, but most will face premiums hikes of as much as 15 per cent.

They will also be reimbursed for payments made for coverage beyond June 15.

Mitchell explained that its low premiums may have been one of Markham's major problems -- the $83 million in premiums it brought in simply wasn't enough to cover claims and maintain the roughly 30 per cent of total policy value it's required to have in liquid assets. Industry sources say Believer Plus alone accounted for roughly $14 million of Markham's premiums last year.

The problem of inadequate rates was aggravated by the stock market slump, which meant the company's investments didn't make up the difference. Some industry experts are blaming provincial regulators and politicians for not changing Ontario's mandatory insurance to help curb the soaring cost of medical treatments for minor injuries, and to speed up approval of rate increases.

Trouble became a crisis, however, in the wake of the Sept. 11 terrorist attacks when insurance companies were hammered by a double blow -- the firms that insure insurance companies against major losses suddenly cut the amounts they would cover and drastically increased the fees they charged.

It works like this. If an insurance company writes a policy for $1 million, it only covers the first $100,000 of the loss and buys re-insurance to cover the balance.

Since Sept. 11 however, premiums for that secondary coverage have tripled and the maximum amounts covered have been slashed.

The damage all those factors did to the balance sheets and bottom lines of insurance firms means more could soon follow Markham out of the business, Mitchell said.

"I don't believe we've seen the end of this sort of thing," he said. "We may see something like this again before the end of the year."

Rowena McDougall, spokesperson for the Financial Services Commission of Ontario, said Markham General is voluntarily cancelling all its business, auto and home insurance policies after a quarterly report filed in February showed it didn't have the required amount of cash on hand.

"Markham came to us and we started working with them as soon as we realized there was a problem," she said. "We consider this a very successful resolution of the problem."

McDougall said after the cash shortfall was discovered, the company was asked to stop writing new policies and was given one month to find new capital. When that search failed, it was asked to shut down.

Until Believer's current policy holders are placed with new coverage, Mitchell said listeners won't be hearing any more of Cherry's commercials. But they will be back, selling policies from a new insurance company.

"We have to take care of our current clientele. We can't even think about writing any new business," he said.

Markham General says it still has enough money to make pro rata refunds for policies cancelled mid-term and to pay claims for wrecks and injuries.

Ken Watson, an interim manager parachuted in by the insurer's principal financial backer, said Dailey Capital Management Inc. of South Port, Conn., will stick around to keep things going until policies are cancelled. It's also possible the company will be revived.

"We are trying to resurrect the business in terms of recapitalizing it," said Watson.

Thousands of other drivers were already being moved around after Zurich Insurance sold its personal lines business in Canada to ING Group NV, and clients of CGU Insurance Co. of Canada were transferred to its sister Pilot Insurance Co.

You can contact Steve Arnold at sarnold@hamiltonspectator.com or at 905-526-3496.
(article courtesy Hamilton Sepctator)

www.thehamiltonspectator.com

(see headlines)

April 19, 2002

An initiative by the Ontario government and the Insurance Bureau of Canada (IBC) to get uninsured vehicles off the road has been delayed by a few roadblocks, the IBC says. Most notably, the change in leadership of the Conservative government, and the strike by Ontario's public employees, have put the project on the backburner.

Nonetheless, the IBC is encouraging members to prepare for the project's implementation after it is put through in legislation. Through the program, the provincial Ministry of Transportation (MTO) will electronically confirm the coverage of private passenger vehicles at the time of license plate renewal. This will be done using information stored by the IBC.
The IBC recently completed its second beta test of Critical Coverage Reporting (CCR), with 500 users, including brokers, agents and insurers, sending time-sensitive changes to mandatory insurance coverage to the IBC.

The IBC plans to continue pursuing the formalization of the project through legislation with new Ontario Transportation Minister Norman Sterling and will provide a revised rollout schedule at a later date.

(see headlines)

Road safety, reducing fatal and serious injury auto accidents, and the rising costs of health care in Canada are important priorities facing the property and casualty insurance industry.

Putting safe vehicles back on the road following repairs is also a top priority. In fact, Canadian P&C insurers have put a number of programs in place to audit the repair of vehicles. These programs may vary from company to company, but common practices are followed.

Some of the most common practices include:

1. Electronic photo imaging - The collision repair facility immediately sends photographs of the damage to the insurance companies, along with a completed estimate, listing the parts and labor required for repair.

2. Random re-inspections - These inspections are carried out by insurance companies. During the re-inspection process, a vehicle is often checked both before and after the repair, and all old parts must be accounted for. Also the parts replaced are verified by a review of the original invoice.

3. Voluntary branding - The Ontario Ministry of Transportation (MTO) plans to introduce a mandatory branding program some time in 2002. Many companies are already branding vehicles that have incurred severe structural damage. The branding program is designed to keep unsafe vehicles off the road.

One of two brands is shown on the vehicle ownership - "irreparable" and "salvage." A vehicle branded "irreparable" can be used as a source for parts or scrap only. The vehicle's structural damage is too extensive to repair safely for road use. A vehicle branded "salvage" can be safely repaired but cannot be used on the road until it passes a very rigid structural inspection approved by MTO. If the vehicle passes the inspection, it is branded "rebuilt" and approved for road use.

4. Preferred or Direct Repair Programs - While consumers have the right to take their vehicle to any shop, many take advantage of the insurance company's "preferred" or "direct repair program (DRP)". Insurance companies guarantee the workmanship for as long as the customers owns the vehicle if repaired at a preferred or direct repair shop. Additionally, preferred or direct repair shops must have a good reputation for quality repairs, and must be properly equipped to repair structurally damaged vehicles.

5. Audit programs - Insurance companies are equipped with various electronic audit programs featuring triggers that are able to select files for review.

The Canadian P&C insurance industry continues to work with the Collision Industry Standards Council of Ontario (CISCO), which has developed an accreditation and self-management program for collision repair facilities. The insurance industry supports the proposed standards, which include a compliance monitoring and enforcement component. For more information, visit The Collision Industry Action Group web site at www.ciia.com .

Consumers can also obtain more information by calling the Insurance Bureau of Canada's Consumer Information Centre at 1-800-387-2880.
(see headlines)

Supreme Court of Canada Ruling May Mean Millions in Refunded Auto Deductibles

March 18, 2002

Consumers who had their cars written off, but paid the deductible on their policy, may be in for a refund.
Lawyers in Toronto, Calgary and Vancouver have filed a number of lawsuits against car insurance companies in courts in Ontario and Alberta. As many as two million Canadians in six provinces and the three territories who have written off their cars in the last 10 years could be eligible for refunds of their insurance deductibles ranging from $250 to $50,000 as a result of a recent Supreme Court of Canada ruling.
The lawsuits involve insurance deductibles withheld by the companies for cars totalled in collisions. Anyone in Canada whose car was written off and who paid a deductible could be affected.
On March 8, 2002, the Supreme Court of Canada refused to hear an appeal by the Co-Operators General Insurance Company, meaning an Ontario Court of Appeal decision that policy holders whose cars are written off should get the full value of their vehicle, and that no deductible should be applied.
"The court ruling states that people must be paid the actual cash value
of their car, not the actual cash value less the deductible," says Kirk Baert of the Koskie Minsky law firm.
Bill McNally of McNally Cuming Allchurch stated that "the Supreme Court of Canada has decided that they do not want to tinker with the Ontario decision. It means that for all intents and purposes, it's the law of the land.
"It doesn't seem like a lot of money, but when you consider there are thousands of people involved, it amounts to a lot of money", McNally said.
David Klein of Klein Lyons said that "about 100,000 people total their cars annually in the affected provinces, so many people may have a claim." Affected policyholders should call to find out if the insurance company they deal with has been sued.

(with thanks to www.autoserviceworld.com)

More information from National Post

More information from McGowan Elliot & Kim

(see headlines)

Low earnings resulted in increased prices at most insurance companies, with a premium revenue increase of 8 percent. At the same time a 12 percent surge in insurance claims all but wiped out the revenue hike.

"The new data are troubling because they show that the industry's financial health did not improve at the end of the year," says Paul Kovacs, IBC's chief economist.

"Insurers have been losing money in Atlantic Canada for 9 of the last 12 years -- including the last six consecutive years. Results are also poor in Ontario and Alberta," adds Kovacs. By contrast, the Quebec insurance market is by far the healthiest in Canada.

"The industry was caught last year between a rock and a hard place. Governments have not yet given the industry authority to manage and control its healthcare expenses and medical claims. Such costs have been on the rise by 14 percent annually for more than a decade. Add to that falling interest rates and volatile equity markets, and the result is lower earnings."

"Four consecutive years of weak profits are nature's way of saying that more adjustments lie ahead for insurers and their customers," Kovacs says. "For insurers, the priority needs to be material improvement in underwriting performance and profitability." IBC believes the 17 percent growth in industry direct written premiums over the past four quarters is evidence that the adjustment has begun.

Copyright 2002 by CollisionWeek. All rights reserved. No part of this publication may be reproduced or transmitted by any means without permission in writing from the publisher.

(see headlines)

March 8, 2002

The victory of one policyholder in a case involving auto insurance deductibles could give rise to large numbers of Canadians seeking similar action against insurers. A Supreme Court of Canada ruling yesterday denies Co-operators General the right to appeal a lower court judgement forcing the insurer to return the deductible on a vehicle destroyed in a car crash. Although that decision alone means the company will have to pay an Ontario man, Gary McNaughton, $1,000, insurers fear the decision will cause an onslaught of similar cases now.
The case involved McNaughton Automotive, which owned a fleet of vehicles insured by a commercial policy, one of which was damaged in a collision. Co-operators paid McNaughton $8,100 minus a $1,000 deductible, took the vehicle and sold it off for $1,900. McNaughton filed a class action lawsuit on behalf of all Co-operators auto policyholders in Ontario, Alberta and the Maritimes.
The Ontario Court of Appeal had ruled that the insurer should have waived the deductible in light of having sold the vehicle. This decision would apply only to Ontario cases. The Supreme Court's decision not to hear an appeal means that policyholders going back years can join in similar suits to recapture their deductibles in similar situations.
"For some automobile insurers, particularly direct writers, if classes [for lawsuits] were successfully certified, the potential payout to the class in addition to lawyers fees could amount to millions of dollars," writes lawyer Bill Blakeney in a recent edition of Canadian Underwriter, referring to the McNaughton case. He says that as a result of the Ontario decision "the property/casualty industry faces one of the largest potential class actions in history".

from Canadian Underwriter www.canadianunderwriter.ca

More recent information from Canadian Underwriter

(see headlines)

February 22, 2002

The Supreme Court of Canada has restored a jury award of $1 million in punitive damages made against Pilot Insurance Co. The Whiten v. Pilot case has been closely watched by insurers due to the magnitude of the punitive award.
A legal source serving the insurance industry says the Supreme Court's ruling has set a new precedent in the application of punitive awards in Canada. Insurers will have to increase their contingency reserves to deal with such costs, he adds, with future punitive court awards expected to rise in both number and value.
Daphne and Keith Whiten initially sued Pilot for $125,000 in punitive damages after the insurer refused a claim for the loss of their house due to fire. The insurer alleged that the couple had destroyed their own home with the intent of committing insurance fraud. A jury then awarded the Whiten couple an amount of $1 million in punitive damages. This outcome was appealed by Pilot, with the result that the Ontario Appeal Court reduced the damages to $100,000 in 1999. In response, the Whitens cross-appealed the Ontario court decision, resulting in the latest $1 million outcome. In addition to the $1 million in punitive damages, the Whitens also received $320,000 in court costs and $345,000 for the loss of their house.
In a statement released after the Supreme Court ruling, Pilot's president Stuart Kistruck says that, while the company recognizes the decision of the court, it is also disappointed with the fact that the punitive award was raised back to the level previously determined by a trial jury. "To maintain the integrity of the insurance business for both policyholders and the industry, it is the duty of every insurer to verify claims made. We believed in this case [Whiten] that there was sufficient initial evidence to take the position that we did. We fear that the court's decision on this case may have ramifications on future cases of insurer/policyholder resolutions that will have a very negative effect on what is a very smooth functioning insurance system in Canada, for all sides."
from Canadian Underwriter Magazine

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February 20, 2002

British Columbia's public insurer is reporting a loss of $251 million last year, but is predicting a close to break-even 2002. This compares with a net income of $139 million in 2000 for the Insurance Corporation of B.C. (ICBC).
In fact, 2000 saw income of $357 million, but $219 million of this was paid back to motorists as a dividend in early 2001.
A good piece of the loss in 2001 is due to a financial hit on the corporation's investment in a real estate venture in Surrey, B.C., with another $40 million due to restructuring costs as ICBC reduced its staff by almost 1,000. More than two-thirds of those staff members opted for voluntary severance packages.
The other increased cost was due to rising claims, which went up $105 million in 2001 as compared with 2000. Total claims rose 1.1 million, up almost 8% over the year prior, although little of the increase was in accident injury claims, which have hit other provinces hard. At the same time, positive claims development from prior years' claims tailed out in 2001. While in 2000 the company saw income of $266 million, in 2001 it made a negative adjustment of $2 million for prior year's claims.
Investment income also dropped last year, to $454 million, as compared with $626 million the year prior.
ICBC did introduce rate increases last year, averaging 7.4%, and expects those increases to show up in the bottom-line for 2002 and 2003. Added to that are the staff cuts and building closures, which the corporation expects to bring efficiencies in the coming year.

from Canadian Underwriter Magazine

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The Supreme Court of Canada struck a blow for all insurance consumers yesterday by sending a $1-million message to insurance companies that act in bad faith. The country's top court reversed an earlier ruling and awarded $1 million in punitive damages to a Haliburton couple who had been falsely accused by their insurance company of burning down their home.
It's the largest award for punitive damages in Canada and is seen as a victory for any Canadian who holds an insurance policy.

It's also a victory for Hamilton lawyer Bob Munroe, who argued part of the case and helped convince the Supreme Court that there should be no cap on punitive damages when a company blatantly and maliciously abuses its power.

"It's a terrific victory for insurance consumers because it gives policy holders protection against those rare instances when powerful insurance companies don't live up to their obligations under the insurance contract," said Munroe, a civil litigation specialist who was acting on behalf of the Ontario Trial Lawyers Association.

"This decision is not something that is bad news for the insurance industry because the court is very clear in this decision that the type of conduct that is being punished is extreme conduct," he added.

"Secondly, they set out very carefully the factors that should be taken into account to ensure that the award is not out of proportion."

The case centred on the issues of good faith, the special relationship that exists between an insurance company and a policy holder, and what should be an appropriate penalty when a company acts in an "exceptionally reprehensible" manner, as the Supreme Court described it.

It began in January 1994 when Daphne and Keith Whiten were forced to scramble out of their burning house into a frigid -18 C night wearing only their pyjamas. Their three cats perished in the fire and Keith, barefoot and freezing, ended up in hospital with frostbite.

The Pilot Insurance Co., which insured their home, decided the fire was arson and set about trying to prove its case as it denied the Whitens' claims.

The Whitens eventually sued Pilot for their losses and asked the court to assess punitive damages against the company. At the original trial, Pilot admitted the jury could reasonably conclude that the company either withheld information or provided misleading information to its experts.

Disgusted by the company's conduct, the jury awarded the Whitens $345,000 for their losses and another $1 million in punitive damages.

But the Ontario Court of Appeal later reduced the punitive portion to $100,000.

That decision was then appealed to the Supreme Court, which decided 6-1 to uphold the original $1 million award.

"The jury decided a powerful message of denunciation, retribution and deterrence had to be sent to (Pilot) and they sent it," the Supreme Court said.

"Insurance contracts are sold by the insurance industry and purchased by members of the public for peace of mind. The more devastating the loss, the more the insured may be at the financial mercy of the insurer and the more difficult it may be to challenge a wrongful refusal to pay the claim."

The legal principle of good faith requires the insurer to put the policy holder's interests on par with its own interests. Neither side is supposed to seek an unfair advantage in living up to the contract.

When policyholders have to call on insurance, they are already in a vulnerable position through the loss of health, employment or property.

Because of this special need for good faith between the insurer and a policyholder, it's all the more serious when there are problems of bad faith.

"The obligation of good faith dealing means that the (Whitens') peace of mind should have been (Pilot's) objective," said the Supreme Court, "and (their) vulnerability ought not to have been aggravated as a negotiating tactic.

"It is this relationship of reliance and vulnerability that was outrageously exploited by (Pilot) in this case."

Pilot released a statement yesterday expressing disappointment with the decision, but said it will pay the damages immediately.

The Supreme Court also rejected an argument by the Insurance Council of Canada that there should be a cap on punitive damage awards. The council suggested large awards would hurt consumers by driving up insurance premiums.

Whiten v. Pilot Insurance Co.
www.lexum.umontreal.ca/csc-scc/en/rec/html/whiten.en.html

You can contact Steve Buist, of the Hamilton Spectator who wrote this story at sbuist@hamiltonspectator.com or at 905-526-3226.

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AUTO INSURANCE RATES UP AGAIN IN FOURTH QUARTER 2002
Average increase approved is 5.17%

February 8, 2002

Ontario's private passenger auto insurance rates rose again during the quarter ending December 31, 2001
The rate applications approved during the fourth quarter of 2001 indicate an average increase of 5.17 per cent when weighted by market share for those insurers with rate changes. This compares to an average increase of 4.92 per cent for rate applications approved in the quarter ending September 30, 2001. Insurers with a total of 64.5% of the total market share applied for changes to their premiums charged.
On a year over year basis, based on the renewal effective date of rate changes, rates for private passenger automobile insurance for the total market have increased by 7.85 per cent.
Some approved rates and the insurer's market share:

For more information please see : Ontario Insurance Rate Increases

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ING and Zurich form Canadian alliance in asset swap deal

December 1st, 2001

ING Canada and Zurich North America Canada have concluded a deal through which the Dutch financial services company will acquire the latter's property and casualty personal lines insurance book. In turn, Zurich will renew the large commercial and corporate risks previously underwritten by ING. No value has been attached to the deal, and it appears the arrangements agreed to are a form of "asset swap" type transaction. A joint statement released by the two companies describes the deal as a "strategic alliance" boosting their combined Canadian p&c marketshare to 15%.

Both ING and Zurich will market all of the insurance products available between the two companies via their broker distribution networks. ING will, however, retain its commercial business not falling into the category of "large risks". It is expected that the deal will increase ING's insurance premiums by $460 million to a total for 2002 of about $2.8 billion – pegging the group's share of the insurance market at around 12%. Zurich expects its annual premiums for 2002 will rise to approximately $550 million. The deal will also boost Zurich's stake of the Canadian large commercial/corporate risk market to around 21%.

Around 1,000 Zurich employees involved with personal lines business will now become part of ING's work force, the companies say in a statement. Zurich will retain its life business in Canada as well as World Travel Protection, a wholly-owned subsidiary. Neither company has revealed whether the deal will result in cost-cutting measures. "The strategic alliance and its expanded distribution network will allow us to improve the scale of our activities and offer a more compelling value proposition to insurance brokers," says ING president Claude Dussault. Zurich president Barry Gilway adds, "we [Zurich Canada] have a leadership position in the large commercial and corporate business, and we play a pivotal role on behalf of international corporate customers operating in Canada".

Thanks to Canadian Underwriter

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Auto Repair Perspective: Work For, Not Against

By John Norris, executive director of the Hamilton District Autobody Repair Association

The world of repair shops and front-line collision damage appraisers is very different to that of the corporate insurance industry. A closer understanding of the challenges faced by both sides is clearly needed. In fact, with both bodyshops and insurers facing extremely tight operating margins in the highly competitive auto repair market, it can only make sense that both the body shop owner and insurer should work together rather than against each other.