Insurance profits soar despite ‘weak’ industry
By Anton Vidgen
Canada’s insurance companies raked in $2.6 billion in
profits in 2003 — a whopping 775 per cent jump over the
previous year — but many are slamming the industry for
raising premiums after pleading financial difficulty.
Consumers such as the University Students’ Council have
seen skyrocketing rates and an unwillingness by insurance companies
to take on high risks such as providing alcohol coverage, said
USC general manager Mark Sellars.
This has forced the USC to cut costs elsewhere and even pass
the burden on to clubs in the form of higher prices for licensed
events, and stricter regulations such as the Campus Alcohol
“There’s obviously insufficient competition,” Sellars
said of the possible reason behind the high premiums. “I
think there is a dearth of companies in the market right now.”
Sellars said he believes some companies are “gouging” consumers
by charging exorbitant rates. “I suspect there are questionable
practices in terms of pricing,” he said.
But John Karapita, a spokesperson for the Insurance Bureau
of Canada — the group that represents the 207 companies
in the industry — disputed claims that insurers were
purposely hurting consumers.
“It’s important to put the profits within a certain
context,” he said. “Some people have come to believe
these are excessive profits, but that’s just doing business.”
Karapita said weak revenues and the sluggish economy of two
years ago drastically reduced the financial security of the
insurance industry, forcing them to raise premiums to replenish
capital reserves. But the stronger-than-expected performance
of the past year led to higher revenues from investments, in
addition to the healthy draw from premiums.
“What will likely change as a result of a return to
profitability is that you’ll have companies that will
be more willing to take higher risks,” he said. As a
result, there might be more competition, which will subsequently
lead to lower prices.
If the competition increases and premiums fall, USC VP-finance
Rohan Belliappa said this could bode well for clubs. “If
insurance companies can reduce these rates, it will probably
reduce a lot of the paperwork and procedures currently necessary
to satisfy our insurance companies,” he said.