N&L Pub Property

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  1. Newfoundland homeowner insurance:
    • less than 1% of the average household expenditure
    • price of insurance in NL is similar to Atlantic, which is lower than the rest of Canada
    • taxes on insurance are higher in Atlantic
    • analysis shows that customer are shopping around to get the lowest premium
    • premium growth followed housing prices and home replacement costs
  2. Homeowner’s insurance issues:
    • in 2000-2003, insurers did not renew some policies to decrease exposure by geographic area. This resulted in a slight availability issue, but not price increase
    • hard to place risks: industry voluntarily set up a an innovative program to solve this
    • electrical wiring: only need certified electrician’s report, possibly minor modifications
    • oil tanks: if meet standards, insured; other require changing the tank; communicate risks
    • galvanized plumbing: some companies insure if used only for waste lines 
    • student housing: coverage is available in the non-standard market
    • wood stoves: coverage is provided, if installed and maintained properly, and certified
  3. Flaws in MOW’s analysis
    • used all personal property data from OSFI, but homeowner’s loss ratio is 6% higher
    • data used didn’t include all relevant liability claims (+17.5%)
    • ROI assumption of 5% is too high for current environment; 4% more reasonable
    • expense ratio of 35% is average across Canada; should use personal property ratio
    • also expense ratio not adjusted to reflect higher premium tax in NL
    • after adjustments, COR is 100.1% instead of 81%
  4. ROE in NL homeowner industry
    • must account for possibility of catastrophe (2001 tsunami wiped out next 3 years’ profits)
    • insurance is cyclical, so one good year of return must not provoke over-reaction
    • 5-year return is less than many other industries, including banks, hardware stores, etc.
    • even 1 year 18% return is slightly lower than same year’s financial services return of 20%
Card Set:
N&L Pub Property
2014-04-12 20:27:01
Misc Govt Programs
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