Mapping the mutuals and co-operative insurance movement in the Ontario and Canadian context: challenges and opportunities for the social economy

Transcription

1 Mapping the mutuals and co-operative insurance movement in the Ontario and Canadian context: challenges and opportunities for the social economy Project #31 Supervisor: Jack Quarter Community Partners: OMIA, CAMIC, Imagine Canada Researcher: Antony Chum Contact info: Social Economy Centre SOCIALECONOMY.UTORONTO.CA

2 Click to edit Introduction Master title style Research Questions 1) To what extent do mutuals impact (and are impacted by) the social economy in Ontario and Canada? 2) What is the size and scope of mutuals compared to other insurance companies? How do they compare to one another? What are the geographic and social characteristics of some communities that they serve? 3) How do mutuals function as (a kind of) co-operative? What are their historical roots and major challenges and opportunities that confront them today? Definitions Mutuals: community-based insurance companies that are owned by their policyholders - typically property and casualty (P&C) insurers - typically related to the agricultural industry Co-operative Insurers: owned by members but not necessarily policyholders - may be associations e.g. Co-operators, Wawanesa, and Desjardins Insurance are subsidiaries of cooperatives

3 Click Background: to edit Master Ontario Mutuals title style lack of access to fire insurance protection in Upper Canada in 1832 led to an alternative insurance model crafted by farmers of the time. through lobbying by farmers, mutual insurance legislation was first enacted in 1836 authorizing the establishment of mutuals over seventy mutuals were operating in Ontario by the 1880 s - delegates met in Toronto in 1882 and formed the OMIA (not all mutuals in Ontario are members) reinsurance mechanism began in 1959: mutuals in OMIA were required to cede all of their reinsurance to the association s own mutual the coverage expanded to wind-related damage and other perils in the 1950s and 1960s, to liability and auto insurance in the 1970s, and commercial coverage such as boiler insurance and group benefits in the 1980s

4 Click to edit Rationale Master title style Not enough is written on mutuals despite their significant presence in the Canadian P&C market (11.5%) and the Ontario P&C market (12.93%). Share of P&C Market in Canada: Mutuals, stocks, and non-mutual co-op insurance While mutuals have historically served rural/agricultural communities, recent trends of agricultural agglomeration, conversion/loss of farmlands, and entrance of foreign competition have changed the way many mutuals operate. We want to investigate how mutuals function as an alternative and adapt within a largely market-based economy and its changing impact on the social economy.

5 Click to edit Project Master Methods title style! semi-structured phone interviews conducted with 31 Canadian mutuals! literature review of insurance trade journals, academic journals, legislative documents on co-operatives in the insurance market.! secondary analysis of data compiled in the 2006 Statistical Issue of Canadian Insurance (a report of the Canadian Insurance Market)! mapping the geographic locations of mutuals offices in Ontario followed by a spatial analysis! analyzing financial statements of all Ontario mutuals (82) and the publicly disclosed aggregated financial data of OMIA and CAMIC.

6 Role Click and to participation edit Master of title community style partners " formulating research questions and methods of data collection and dissemination " mutuals associations promoted the project to managers at the quarterly meeting and through s " informal networking " due to the competitive nature of the insurance market, establishing trust was an ongoing issue

7 Click to edit Master title style Main Findings: Types and size of mutuals Two large mutuals control 64.21% of the mutuals market, while 104 mutuals control only 35.79%. Smaller mutuals have the competitive advantage of knowing their residents to enable them to assess their risks with more accuracy, large mutuals have little knowledge of their communities and are similar to stock companies in this regard. Represents 104 mutuals across Canada Small mutuals focus more on property insurance and less on auto insurance reflecting its roots in rural agriculture. Large mutuals focus on auto insurance, as do large insurance companies owned by co-operatives.

8 Click to edit Master title style Main Findings: Geographic Dispersion 1 Ontario has 56.68% of Canada s direct written premiums from mutuals, a greater share than its population of 38.9% and its GDP of 40.7%

9 Main Dispersion ClickFindings: to editgeographic Master title style2 The size of mutuals has a strong correlation to whether its offices will be based in rural or urban areas: with smaller mutuals in rural areas and bigger ones (and co-op insurers) in urban areas.

10 Click to Implications edit Master for title the style Social Economy Function as an alternative to stock company: - mutuals do not acquire external capital like stock companies through market means - grow by expanding their member base and premiums - much less affected by market fluctuations: seen in the industry as in it for the long haul Marketization and urbanization of mutuals: - smaller mutuals expand their insurable geographic region and to increase their number of insurance products to stay on top of the game - trend of movement of these large mutuals from rural to urban areas - the size of mutuals has a strong correlation to whether they primarily serve rural areas - continuing shrinkage of farm/agricultural market in Canada (fewer and larger companies owning more and more of the market share) and foreign competition assert economic pressure on small mutuals that primarily serve rural communities

11 Click Conclusions to edit Master and Next title Steps style While the larger mutuals market experiences growth in the Canadian P&C market, foreign competition, urbanization, marketization, agglomeration/loss of farms have disproportionately negative effects on smaller mutuals. Smaller mutuals benefit tremendously through their membership in national & provincial associations: especially through a guaranteed reinsurance plan. Recent debates of expanding the category of mutual insurance to include other cooperatives are among the inclusionary practices to expand the associations. Over the past two decades many mutuals have largely shifted their primary focus from rural needs to the needs of a diverse group of members/owners, more innovative strategies are needed to keep up with the competition while maintaining the bonds and relationships with the communities from which they grew.