Insurance Companies profit HUGE in Q2
Insurance firms' profits no accident
By LICIA CORBELLA, Editor
Those poor starving insurance companies at long last released their second- quarter profits ... er, I mean numbers.
And lo...surprise, surprise, things are looking up ... waa-aay up.
Don't get me wrong, I'm a big supporter of profits. After all, I wouldn't want my insurance company to go broke and I wouldn't want this newspaper to go broke, either. Profits, to quote Martha Stewart, "are a good thing."
But insurance industry numbers prove there's no reason to pull out a hanky for the insurance companies and more importantly to remove the rights of innocent accident victims either -- as industry bigwigs and provincial Tories are aiming to do.
The second-quarter net profit for insurance companies in Canada was $644 million -- which is nearly 500% higher than the $110 million collected in the same quarter last year.
We're not talking gross revenue here, but net profits!
For the first half of 2003, the net profit is $1.11 billion, which far exceeds last year's net profits of $340 million and the net profit of 2001 ($465 million) combined.
But insurance industry spokesman Jim Rivait is still not pleased.
"It's a pretty lousy return on equity," says Rivait of the 5.9% return, saying 10% to 12% would be more reasonable.
Well, it's a darned site better than the return on many investment portfolios across the country, if not the world.
Rivait, a VP with the Insurance Bureau of Canada, harps on the fact that while the industry had a "modest" profit this past quarter, automobile insurance was once again at a loss almost clear across the board in Canada.
Well, that's just the nature of the beast. Much like the newspaper business.
Most people don't know this, but the cost of their subscription to their newspaper doesn't come close to covering the cost of the paper, ink, staff and distribution.
But most newspapers are willing to take a loss on the circulation side, since the more people who read the newspaper, the more you can charge for advertising. That's the nature of the newspaper beast.
The nature of the insurance beast is, consumers hand over their money to buy, generally speaking, a package of insurance, on our home, lives and vehicles.
If we're lucky, we won't ever have to claim any of those while we're alive.
My mother, for instance, is in her 70s and has been paying home insurance for five decades and has NEVER made a claim. Lucky her AND lucky insurance company.
So, while home and life insurance is profitable, vehicle insurance traditionally is not.
Nevertheless, the money that comes in from auto insurance isn't paid out in claims immediately, it is invested in the markets and makes the industry lots of cash.
"Two quarters don't make a trend and already in the third-quarter there's a bunch of fricken' disasters," Rivait says, referring to the B.C. fires, severe weather catastrophes and the Toronto blackout.
"So don't be bringing out the party balloons yet, please give us a chance," pleads Rivait.
It appears the Alberta government is determined to give the industry more than just a chance.
Mark McCourt, an Edmonton injury lawyer and member of AVIPA, the Accident Victims/Insurance Policyholders Advocate, says "the jig is up.
"The insurance lobby has been pleading poverty and begging for government protection from innocent injured car crash victims," states McCourt.
"But the industry's own numbers expose the insurance lobby's blame-the-victim campaign as a monumental scam."
Speaking of scams, the provincial government's cozy little committee made up almost exclusively of insurance company executives, continues with its work.
The committee is made up of six insurance industry heavy-hitters, an MLA and a lawyer.
Kind of lopsided, eh?
In other words, it sounds like the province is giving the poor, suffering insurance companies more than a chance. It's giving them a blank cheque.
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