Since the introduction of the Little Report which looked at the relationship between prices and profits in the property and liability insurance industry, there has been extensive discussion in the Journal of Risk and Insurance and elsewhere on the important issue of calculating the profitability of property and liability insurance companies. Much of this discussion has centered on defining the appropriate measures of risk and return in order to determine the insurance industry's profitability relative to that of other industrial groups. It is generally agreed that such inter-industry comparisons must be set within a risk-return framework. However, the emphasis placed on the conceptual problems of defining and measuring risk has resulted in a good deal of arbitrariness in, calculating rates of return. To be specific, none of the studies published in the Journal of Risk and Insurance employ the same rate of return measure. These variations arise in part from the differing approaches adopted in arriving at a comparative measure, but they also reflect an attempt to develop a more precise method of measurement. This study investigates the underlying difficulties that are associated with these previous studies. It is felt that many of these difficulties can be circumvented by analyzing the rate of return that is earned within the insurance industry, ignoring a comparison of returns with other industries. This allows the risk dimension to be dropped from the analysis. In arriving at a accurate measurement procedure, it is explained that profit should be related to net worth rather than total assets, investable funds, or some other measure. The reason is that the return on net worth considers only those funds which management has under its control for alternative indirectly as the difference between total assets and liabilities at one point in time. However, there are several adjustments that must be made to the statutory asset and liability figures before they can be used. Assets, which consist primarily of financial assets, should be valued at market prices, because market values are a more realistic valuation of assets at a point in time than book values. Non-admitted assets should also be included in the total asset figure. Liabilities require subtracting a realistic value of the "equity" from the unearned premium reserve. Care must also be taken not to classify such items as unauthorized reinsurance reserves, investment and contingency reserves, etc. as liabilities because they are really a part of the net worth of the company. It is then explained how an accurate calculation of the return on net worth can actually be made. In this area, special consideration must be given to the quarterly payment of dividends, the payment of income taxes, any additional capital that is raised during the time period, and to tax or tax credits relating to any unrealized profits or losses that are to be included in the return measure. A brief explanation of how the population and sample were chosen is presented along with other various empirical procedures that were followed. This study then presents the results of the empirical work. Several rates of return were calculated including the rate of return before and after tax for the industry as well as for three generally defined size classes of the industry. The latter was done to determine if there are any economies of scale in operation. The rate of return was then defined to originate from three sources. These sources are investment income, mainly consisting of rents, interest and dividends received, underwriting profit, and other or residual income mainly comprised of unrealized capital gains or losses. The 'tax shield effect relating to the difference between underwriting profits calculated on a statutory basis and on an incurred basis was also determined. On the other hand, the tax shield effect associated with unrealized capital gains and losses was not calculated because no capital gains tax were evident in Canada during the time period studied. Finally some conclusions are presented along with mention of further study and research that could be undertaken in light of the results of this study. The general conclusions are that the insurance industry return during this period was not excessive. It was also concluded that after a certain volume of insurance business is reached, some economies of scale seem to exist. Finally, investment income (rents, interest, and dividends received) accounted for most of the industry rate of return before taxes because underwriting and residual income (unrealized capital gains and losses were generally within the - 1 percent to + 1 percent range on net worth during the time period of the study. / Business, Sauder School of / Graduate

On August 7th, 1960, in less than a year from now, it will be twenty years since an unemployment insurance scheme was started in Canada. It is perhaps appropriate at this time to review the development of the scheme,and evaluate its impact on the Canadian economy. [...]

Problems of price analysis and price comparisons at the retail level in whole life insurance are so complex as to be well beyond comprehension to the average purchaser. In addition to the initial difficulties arising from the combination of savings and insurance protection which exist in whole life insurance policies many variables exhibit influence in the analysis of retail whole life insurance prices. The determination of price is no easy task but is ably accomplished by the level-price method which is utilized in this study. Competition, it is often expressed, should function as a sufficient deterrent against the charging of excessive prices. From economic theory the concept of effective competition dictates that prices need not be completely uniform but that they ought not to exhibit substantial diversity and that they should be flexible. The flexibility of prices in whole life insurance is restricted, by the nature of the product, to changes on an annual basis. Evidence from this study, based on 1967 data, indicates that substantial price disparity between different companies is existent in various types of whole life insurance policies offered in Canada. Competition however, operates as well on variables other than price. The extent to which the existent price disparity reflects the costs of the added variables is not completely clear. While this study only views the price competition situation at one point in time, and is therefore restricted from the advantages of conclusions based on broad foundations in time, it nevertheless appears evident that while no conclusions can be made here on competition as a whole, competition on the basis of price alone is less than wholly effective. / Business, Sauder School of / Graduate

During recent years unemployment insurance has come to be recognized as an automatic stabilizer in the economy. This implies that unemployment insurance programmes operate so as to automatically dampen both economic expansions and contractions. In Canada, however, little empirical research aimed at determining the magnitude of this dampening effect has been undertaken. In an attempt to fill this void, this study makes an empirical assessment of the effectiveness of Canada's unemployment insurance programme as an automatic stabilizer. To do this the period 1950-1965 was broken down into its component periods of economic expansion and contraction. This period was chosen to reflect modern postwar economic conditions. The component periods consisted of three downswings and four upswings. Three techniques were then employed to determine the countercyclical role of the programme during each of the seven periods. Firstly, the change in national income during each period was compared to the changes in unemployment insurance benefits and contributions during the same periods. From this was obtained a measure of the portion of any change in national income offset by compensatory changes in benefits and/or contributions. Secondly, using the same periods, a simple multiplier model was employed to determine what portion of any potential change in national income was prevented by the unemployment insurance programme. For both of these techniques both historical data and data adjusted to remove the effect of changes in the programme were used. And thirdly, a correlation analysis was employed to determine whether benefits and contributions were directly or inversely associated with the level of economic activity. The results of this study indicate that Canada's unemployment insurance programme has performed creditably as an automatic stabilizer during periods of economic contraction. The benefit component of the scheme has been almost totally responsible for this effectiveness. Moreover, the efficacy of the programme during downswings has doubled in recent years - increasing from a compensatory effect of about 14% of the change in national income during the contraction of 1953-1954 to one of about 27% of the change in national income during the contraction of 196O-I961. The programme has been relatively less effective as an automatic stabilizer during periods of economic expansion. However, during the last two upswings a significant compensatory effect was experienced. The magnitude of this effect lay between 10% and 17% of the change in national income during the expansion of 1958-1960 and between 5% and 8% of the change in national Income during the upswing of 1961-1965. / Business, Sauder School of / Graduate

The Canadian life insurance industry has been undergoing constant market and product changes since 1950. This study is meant to identify, analyze, and document those economic and social factors that have influenced the growth and decline in sales of ordinary; group and industrial life insurance. The method by which each of these products is marketed is also examined. Much of the information used was obtained through a series of comprehensive interviews with the personnel of a number of life insurance companies. Many factors have been isolated as having a significant impact on the sales of the various forms of life insurance. Many of these factors were identified principally from current literature in the particular field and tested by means of a correlation and regression analysis. The study found that sales of ordinary life insurance in force has declined from 73.82 percent in 1950 to 52.79 percent in 1969. Applying net new purchases as the unit of measurement it was found that ordinary life sales have decreased from 74.76 percent in 1950 to 60.16 percent in 1969. Net new premium was decided upon as the most relevant unit of measurement for this study. Net new premium income for ordinary life increased from 80.34 percent in 1950 to 81.85 percent in 1969. It was also found that marriages and the number of full time life insurance agents have had a significant impact on ordinary life sales over the past 20 years. Industrial life sales in force declined from 9.76 percent in 1950 to 0.60 percent in 1969. Net new purchases of industrial life declined from 8.94 percent in 1950 to 0.045 percent in 1969. It was found that net new premium income dropped from 13.46 percent of the total premium income to 0.01 percent in 1969. The decline has been a reflection of the growth in group life policies, and the increased affluence of the blue collar worker who can now afford ordinary life policies. Group life insurance sales have grown at an astonishing rate. In 1950 group life insurance in force accounted for 16.40 percent of the total life insurance in force. By 1969 the figure had climbed to 47.10 percent of the total amount in force. Net new purchases of group life policies over the same period jumped from 13.50 percent in 1950 while 18.12 percent of the total premium income in 1969. It was also found that gross national product, total employment, and the number of federally registered life insurance companies have each had a significant impact on the aggregates sales of group life over the past 20 years. / Business, Sauder School of / Graduate

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No description available.

This thesis addresses the complex issue of risk classification in the field of insurance. Prior to accepting risks, insurance companies must first be able to evaluate those risks. Accordingly, they seek to collect the most information possible from, amongst other sources, the insured, so as to gage relative risk and evaluate whether to insure or not, to what degree and at what rate. In due course, the insurer will use this information on conjunction with statistical and actuarial calculations to draw hypotheses on the degree, probability and cost of risk. In selecting relevant risks for analysis, insurers will utilise set variables based on the area of insurance in which they operate. However, said variables are highly susceptible to being discriminatory. Notably, one thinks of sex and age which are contentiously considered by practitioners and scholars whether or not they operate in the field of insurance. This dissertation will examine exhaustively the normative framework in place in order to determine to what degree, if indeed at all, insurers can legitimately and legally utilize certain classifications such as age and sex in order to select, categorise and fix the price for the various risks offered to them. / The question shall arise, to what degree less or all-together non-discriminatory criteria should be favoured over criteria, sometimes considered, prohibited. In order to answer all these questions to better address the issue, we must first examine certain essential notions of insurance. Thus, in the first section, we will describe the relevant logistic practices in insurance industries. We shall focus on the decision process at various levels where potential discriminatory practices may arise. We will see that certain schools of thought on insurance classification are at odds, some times diametrically. We will, incidentally, favour the 'fair discrimination' doctrine over its traditional theoretical rival: 'anti-discrimination'. Our research shows that potentially discriminatory classification occurs at several stages of the ex ante and ex post contractual relationship, stages we will examine one at a time. In the second portion we will cover the general juridical regime of the right to non-discrimination in contracts at the international, national and provincial levels. Special attention will be paid to specific rules which allow some limited derogation to the constitutional rights against discrimination. We shall highlight that the legislative authority granted by the Quebec Charter does have limitations. What's more, certain guidelines recently established by the Supreme Court of Canada regarding application, must take precedence over various classification criteria pertaining to insurance which find their root in article 20.1 of the Quebec Charter. Ultimately, we will concentrate on what is just, which is to say the legitimacy of discrimination in a field that takes it for granted while seldomely questioning its foundations. We will come to apply a new measure for insurance discrimination. We will test this new measure in two specific fields: life insurance and automobile insurance. Overall, this thesis will allow us to determine how discriminatory classification can, at times, be legally employed (mostly in pre-selection and segmentation) in the above mentioned fields. We will conclude by proposing a new operating model which seeks to limit classification procedures that circumvent rights to privacy and non-discrimination.

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A theme which currently dominates environmental regulation in Canada is for a strengthening of the "polluter pays" approach to environmental regulation. This trend sees those who impair the environment held increasingly financially responsible for their actions through such mechanisms as a new generation of statutory liabilities which include liability for environmental response and cleanup charges, the requirement of security in the event of environmental contamination, and the creation of statutory civil causes of action designed to assist claimants in recovering for losses resulting from environmental contamination. These mechanisms are supplemented by an increasing willingness by the courts to give serious consideration to innovative new approaches by private claimants to hold polluters civilly accountable for toxic tort related claims. As a result, those in Canada with potential exposure to this new generation of environmental liabilities will inevitably turn to the insurance industry for coverage. Ironically, it is these same new liabilities which will make it increasingly difficult for insurers to provide the desired coverage. Further, in the event that such coverage is provided, insurers will be required to be especially diligent in evaluating and delineating those environmental risks which they are prepared to cover. Many industrial and commercial enterprises will require environmental impairment insurance in order to carry out operations subject to environmental risk. Insurers providing environmental insurance in this context will effectively find themselves cast into the somewhat unlikely role of environmental regulators within Canadian society. For more than fifty years the insurance industry in Canada has provided a wide range of insurance products for liability resulting from impairment of the natural environment. In developing and marketing environmental impairment insurance products the insurance industry has primarily relied upon the risk-based analysis which it has historically utilized to provide coverage for more traditional insurance products such as fire, automobile, and marine insurance. However, it is submitted that the attempts by the industry to provide environmental impairment insurance has been fraught with problems, and the success of the products which have been provided has been limited. This in turn raises serious questions as to the ability of the insurance industry to assume responsibility for the regulation of environmental impairment in the future. It is the primary hypothesis of this thesis that the insurance industry has experienced significant difficulties in providing environmental impairment liability insurance in Canada, and that these difficulties are due in large part to the inability of the industry to accurately predict the incidence of loss associated with environmental impairment in Canada. Further, the difficulties with prediction experienced by the insurance industry are primarily the result of its failure to take into account perceptions of environmental risk by the Canadian public and by environmental decision-makers. Finally, this inability to accurately predict has been accompanied by the failure of the insurance industry to recognize the problem, resulting in overconfidence by the industry with respect to its environmental impairment liability products.