By Jeff Sanford
Toronto, Ontario — December 8, 2016 — This week we take a look at the decline in insurance industry profits, China’s incredibly crowded car manufacturer landscape, why experts are concerned legalized pot may lead to more collisions and much, much more!
– Insurers are reportedly running into problems due a reduction in investment returns as interest rates stay mired at weirdly low rates. A report in the Wall Street Journal finds that car and home insurance companies, “… will struggle to earn higher profits next year, as increased competition dents pricing and the impact of low rates hurts their investment returns.”
The idea is contained in a report from bond-rating firm, Fitch Ratings, which “cut its outlook on the property and casualty insurance sector to negative and called for the industry to post an underwriting loss in 2017.”
Insurance companies earn money by taking in more in premiums than they pay out in claims, but that’s only part of the story. The money taken in is typically invested in bond and asset portfolios to generate extra money. But according to Fitch analysts, “Both sides of the business are facing pressure with strong competition and a lack of major losses weighing on prices for most types of insurance … There is no catalyst in sight in 2017 that would promote a meaningful shift in pricing trends in the softening market … On the investment side, persistent low interest rates have pushed the industry’s pretax investment yield down to 3 percent this year, down from more than 4.5 perce in 2006 …”
– Ever have trouble remembering which OEM has which standards? Just be glad you’re not operating in China! A report by Forbes found that, “By any measure, China’s auto industry is crowded. The China Association of Automobile Manufacturers (CAAM) lists 79 original equipment manufacturers (OEMs) of passenger cars, trucks and buses in the country. However, CAAM’s list understates the actual number of OEMs by a wide margin … When counted separately, there are 86 different companies making passenger cars in China alone. When truck and bus manufacturers are added, the number of OEMs is well in excess of 150.”
The report goes on to say that, “Over the years, there have been repeated calls for the consolidation of China’s auto industry by government officials and auto experts alike—all to no avail. It has not been for lack of trying, though. In the mid-1990s, China announced its plan to consolidate the auto industry to just eight companies: ‘Three Big, Three Small, and Two Mini.’ That policy was never implemented, and few remember that it was ever even announced as a goal.” Presumably those looking to find part from over 150 OEMs find the task more than a little challenging.
– A Montreal pile-up involving buses, a snowplow and cars made headlines around the world last week. “From Australia to England to early-morning and late-night US talk shows,” the pile-up has, “proven popular the world over,” according to a Toronto Star story. Just twenty three hours after a local posted a video of the accident to Facebook the segment had been viewed 17.8 million times. Views hit 20 million by Tuesday of last week as late-night talk show host Jimmy Kimmel and Good Morning America mentioned it. Taking a jab at Montreal, the Toronto Star story notes that, “In a city that likes to pride itself on having one of the most efficient snow-clearing operations in the world, the accidents that occurred after a few centimetres of snow fell is a bit of an embarrassment. Fortunately, no one was injured.” A city spokesperson explained that the salt and sand trucks and employees were out as of 6 a.m. in preparation for the snowfall. “A sudden temperature drop at 8 a.m. required a change in the order of operations as workers had to respond to several incidents when sheets of black ice formed in several areas in a matter of minutes.”
Go ahead, watch it again:
– In Ontario, a study found that poor areas pay more for car insurance in Ontario. The reason is that, “… people with no jobs or with precarious ones don’t generally have medical benefits or wage loss benefits. So when they are in an accident, the car insurer is the first payor. People who have medical and sick leave where they work claim those benefits first, and the insurer often doesn’t have to pay. So the cost per collision, which is the primary driver of premiums, is more than double in poor neighbourhoods than in rich ones.” A reader letter in the Toronto Star suggests that the Ontario auto insurance industry should, ‘Make medical and wage loss benefit premiums province-wide. There can be some variance in property and liability coverage based on rural vs urban, (frequency of collisions) but poor people shouldn’t be penalized by our system for being poor,” wrote Mike Sullivan, former MP, York South–Weston.
– Auto executives are increasingly talking about “peak sales” of autos. A report on Bloomberg quotes senior executives from Toyota and Nissan as saying they are, “… convinced that the US auto market has peaked.” Toyota co-CEO Hiroto Saikawa was quoted as saying, “It’s a peak and we don’t see a potential for further growth … incentives are rapidly growing in the industry, and we are paying close attention to it.” Another Japanese exec was said to have noted that, “The market turned out to be somewhat weaker,” than many thought it would be in the last quarter.
– Ride-sharing service Uber relaunched in Calgary this week. The emergence of Uber in Toronto had caused no end of chaos last year. According to a report from the Calgary Herald, “This time around, there were no bylaw officers threatening thousands of dollars in fines, no multimillionaire first passenger and no accusations from city councillors of bullying … Instead, Uber’s relaunch in Calgary on Tuesday was remarkably drama-free.”
– Experts at Toronto’s Center for Mental Health and Addiction (CAMH) are worried about pot use behind the wheel and are concerned that auto accidents could pick-up in the years ahead as the government moves to legalize weed. A survey released Wednesday by the Centre for Addiction and Mental Health (CAMH) found that, “… cannabis use virtually doubled between 1996 and 2015, rising from about eight per cent to almost 15 per cent of respondents … One finding of particular concern is the proportion of respondents who reported getting behind the wheel after using cannabis. In the last five years, that figure doubled, rising to three per cent in 2015 from 1.5 per cent in 2010,” according to a report by Metro.
– Good marketing, low cost: Peruzzi Collision Center in Fairless Hills, Pennsylvania, issued a press release encouraging, “Drivers to Stay Safe This Winter,” while inviting drivers to inquire about auto repairs. The release is a good way to generate some buzz around the brand. Peruzzi Collision Center managers also created a blog post titled “Tips for Staying Safe This Winter,” as a way of encouraging drivers to stay safe as everyone gets used to driving in winter conditions again.
