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© Copyright 2000 Rogers Media. The following article first appeared in the June 2000 edition of
BENEFITS CANADA magazine.
E-Poll
In the long term, what effect will the trend toward demutualization among Canadian insurance
providers have on group insurance in this country?
The demutualization debate continues this month, with 38% of respondents to our e-poll saying
demutualization among Canadian insurance companies will have a positive effect on group insurance.
Responses were almost evenly divided--36% say demutualization will have a negative impact, while 26%
believe it's too early to tell.
With their carriers increasingly focused on the bottom line, the needs of plan sponsors may take a back
seat. "There are added responsibilities now on the part of the people who are managing the programs at the
insurance company level. They have to become a lot more focused on whether their clients and blocks of
business are profitable," says Charlene Milton, a consultant with Eckler Partners in Don Mills, Ont.
Essentially, plan sponsors have to be prepared to get what they're willing to pay for. "Some organizations
don't always use advisers and depend on the carrier for things like pricing and giving them advice on
trends," says Milton. "The insurance companies are starting to price these value-added services more
directly, or they're saying 'this is out of our area of expertise.' So that's a bit of a change for plan
sponsors."
But demutualization isn't all doom and gloom. With increased capital, insurance companies are likely to
invest in more Internet technology and services so that employers can offer self-service to plan members.
Another fallout from demutualization is its potential effect on service. In general, companies usually make
a profit by trimming expenses and/or increasing revenue. Since it's difficult to increase group insurance
revenue because there isn't a lot of new business, it's possible that insurers will cut expenses at some
point.
"This will have an effect on service in two ways, the most obvious being fewer people to do the work," says
Milton. "But the less obvious is the loss of history on certain accounts. Many large, complex accounts
require some type of manual intervention by the carrier for various administrative functions, for the most
part hidden to plan sponsors. When you lose the staff with the history, you will affect the service."
Kim Swarts is the supervisor, benefits and administration with Western Star Trucks in Kelowna, B.C. She
doesn't believe demutualization will have a negative impact on customer service. She says her company's
experience with demutualization has been pretty neutral. Western Star Trucks deals with a newly
demutualized insurance company over an annuity in one of its pension plans.
"We haven't really noticed a change one way or the other because we tend to get in touch with them when
we're setting up a pension for one of our deferred vested members, which, in that group, might happen once
a year," she says. "Or if one of our pensioners passes away, it's just a matter of advising them [the
carrier]. So we haven't really noticed [a change in service]."
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