A strong majority of Canadian insurers, 81%, see the industry’s ability to increase margins over the next one to three years as strong to moderate, compared to 65% of respondents in the United States, according to the results of a survey conducted at KPMG’s 13th annual Insurance Issues Conference 2004.

The survey results were compiled by polling CEOs, CFOs, board members, as well as senior and middle management in attendance at the conference held October 19 in Toronto.

In addition, 68% of Canadian insurance companies expect their companies to perform significantly ahead of expectations over the next year, in contrast to 57% of U.S. survey respondents.

“While U.S. insurers are reasonably optimistic, Canadian insurers are even more so,” said Neil Parkinson, national director of KPMG’s insurance practice, in a release.

“Certainly Canadian non-life insurance results are sharply improved this year, after several grim years, and life results continue to be solid. On the other hand, U.S. insurers are facing greater regulatory pressure now, particularly from the cost and effort of Sarbanes-Oxley compliance. Also, there is bound to be some concern in the U.S. about the long term economic consequences of their federal government deficits and balance of trade,” he added.

Forty-two per cent of Canadian respondents agreed that regulatory and market issues are the greatest threat facing the industry here in Canada, relative to 23% of U.S. respondents. In contrast, while 31% of Canadian insurers agreed that the Sarbanes-Oxley Act would have the greatest affect on the way they do business going forward, 83% of their U.S. counterparts saw this as having a huge impact on their business operations.

“Sarbanes-Oxley is still a very significant issue for Canadian companies. Even for insurers who are not public and will never have to comply, Sarbanes-Oxley has radically changed what is seen to be “best practice”, and even minimum practice,” said Parkinson.

With regard to the competitive landscape over the next three to five years, half of Canadian respondents indicated that they see other insurance companies as their major competition, while one quarter regard the banks as a greater competitive threat.

Forty-nine per cent of Canadian respondents expect mergers and acquisitions in the industry to increase over the next 12 months, with US companies in close agreement at 52%.

In addition, a quarter of Canadian respondents indicated that the provincial automobile insurance reforms would have the greatest impact on their business operations.

Most Canadian insurers indicated that they do not outsource or plan to outsource the majority of their business functions. However, where applicable, over 57% indicated that they currently do outsource payroll, and 39% outsource employee benefits functions. In addition, the outsourcing of claims processing has seen an increase of 21% from 2003 survey results.