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‘It’s too complex’: The evolution of Canadian insurance

Kathy Bardswick of the Co-operators Group.

Ian Brewster

Kathy Bardswick stands out among Canadian CEOs. She's one of just a handful of women, and her company is a co-op: The Co-operators Group, the $44-billion insurance conglomerate based in Guelph, Ontario. It's owned by 43 member organizations, not shareholders. Bardswick feels that structure has insulated her from day-to-day market pressures and helped her focus on the long term. At age 59, she's retiring after 14 years at the helm of the company she joined straight out of McMaster's MBA program in 1978.

Why did you go into the insurance business?

My mother pretended to be me in a phone interview. I was graduating with an MBA and a ton of debt. If I didn't find a job, she'd have to help me with my student loans. She saw an ad in the paper and applied on my behalf. They called her and liked her. So she phoned me and said, "By the way, you have a face-to-face interview." I was offered an underwriting supervisory job. But I didn't even know how to spell underwriting, so they sent me away for the first six months to learn.

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What has changed?

It's become far more complex. I used to have the rate manual memorized. Now, the algorithms are like a black box—so many factors determine rates. You can have one home insurance rate and your neighbour can have an entirely different one. And therein lies a challenge to us related to transparency.

You've been dealing with auto insurance for decades, and provincial governments keep trying to fix it. Does it work anywhere?

When I was younger, I thought it did. But as I reflect on it now, no, it's not working—perhaps with the exception of Quebec. It's too complex, and government intervention has driven out any innovation that the market could bring. Consumers have no choice.

So what should governments do? Just let the market rule?

We have close to 200 players across the country. I think competition would play out the way it should. You are going to constantly sharpen your pencil, and drive the sophistication and understanding needed to bring the best price to the market.

You run one of the largest co-ops in the country, but there are only a handful of big ones. Does the co-op model have a future?

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My owners bring diverse expectations to the table. I've got very small natural-food co-ops alongside credit unions and Federated Co-op, which is very large. But they share a commitment to long-termism. There is often a disconnect between boards, which represent shareholders and the short-termism associated with that, and managers, who realize that strategic execution takes time. The insurance co-op and mutual system has also been gaining market share globally since the financial crisis. So the co-op ethos is not irrelevant.

The Co-operators has done very well in rankings for social responsibility, best employers and so on. Does behaving ethically pay off?

I think behaving ethically is the price of admission these days. Given the level of transparency, if organizations aren't getting it—and I'll refer most recently to Wells Fargo—everyone and their neighbour knows the truth.

You sit on the advisory council of the United Nations Environment Programme's Inquiry into the Design of a Sustainable Financial System. What's next for that and for you?

The UN has three sets of sustainable principles—for the investment, banking and insurance communities. Historically, we in Canada have been authors of our own destiny, and we've had a very solid financial regime. But when I tried to bring the insurance principles back here, it fell on deaf ears. I think this has to be driven by a partnership between Environment and Finance at the federal level. I'm also sitting on a three-way partnership between the World Bank, the UN and the insurance industry looking to drive resilience—both country and industry resilience. So I'm not slowing down.

This interview has been condensed and edited.

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