Even as Canadian group insurers improve their profitability through rate increases, their ability to sustain earnings levels and maintain market share may be challenged, according to the A.M. Best Co. Commentary, “Canadian Group Insurers Face Operating Challenges After Price Rationalization.”.

Increased consolidation, market segmentation, technology and customer-service requirements, as well as economic and legislative issues all contribute to the pressure on earnings and market share.

Several group insurers continue to struggle to improve their performance as they are hampered by lack of scale, adverse morbidity and soaring health claims costs resulting from new treatments and government offloading, increasing disability claims and escalating drug costs.

A.M. Best notes that expense gaps still exist in several of the major insurers’ group operations. While such expense gaps will ultimately be closed, it might be challenging to effectively digest any new acquisitions. Nonetheless, A.M. Best believes that such integration challenges will be partially mitigated by the strong management talent at the major Canadian group insurers.

The full commentary can be downloaded free at the A.M. Best Commentary section at www.ambest.com/ratings/specialreports.html.