Canadian Underwriter April 2021

April 2021

YYOUR YO UR G GUIDE UIIDE DE TTO O IN INSU INSURANCE SURA U ANCEE SU SUCCESS. UCC CESS. ESS. SIN ES SINCE I CE 1 1934 934 93 4

RISK REPORT

HIGHER GROUND WE’RE ALL LIVING WITH RISK NOW. HOW THAT HELPS RISK MANAGERS

PANDEMIC POLITICS What h to d do when h politicians scapegoat the industry

Betty Clarke

cu

INTERVIEW

INSIDE THE ILLUSTRIOUS CAREER OF A CANADIAN RISK MANAGEMENT ICON

+

DOES WORKING FROM HOME STILL WORK?

LIABILITY RISKS IN A TOXIC WORKPLACE

CODE GREY: BUILDING UPGRADES

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CONTENTS Volume 89, No. 2 (April 2021)

YOUR GUIDE TO INSURANCE SUCCESS. SINCE 1934

CANADIANUNDERWRITER.CA

F EATU R E S

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Elevated Conversations Company leaders and employees are more aware of risk, thanks to COVID-19. How that makes a risk manager’s job easier

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POLITICAL SQUEEZE Politicians vented their beefs with the P&C industry recently. But insurance pros understand the anger. Here’s a key to avoiding future outbursts…

Betty Clarke, Manager, Corporate Risk and Recovery, City of St. John’s, Newfoundland

canadianunderwriter.ca | April 2021

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The Digital Future of Insurance Is Now 2020 drove the industry to a turning point where the traditional ways of doing business are in the rear view.

The road ahead is built on open technology.

Mobilizing operations on the go. Taking you to new customer service destinations.

Exploring uncharted business opportunities and operational speeds.

Trust Applied to be your technology partner of the future to light a digital path of productivity, simplicity, intelligence and value.

Let’s get there together.

appliedsystems.ca

CANADIANUNDERWRITER.CA

Twitter: @cdnunderwriter

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28 32 17

FROM THE EDITOR

TOXIC WORKPLACES

RECOVERY

IN EVERY ISSUE

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17 Harassment risk

34 Code Grey

14 BY THE NUMBERS

The high-profile resignation of Canada’s governor general and her secretary has highlighted the ongoing risk of workplace harassment

Grandfathering is a key issue when a building is upgraded to the current code. Exploring the answers to common questions following a property loss

The Inward Period

PERSPECTIVES 9 Readers respond to recent stories on credit scores in auto, telematics, and working from home…

INTERVIEW VOICES

20 Betty Clarke

11 Opportunity knocks The pandemic has shown the value of aggregators and brokers working together. Justin Thouin, co-founder and CEO of LowestRates.ca, explains why

The risk manager for the City of St. John’s recently received the highest honour in Canada’s risk profession. She shares the lessons she’s learned over her career

DECLARATIONS

HANDBOOK

13 Working from home

32 Mobility series, Part 2

How P&C professionals feel about working from home, one year later, and how they envision a postCOVID workplace

How Canadian brokers can hold their own against emerging disruptors in the mobility space

36 Fire Following

18 NEW OFFERS 19 BIG MOVES 19 SUMMARY 33 DEAL TRACKER

Fire following an earthquake could cost the industry $10 billion in insured damage.

How to reduce that cost for “pennies on the quarter”

COMMERCIAL SPOTLIGHT 38 Cannabis What insurers have found when contemplating D&O liability coverage for board directors of cannabis corporations

canadianunderwriter.ca | April 2021

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FROM THE EDITOR EDITORIAL EDITOR-IN-CHIEF David Gambrill david@canadianunderwriter.ca 416-510-6793 MANAGING EDITOR Adam Malik adam@canadianunderwriter.ca 416-510-6763 ASSOCIATE EDITOR Greg Meckbach gmeckbach@canadianunderwriter.ca 416-510-6796 ONLINE EDITOR Jason Contant jcontant@canadianunderwriter.ca (416) 510-6893 ART DIRECTOR Ellie Robinson ADVERTISING AND MARKETING MANAGING DIRECTOR Sandra Parente sandra@canadianunderwriter.ca 416-510-5114 SALES & MARKETING CONSULTANTS Pam Chodda Young pam@canadianunderwriter.ca 416-510-5122 Andrea Berry andreab@newcom.ca 416-510-6852 ADVERTISING PRODUCTION MANAGER Karen Samuels karens@newcom.ca 416-510-5190 CIRCULATION/SUBSCRIBER SERVICES Pat Glionna pat@newcom.ca 416-614-2200 PRINT PRODUCTION MANAGER Lilianna Kantor lily@newcom.ca 416-614-5815

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The Inward Period How to get ahead while we hurry up and wait for vaccines

T

his editorial marks the one-year anniversary of COVID-19 being declared a global pandemic.

Canada’s property and casualty insurance industry quite rightly prides itself on its resilience and agile response during the early stages of the pandemic. But one year later, like the rest of Canadian society in general, the industry appears to be hitting the proverbial wall.

Remember those heady days last March, when everyone in the industry was setting up their workspaces at home and figuring out how to communicate with their colleagues and their clients?

Stressed, furloughed, broke and besieged Canadians were calling, begging for premium relief. And insurers, who were posting losses in many business lines, found a way to free up funds for their clients and customers.

Throughout it all, brokers were on top of their game, serving customers 24/7, using all manner of digital services, and essentially ushering in a form of omnichannel service that had been previously just a seminar topic at industry conferences. The broker value proposition soared, and — thanks to the efficiencies introduced by video technology — so did brokerage sales.

All of this expended energy comes at a price, of course.

Today, online news stories about wellness, self-care, workplace stress, and burnout all seem to resonate with an industry workforce that has been dealing with a societal crisis for much longer than anticipated. Ever the social beings, P&C professionals are being called upon to dig deep and confront their personal limits while living in a state of extended isolation.

As we all endure a glacially-paced vaccine rollout in Canada, the first six months of 2021 represent what I would call “The Inward Period” for the industry. This is a time to reflect on emerging issues such as managing remote workers; ensuring workplace safety once vaccines arrive; planning what the future workplace/workforce will look like; and finding innovative ways to provide cover in an ongoing hard market. And, of course, digital upgrades.

Those who use this period of suspended animation wisely will have a competitive advantage come September, when the industry will be ready to answer the bell for the next post-COVID challenge. Until then, however, it’s a good time to pause and answer the existential question: “What are we all doing?’

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Regulator allows Co-operators to use credit score for rating auto February 9 The story: Co-operators General Insurance Company has received approval from Nova Scotia’s auto insurance regulator to use credit scoring as a rating factor to help price auto rates for private passenger vehicles.

Harry says: Another intrusion into the privacy rights of people. At a certain point, these insurers will amend their underwriting practices to refuse coverage to any applicant or existing client who will not consent to the release of their credit information.

Frank says: Credit scoring penalizes lower income people or people who have gone through economic trauma such as divorce, bankruptcies, consumer proposals, etc., with higher insurance rates.

Since when were discriminatory practices okay? What’s next? Actuaries can find a numerical correlation to support anything. Will hair colour be used next?

Scott says: I strongly agree with this statement. So many things in the world cause people with less money to pay more. The whole goal of the insurance industry is to share the risk of loss over a large group of people so we can help each other out. This burdens poor people with more of the premium. I’m not saying it’s not statistically valid, but I am saying it’s possibly immoral.

Also, you have to remember that because of other structural problems in Canada, people are more likely to have less money if they are Black, Indigenous, or if they have mental health issues, addictions, disabilities, etc. I don’t think regulators should be allowing us to use credit scores for anything we don’t have to, especially in the case of auto insurance, which is legally mandatory to buy.

Stephen B says: I am not surprised IBC allows such practices. Insurance companies want a subjective moral hazard to play to a rating factor, this time a credit score. “Actuarial” correlation of income level to claims frequency is more like status profiling and, hence, discriminatory. Provincial governments must intervene and stop such practices.

canadianunderwriter

What’s missing while working from home January 26 The story: Employees may be missing out on mentoring opportunities for career development in the current remote working environment, P&C leaders say.

Joyce Poon says: Not the same kind of service we can provide to customers. I don’t like working from home at all. Only homemakers can work from home.

Miss the office commute?

This is why you should January 21 The story: Many P&C industry professionals don’t miss the daily commute these days, but researchers are saying this time provides valuable benefits to workers.

Telematics surcharges arrive for Ontario auto February 5 The story: Ontario motorists who choose usage-based insurance could now be hit with surcharges if telematics data shows they have risky driving behaviour after FSRA removed its UBI Guidance.

Danni says: Seems inevitable that they would proceed this route, but agreed. I still do not trust UBI, even with the discounts that the companies tout. Fair game if someone agrees to use UBI and happens to be a terrible, risky driver. Then this seems appropriate.

Scott says: It sure was predictable. Allowing insurers the thin end of the wedge always means they will push for more. The other article says credit scoring for auto is being permitted in one of the provinces now. Next goal is to remove your right to choose UBI. Either through policy or abhorrent pricing, true choice will be stripped away.

Photos: ©iStock.com

Pat Murphy says: Sometimes, that commute home is valuable time to “turn off” the “employee” and bolster the “mama/ partner/volunteer/caregiver” role that you need to play when you arrive back at your starting point. Moving from one room to another just isn’t the same to some.

canadianunderwriter.ca | April 2021

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All pros kamran afshar, cip Manager, Commercial Lines Auto

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voices

We need each other The pandemic has changed many things, including the relationship between brokers and aggregators

T

he pandemic has rapidly accelerated trends that even just a few months ago we thought were still years away. These changes are fundamentally altering the relationship between insurance brokers and aggregators like LowestRates.ca.

Consumers are increasingly going online to get financial products such as home insurance and car insurance. This trend has been playing out for decades, but it’s been slow to take root in Canada prior to the pandemic.

Data show that Canadians tend to be conservative when it comes to getting financial products like insurance online. The EY Global FinTech Adoption Index shows Canada near the bottom of 27 countries when it comes to the percentage of consumers who use online financial tools. While the global average adoption is 64% (China is highest at 87%), only 50% of Canadians get financial products online.

That is changing. During the pandemic, the type of user coming to our site to compare insurance has shifted.

When we started in 2012, our user base was primarily young, male, and tended to have a traffic infraction or two on their record. They likely got an expensive quote from an insurance company and sought more affordable options.

That’s no longer the case. Today, users

B Y J U S T I N T H O U I N , CEO, LowestRates.ca

are evenly split between men and women, and now skew middle-aged. Many have pristine driving records without any tickets or accidents.

This trend of older drivers coming to our site has accelerated during the pandemic: Fewer people are comfortable visiting brokers in person. Customers who might never have considered going online to get insurance before are coming online and finding aggregator sites like ours.

That presents a major opportunity for brokers.

Brokers must capitalize on this trend if they are to succeed. To do so, they could choose to create their own marketing and content divisions to try and get ranked in search engines and outbid other companies in online advertising.

But this is an expensive option, and it doesn’t guarantee success.

Another option is to work with aggregators — and many brokers are now choosing to do so. Brokers who choose this route can offer the most competitive rate for an insurance product and then choose how many new customers they want to get every day. Some brokers buy 10 leads a day from us, others buy 100. In the end, they control the flow of business.

That makes staffing and costs more predictable. Brokers don’t have to scramble to “staff up” because an advertising campaign brought in far more customers than

predicted; or worse, eat the costs of being overstaffed based on rosy predictions.

Of course, as insurance rapidly moves online and aggregator sites continue to grow, some brokers view us as competitors to their business. That’s just not the case. We need brokers to be successful in order for our business to succeed.

We don’t envision any future where we’re not working alongside brokers in Canada. We can’t succeed if they don’t succeed.

The full experience of LowestRates.ca doesn’t happen without brokers. We need brokers to provide expertise and peace of mind to anyone looking to buy insurance products on our site — and peace of mind usually comes from getting on the phone with a broker, asking questions and having a human presence to guide the person through the process of getting insurance.

In the past five years, we’ve seen an 8,022% increase in leads processed, the majority of which were in auto insurance. We expect this trend to accelerate as the pandemic continues to bring new customers online that would not have previously considered our site.

The success of aggregator sites doesn’t have to come at the expense of brokers.

In fact, we view it as a symbiotic relationship. We can’t succeed without brokers succeeding. And as we grow, we want to help brokers grow with us. canadianunderwriter.ca | April 2021

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declarations Workplace Diversity p.14 l Harassment Risk p.17

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HIGHLIGHTS

THE P&C WORKPLACE

The future of remote work How P&C professionals feel about working from home, one year later B Y D AV I D G A M B R I L L , Editor-in-Chief

W

orking from home in Canada's P&C insurance industry is here to stay, even when the threat of the global pandemic recedes.

“The future of your daily work environment [post-COVID] will probably look more like a hybrid model between two and four days in the office each week,” Paul Martin predicted in his 2021 CEO Outlook piece for Canadian Underwriter.

“Flexibility of the work environment will be one of the greatest selling points in at-

CONDO CONFUSION | FEB 24 One out of five condo unit owners in Quebec is not aware that two insurance policies cover condos in the province — a home insurance policy for the unit owner, and a commercial insurance policy for the condo corporation.

Photos: iStock.com

tracting new talent to any organization.”

Martin’s view reflects the results of Canadian Underwriter’s recent online survey of more than 1,150 P&C industry professionals, who shared their feelings about working from home.

Eighty-one percent of survey respondents called for employers to offer more flex time to work from home after the pandemic is over.

Mar. 11, 2021, marked the one-year anniversary of when the World Health Or-

ganization (WHO) declared COVID-19 to be a global pandemic. The survey shows 87% of Canada’s P&C industry is still working from home. The P&C industry is an essential service, meaning that offices are allowed to remain open, but most are working from home to contain the spread of COVID-19.

Seventy-two per cent of P&C professionals surveyed said they prefer to work from home.

“Better work-life balance,” one read-

CANNABIS CLAIMS | FEB 24 Vaping claims are a big issue for cannabis insurers right now. One licensed producer ordered a recall of 500,000 vape pens due to the risk of explosion, according to Kelli Hunt, vice president of underwriting with Next Wave Insurance Canada. canadianunderwriter.ca | April 2021

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DECLARATIONS er explained in the survey, when asked to elaborate on their feelings. “Better mental health. Less distractions and more productive at work. No commute, back to home life faster and can get more done at home.”

Once we enter the post-pandemic era, expect a flexible work environment to prevail, as many industry leaders have stated in various interviews, webinars, and in communications with employees.

“I’m not really keen to go back to five days a week [in the office],” one reader wrote in the survey. “I want to go back one to two days a week, on an as-needed basis, with no pre-set schedule. I may want to continue working from home full-time so I can move outside the city.”

As far as productivity goes, top-tier Canadian P&C brokerages have reported individual sales records being broken during the pandemic. Video technology has proven to be an efficient way to meet with clients.

“Interestingly, in 2020, we had more people in our organization, believe it or not, pierce the $1-million mark of new revenue than in any other year of our corporate history,” Tina Osen, president of Hub International Canada, said during a Canadian Underwriter webinar panel discussion on the topic.

“Previously [before the pandemic], we had these subject matter experts flying around the country to appointments with clients and prospects. If you were lucky, they maybe got 5-6 meetings done in a week. In this [virtual] world now, they are doing 5-6 a day.”

But working virtually and in isolation is clearly taking its toll, causing some to long for in-person contact with work colleagues again. In March 2020, when most people started to work from home, P&C professionals generally expected to work from home for no longer than two to six months, as indicated in the survey. Now, the absence of social interac-

AUTO RATE FORECAST | FEB 24 It could be up to a year before driving habits return to normal, but don’t expect big decreases in auto insurance. “My view is, you are probably in a flat environment in auto from a rate point of view,” Intact CEO Charles Brindamour predicted.

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April 2021 | Canadian Underwriter

wBY THE NUMBERS

Minority Report The Insurance Institute of Canada published an industry demographics report in 2018 showing the state of diversity within the ranks of the industry, pre-COVID.

Percentage of visible minorities in the P&C industry by occupation and by managerial roles 20 18 Broker/Agent

16 Claims

14

Underwriting

12

Front Line Management Middle Management

10

Senior Management

8 All Respondents

6 4 2 0

Visible Minority

LGBT

Person with a Disability

Indigenous

Source: The Insurance Institute of Canada, Demographics of the P&C Insurance Industry in Canada 2017-2027, published in 2018

tion with colleagues is clearly starting to wear on people, even those who say they would prefer to work from home.

“At first, I loved it, and I still do really enjoy working from home,” one reader wrote. “It’s so easy — no commute, food and bathroom close by, and you don’t have to ‘get ready’ the same way. I get more time with my family and animals and I love that. However, as the months drag on, I also really miss my friends and colleagues, and I miss our daily

routines. I’ve never felt so alone.”

That said, people in the survey recognized that interacting with colleagues can also result in distractions that lead to reduced productivity. For some readers, the decision to work from home or in the office is a real conundrum.

“When I am working from home, I think I would rather be at work,” one reader wrote. “When I occasionally go into the office, I realize the benefits of working from home.”

CAT COUNTER | FEB 19

Two winter storms in Western Canada caused more than $134 million in insured damage, Catastrophe Indices and Quantification Inc. (CatIQ) reported.

High winds and heavy snow hit British Columbia, Alberta, and Saskatchewan.

Photos: iStock.com

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ON THE SCENE

EVENTS COVERAGE

The Insurance Institute of Canada 2020 GTA Convocation VIDEO Summary: The Insurance Institute of Canada held its Greater Toronto Area (GTA) Convocation virtually on Wednesday, February 17, 2021, celebrating the 1,421 graduates in all of its designation and certificate programs.

“It’s not easy at the best of times to go back to school while maintaining a demanding job, being there for your family, and staying on top of all your other responsibilities,” Insurance Institute of Ontario President Joe Colby of Echelon Insurance said to the graduates in his opening address.

“Then, suddenly, COVID-19 threw another big challenge into the mix. But you demonstrated resilience and you rose to the occasion. You should feel especially proud of your achievement given today’s realities.”

The Insurance Institute offers the Chartered Insurance Professional (CIP) and the Fellow Chartered Insurance Professional (FCIP) designation programs. Certificate programs include the General Insurance Essentials (GIE); the Advanced CIP, Risk Management Certificate, and the Commercial Insurance Certificate.

A one-hour video tribute included congratulatory messages from Insurance Institute of Canada CEO Peter Hohman and Insurance Institute of Canada President Martin Thompson, who is also president and CEO of RSA Canada.

Photos: ©iStock.com/baona

iStock.com/Gearstd

DECLARATIONS

LIABILITY RISK

How to handle harassment What your corporate clients can do to reduce their liability risk in case of a toxic workplace…

D

espite wishful thinking, bullying or a toxic work culture can happen anywhere, and workplace harassment creates liability risk.

To manage this risk, commercial clients need clear policies on harassment and violence in the workplace, as well as procedures to have complaints investigated, employment lawyers say.

The high-profile resignations earlier this winter of Governor General Julie Payette and her secretary exemplify how workplace harassment allegations can be a risk management issue. Their resignations came shortly after the federal government received a report about allegations of a toxic workplace within the governor general’s office. The report has not been made public; specific allegations made in the media have not

COST OF COVID | FEB 18 Business interruption claims arising from the COVID-19 pandemic are expected to cost Fairfax Financial Holdings Ltd. nearly CAN$300 million, the insurer reported. Fairfax reported US$669 million in COVID-19 losses across all of its insurers in 2020.

Photos: iStock.com

B Y G R E G M E C K B A C H , Associate Editor

been proven or reviewed in court.

What if similar complaints are raised against one of your commercial clients?

“There is all kinds of financial liability” if current or former employees allege they were bullied, harassed, or claim to be victims of violence in the workplace, says Alex Warshick, a Halifax-based lawyer with McInnes Cooper. He was commenting in general and not on the governor general’s office.

“You would like to think, ‘It can’t happen or wouldn’t happen at my organization,’ but that’s just not the case,” Warshick said. “It happens everywhere.

Wherever people are required to work together, these types of frictions can occur.”

Financial liability may include damages awarded when employers are sued by practices, y workers over employment p

Warshick says. Liabilities can also include fines and penalties imposed by courts or human rights tribunals or by occupational health and safety tribunals.

If a person sues an employer alleging they were bullied or harassed by a manager, there could be allegations of vicarious liability on the part of the employer, according to Warshick.

“You want to have a digestible policy that’s clear to employees that, if they bring forward an issue or a complaint, their complaints are confidential and there will be no reprisal for bringing forward the complaint,” he says.

What's needed will depend in part on which jurisdiction regulates your client as an employer. For some, it may be mandatory to have a workplace harassment and violence policy. For provin-

PREDICTING PROPERTY DAMAGE | FEB 17

When a record hail storm hit Calgary last June, many restoration contractors compiled claims estimates before the end of July. “There have been five price increases on a lot of those [estimates] since then,” an expert from Peak Services said. canadianunderwriter.ca | April 2021

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NEW OFFERS cially-regulated employers, regulations vary by province and territory.

New regulations for federally-regulated workplaces took effect Jan. 1. Among them, federally-regulated workplaces now require: 1) confidentiality of all parties involved, including witnesses, throughout the investigation; 2) protection for employees victimized by a third party (for example, an employee harassed by a client); and 3) a competent person to investigate and provide recommendations.

Most workplaces’ safety and employment practices are regulated by the provinces and territories. But some — such as airlines, railways, banks, telecommunications and federal crown corporations — are federally regulated when it comes to employment practices.

Most Canadian provinces have regulations mandating that employers have harassment and violence policies, said Warshick. This means your clients may need to put in place new policies, or amend existing policies, to comply with those regulations. Depending on the jurisdiction, those regulations usually include timelines for investigating and reporting complaints.

An organization should also have an ombudsperson to deal with harassment issues, according to Alexandra Monkhouse, Toronto-based partner with Monkhouse Law Employment Lawyers.

Having an ombudsperson available to discuss concerns with employees on a confidential basis is part of a proper process by which an employee can make a formal complaint about harassment or bullying in the workplace, Monkhouse says. An ombudsperson should not disclose the names of employees who approach him or her.

Large organizations often have an ombudsperson, Monkhouse reports. Smaller companies may opt to contract the role out to a third party service.

RISING DEDUCTIBLES | FEB 16 A large increase in deductibles on condo corporations’ insurance is having a knock-off effect of increasing individual condo owners’ premiums, LowestRates.ca reported. Personal condo and strata insurance rates rose 20% in B.C. and 18% in Alberta.

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April 2021 | Canadian Underwriter

INTELLIDRIVE Vendor: Travelers Canada Target Audience: Auto insurance customers What it Does: Rewards drivers up to 30% off their auto insurance premiums for responsible driving through a usage-based auto insurance mobile app

Travelers Canada has released its usage-based auto insurance mobile app, IntelliDrive.

The app provides customers with a better understanding of their driving habits. It also rewards them for responsible driving by collecting and assessing data on behaviours such as hard braking, rapid acceleration, speed, distraction, and the time of day they’re driving. Responsible drivers can save up to 30% on their auto insurance premiums at renewal, and new customers can save up to 10% when they enroll. Risky driving habits may result in higher premiums. In addition to measuring driving performance, the app provides helpful resources including: Information about the number of consecutive drives taken without interacting with a smartphone; a dashboard allowing drivers to track their performance and compare it with other drivers in the household; and articles providing tips on safe driving.

BUILDFAX Vendor: Verisk Target Audience: Canadian insurers What it Does: Provides insurers with more than 1-billion data points related to residential and commercial properties in Canada

Verisk has expanded its BuildFax product into Canada. The product provides property condition and history information to insurers, drawing on previously untapped building permit data. Available information includes remodeling, renovation and maintenance activity; major storm updates; solar installations; pool construction; and other characteristics. The product encompasses more than 1-billion data points and is continually expanding. “Insurers are often unaware of changes in the properties they insure, making it difficult for them to make informed underwriting decisions and provide the coverage their customers need,” BuildFax managing director Jonathan Kanarek said when announcing the product. “With our expansion into Canada, we’re providing Canadian insurers with data about what actually occurs in properties over time. Leveraging more than 20 years of proprietary data, we can eliminate the guesswork and help underwriters gain new insights into risks, prioritize investments in inspections, and improve their customers’ experience.”

SPECIAL EVENT LIABILITY PRODUCT Vendor: CHES Special Risk Inc. Target Audience: Brokers What it Does: Provides coverage for third-party bodily injury and property damage that may arise from an event

Managing general agent CHES Special Risk now offers special event liability insurance.

Demand for the product is expected to surge once lockdown restrictions ease and event organizers are back at work. Coverage includes third-party bodily injury and property damage that may arise from an event. This may include, but is not limited to, financial losses and bodily injury such as foodborne illness. While this type of insurance is optional, local authorities often require liability policies in excess of $1 million and organizers must comply to get permission to put on events. “A number of insurers have exited this market because of the lockdowns and are unlikely to come back in,” said Gary Hirst, president and CEO of CHES Special Risk. “People are expected to be shopping for this type of specialty coverage and only a few providers are left in the marketplace.”

MGA MERGERS | Feb 11

Exepct more mergers and acquisitions activity between managing general agencies (MGA) in the future, MGA executive Stephen Stewart predicted.

Private equity investment is giving MGAs the fiscal tools to make acquisitions.

Photos: iStock.com

DECLARATIONS BIG MOVES

SUMMARY

Brokerage hires former SCOR Canada CEO

MARKET INSIGHTS

Looking ahead Aon Q4 2020 Global Market Insights Report

Lussier Dale Parizeau has recruited Joseph El-Sayegh as a new regional vice president.

WHO: Joseph El-Sayegh CURRENT ROLE: Regional vice president, commercial services and practice leader in risk management, Lussier Dale Parizeau P&C EXPERIENCE: More than 30 years, including 20 at SCOR Canada.

PROFILE: CEO of SCOR Canada from 2016-20. Electrical engineering degree. Former underwriter for FM Global.

Served on the boards of ICLR and IBC.

Joseph El-Sayegh has joined Québec’s largest brokerage, Lussier Dale Parizeau, as regional vice president of commercial services and practice leader in risk management.

El-Sayegh “has a collaborative and open management philosophy combined with a strategic vision that will contribute to Lussier Dale Parizeau’s reputation as a leading provider of insurance and financial advisory services for businesses,” Michel Laurin, Lussier Dale Parizeau’s president and chief operating officer, said of the appointment.

Until February 2020, El-Sayegh was CEO of reinsurer SCOR Canada. He took over the role in 2016. El-Sayegh’s new role at Montreal-based Lussier Dale Parizeau took effect Jan. 11, 2021.

El-Sayegh has an electrical engineering degree from Ecole Polytechnique de Montréal. After graduating, he joined FM Global in Montreal in 1989 as an underwriter and loss prevention engineer.

During the 1990s, El-Sayegh worked in Beirut for Gen Re as Middle East and North Africa branch manager for property facultative. He joined SCOR Canada in 2000.

El-Sayegh holds the Canadian Risk Manager (CRM) and Chartered Insurance Professional (CIP) designations.

El-Sayegh has served on the boards of the Institute for Catastrophic Loss Reduction, the Insurance Bureau of Canada and the Reinsurance Council (Canada).

Mike Van Elsberg has joined On Side Restoration as senior vice president of national services.

Van Elsberg was previously deputy senior vice president of western claims ms at Intact Financial Corp., which acquired red On Side in 2019.

PANDEMIC SALES RECORDS | FEB 11

Alex Barker has joined AXA XL as head of specialty and aviation for Canada. Previously, Barker was senior vice president of the aviation business for Marsh & McLennan. He has also worked at AXA XL as a senior underwriter.

Videoconferencing during the pandemic ic helped brokers in top-tier brokerages across the country ntry shatter sales records for individuals topping the $1-million 1-million mark in new revenue, senior brokerage executives cutives reported in a recent Canadian Underwriter webinar. binar.

Photos: iStock.com

John Slattery is the new vice president of condominium and strata accounts for independent claims adjuster Sedgwick’s Canadian operations.

Slattery has been with Sedgwick since 2016, most recently serving as executive general adjuster.

Pricing is increasing, capacity is shrinking, and deductibles are on the rise in the Canadian property and casualty insurance industry.

That’s all thanks to the sharp reduction in interest rates dragging down insurer profitability and investment income, says a recent report from Aon, which includes an assesment of the Canadian P&C marketplace.

“Coverage limitations are being mandated by some insurers, and subjectivities are being required where they have not been in the past,” Aon says in its Q4 2020 Global Market Insights Report. “The Canadian government continues to provide financial support to businesses and individuals impacted by COVID-19 which is, amongst other benefits, serving to mitigate risk and temper underwriting behaviours.”

The report notes the Canadian economy has contracted by 5.4%, citing the Organization for Economic Cooperation and Development. However, the economy is expected to rebound this year as vaccines for COVID-19 make their way through the population. “There is general optimism about the New Normal,” the report states.

When looking at rate increases, many lines have seen jumps of at least 11% and a few — construction, financial lines, and personal indemnity, for example — have crossed the 30% threshold. And it doesn’t matter if they’re small, mid-sized, large or complex placements, Aon reports.

When assessing certain lines, Aon notes that social inflation is affecting auto insurer performance. “Insurers are focused on risk quality. Organizations with unaddressed risk quality issues — or with U.S. trucking exposure — are finding very limited insurer appetite,” Aon says, later adding, “pricing is significantly escalated — even for well-performing risks.”

Social inflation is also impacting the casualty side of the business. Claims costs are increasing. But even where exposures have decreased, insurers are not looking to reduce premiums, since they are focusing on a return to profitability.

TOWING GUIDANCE | FEB 5

Insurance Bureau of Canada (IBC) applauded the Ontario Provincial Police (OPP) for its new towing services guidelines, which provide clear direction to tow truck operators about what kinds of towing are required, and how each of these circumstances should be handled. canadianunderwriter.ca | April 2021

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INTERVIEW

BETTY CLARKE, MANAGER, CORPORATE RISK AND RECOVERY, CITY OF ST. JOHN’S

RISK MANAGEMENT

AWARDWINNING CAREER Betty Clarke, winner of the Donald M. Stuart Award, the highest honour within the risk management field in Canada, has had an expansive career in insurance. Find out what she’s accomplished, the secrets to her success, and what she loves most about being a risk manager

By Adam Malik, Managing Editor

20

April 2021 | Canadian Underwriter

cu | Tell us about your career path I started off as an insurance renewal clerk.

Within a few years, I accepted the position of insurance underwriting supervisor and later as manager with the Insurance Corporation of Newfoundland. Then I accepted another promotion to vice president of underwriting with the same company. I took on the additional role of vice president, administration with Anthony Insurance, which was their sales arm.

AXA subsequently bought into Anthony Insurance. Our views were not totally compatible so the timing was right for me to move on to expand on other opportunities.

While in Toronto, I met with Baird MacGregor Insurance Brokers. They offered me a position within their special programs department. They wanted it revamped.

I’ve always considered myself to be pretty good at going through the operations of a company and finding what the roadblocks were for people on the frontlines; then I would put together information on how I thought it could be run better.

I joined Baird MacGregor’s special programs department, which provided insurance to restaurants and used car dealers. They felt I did a pretty good job in making recommendations for this division.

I was then asked to complete another review and make recommendations for their Mississauga, Ont., office that looked after transportation.

cu | How did you end up in risk management?

A former colleague from Baird MacGregor reached out to see if I would consider joining Hunter Keilty Muntz & Beatty, where he worked. I was offered a great position in their transportation division, which I accepted. While there, I assisted some of my larger transportation and marine clients with risk management. I fell in love with that part of my position. I loved working with this company.

However, I missed my family back home, so I waited for the right career opportunity to move back to Newfoundland.

I saw Fishery Products International had a job posting for risk management, so I applied and got the job. That’s how I got into risk management.

cu | You’ve had a wide-ranging career. How has this helped you in your job?

I understand what the insurance broker and underwriter do because I held similar positions. I understand what the insurance underwriters need to do and what their tasks are, and that they need to make a profit. At the same time, they need to deliver proper service to their customers.

I understand the language, so that if I’m presented with a challenge — for example, if an insurance company says no — then I can get on the phone and deal directly with the underwriter. It is important in situations when I deal directly with underwriters to always update the broker, since we all need to share the same updates. I understand the language of the insurance policy wording.

It has made a huge difference for me in being able to do risk management more effectively because I know enough about what happens from the insurance industry perspective and how most things work.

cu | Why are these relationships so important?

You’ve got to be open to ideas and work with people. They’re your partners. I don’t look at insurance people as, ‘Oh, those insurance people.’ I look at them as partners. I call them partners because it makes a whole lot of difference for everyone to see themselves that way. Because if you’re in something together, it’s going to work. If one has gone off on one trail and the other has gone out on the other trail and you have this animosity between you, it’s not going to work.

When we could meet face-to-face, I’d spend the time to meet with my broker — since working with the city, my broker has

canadianunderwriter.ca | April 2021

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INTERVIEW

been Aon — say, before a conference. We would set aside time to sit down and talk about what the city has done; the new issues; whether things have been good, bad, whatever, and work out between us what the best solutions may be for all.

In doing that, I’ve managed to keep the insurance premiums under control over the years, while keeping good coverage in place. And if you must have a rate increase, it’s usually reasonable and it’s easy to explain why.

cu | What advice do you have for managing relationships?

Be respectful of other people and what they have to say. If somebody has been good enough to give me an idea, I will never shout it down. I’ll explain why this could be a good idea for something but won’t work in this particular case.

I’ll tell them why, in my opinion, it wouldn’t work.

You’d be surprised where the majority of good ideas come from. In a lot of instances, I found they came from the frontlines where people are dealing with the issue every day. Managers don’t always see the things they see. When you take their ideas and make them work, it makes people feel good.

cu | How can risk managers continue to learn from each other in these times?

You’d be surprised how much you can learn by reaching out to your colleagues.

Always reach out to other risk managers all across the country, and even across the continent. I find that folks in the U.S. have helped us out an awful lot.

You also have an opportunity to make new friends and contacts all across the world with diverse backgrounds.

And you certainly personally benefit from it as well. It’s opened doors for me in my career, and it will do it for people coming on stream. It helps us to grow as individuals and professionals, especially by being part of the risk management society.

You learn better communication skills. You lose the fear of public speaking. I used to be scared and felt better when no one in the room knew 22

April 2021 | Canadian Underwriter

PROFILE

BETTY CLARKE Title: Manager, Corporate Risk and Recovery, City of St. John’s, Nfld.

Industry experience: 30-plus years of experience in underwriting, brokering, and risk management. Spent time at Merit/Sovereign Insurance, Aon Reed Stenhouse, Anthony Insurance, Baird MacGregor, Hunter Keilty Muntz & Beatty Insurance Brokers, and Fishery Products International Ltd. Currently with the City of St. John’s Education: FCIP, RF, ICS-300 and Certificate in Business Administration from Memorial University Volunteer work: NALRIMS, currently director on board. Previously president and NALRIMS RCC chapter delegate. Also, previous chair of RCC, former president of Insurance Institute of Newfoundland, and RIMS Canada Conference co-chair in 2009 and 2018

me. But I got over that. Public relations are so important. Just improving your skills so that you can understand and motivate others is so rewarding.

cu | What opportunities has COVID-19 created for risk managers?

It creates an opportunity for others to understand the value in what you do.

I do lots of research anyway, but it’s shown how important it is to have all of that stuff ready in case something like this happens so that you can explain, ‘Okay, this is why the capacity is the way it is.’

The pandemic has shown that we’re not alone. People don’t like to be alone in anything. There’s an opportunity to learn from this. Continue to research and find out how everybody else did during these times. Find out what the pluses and minuses are. Compare that with your own experience, and update your plans the way they should be.

cu | What emerging risks should be on peoples’ radar?

In my mind, it’s cyber first, then climate change and pandemic.

Just a few years ago, I don’t think anyone had cyber insurance in place.

Now few, if any, are left without it. As you know, a lot of people have been working from home since COVID. There’s been a lot more hacking into different computer systems. And so you really have to be on the ball and have the right assessments and response in place. Cyber insurers are not just there to insure you. They’re also advising on good risk controls to put in place. Down the road, you’ll probably see better coverages become available.

With climate change, we’ve all got to be aware of it and find out what we can do to minimize the risk successfully.

As for the pandemic, well, I don’t think that’s going anywhere out of people’s minds for a long time. That will be a topic for awhile, for sure.

cu | What excites you about the risk management profession?

I think it’s just huge that you can be called upon to make things better for people.

It’s just so rewarding to be able to sit down with people, figure out all t he risks you’re dealing with, and come up with measures that can eliminate some of these risks altogether. I really enjoy that kind of thing.

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COVER FEATURE l 2021 RISK REPORT

2021 RISK REPORT

ELEVATED CONVERSATIONS Thanks to COVID-19, it seems like everyone in the organization is playing the role of a risk manager these days. How that benefits risk managers, and where they are setting their sights moving forward…

Photos: iStock.com

By Adam Malik, Managing Editor

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April 2021 | Canadian Underwriter

2021 RISK REPORTT l COVER FEATURE

WHAT A DIFFERENCE A YEAR MAKES.

B

efore the pandemic was declared in March 2020, risk managers were pushing for the ability to have a seat at the executive table to offer insights and help shape corporate strategies around risk. Typically, they were called upon to help senior executives only when something went wrong.

Today, though, is a different story. Managing risk has become top of mind at companies of all shapes and sizes. Leaders are including risk considerations in their thoughts about managing the business through COVID-19.

Company leaders are carefully thinking about how to keep staff and customers safe, by preventing the spread of the virus. Take, for example, directional arrows at the grocery store. Their purpose is to manage the flow of traffic in the store to prevent people from coming too close together in the narrow aisles. That’s something a risk manager would have co-ordinated before the pandemic. Now, it’s a standard consideration by company leaders in any office.

In fact, company employees of all stripes are starting to sound like risk managers. That’s giving risk managers more confidence about the importance of their role in the company’s day-to-day operations.

“It’s kind of cool to see departments applying risk management thinking and techniques on their own,” observes Tina Gardiner, who is a board member for the Risk and Insurance Management Society (RIMS), and the risk manager for York Region, a regional municipality bordering Toronto to the north.

Gardiner says that when she and her staff meet with company working groups, they see that others in the group have done scenario testing under the corporate business continuity plan.

“Or they’ve already said, ‘This is going to affect this, this and this, so here’s what we need to do,’” Gardiner says. “And they’re using risk terminology like ‘mitigation’ and ‘loss prevention.’ And I’m like, ‘This is great.’ It’s really good to see people were actually listening all that time. And I just thought I was nagging.”

Workplace conversations about risk have become “elevated,” especially around scenario planning, reports Steve Pottle, RIMS Canada Council vice chairman and risk manager for Thompson Rivers University in British Columbia. That means taking into account all the ifs and buts — and there are so many of them.

canadianunderwriter.ca | April 2021

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COVER FEATURE l 2021 RISK REPORT

“They’re using risk terminology like ‘mitigation’ and ‘loss prevention.’

And I’m like, ‘This is great.’ It’s really good to see people were actually listening all that time. And I just thought I was nagging.”

“I think most of us would have loved to have had [these elevated conversations] years ago with our boards and our senior administrators,” he says.

“Just to say to them, ‘We’ve got to start to think about this, and what happens if this isn’t available?’ Then we can at least have some way for planning, as opposed to sort of making it up at the moment.”

In one specific example of a challenge his school is facing, Pottle notes the issue of international students attending the university during the pandemic.

What if they can’t get into the country to attend classes? Most universities depend on international student tuition.

What do they do in this case? “What are those risk drivers and what are the risk indicators?” he asked.

Vaccination not the magic bullet Speaking about safety, as the COVID-19 vaccine rolls out across the world, risk managers and their work colleagues are turning their minds towards handling a return to the office. How will they manage the safety of staff when some may be vaccinated and others may not? One additional wrinkle is that vaccinations don’t necessarily stop the virus from circulating, but rather they reduce mortality rates among those who are infected.

For risk practitioners advising on a return to work, “it’s about making sure you [i.e. employees] understand that, despite getting a vaccination, you could still get the virus and you can still be spreading it,” Pottle explains. “For some people, there will be a lot of dis26

April 2021 | Canadian Underwriter

comfort about suddenly being ramped up to full capacity.”

The point being that vaccinations aren’t the magic bullet that will return everything back to its pre-2020 “normal” state. In fact, much of the strategy from what is considered the “new normal” today will carry over for some time.

“People are going have to get into their heads that you’re going to still have to follow the safety protocols for a while,” Pottle says. “You’re still going to have the mask. You’re going to have to follow good hygiene practices for yourself. And for the facilities, we have to constantly maintain that level of cleanliness. And that means making sure we have sanitization.”

Gardiner agrees. “Just because you get a needle, or someone next to you gets the needle, that doesn’t mean you’re safe,” she says. “Masks don’t come off.

Hand sanitizing doesn’t stop. The station cleaning doesn’t stop. We’re in this for the long haul.”

For risk managers, it won’t be about blocking the entrance for those who aren’t vaccinated, or requiring staff to prove that they’ve been vaccinated. “It’s being able to support employees, whatever their decision is about immunization, and making it a safe environment for everyone to come back and really supporting that,” Gardiner says.

This will be the reality for quite some time and risk managers should be preparing for it, experts counsel.

“As much as I don’t like to say it, I think [of ] COVID as endemic, as opposed to [a] pandemic,” Pottle says.

“It’s something people are going to have to get their heads around for a long time.”

If that’s true, risk managers must consider one very important thing: “Do we all have the bandwidth and the stamina to get us there?” Pottle said.

Indeed, the mental health aspect is gravitating to the front of risk managers’ minds. “We’ve been at this a long time,” Gardiner said. “How is everybody’s stamina? I think the mental health piece is becoming a big thing, for sure. How we’re supporting that mental health piece is huge.”

One answer to that question lies for the most part with human resources.

They should have the tools to help colleagues manage through the process.

But they’ll need risk managers to help them out.

“As risk managers, we have to support our partners in HR,” Pottle said.

“They are the risk managers in some respects. We can support, but they have the expertise.”

For Pottle, HR’s tools to help employees’ mental health are just as important as a mask, face shield, or hand sanitizers in protecting employees’ physical health.

“If anything comes out of this, I think there’s going to be a proper acknowledgement that mental health is as important as a person’s individual physical health — colds, that sort of thing — and that’s a good story. I think it’s important that that continues going forward.”

Uncertainty Despite being fairly certain that the threat of the pandemic will last longer than people think, and that people’s mental health should be a main focus going forward, a lot remains uncertain.

For example, will all Canadians who want to be vaccinated actually have the opportunity to do so by the end of September? There have already been delays. The biggest one may have been in January 2021, when Pfizer announced a temporary delay in getting vaccines to several countries because it was upgrading its plant in Belgium in order to produce a larger number of vaccines in the future. There have been other de-

2021 RISK REPORTT l COVER FEATURE lays, including harsh winter weather causing hold-ups in moving vaccines into Canada.

“We’re finding a lot of uncertainty right now as to what September could look like,” Pottle says. “Will all the vaccinations be complete by September? Most likely not, especially when you’re seeing all these delays in the supply chain.”

There’s also a question about the efficacy of the vaccination. At the time of writing, CBC reported that two nursing care homes in B.C. experienced COVID outbreaks recently, even though 82% of residents in one home were vaccinated and 88% in the other.

“You’re not going to be risk-proof [with the vaccine],” as Pottle points out.

“You’re not going to be 100%. There’s always going to be the risk of something — it doesn’t have to be COVID. So what is the best way to minimize people’s concerns? Make sure you’re up-front and completely transparent in your processes. Communicate, communicate, and communicate.”

At the beginning of the pandemic, Gardiner and her team had to figure out how to get everyone to work remotely. Now their focus is on how to bring people back. Doing so requires four key things to consider: • Ensuring employee safety.

Measures include social distancing, personal protective equipment, and mental health.

• Maintaining a service focus.

Gardiner works for a regional municipality, for example, which is responsible for its citizens.

• Leveraging technology. It can be used to help staff work remotely or train them.

• Pivoting as required.

Pivoting might well be key over the next several months. “There’s been a lot of unpredictability and a lot of change,” as Gardiner observes. Last March, for example, early estimates pegged an early summer return to the office. That changed to September. Then people predicted returning to the office in January 2021, which got moved again to the spring. Now? Prognosticators have learned their lesson.

“People are going have to get into their heads that you’re going to still have to follow the safety protocols for a while.

You’re going to still have the mask.

You’re going to have to follow good hygiene practices for yourself.”

“We’re aiming for when everybody’s vaccinated,” Gardiner says. “But there’s been no date this time. It’s just, ‘As soon as we can.’”

And when that finally happens, what will things look like then? Who knows?

For risk managers, it’s most important to consider what’s in the best interest of staff and customers in addition to taking into account the best interests of the business. In Pottle’s situation, that would mean taking into account the best interests of faculty and students, in addition to the big-picture interests of the university as whole.

Work is being done, Pottle says. “We’re not just waiting until September and then snapping a finger. Right now, we’ve put together three scenarios: 1) We’re back in the office, 2) we’re not back, or 3) some kind of hybrid. I think the reality will probably be that it will lead to something in the middle. Theory-based courses can probably be remote. Or, students might be given the option of coming in for one day a week for in-class session, for example, and then the rest of the time you are remote. Until things start to firm up in terms of scenarios, you’re really just trying to cover all your bases as best you can.”

Broad concerns The challenges risk managers have faced over the past year are not generic. Different industries require different responses to the pandemic. In the P&C insurance industry, for example, a recent Canadian Underwriter survey shows about 87% of the workforce transitioned to working from home. However, risk managers in the

manufacturing sector had almost no time to think at all, reports Ginette Demers, RIMS Canada Council chairwoman and risk manager at Domtar in Montreal.

They had to figure out a solution quickly to get their paper production plant up and running as soon as possible.

“We had to turn around very quickly because we needed to maintain operations,” she says in an interview. “It was a matter of days, weeks, for all the plans to be in place. We needed to think about, ‘Okay, how many employees do we need on the floor to operate this equipment?’

We had to re-think about shifts, and the number of employees, and then [the employees’] protection. It was a quick turnaround.”

That said, Domtar’s workforce is largely working onsite already, so Demers’ focus is not so much on returning to the office. Indeed, her company’s top concern is how to deal with reduced demand for her company’s products. With people working from home and doing their work virtually, the demand for paper has dropped off.

“The impact [of the pandemic] on us is more on the economic side than on worrying about when we go back,” Demers says. “It’s more about, ‘How are we going to keep business?’ We’re thinking of repurposing facilities and stuff like that.”

It’s just an example of how wide-ranging a risk manager’s concerns can be.

“We all have our priorities and it’s very broad as to what we face as risk managers, depending on how the economy and the pandemic affect our activities,” Demers says. canadianunderwriter.ca | April 2021

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FEATURE l POLITICS AND INSURANCE

POLITICS

POLITICAL SQUEEZE Unfortunately, the pandemic hit right during the middle of a hard market, so Canadians sought premium relief at the same time insurers needed rate increases to restore profitability. The result? Politics.

How the P&C industry plans to respond

Photos: iStock.com/roberthyrons

By Adam Malik, Managing Editor

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April 2021 | Canadian Underwriter

POLITICS AND INSURANCE l FEATURE

I

n the fall of 2020, the second wave of the COVID-19 pandemic tightened its grip across the country, forcing governments to further restrict and even close some segments of businesses in an attempt to prevent the spread of the virus. Particularly hard hit was the hospitality industry, which faced the double whammy of pandemic-related restrictions and increased insurance renewal rates. Alas, Canadian businesses, shuttered and scrambling, called for premium relief at the very same time that insurers needed to hike rates to return to profitability. This confluence of events led to a perfect storm.

Lightning struck in late October, when Ontario Premier Doug Ford took specific aim at the insurance industry for a commercial insurance capacity issue that developed during the hard market pre-COVID. At a press conference to discuss the pandemic, the frustrated premier unloaded.

“They’re absolutely just refusing to insure people — we don’t play that game,’’ Ford said, specifically referencing the rate hikes and capacity issues facing banquet halls.

“You guys don’t get to get all the cream and gravy…and just slough off everything else and think we aren’t going to insure it.”

Ford went on to accuse the industry of “gouging” clients by raising commercial rates and that he’s “had it” with insurance companies. He threatened to go after insurers that were seemingly making money by the truckload, although exactly how he would do this, he did not say. “I’m on to these guys,” he said. “The people are the priority, not the big insurance companies making gazillions of dollars. So I’m coming.”

Pouring gasoline onto the fire, independent MPP Jim Wilson, a former interim leader of the Progressive Conservative party, called for greater regulation of the insurance industry after hearing from condo constituents about increased insurance rates.

“What [condo corporations are] hearing from brokers is that the industry blames [the higher rates] on COVID claims and severe weather claims,” he said. “That’s just bogus…I

“Unfortunately, we have a hard market twinned with a global pandemic, and obviously no one has ever seen that before — and it’s made both worse.” mean, they can’t be having COVID claims yet, it’s just too early. They need to justify the need for these exorbitant rates.”

Ontario NDP Leader Andrea Horwath has also called for greater industry regulation. “The insurance industry has been running amok in this province for years now,’’ she said. Her party has been calling for a 50% reduction in auto insurance premiums during the pandemic.

Unfortunately, some of these sentiments come from outdated and incorrect perceptions, Don Forgeron, president and CEO of the Insurance Bureau of Canada, believes.

Between 2016 and 2019, the Canadian P&C insurance industry has posted a return on equity, one measure of profitability, of between 4.8% and 7.3%. That’s well below the returns of between 16% and 18% during the early 2000s.

“There’s always been a perception that the industry is wildly profitable,” Forgeron told Canadian Underwriter. “It doesn’t matter where the economy is, the industry is always making ‘gazillions.’ There’s no question that when you look at the data, the margins are pretty thin. I’ve had this discussion with [now-former Ontario Finance] Minister [Rod] Phillips, and he accepts and acknowledges that the industry certainly is not gouging. The opposite is happening.”

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“There’s always been a perception that the industry is wildly profitable.

It doesn’t matter where the economy is, the industry is always making ‘gazillions.’

Ford and other politicians who have expressed frustrations with the insurance industry over high premiums are simply reflecting the anger that consumers are directing at them, says Joseph Carnevale, president of the Insurance Brokers Association of Ontario.

“No one’s faulting the premier for having that outburst that particular day,” Carnevale told Canadian Underwriter.

“It’s understandable. Consumers are feeling it. And so, as a representative of all consumers, he has a right to vent.

And that’s okay.”

Forgeron agrees these types of political outbursts are to be expected, given the way things are at the moment. “I think it just makes the point even clearer that we need to continue to work with [politicians and regulators]. We need to continue to show them the good work that we’re doing. And we need to continue to ensure that we’re seen as being part of that solution that they’re looking for, and not part of the many problems they’re dealing with. The frustration is understandable.”

Even at the best of times, no one ever believes they’re getting a deal on their insurance, as Carnevale points out. So, combine the effects of the hard market with the impact of COVID-19, and customers are naturally frustrated.

“With all due respect to consumers, it is clear this is a problem,” Carnevale acknowledges. “COVID has presented a huge problem for consumers, both per30

April 2021 | Canadian Underwriter

sonal and commercial. The frustration that the premier echoes is understandable. We [in the P&C industry] all have the same frustration, and we’re dealing with something that’s still an unknown.”

Forgeron is aware of the lens through which politicians and regulators are looking at the P&C industry. The financial results for 2020 aren’t available yet, but the P&C industry is expected to make a profit, albeit barely, and that’s more than other industries and businesses can say.

“Governments are dealing on a daily basis with sectors that are not profitable,” Forgeron said. “In fact, many are failing. And that’s the lens they’re looking through. We as an industry need to be sensitive to that. Even though our margins are wafer-thin, many sectors don’t have any margins at all and have already failed.”

As far as greater regulation is concerned, the industry shouldn’t be cast as the scapegoat for the hard market conditions in some commercial lines. Politicians also have a role to play in making the situation better for consumers, as Forgeron observes. For example, governments could take measures to improve insurability and risk profile around condos and stratas.

“Governments recognize that markets work in cycles,” said Forgeron. “Unfortunately, we have a hard market twinned with a global pandemic, and obviously no one has ever seen that before — and it’s made both worse. And so we just have to find solutions through that with governance. I think the default for governments...is not to go looking at regulation to solve these problems.”

Charles Brindamour pushed back against the idea of increased regulation during a fall conference call discussing Intact Financial Corp.’s financial results for the three months ending Sept. 30.

“I don’t think that scaring insurers is the way to bring capital back into the system,” he said, later clarifying, “I don’t think you bring capital back into the industry by regulating.”

Public Education Meanwhile, brokers have listened to their fair share of customers’ frustrations directly, according to Carnavale. “We cer-

tainly feel it and hear it first-hand, more so than insurers, in that we’re the ones talking to consumers on a regular basis.

Having said that, I think part of this is really a communications issue.”

The topic of public education has come up a number of times during interviews and industry virtual events.

“Unfortunately, there’s just some misinformation out there and it does not put the insurance industry in good light,” IBAO CEO Colin Simpson said while moderating the CEO panel at the virtual IBAO Convention in October. “We certainly have to continue working together to make sure that we try and educate the public.”

The industry has done a lot of work to educate elected officials and regulators, but the frequency needs to be increased, Forgeron says. Furthermore, the industry needs to call on allies in other industries to help carry the message. Associations such as Restaurants Canada, which represents the foodservice industry, the Canadian Federation of Independent Business, and the provincial Chambers of Commerce across the country could support the insurance industry’s messaging to politicians and the public.

“I think they can vouch for the hard work that the industry is doing, the heavy lifting that we’re doing,” Forgeron says. “The more government hears from us [about] the work that we’re doing, I think that’ll just position us in a much better place with them.”

Brokers need to take their message directly to the client, Carnavale advises.

This will mean more in-depth conversations than compared to previous years.

“I find myself that you have to go into great detail about why we’re here and how we found ourselves here,” he says. “It’s not always about, ‘So what are your risks?

What can we do to help you?’ Sometimes the messaging is, ‘Well, this is where we find ourselves as an industry. This is how it impacts you. This is how we got here.

This is how we see this going forward, and when we [expect to see] changes that are going to benefit you again.’

“It’s a constant conversation. It’s the very essence of what brokers do. Part of our job is also to educate consumers about how they’re being impacted.”

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MOBILITY SERIES - PART TWO

Gaining the upper hand How brokers can defend their turf in the mobility space, as digital disruptors such as directs, OEMs and vehicle subscription services start to crowd the market B Y S C O T T C O B E R , National Practice Leader — Transportation, BFL Canada

T

he shift to mobility is bringing further disruption to the distribution channel for brokers across many insurance verticals.

This gradual disruption has already started to make an impact on personal property and automobile lines. First, it was Economical Insurance launching Sonnet Insurance in 2016 and then Onlia Insurance launching in 2017. Onlia Insurance is a joint venture of Fairfax Financial Holdings Limited and Achmea Canada Holdings Inc.

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April 2021 | Canadian Underwriter

Consumer choice and willingness to share data in exchange for a quote to bind gives Sonnet and Onlia a first-adopter advantage in helping these carriers learn consumer mobility buying behaviours.

Millennials are the anticipated target audience, but the reality is that quoting and binding insurance coverage appeals to any consumer looking for a seamless and efficient online experience.

When a consumer gives consent to use their data and answers a limited number of underwriting questions to confirm

coverage through their smartphones, antiquated insurance brokerages are on notice. In theory, online direct insurance companies should have lower premiums by cutting out broker commissions, increased claims efficiencies, and limited bricks-and-mortar costs.

Apart from direct insurance companies, other potential disruptors to the broker channel in the mobility space may include automotive original equipment manufacturers (OEM). It’s predicted that they may launch mobility insurance

HANDBOOK products offering consumers further digital choices. Embedded telematics devices and connected vehicles provide automotive manufacturers with a real-time gateway to driver and vehicle data.

The looming threat from OEMs and other emerging intermediaries could expose brokers to other future disruptions as the car ownership model shifts. For example, vehicle subscription services are beginning to see uptake with automobile insurance included as part of the monthly vehicle cost.

Close to five years after Uber’s usage-based insurance (UBI) platform disrupted the insurance industry, other approved technology companies in ridesharing, car sharing, food delivery and last-mile delivery programs continue to enter the non-owned fleet space.

An insured vehicle in this area potentially has its asset under several different primary policies in any given day or week, providing sharing economy companies with a tremendous advantage: They can use mobility data with premiums adjusted on mileage and/or behavioural ratings.

How can insurance brokers counteract the growing mobility threat when partner insurance markets have cut broker distribution by renaming or rebranding their business model? One solution will be the growth of specialty MGAs to customize and provide additional capacity as digital platforms and more favourable provincial insurance regulations begin to allow the unbundling of products.

A second solution is education and navigating clients to what makes sense for their specific risks. Direct writers will face hurdles to service multi-line insurance policies and provide the same broker expertise, and challenges with current insurance industry labour shortages may also arise. Engaged, forward-looking brokers have already started to see a service shift with clients requiring expertise in personal and commercial lines as mobility and primary platform insurance policies continue to evolve.

A broker’s role requires educating clients about which platforms are approved and which do not provide primary coverage; it will be a necessity to

review coverage gaps and additional product offerings.

Brokers will be needed to further advise their clients using UBI programs that “double-dipping” in the primary automobile policy may be occurring. The double-dipping occurs when the insured’s primary traditional automobile exposure is transferred to the digital insurance platform, yet their primary auto policy does not adjust to credit the limited annual mileage that is coming off the coverage.

Post-COVID, assuming that a majority of vehicles are not being used as much as before, a broker can help clients find cost-effective solutions by understanding their true exposures. The Financial Services Regulatory Authority of Ontario’s recent approval of telematics surcharges will be a positive step to help UBI programs grow, whether they are simple products to adjust premiums on mileage or on-road behaviours.

Higher-risk drivers who decide not to change their driving patterns will no longer enroll in data-sharing programs, returning them to the traditional pool.

The broker’s professional skillset will continue to be a valuable asset to communicate with clients and help guide them through their digital channels.

Individually rated commercial automobile insurance will be the next target for direct insurance writers and is ripe for similar mobility disruptions in select risk classes. The non-fleet risks look very similar to personal lines automobile insurance.

Brokers have the ability and trust from their insureds to defend this space and to advocate for industry changes with commercial auto being a more specialized class. Risk management expertise will be paramount in educating clients, as they become more comfortable using different mobility solutions.

Similar to personal auto lines, it could be common in the future for an insured’s commercial automobile to have multiple primary insurance platform coverages on a daily basis.

DEAL TRACKER

Latest acquisition news & activity NFP

EdgeHill

NFP Corp. has acquired EdgeHill Insurance Brokers Ltd., which was founded in 2006 and is located in Toronto’s financial district. EdgeHill’s coverages include personal lines for high-net-worth clients, including home, auto, watercraft, and personal excess liability.

EdgeHill’s principals, Patti Hull and Ross Schofield, are joining NFP as a vice president and a consultant, respectively. In commercial lines, EdgeHill covers transportation and real estate, among other things.

NFP has made dozens of acquisitions a year over the past few years. Its previous Canadian acquisitions include Dalton Timmis Insurance Group Inc., McLean Hallmark Insurance Group Ltd., Mass Insurance Brokers Limited and PBL Insurance Limited, among others.

Lundgren & Young Excel Lundgren & Young Insurance is forming a new Alberta brokerage, Excel & Y Insurance Services, as a result of a partnership with Excel Insurance Group Inc. Excel & Y has two Calgary offices, plus one each in Camrose and Edmonton.

The new partnership will now independently operate 17 brokerage offices in Alberta, plus three in British Columbia. The deal is neither a merger nor an acquisition.

Excel & Y’s CEO is Robyn Young, president-elect of the Insurance Brokers Association of Canada and a past president of the Insurance Brokers Association of Alberta.

Other Excel partners include Edmonton-based Treasures Insurance & Risk Management Inc., whose CEO, Scott Treasure, is a past president of IBAC.

FirstOnSite

Spectrum

Spectrum Restoration, a family-run disaster response contractor, has been acquired

by Mississauga, Ont.-based FirstOnSite Restoration.

Spectrum has one office in Cold Lake, Alta. and another to the southeast in Lloydminster, a town that straddles the Saskatchewan-Alberta border.

Travis Stieb, who until recently was Spectrum Restoration’s general manager, is now senior project manager of the complex commercial division at FirstOnSite.

The deal closed Dec. 1, 2021.

Scott Cober is national practice leader — transportation at BFL Canada, based in Toronto. canadianunderwriter.ca | April 2021

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recovery Fire Following Earthquake p. 36

Photo: iStock.com/AleksandarNakic

HIGHLIGHTS

RECONSTRUCTION

Building to code The question is: Which code? A guide to grandfathered upgrades B Y B E N D A E E , J.S. Held

S

hould an old cottage be upgraded to the current code by a new owner? When can a building component be “grandfathered?” Who should pay for the code upgrades following a property loss claim?

These are common questions regarding upgrading a building to current codes and standards prior to a renovation project, before purchasing an old cottage, or after a property loss claim.

Codes, bylaws, and ordinances may mandate code upgrades to the existing buildings for various reasons, such as higher safety standards or energy preservation. However, when a loss occurs, the common expectation might be that the insurer will pay for all required upgrades to the roof, wiring, or plumbing components.

Even if the policy covers code up34

April 2021 | Canadian Underwriter

grades, it may be challenging to determine the extent and applications of the code upgrades in reconstruction.

Ontario Building Code The Ontario Building Code, as in other jurisdictions, includes two parts related to existing buildings that outline change of use and renovation requirements.

In a nutshell, the change of use section states that if the occupancy of the building is changed, a code upgrade to the entire building is required. Examples of change in occupancy may be splitting one residence into two, or using a warehouse as an exhibition place.

Therefore, an old cottage, though lawfully remaining non-compliant to the current code, won’t require a code upgrade by a new owner if it remains a cottage. This is called “grandfathering.”

The renovation section of the code applies to partial alteration of building components that have been in existence for at least five years. In general, this means that only the renovated portions of the building should be upgraded to the current code, assuming that the renovation is not “substantial.”

For instance, in a kitchen renovation project, code upgrades will be limited to the kitchen’s “building systems,” i.e., plumbing, framing, electrical, etc. Similarly, after a property loss, only the damaged components of the building will need code upgrades. There are some exceptions to these general rules.

Renovation requirements Some grey areas exist regarding code upgrades in renovation or remedial projects that may lead to legal disputes,

RECONSTRUCTION l RECOVERY one of which I will explain in detail here.

Sometimes a renovation necessitates upgrading an undamaged or unaffected portion of the building — for example, construction of a new wall on a pre-existing defective foundation wall when the capacity of the foundation wall is questionable.

Under these circumstances, the building code draws a line, stating that the “performance level” of the building after the renovation should not be less than the existing building. This statement is often interpreted to mean that if the existing elements withstand the current applied loads, they can be grandfathered. Hence, no code upgrade or replacement would be warranted. This is not necessarily a true interpretation of the code.

In a recent case in Ontario, a commercial building collapsed immediately following a roof renovation. The building was 30 years old and consisted of a long span, steel-frame structure with no interior columns. The roof renovation

project entailed replacement of the metal decking, roof insulation, and the roof purlins with “like kind” material. The weight difference between the new and old roof was about 1% of the total dead loads, which was negligible. As such, no structural analysis was conducted, and the steel frames were deemed adequate following the code provisions. In fact, the building was grandfathered and only the new components were upgraded to the current code.

The building collapsed following a heavy snowfall. The snow load did not exceed the historical heavy snowfalls of that region, which the structure had safely endured in its 30-year life span.

The renovation project appeared to be the culprit. Investigations revealed that the original structure was not properly designed for the unbalanced snow loads.

However, heat loss through the roof had resulted in melting and sliding of snow that could have reduced the ice and snow load by 30%. In fact, the poor insulation

was the lifesaver up until the replacement with new insulation. The grandfathered building collapsed while the building code did not explicitly mandate any structural upgrade.

Conclusion Grandfathering is often the subject of disputes. A cookie cutter approach in responding to such claims may be disproportionate, since policy interpretation and legal arguments may not be completely consistent with the engineering fundamentals.

These cases require precise multi-faceted strategies to avoid unnecessary legal costs.

Ben Daee, PhD., P.Eng., PE., is assistant vice president of forensic architecture and engineering at J.S. Held. This article is not intended to offer any policy interpretation and/or legal opinion. The author’s objective is to shed light on common code upgrade disputes and challenges.

canadianunderwriter.ca | April 2021

35

Photo: iStock.com

RECOVERY

EARTHQUAKE INSURANCE

The fire next time What it would cost to prevent $10 billion in damage due to fires following a B.C. earthquake B Y D AV I D G A M B R I L L , Editor-in-Chief

F

ire following a major earthquake in the Lower Mainland of B.C. could cost the Canadian property and casualty insurance industry a median of $10 billion in insured claims, according to a report commissioned by the Institute for Catastrophic Loss Reduction (ICLR).

The price tag could be significantly reduced if local public authorities made three investments that would cost only a fraction of the projected damage tally, the report’s author told Canadian Underwriter in an interview.

In its report, Fire Following Earthquake in the Vancouver Region, ICLR projected what might happen if five modelled earthquakes — all varying in magnitude from 6.8 to 9.0 — struck various regions in and around the Lower Mainland of B.C. “Earthquakes are sometimes followed by major fires, whose damage can greatly exceed the shaking damage,” the author of the study, Charles Scawthorn, wrote.

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April 2021 | Canadian Underwriter

Scawthorn is an internationally renowned authority on the mitigation of natural and technological disasters.

“Accounting for fire department response, water system damage, weather and other conditions, the growth and ultimate final burnt area of fires are estimated to result in losses from nil to $10 billion,” the report states, noting these are median estimates, which vary according to the specific details of the earthquake scenario.

This loss would be virtually fully insured and would have a very significant impact on the Canadian insurance industry.

“Fire losses would come on top of shaking and other losses, which would be insured to a lesser extent,” the report goes on to say. “A leading global reinsurer has stated that losses of this magnitude would likely result in failure of some insurers, would entail secondary and contingent losses, and could conceivably lead to financial contagion.”

These damage estimates could be reduced significantly if Vancouver follows three main recommendations contained in the report, Scawthorn said.

The first recommendation is to develop an integrated regional portable water supply system of hose tenders (basically fire trucks that can carry high-volume hoses) and hose reels, with compatible fittings, that can be used to access alternative water supply sources and relay water to the fireground.

Second, an automatic secondary onsite water supply should be established for sprinklers in high-rise buildings and buildings with floors higher than 75 feet above the lowest level of fire department vehicle access.

And third, there should be a review of the ability to control and isolate the gas transmission and distribution networks in the event of a major earthquake. Plus, the gas distribution operator should

FIRE FOLLOWING l RECOVERY consider incorporating an automatic gas shutoff device in gas meters.

Among these recommendations, the big-ticket item would likely be $20-40 million for 20 new hose tenders and pumps for the Lower Mainland of B.C. “The bottom line is we are talking about maybe 20 of these [hose tenders],” Scawthorn said. “The gold-plated version of these things is maybe $1 million, so we are talking about 20 times $1 million. So that’s $20 million for these hose tenders, and then for some of these pumps, maybe another $15 million to $20 million. So, let’s say around $40 million.

“And that’s spread out over, say, four years. So, $10 million per year for four years, for a city of perhaps 2.5 million people? I mean, that’s a noise-level expenditure. It’s nothing.”

As for the cost of installing a secondary water supply for high-rises, Scawthorn says it’s not an issue for newly constructed buildings. “It’s just part of the cost of

doing business,” he said. “For a high-rise building, it’s not even pennies on the quarter. Ballpark for a high-rise building, maybe we are talking about $100,000. They spend that much on carpeting in the lobby. It’s nothing.”

Retrofitting the older high-rise buildings with a secondary water supply might appear to be a greater challenge, although Scawthorn said it would likely mean filling up two spots in the parking lot with water tanks. “The biggest obstacle there is that Vancouver has gone through a building boom over the past 20 years, and put up 1,000 high-rises,” he said. “They are all sprinklered, but they didn’t put in a secondary water supply…Why that is not in the building code, I do not know.”

Finally, automatic gas shutoff meters should be installed in advance of a quake.

There are two parts to this recommendation, Scawthorn observes. One is to install “block valves,” which operate remotely and are triggered by a seismic device. The

second is to build seismic set-off devices into the gas meters of individual Vancouver consumers who use gas. The cost for the meters would be negligible; most of the cost would be the labour to retrofit the gas meters in B.C. homes.

FortisBC delivers natural gas, electricity and other energy solutions to approximately 1.2 million customers in 135 communities throughout B.C. “Fortis is on record as saying they are intending to replace every gas meter to save a few bucks for gas meter readers, so they are going to replace every one of these meters anyway,” Scawthorn said. “So, all we are asking is to build this [set-off device] into the new meters you are going to put in. Japan did that. It’s a very simple little device. It works very well, it doesn’t cost a lot of money.”

The bottom line is that money is not the issue, Scawthorn said. The question is whether there is a political will to implement the report’s recommendations.

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canadianunderwriter.ca | April 2021

37

COMMERCIAL

SPOTLIGHT

cannabis

HIGH ON GOOD GOVERNANCE Insurers want to see solid experience at the board level of cannabis companies.

iStock.com

By Jason Contant, Online Editor

W

hether or not a cannabis company is following good corporate governance procedures can be the difference in finding liability cover for its directors and officers, HDI Global Specialty SE says.

After recreational marijuana became legal in Canada on Oct. 17, 2018, the qualifications of board members and executives of cannabis companies came under scrutiny by the nation’s underwriters.

Sometimes board members or executives were really good at growing cannabis, but they didn’t know the ins and outs of corporate governance procedures, dealing with investors and lenders, or handling employees on the company’s books.

“Over the years, there were claims [regarding] business decisions or practices that people did that were [against] what proper corporate governance would be,” said Oren Schemool, head of financial lines underwriting with HDI Global Specialty SE–Canada, referring to things such as omitting expenses or misleading forecasts.

38

April 2021 | Canadian Underwriter

There was a wide variance of qualifications among board directors, observed Schemool, who was one of the first underwriters to start writing D&O coverage for cannabis companies.

Allison Sinha is a senior underwriter in Burns & Wilcox’s property and casualty department who specializes in cannabis insurance. She noted that cannabis underwriters often see a wide variety of board members, with the majority of them having experience in the pharmaceutical or farming industries.

“Which is really great, because they can bring those past experiences to the table to help navigate various legal and regulatory requirements and ensure that their companies are running appropriately and everything is above board,” Sinha said in an interview in December 2019. She added that some directors also come from different business backgrounds, including banking or other financial services sectors.

Most directors of a cannabis company have served on a board before coming

onto a cannabis board, Sinha said. “It is something we look for, and it is better for us if they have. We like to see track records and past experience in order to provide coverages that they require.”

When recreational marijuana first became legal, D&O liability came into play in another way, Schemool said. At the time, a lot of money was being pumped into the sector by investors, he said.

“But with the amount of money coming into the sector, this encouraged investors to make quick decisions that had the potential for a bad investment.”

For instance, investors sometimes quickly invested in companies with a limited amount of information, leading to a bad investment. “When you make a bad investment, a lot of times that leads to a D&O claim,” Schemool said. “I looked at too many business plans to remember and, as an underwriter, you’re trying to separate what you see as good business plans from bad business plans. I can tell you there was really a wide spread [in terms of] quality of business plans.”

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