Canadian Underwriter June 2012 by Annex Business Media

C A N A D A’ S I N S U R A N C E A N D R I S K M A G A Z I N E . C A N A D I A N U N D E R W R I T E R . C A

JUN E 2 0 1 2 A Business Information Group Publication #40069240

Cyber Surge BY CRAIG HARRIS

Single Sign On BY KEN METCALFE

Providing the Policy BY GREGORY D. HARDY AND SANDRA McCULLOCH

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VOL. 79, NO. 6, JUNE 2012 CANADAâ&#x20AC;&#x2122;S INSURANCE AND RISK MAGAZINE. PUBLISHED BY BUSINESS INFORMATION GROUP

www.canadianunderwriter.ca

COVER STORY

Cyber Surge

28 FEATURES

42 Sawmill Dust-Up

Single Sign On promises to eliminate the need for staff to remember multiple passwords and ID names to access multiple applications and network resources.

High-profile explosions at B.C. sawmills have seen some insurers bail out of the beleaguered market segment, while others seem poised to take advantage.

BY KEN METCALFE

20 Big Data

BY ANGELA STELMAKOWICH

54 The Leaky Bucket

Using high performance analytics (HPA), insurers can transform Big Data into faster, better information processing.

To prevent the leakage of business from brokers to direct writers, brokers will need to embrace technology and consumer metrics.

BY STUART ROSE

BY DAVID GAMBRILL

BY CRAIG HARRIS

16 Portals and Silos

50 Providing Policies

Insurance company portals are becoming a new breed of IT silos. User experience platform technologies (UXP) may be a way to knock them down.

It seems like a basic Insurance 101 principle, but the insurance provider is obligated to provide the policy to the insured.

BY WENDY AARONS-CORMAN

Single Sign On

There has been a surge of interest in cyber insurance coverage. Increased media reports of data breaches and evolving privacy regulations are spurring senior management and risk managers to recognize information security as a strategic business issue.

BY GREGORY D. HARDY AND SANDRA L. McCULLOCH

24 Replacing a Legacy

58 E&O Protection

Replacing a legacy system is fraught with peril, but insurers would be wise to slay the beast, since doing nothing amounts to a career-killing move.

Panic or paranoia should not override good judgment when brokers protect themselves against potential E&O claims. BY FRANK CAIN

BY GREG THORNTON

38 Making it Happen

63 IBABC Convention

Industry stakeholders are working together to achieve technology solutions in the spirit of SEMCI.

B.C.â&#x20AC;&#x2122;s brokers turned out in droves to discuss the twisted turns of applying strata insurance deductibles.

BY RENEE DUREPOS

BY DAVID GAMBRILL

46 Collaborative Solutions True success in technology is only achieved when industry stakeholders are all rowing the boat in sync and in the same direction. BY RICK ORR

June 2012 Canadian Underwriter

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VOL. 79, NO. 6, JUNE 2012

PROFILE

Senior Editor David Gambrill david@canadianunderwriter.ca (416) 510-6796 Editor Angela Stelmakowich astelmakowich@canadianunderwriter.ca (416) 510-6793

10 Wind Whisperer Dr. Gregory Kopp, a professor of civil engineering at Western University, is a central figure in research on wind damage in aid of building safer homes. BY DAVID GAMBRILL

SPECIAL FOCUS

Editorial

Marketplace

Senior Publisher Steve Wilson steve@canadianunderwriter.ca (416) 510-6800 Associate Publisher Paul Aquino paul@canadianunderwriter.ca (416) 510-6788 Account Manager Michael Wells michael@canadianunderwriter.ca (416) 510-5122 Account Manager Christine Giovis christine@canadianunderwriter.ca (416) 510-5114

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Connect with Canadian Underwriter

66 Moves & Views

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68 Gallery

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EDITORIAL

Making a Noise

This raises a very difficult problem for the industry. Accumulated knowledge about climate change often fails to prompt political action. David Gambrill, Editor david@canadianunderwriter.ca

Canadian Underwriter June 2012

If small towns burn among our forests or if water seeps into our basements and politicians are not around to listen, does the catastrophe make a noise? Shortly before we went to press, the Insurance Bureau of Canada (IBC) released research findings from a study by climate scientist Dr. Gordon McBean. The short version is by now a common refrain for people in the industry: By 2050, Canadian temperatures will warm more than the global average, resulting in much warmer winters and summers. We are already experiencing early examples of anticipated consequences. For example, Alberta, B.C. and Ontario, having just come through warmer-than-usual winters, are now dry as tinderboxes. Weather conditions are now perfect for wildfires of the type that burned down much of Slave Lake, Alberta last year, costing the industry more than $700 million. AccuWeather in the United States is forecasting an above-normal severe weather system in 2012, based on the warmer air. It predicts an above-normal number of tornadoes this year. If that happens, it would build upon an almost-record number of tornadoes in 2011 (almost 1,700 U.S. tornadoes last year, versus an annual average of 1,300). In Canada, a 1998 Environment Canada report, Extreme Weather and Climate, notes tornadoes are “more frequent in warm springs and summers.” As warm springs and

summers become more common as a result of climate change, research results “imply an eventual increase in tornado frequency on the Prairies if seasonal temperatures rise beyond present normal values,” the report says. Note the date of the report was 24 years ago — hardly cutting-edge stuff. This raises a very difficult problem for the industry. Accumulated knowledge about climate change often fails to prompt political action. Ottawa right now is in the grip of a hyper-partisan atmosphere in which knowledge is only useful insofar as it supports the policies of the government of the day. And alas, the feds are content to leave climate change stagnating at the bottom of their agenda. Most prominently, Canada has withdrawn from the Kyoto Protocol, a United Nations framework on climate change. It has also axed a number of organizations studying the effects of climate change, including the Climate Change Policy Directorate at Environment Canada, and most recently the National Round Table on the Environment and the Economy. In Budget 2011, Ottawa committed the paltry sum of $58 million toward climate change research projects. Budget 2012 doesn’t even mention climate change, although it does include a significant commitment to improving infrastructure. But from the feds’ point of view, why waste time and

money researching something that doesn’t support the views of your political base? The answer, of course, is that climate change affects everyone — including the Conservatives’ political base. Tornadoes and severe weather do not destroy homes of opposition party members only: they destroy the property of everyone the government supposedly represents. Canada’s P&C insurance industry, representing a significant segment of the financial and business community that underpins the reigning government of the day, is concerned about climate change. The industry has invested a substantial amount of time, energy and money on researching the issue. It is convinced climate change is negatively affecting their business. And so what happens when a government doesn’t listen to its base of support? There comes a point at which accumulated knowledge gained through research does not translate into political action. We have reached that point. It might be that the answer for the industry lies in relying less on research to make the point, and more on political pressure. Such political pressure by the industry can remind the government that climate change is not a partisan issue: it is a business issue. And a government that prides itself publicly on the support of business leaders needs to listen much more than it has been.

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MARKETPLACE

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Canadian Market APPLIED SYSTEMS ACQUIRES COMPU-QUOTE Broker management software provider Applied Systems Inc. has acquired Compu-Quote Inc., a Canadian provider of comparative insurance rating solutions. Applied Systems announced the sale on June 5 after closing the deal on June 1. Terms of the agreement were not disclosed. Compu-Quote and Applied Systems Canada will ultimately be integrated into a single entity, Applied Systems CEO Reid French told Canadian Underwriter. French noted Applied Systems and Compu-Quote had already been long-term partners in providing Applied System’s TAM broker management system (BMS) to the Canadian marketplace. French said that acquiring Compu-Quote made strategic sense in light of Applied System’s intention to introduce its forthcoming Epic BMS into Canada during 2013 Q1. Since its introduction into the U.S. marketplace just over three years ago, Epic has been adopted by 500 brokerages in the United States and is being used by more than 18,000 brokers. “We intend to bring that to Canada in the first quar-

8 Canadian Underwriter June 2012

ter of next year,” French said. “In order to support that roll-out, we needed more capability in the marketplace. And so now with the acquisition of CompuQuote, we have three offices in Canada, 160 people and we’re really excited about it.”

Regulation P&C INSURERS SHOULD LOOK AT EARTHQUAKE EXPOSURES ON A NATIONAL BASIS: OSFI Canada’s federal solvency regulator, the Office of the Superintendent of Financial Institutions (OSFI), is telling property and casualty insurers to be prepared to start looking at their earthquake risk exposures on a national basis. OSFI assistant superintendent Mark Zelmer outlined the new expectation in notes to his speech at the 2012 Property and Casualty Insurance Industry Forum in Cambridge, Ontario on May 30, 2012. He said the new approach would be phased in over 10 years to give companies time to adjust how they calculate their probable maximum losses (PML) arising from an earthquake event. The shift in expectation would affect P&C companies that have earthquake exposures in more than one region of Canada —

for example, in both B.C. and Quebec. “That does not mean that we expect companies to be able to cope with an event in B.C. and an event in Quebec at the same time,” Zelmer said. “This means that we will expect you to compute the probability of an earthquake major loss, assuming that an event could take place in either location, bearing in mind where your exposures are located and that the probability of an event in both locations is highly remote.” Companies with only exposures to one region (B.C. or Quebec) will not be affected by the changes, he added.

Claims IBC SAYS CLAIMS COSTS FOR ONTARIO AUTO INSURERS “STILL OUT OF CONTROL” Claims costs for Ontario auto insurers remain high despite the gains realized as a result of the provincial reforms in 2010, notes Insurance Bureau of Canada’s (IBC) submission to the Ontario Committee Hearings on Auto Insurance on May 28. “While the September 2010 reforms were a needed first step in reducing the pressure on no fault injury costs, claims costs are still out of control,” IBC’s vice

president for Ontario Ralph Palumbo told the hearings. The Standing Committee on General Government passed a motion Apr. 16 to strike the select committee, which is holding public hearings to propose recommendations to the minority government. Palumbo listed four reasons why claims costs remain high, namely mediation backlogs, more catastrophic injury claims, an increase in bodily injury costs and the persistence of auto insurance fraud.

RAINSTORM FLOODING IN MONTREAL HAS A RETURN PERIOD OF 1 IN 100 YEARS Environment Canada reports that the rains that flooded Montreal and overwhelmed the city’s sewer system on May 29 had a return period of 1 in 100 years. Environment Canada spokesman André Cantin said 47 mm of rain in total fell during a storm that caused widespread flooding of home basements, highways, businesses, streets and subway stations. Of that amount, 44.5 mm of rain fell in a two-hour period and 30 mm fell in less than 15 minutes, he said. “No sewer collector network would have been able to manage the quantity of water that we saw yesterday,” Montreal mayor Gerald Tremblay told a news conference, as reported by CBC News.

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MARKETPLACE

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Crawford & Company (Canada) Inc.’s adjusters in Quebec and New Brunswick, along with the company’s national CAT team, responded to assist with the surge of resulting claims. City crews were also dispatched to repair sewer pipe covers and handle the overflow.

THUNDER BAY FLOODING OVERWHELMS SEWAGE TREATMENT FACILITY Thunder Bay declared a state of emergency after a rainstorm on May 26-27 unleashed 91 mm on the city in 18 hours, flooding the city’s sewage treatment facility. André Cantin, a spokesman for Environment Canada, said 71 mm of rain fell in the city over a little less than six hours. A Thunder Bay flood update on May 30 noted a special council meeting had been requested to approve a resolution directing the city manager to take all necessary actions to secure financial assistance for city flood victims. “Discussions are ongoing with the provincial and federal governments and the resolution is required to proceed further with formal requests,” the update says. The city established a temporary pumping station at the Atlantic Avenue Secondary Sewage Treatment Plant, which started at a 50% pumping capacity on

May 29. The city reported the capacity of the temporary pumping station increased on May 30.

Insurance Bureau of Canada (IBC) deployed its Community Assistance Mobile Pavilion (CAMP) to

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June 2012 Canadian Underwriter

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PROFILE

The Wind Whisperer David Gambrill Editor

Dr. Gregory Kopp, a professor of civil engineering at Western University, is a central figure in researching wind damage in aid of building safer homes. Who has seen the wind? Dr. Gregory Kopp has. Kopp is a professor in civil engineering at Western University in London, Ontario. His observations regarding the effects of wind forces on houses is a key factor in helping the Canadian property and casualty insurance industry advocate for building safer homes. For more than a decade, Kopp has worked on the so-called Three Little Pigs project, which essentially replicates wind pressure and applies these forces to a full-scale house to see how it breaks. Kopp’s research, funded in part by the Institute for Catastrophic Loss Reduction (ICLR), has provided the basis for recommendations the insurance industry can make to improve building codes. Kopp, 45, has always been fascinated with wind and turbulence. A Winnipeg native,

10 Canadian Underwriter June 2012

he studied mechanical engineering at the University of Manitoba. A professor convinced him to get his Master’s degree at McMaster University in Ontario. He then went to the University of Toronto to complete his Ph.D. in mechanical engineering. Kopp had an early interest in fluid mechanics and air turbulence. “Think of turbulence as smoke coming out of a stack on a cold winter day — you can see the vortices swirling, and the whirls are all in different scales,” he says. “It used to drive my wife nuts when we went camping and I would look at the smoke in the fire. That’s always what I really loved.” Kopp’s research evolved to an interest in the wind’s forces after he applied for a position at Western University. The university had a Boundary Layer Wind Tunnel founded by Dr. Alan Davenport, a researcher who played an important role in the early founding of ICLR. Established in 1998 by Canada’s P&C insurers, ICLR is an independent, not-for-profit research institute focusing on disaster loss prevention research and education. “The ICLR was really instrumental in looking at houses,” Kopp says. “I wouldn’t have looked at houses otherwise. Very few engineers would, because they are not engineered structures. They are not as sexy, say, as a mile-long

bridge or a super-tall building, so you tend not to get as many people looking at them. But from a disaster point of view and a societal point of view, when there are disasters, houses suffer disproportionately because they are not engineered.” Kopp’s early work involved developing a wind pressure loading system that could be applied to a large-scale model house. “We knew we had to

Very few engineers would look at houses, because they are not engineered structures. But in a disaster, houses suffer disproportionately because they are not engineered. do full-scale houses to understand how they come apart,” he says. “The reason is that the materials in a house are quite variable. You are dealing with wood, which has knots and is bent and is put together by human beings, who are in a hurry. You put nails in, it cracks the lumber. Drywall is not an engineering material. You have the brick on the outside. So you have all of that variability, you don’t know what all of these things do. To understand how a house comes apart, therefore, you

have to build it full-scale.” How do you apply hurricaneforce wind loads to a full-scale house for experimental purposes? It would cost about $30 million to build a wind tunnel big enough to encompass a full-scale home. “We thought for under $10 million, we could get this Three Little Pigs project, which was under budget at $7 million,” says Kopp. The pressure loading system at the core of the Three Little Pigs project is designed primarily around a system of 100 parts known as “pressure loading actuators.” Each costs $20,000 to build for a grand total of $2 million. “We jokingly call it a vacuum cleaner,” Kopp says. “It looks like a vacuum cleaner, but there is a lot of intelligence in the software that runs the thing.” If you see the device inside the lab in London, Ontario, it looks like a lot of differentsized airbags connected to the roof of a two-storey model home. A ladder takes you to roof level, where a number of ‘vacuum cleaner’ hoses are attached to the airbags. “We are representing wind forces, so when wind moves over the surface of a building, it creates pressure on that surface,” Kopp says. “We are just replicating those pressures. We can get up to about 20 kilopascals, 400 pounds per square foot. That’s a huge structural load. That’s the worst kind of load you could

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PROFILE

get in the worst hurricane possible. Hurricanes were foremost in our mind.” In fact, eye witnessing the destructive force of hurricanes allowed Kopp to see the practical application — and value — of his research. Kopp was at a pivotal moment in 2005, when he had to decide which of several research streams he might follow. At

portant. It’s going to make a difference to people’s lives.” Hurricane Dennis hit the Florida Pandhandle as a Category 3 storm packing winds of between 120 mph and 125 mph. Just before the storm hit, Kopp was feeling the rain sting as he set up the instruments on the houses to measure

The crew members drove three hours away and bunkered down in a hotel. The next morning, they drove back to pick up their gear and start doing damage surveys. “Dennis did a lot of damage there,” Kopp says. “It was what I imagined Beirut would look like after the civil war there. There was a highrise building that just a concrete

that point, Florida researchers asked him down to help them prepare instrumentation for observing Hurricane Dennis. “I thought, ‘Well, if I’m going to be breaking stuff in the lab, I really had better go and see what’s happening out in the field.’” Kopp says. “That was the first hurricane I was in. It changed my life. After that, I realized we have to jump into this [research] with both feet because it’s im-

pressures on houses and wind speed. “I remember the emergency personnel had already left,” Kopp says. “We were the last people there, setting up the towers. Then we were driving a big F-150 pickup truck at 80 miles an hour, and there are gusts of 80 or 90 miles an hour. It’s a little frightening, because you know what can happen.”

shell. A building beside it had been built to a higher standard: it had a couple of broken windows and that was it. You had these buildings side by side, so you could see the difference. You really got the sense of what mitigation can do.” Kopp’s experiments indicate two ways to mitigate damage to a house in a hurricane. Essentially, if roof fasteners weaken and the roof flies off

the house, the walls collapse. But even if one plywood sheathing comes off, the water entering the hole in the roof can destroy 80% of the home’s contents, making the place a total write-off for insurers. Using more nails to connect the roof sheathing can help prevent damage to the roofs, Kopp’s research shows. “In the damage surveys, you rarely see broken lumber,” Kopp says. “What you see are connections that have failed. That’s why we focus on the nails, because that’s what actually fails.” Kopp says a beer case worth of additional nails can make a big difference to the strength of the roof. Also, hurricane straps, thin pieces of steel that connect the roof to the walls, can be built into new homes for a cost of $200 or so. “We’re trying to effect these changes through the building codes,” Kopp says. “ICLR and the insurance sector can play a big role in helping us get the research out there. They can say, ‘These are the losses, here are the costs.’” In the future, Kopp sees research being able to determine the impact of product endurance on the failure of connections. He also sees research evolving towards studying the effects of water. For example, if shingles fly off the roof, but the roof stays fastened, water damage can occur, causing significant insurance losses when the contents of the house get wet.

June 2012 Canadian Underwriter

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Single Sign On promises to eliminate the need for staff to remember multiple passwords and ID names to access multiple applications and network resources. Ken Metcalfe Director, I.T., Portage Mutual Insurance

“What's in a name? That which we call a rose by any other name would smell as sweet.” — Romeo and Juliet (II, ii, 1-2) At one time in the past, you were obvious to everyone who mattered: business dealings were performed face to face. Today, in the digital age, you must prove your identity time and time again, especially when dealing with sensitive personal information. What is single sign on? SSO, also known as Enterprise Single Sign On, is the ability for a user to enter one ID and password to log on and gain access to multiple applications and network resources within an enterprise. SSO can also take place between enterprises using a mechanism called “Identity Federation.” Many organizations have sought a

12 Canadian Underwriter June 2012

solution like SSO, but few have successfully implemented it. The requirement to manage multiple user IDs and passwords is a problem throughout the Canadian property and casualty insurance industry. Brokers are particularly hard hit by the lack of SSO. Broker management systems (BMS), company portals and information and service providers all require users to sign on. Multiple sign ons come with various risks and drawbacks, including decreased security and productivity. These will be discussed in more detail below. A few initiatives are attempting to address these issues. Broker software vendors and companies are working together to allow company portals to recognize BMS credentials.This would allow brokers to sign on to their BMS and access a company portal or make a real-time submission to the company with no additional sign on. Recent Canadian Underwriter articles have discussed partnerships among Keal, iter8 and York Fire. The same situation applies to information and service providers. Some have partnered with companies to allow their credentials to be used by the company. The broker accesses the company either in real time or through their portal

Illustration by Dave Whamond/www.threeinabox.com

All for One, One for All

using the service provider credentials. using the service provider credentials. In the real-time example, the broker In the real-time example, the broker would authenticate to the service would authenticate to the service provider, order services during BMS provider, order services during BMS workflow and upload to the company workflow and upload to the company using the service provider credentials. If using the service provider credentials. If the company has a portal, brokers can the company has a portal, brokers can then access the service provider services then access the service provider services during portal workflow with no addiduring portal workflow with no additional sign on. As well, the company tional sign on. As well, the company only has to recognize and trust credenonly has to recognize and trust credentials from a single source: the service tials from a single source: the service provider. Portage Mutual Insurance, for provider. Portage Mutual Insurance, for example, has partnered with CGI to alexample, has partnered with CGI to allow brokers and company personnel to low brokers and company personnel to sign on to its portal using CGI Rapidsign on to its portal using CGI RapidWeb credentials.Those signing on have Web credentials.Those signing on have access not only to the portal, but can access not only to the portal, but can order AutoPlus, MVR and other CGI inorder AutoPlus, MVR and other CGI information services seamlessly during formation services seamlessly during portal workflow. portal workflow. This industry collaboration shows This industry collaboration shows both initiative and necessity. Lacking both initiative and necessity. Lacking clear direction or standards, organizaclear direction or standards, organizations will do the best they can with tions will do the best they can with what they have. what they have.

FEDERATED IDENTITY MANAGEMENT FEDERATED IDENTITY MANAGEMENT

Where others see a policy...

14 Canadian Underwriter June 2012 14 Canadian Underwriter June 2012

Single sign on can also take place beSingle sign on can also take place between enterprises using a federated tween enterprises using a federated identity. A federated identity is obtained identity. A federated identity is obtained by signing on to a trusted third-party by signing on to a trusted third-party source.The identity is automatically and source.The identity is automatically and invisibly presented, recognized and invisibly presented, recognized and trusted by partner organizations as an trusted by partner organizations as an alternative to direct login. alternative to direct login. Federated Identity Management inFederated Identity Management involves as many as three parties: volves as many as three parties: • Identity Provider (IP):The sign on and as• Identity Provider (IP):The sign on and associated user administration system are sociated user administration system are typically hosted by a trusted third party typically hosted by a trusted third party called an identity provider. called an identity provider. • Relying Partner: This is an organization • Relying Partner: This is an organization that owns software that uses an Identithat owns software that uses an IdentityProvider for identity verification tyProvider for identity verification (signon) purposes. (signon) purposes. • Standards Organization: The standards • Standards Organization: The standards organization is responsible for defining organization is responsible for defining the Trust Framework, which refers to a the Trust Framework, which refers to a set of standards, technologies and imset of standards, technologies and implementation guidelines.Trusted Frameplementation guidelines.Trusted Frameworks are typically created by industry works are typically created by industry organizations and formalize interaction organizations and formalize interaction between the Identity Providers and the between the Identity Providers and the Relying Partners. Relying Partners.

For example, a broker acting as a ReFor example, a broker acting as a Relying Partner would log on to an induslying Partner would log on to an industry Identity Provider. The provider will try Identity Provider. The provider will automatically and invisibly provide the automatically and invisibly provide the broker’s computer with a temporary broker’s computer with a temporary security token, using identity federation security token, using identity federation standards such as SAML, Liberty Alstandards such as SAML, Liberty Alliance, WS Federation or Shibboleth. liance, WS Federation or Shibboleth. The BMS would recognize this token The BMS would recognize this token and allow access with no additional and allow access with no additional sign on. The same happens when acsign on. The same happens when accessing a company (portal or real time) cessing a company (portal or real time) or an information/service provider’s or an information/service provider’s system. The partner’s software receives system. The partner’s software receives the token, checks it and then allows the token, checks it and then allows the broker access to the business the broker access to the business partner’s system without additional partner’s system without additional sign on. sign on. Industry standards organizations like Industry standards organizations like the Centre for the Study of Insurance the Centre for the Study of Insurance Operations or Acord typically define the Operations or Acord typically define the “rules of engagement” by establishing “rules of engagement” by establishing industry standards using technical stanindustry standards using technical standards such as those mentioned above dards such as those mentioned above (SAML, Liberty Alliance,WS Federation, (SAML, Liberty Alliance,WS Federation, Shibboleth, etc). Shibboleth, etc). Often what happens is that the insurOften what happens is that the insurance industry implements its own (de ance industry implements its own (de facto) standards, and presents them to facto) standards, and presents them to the standards body as the basis for inthe standards body as the basis for industry-wide standards. dustry-wide standards. The issue of too many sign ons is recThe issue of too many sign ons is recognized all the way to the White House. ognized all the way to the White House. In a real life example of Federated IdenIn a real life example of Federated Identity Management, the National Institutes tity Management, the National Institutes of Health (NIH) will offer the first U.S. of Health (NIH) will offer the first U.S. government website to allow users to government website to allow users to log in using federated identities. Google log in using federated identities. Google Inc., PayPal Inc. and Equifax Inc. are the Inc., PayPal Inc. and Equifax Inc. are the first identity certifiers approved to offer first identity certifiers approved to offer secure access to government Web sites secure access to government Web sites under a new trust framework operated under a new trust framework operated by Open Identity Exchange. by Open Identity Exchange. In the United States, an organization In the United States, an organization called ID Federation Inc.1 1 is developing called ID Federation Inc. is developing a trust framework for the insurance and a trust framework for the insurance and financial services industry.They are now financial services industry.They are now working with Acord to establish Acord working with Acord to establish Acord standards for identity federation.2 In standards for identity federation.2 In Canada, the Organization of Real Time Canada, the Organization of Real Time Brokers Implementing Technology (ORBrokers Implementing Technology (ORBiT) has established a password manageBiT) has established a password management committee to examine password ment committee to examine password best practices and workflows for contact best practices and workflows for contact with industry partners. with industry partners.

...we see people

While article is broker centric, While thisthis article is broker centric, everyone in the insurance industry everyone in the insurance industry can can benefit from single benefit from single signsign on. on. individuals, benefits include: For For individuals, the the benefits include: • Improved user security . Users no longer • Improved user security. Users no longer need to refer to easy-to-remember need to refer to easy-to-remember passwords, sticky notes compasswords, sticky notes nearnear the the computer or other records allow them puter or other records thatthat allow them — and passers-by — recall to recall these — and passers-by — to these passwords. Users IDs IDs andand passwords. Users willwill tendtend to to a more complex password if they use use a more complex password if they to remember. onlyonly havehave onlyonly oneone to remember. • Improved productivity . Users more • Improved productivity. Users are are more productive when they are not bogged productive when they are not bogged down by multiple logins do not down by multiple logins andand do not to remember multiple havehave to remember multiple IDs IDs andand passwords. passwords. organizations, benefits For For organizations, the the benefits of aof a single on include: single signsign on include: • Improved system security . Many corpo• Improved system security . Many corporate systems employ hastily implerate systems employ hastily implemented, substandard security pracmented, substandard security practices in entry, transport and storage tices in entry, transport and storage of of credentials. useruser credentials. • Increased regulatory compliance . Organi• Increased regulatory compliance . Organizations more easily achieve comzations can can more easily achieve compliance government regulations pliance withwith government regulations (In United the United States, for example, (In the States, for example, therethere is the Sarbanes-Oxley Act or the Health is the Sarbanes-Oxley Act or the Health In- Insurance Portability and Accountability surance Portability and Accountability Act).Act). • Decreased development cost . SSO provides • Decreased development cost. SSO provides developers a common authentidevelopers withwith a common authentication framework. If the mechacation framework. If the SSOSSO mechanism independent wellnism is is independent andand wellformed, developers formed, thenthen developers are are ableable to to it rather re-inventing use use it rather thanthan re-inventing it. it. • Decreased administration costs .When • Decreased administration costs.When ap- applications participate in single plications participate in single signsign on, the administration burden on, the administration burden of of managing accounts is greatly managing the the useruser accounts is greatly simplified. Also, simplified. Also, helphelp deskdesk staffstaff willwill to answer fewer requests to rehavehave to answer fewer requests to reset forgotten passwords. set forgotten passwords. Portage Mutual initiaTheThe Portage Mutual andand CGICGI initiative is a demonstration that single tive is a demonstration that single sign on can be achieved. With sign on can be achieved. With so so many systems, so little time, many systems, andand so little time, wouldn’t be wonderful if could we could wouldn’t it beitwonderful if we once, recognized signsign on on once, andand be be recognized everywhere? everywhere?

“Aviva’s w produc ts ide range of the need helps me mee t so Protec tin f my customers . g them with an RV polic y compan from the same y th home is at insures their very rea s to them suring .”

*Aviva and the Aviva logo are trademarks of Aviva plc and used under license by Aviva Canada Inc. and its subsidiary companies.

SINGLE SIGN BENEFITS SINGLE SIGN ON ON BENEFITS

Burke Neale President & COO McFarlan Rowlands Insurance Brokers Norwich, ON

...we see people Aviva believes brokers can see further – beyond policies and transactions to the people seeking insurance expertise and advice. We recognize it takes a special kind of person to be a broker, to always put your customers’ needs above all else. With that kind of attention to customer service, you deserve nothing less from us. Experience how we put people before policies. Contact us today.

1 http://idfederation.com 1 http://idfederation.com 2 http://www.acord.org/about/NewsCen2 http://www.acord.org/about/NewsCenter/news/Pages/ 20120404_idfederater/news/Pages/ 20120404_idfederation.aspx tion.aspx Canadian Underwriter 15 15 JuneJune 20122012 Canadian Underwriter

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Down

the New Silos

Wendy Aarons-Corman

President, edge IPK, Incorporated

Insurance company portals are becoming a new breed of IT silos. User experience platform technologies (UXP) may be a way to knock them down.

Insurers have spent a good deal of IT time, effort and budget over the past decade on developing and maintaining back-end systems for core insurance processing â&#x20AC;&#x201D; quoting, policy, billing, claims, etc. For some, in-house technology teams have developed custom systems; others have turned to third-party vendors for packaged solutions. For the most part, each of these systems does its job and might do it very well. But many insurers are left with an environment of siloed systems that support different functions or different lines of business. Silos donâ&#x20AC;&#x2122;t end on the back end: each of these systems comes with its own version of a user experience, resulting in replication of the back-end silo problem on the front end. Insurers are now becoming painfully aware of the shortcomings of front-end silos. Consumer expectations have changed with the adoption of the Internet and its ubiquitous availability and easy access to information and function.

16 Canadian Underwriter June 2012

Insurance customers are looking for that same ease of use when it comes to buying insurance or obtaining service. Add to that the expanding use of mobile devices, and expectations just ticked up another notch or two.

PORTALS: THE NEW SILOS Thatâ&#x20AC;&#x2122;s not to say the insurance industry has remained stagnant when it comes to supporting users. Carriers recognized the move to the Internet a few years back, but distribution of insurance was still primarily through the agent and broker channel rather than direct to consumer. As a result, the agency portal solution was born to extend the back office system and the user interface to the agent/broker channel. This new breed of software application was written inhouse, purchased from a vendor specializing in agent portals, or acquired from a solution vendor who offered an agent portal as an extension to their insurance package. It would seem that the problem was solved. But, was it really? Like the siloed back-end systems and the siloed front-end user interfaces, agency portal solutions are typically tactical in nature. Unfortunately, they do not solve all current require-

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ments of delivering to the Internet and the growing desire for mobile access. In fact, if the industry continues down its original agent portal path, it could produce yet another layer of silos. Haven’t we learned this lesson enough times? For the most part, agent portals support Web only, limited browsers and limited functionality. In addition, getting changes to market is a tedious process, requiring the dreaded code changes and careful management of new version distribution and control. By the time these changes reach the agent or customer users, they are often already out of date and in need of additional modification. Today’s popular social networking sites have set a new standard in delivering optimal customer experiences, and have significantly influenced insurance buyers and agents. Users expect ease of delivery of information and functionality that goes beyond what carriers have been able to provide through traditional agent portal offerings. So how do carriers become agile at delivering capabilities and responding to

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If the industry continues down its original agent portal path, it could very well produce yet another layer of silos. the high expectations and ever-changing requirements of the agent and/or the customer? How do carriers continuously provide optimal user experiences to a wide range of demographics?

UXP TECHNOLOGY A technology strategy that effectively separates the “front end” from the “back end” is a good place to start. By separating presentation from core functionality, the carrier is better able to control the user experience while leaving transactional processing and data storage to continue to perform effectively within the core system. Carriers might want to investigate new user experience platform (UXP) technologies, designed specifically for this purpose. These technologies are designed to be

device-, browser- and language-agnostic, providing the flexibility to configure, deliver and change the user experience quickly and easily. UXPs focus on the presentation of information and access to function, so they take on the heavy lifting of the delivery.Therefore, carriers who use UXP technology do not have to worry about the flavour or version of browser the customer or distribution channel may be using, the language in which they would like to communicate or the device being used. The UXP identifies these attributes and then translates to the most appropriate experience for the user. 1 Imagine the nightmare of trying to support every potential combination with traditional portal solutions. UXPs enable the carrier to respond without being hindered by a user’s needs and preferences, even as they change. Forget the saying, “What you don’t know can’t hurt you.” If carriers aren’t preparing to respond to what they don’t know, they might very well find them-

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selves at a serious competitive disadvantage.What will users want tomorrow or next year? Who will those users be? What new revenue channels will a carrier need to support? What new product requirements and access to processing will be required? Carriers can’t always predict where the business will go, but some things are predictable. For example, people will always seek the ideal user experience. To this end, access to multiple, disparate back-end systems will be required. Consumers will demand more information in a variety of formats. They will want to see a portfolio of information in a single view. They will also demand what they want from service and the product provider’s Internet offerings, further raising the bar for our notoriously slow-moving industry. Is your head spinning yet? It’s not as overwhelming as it sounds, assuming that carriers take advantage of new technologies designed to tackle the user experience. However, if they continue down the path of a one-off user interface or agent portal, the problem will only get worse over time.

By separating presentation from core functionality, the carrier is better able to control user experience while leaving transactional processing and data storage to continue to perform effectively within the core system. Insurance carriers have options should they wish to keep up with changing demands for quality user experiences. For carriers that opt to continue to develop software, an ongoing acquisition of the right skills and technology, as well as a process to keep up with the never-ending change, will be required. The challenge here is the delivery cycle and resource acquisition can be long. The same problem-prone model exists for vendors who provide an insurance software application. At the same time

carriers are busy delivering and maintaining user experiences, they also need to continue support for a multitude of core functional systems — an ongoing need that frequently drains the organization’s resources in and of itself. It may not seem like it, but user experience delivery is a huge undertaking today. The scope is broader than it appears at first glance and the effort to support and deliver change requires carriers to sustain an incredible pace. Por-

tal development might continue to work for carriers that have a contained set of channels. But for carriers looking to expand, or for those that don’t know what the future holds, evaluating alternate approaches and technologies for the delivery and support of the optimal user experience may be in order. 1 A‘user’ includes an insurance buyer, seller, claims adjuster, customer service representative or virtually anyone requiring access to a carrier’s systems and functionality.

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Using high performance analytics (HPA), insurers can transform Big Data into faster, better information processing. Stuart Rose

Global Insurance Marketing Manager, SAS

Big data seems to be all the rage these days. The term refers to the rapid accumulation of data generated by an explosion of new electronic sources. But the real conversation should be about the value of being nimble. This is where big data and high performance analytics (HPA) meet. The amount of data we have to analyze is expanding exponentially, including social media, sentiment data, blogs, sensor data, transactional data, third-party data and other big data sources. Insurers analyzing scenarios need to make decisions in minutes, or at most hours â&#x20AC;&#x201D; not days or weeks. Plus, itâ&#x20AC;&#x2122;s very time-consuming to create, test and evaluate every analytical model prior

20 Canadian Underwriter June 2012

to production. As a result, there can be one validated, production-ready model from each modeller daily. HPA solves these problems. HPA provides insights from big data in shorter reporting windows by using analytical capabilities executed in highly scalable, inmemory distributed architecture. Customers can prepare, explore and model multiple scenarios using data volumes never before possible. They can process complex analytical algorithms faster, quickly delivering better answers for decision-makers. HPA is the next generation of analytical focus. IT gleans relevant data quicker than earlier analytical models and delivers it in real time. For insurers, the adoption of HPA can mean cost savings, increased revenues, lower expenses/losses, improved forecasting and accurate decisionmaking. But how does it do this? Before HPA, many insurance companies relied on sampling data to run analysis. By using HPA, insurers can now run robust, precise analysis on all their data more quickly. They can also in-

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corporate external data (such as Google maps, GPS, credit scoring, social media, etc.) to supplement the results. Currently, insurers use a handful of variables to support segmentation and pricing. Because it operates much faster, HPA helps insurers increase the number of variables used in “what if” analysis to find the one with the biggest positive impact on profitability.

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HPA-SUPPORTED INSURANCE BUSINESS Claims Analytics Fraudulent activities are increasing. But if not detected immediately, the insurer may never know fraud occurred. HPA helps insurers analyze organizational data for unusual behaviour and incorporates external data, such as social media, in-

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creasing the likelihood of detecting fraudulent activities before claim settlement. One of HPA’s greatest value propositions is helping to dramatically reduce the analytical life cycle. Instead of spending weeks or months developing models that take days to run, HPA can be used to run many iterations in a matter of minutes. This capability changes the way analytics are typically performed moving toward a more agile analytics environment. Insurers can react quicker to ever-changing fraudulent activities by organized crime syndicates.

Telematics The adoption rate of analytics is dramatically increasing. A study by ABI Research shows the number of telematics users will increase from less than 2 million in 2010, to almost 90 million in 2017. Insurance companies are going to be inundated with data from these in-car recorders. Many insurers are already struggling to analyze existing data, so how will they handle this additional information? The answer is HPA so insurers can analyze billions of data records in a fraction of the time required by traditional computing environments. Ratemaking and price optimization Today, many insurers are using advanced analytical techniques such as generalized linear modelling for ratemaking and product pricing. A recent survey by Towers Watson showed that 70% of U.S. insurers are using predictive modelling for personal auto insurance. However, actuaries often rely on using a subset of historical data to run pricing models since it is too time-consuming to prepare the data and run the models. To combat these problems, insurers are turning to HPA to process the data faster. Customer intelligence As customer interactions in insurance move from in-person to digital channels, insurers must react faster and predict future behaviour better. Using HPA, they can detect changes in customer behaviour in real time during digital interactions. Insurers can also improve customer experiences and make relevant,

real-time offers with higher acceptance probabilities. Faster analytics deliver predictive modelling results more quickly and identify the best future action to take while considering both financial and organizational constraints. This results in the best opportunity to grow revenue at the lowest cost, leading to increased ROI.

Cat modelling It has been reported that 2011 may end up being a record year for catastrophe losses, placing a significant impact on the financial stability of insurers. Carriers need to evaluate their loss exposure and financial position to meet liquidity requirements, often in a real-time environment. However, many are unable to achieve this because of restrictions within their existing IT and analytical environments. Last year proved how crucial cat modelling systems can be — HPA can help. Insurance companies are wellequipped to manage the potential losses associated with claims from individual

fires and automobile accidents. They have a wealth of historical data associated with such losses, so actuaries can determine future losses with a high degree of confidence. However, since cat-

astrophic events are relatively infrequent and historical data is limited, it’s virtually impossible to reliably estimate potential future catastrophe losses using standard actuarial techniques.

THE BOTTOM LINE HPA is not the answer to all insurance problems, but it speeds up the iterative business process of data acquisition, data analysis, variable selection, modelling and model assessment. As a result, reports run in seconds or minutes, not hours or weeks. The question becomes “How can insurers use those extra hours or even days to benefit their business?” Many believe that HPA will revolutionize and change the way the world works. Before HPA, some data is stored, some is analyzed periodically, and calculations take days to run. With HPA, every relevant big data variable is collected, analyzed and used to predict outcomes in near-real time. In many ways, we’re just starting to fully realize the power of data. The exponential growth of data presents both challenges and opportunities for businesses. Organizations that compete by using analytics will survive these uncertain economic times better positioned than those that do not.

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Slaying the

Beast

Replacing a legacy system is fraught with peril, but insurers would be wise to slay the beast, since doing nothing might amount to a career-killing move. Greg Thornton

Vice President, Business Development, Sapiens North America

Most insurers are either in the midst of, or on the verge of starting,the onerous process of replacing one or more core legacy systems. There are far too many reasons to stop delaying the inevitable — reduced maintenance costs, better customer service via web-based portals, business partner needs, competitive pressures and business agility are just a few examples. However, the task of replacing systems that have driven core processing for organizations for decades is a significant undertaking, and downright scary for business and IT management. These projects are fraught with closets full of skeletons: frequently, they run significantly over budget and beyond targeted timelines. Worse, they can get cancelled or completely fail. Companies in the financial services sector have generally done a good job of replacing legacy

24 Canadian Underwriter June 2012

technology and modernizing processes, but the insurance industry continues to lag behind. Historically, the industry has approached IT as a cost of doing business rather than as a strategic business opportunity.The bulk of IT spending often goes towards maintaining the legacy systems. Given a typical IT budget of between 1.5% and 2% of written premium, that’s quite an investment to just maintain the status quo. Up until recently, the competitive environment, consumer demand and the distribution channel have not pushed the issue to the forefront. And so, given the expense and risk involved in core system replacement, insurers have been able to kick the proverbial can down the road. However, insurers are increasingly compelled to upgrade core systems and processes as direct writers and more technically savvy insurers gain market share. Even so, some insurers still find themselves sitting on the sidelines, hesitant to commit. Let’s face it, making the wrong decision when replacing core processing systems can be a career-limiting — or even a career-killing — move. Excuses, risks and foot-dragging aside, we can probably all agree it is best for businesses to replace their core processing systems with new

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Companies in the financial services sector have generally done a good job of replacing legacy technology and modernizing processes, but the insurance industry continues to lag behind. technologies. But where is the best place to start when an insurer reaches the inevitable conclusion that it’s time to slay the legacy beast?

SLAYING THE LEGACY BEAST First things first: Some ‘must-haves’ must ensure the effort kicks off on the right foot. They include the following: • Buy-in from business and executive sponsors. This results in a business-led project, for which IT provides the solution, the heavy lifting and guidance for delivery. • Dedicated business sponsors and subject matter experts, combined with a dedicated IT project team.This team may be small, depending on the insurer’s approach to the legacy replacement effort. • A clear and definitive plan on expected deliverables and timelines. • Well-documented anticipated cost savings and business benefits. This not only helps gain early support for the initiative, but also keeps the project on track and measure the results once in production. Should the insurer buy or build the new system? Insurers are in the business of insurance and not software development, so a strong argument could be made for the buy option. Unless an insurer truly has the in-house expertise — not to mention the time and budget — to build a system, they might consider evaluating and choosing from a plethora of packaged insurance software solutions on the market. A winning combination includes a carrier that knows what it really needs in technology, functionality, maintainability and scalability, as well as a software solution vendor that represents a good organizational and cultural fit for the insurer. In the buy approach, working with a software vendor is not a matter of all-

26 Canadian Underwriter June 2012

or-nothing. Depending on the size of the initial project and the insurer’s appetite for in-sourcing some of the work, the insurer can determine the right balance of internal IT and business staff involvement, combined with expert vendor resources. Once the vendor and software solution are chosen, the goal of minimizing risk often leads insurers to start small to achieve some quick results and success. The project expands as insurers become more confident and as the joint team becomes more competent. Rarely do insurers employ the ‘Big Bang’ approach to their legacy replacement projects. When starting small, separating a large project into manageable bites, insurers typically need to have a new technology solution co-exist with legacy systems via interfaces.This may sound like a difficult feat, but the additional work required is small compared to the risk of replacing the entire core legacy environment in one fell swoop. Also, interfacing with legacy systems offers the insurer an opportunity to assess the quality of legacy data; this knowledge comes is certainly handy when it comes time for data conversion. Now that the decision has been made to start small, where is the best place to begin? There is no one best answer. It all depends on the insurer and what its biggest pain point might be, or where the opportunity for the quickest results might be. One insurer, for example, might target a line of business that is being managed manually. Manual underwriting might work in low volume, but as volume increases the cost to administer becomes prohibitive. This insurer could ‘start small’ by choosing this one line of busi-

ness and implementing a solution for this line in its entirety. Another insurer might see an opportunity to gain market share by delivering a solution to agents through an agent portal, allowing agents to enter new business easily and effectively. At the end of the ‘start small’ project, policy administration transactions might still be executed by the legacy system, while the new business is processed in the new environment. Yet another insurer might see cost avoidance as the primary motivation for its ‘start small’ focus. For example, by implementing something new, perhaps the carrier can avoid further licensing charges or high service costs charged by its legacy system provider. Or perhaps it might choose to implement a system that initially mimics the limited functionality of the legacy system, but that leaves new capabilities such as automated underwriting, rules, workflow and other processing efficiencies for subsequent projects. Regardless of its scope, the initial project should take no more than six to nine months from project kick-off until it is ready for prime time and for roll out to production. Start slow and ramp up with incremental success along the way. Find a vendor offering the right team synergy and the most suitable technology and application functionality. Understand the legacy environment, data and processes in order to facilitate the transition to a new system. Establish a solid team of dedicated resources from both IT and business. And, get started. No one ever said it was going to be easy, but there is still no time like the present to replace legacy systems.

Cyber Surge There is a surge of interest in cyber insurance coverage. Media reports of data breaches and evolving privacy regulations have spurred senior management and risk managers to recognize information security as a strategic business issue. Cyber insurance may be following a similar trajectory to D&O liability protection, which is now widely perceived as a vital part of an organizationâ&#x20AC;&#x2122;s insurance platform. CRAIG HARRIS

28 Canadian Underwriter June 2012

he embrace of cyber liability insurance has been a long time coming. Although several insurers have offered coverage for a decade or longer, only recently have customers moved to outright purchase of insurance protection. The road to get there has been a “tough slog,” suggests at least one underwriter. “Brokers needed at first to understand the exposures and talk about them with clients,” says Matthew Davies, senior underwriter at Chubb and Canadian manager of professional and media liability. “I think brokers are still learning in this space. It is a wide spectrum — some have been early-adopters and built a team of specialists; others have taken a more generalist approach.” Many brokers cite the importance of client preparedness in accepting cyber coverage as a key component of their insurance package. “Five years ago, I was doing seminars for companies on privacy and data security and the reaction was very polite, but there was definitely more faith in the IT [information technology] systems and a sense that cyber insurance was not necessarily a good fit,” says Brian Rosenbaum, senior vice president and national director of legal and research practice for Aon. “What has changed today is we are seeing a push down from the C-Suite [chief executives], who are asking tough questions of their IT and risk management staff about how these exposures are being covered.” Davies, Rosenbaum and other sources interviewed for this article say they have seen a distinct rise in the volume of cyber liability policies purchased over the past year. At Chuff, Davies notes monthly submission volume has increased by 40% over the same period last year.

June 2012 Canadian Underwriter 29

COVER STORY

Cyber Surge Tracking the actual premiums for cyber insurance is difficult: it is not viewed as a distinct “line” of business in industry statistical reports. Sources report that 25 to 30 insurers in Canada offer some form of cyber insurance coverage, with an estimated capacity of $150 million to $200 million. “We have seen a significant increase in the take-up rate of cyber policies, both in terms of the number of submissions coming in and the number of people buying the coverage,” says Jeanette Lawrence, assistant vice president of professional liability for Chartis. “Historically, the sales cycle for this type of product could be quite long, since companies had to examine the coverage and budget for it. But (that) cycle has shortened considerably. I also think broader coverage is available in the market at more appealing price points.”

TYPES OF COVERAGE Cyber insurance in today’s market is offered on a standalone basis. But it is also provided through endorsement, often to an errors and omissions (E&O) policy and, in some cases, to existing general liability policies. A popular trend is the “modular” approach to policy design, with clients selecting insuring agreements that fit their needs. “We tailor coverage to what our client needs are,” notes Michael Petersen, national leader of the communications, media and technology practice for Marsh Canada. “There are a lot of new products in the market today and not all are identical.” Cyber insurance, for example, can be purchased on a strictly third-party liability basis, which would cover exposures such as legal defence costs and regulatory fines. More comprehensive insurance includes first-party coverage for the costs associated with a data breach. As part of this, insurers often offer access to service providers such as credit monitoring facilities, call centres, forensic accountants, law firms and public relations and crisis management companies. Many sources suggest 30 Canadian Underwriter June 2012

the quality of these services will distinguish whether or not clients will select a given cyber insurance product. Insurers are also seeing a growing interest in network interruption coverage — a modified form of business interruption insurance for computer or data losses that have no “trigger” of physical damage.

As well, high-profile data breaches have knocked some of the stuffing out of companies’ confidence in their data security systems. “Historically, there has been some pushback from IT people on the need for cyber liability insurance,” observes Lawrence. “Many were adamant that their IT security protocols were so well-established that they were unsusceptible to a breach. But as we have seen more security breaches at high-level organizations, that pushback has subsided. It is becoming much more a business and enterprise risk management issue.”

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Historically, there has been some pushback from IT people on the need for cyber liability insurance. Many were adamant that their IT security protocols were not susceptible to a breach. But as we have seen more security breaches at high-level organizations, that pushback has subsided. A greater awareness exists today that traditional insurance policies, such as CGL (commercial general liability), commercial property and business interruption, were not designed for cyber risk, Petersen offers. “We are frequently getting questions from clients about whether or not they have coverage for cyber risk,” he says. “We point out where the gaps are in traditional policies.”

Cyber security has also become a reputational issue for companies and organizations. The Ponemon Institute conducted a survey of 850 executives to determine the negative effects of a data breach on brand equity and reputation. It reported last October that the average time it takes to restore an organization’s reputation is one year, with average loss in the value of the brand ranging from $184 million to more than $330 million. Privacy breaches associated with top brand names have imparted a sense that everyone is at risk, even organizations previously thought to be “untouchable.” Petersen says FBI director Robert Mueller recently predicted that cyber risk would eclipse terrorism as his agency’s number one concern. “He basically said: ‘There are only two types of companies: those that have been hacked, and those that will be,’” Petersen recalls. In fact, the FBI itself has been hacked by a group called Anonymous. In Canada, the University of Victoria suffered a data breach when thieves broke into the school’s administrative building in January 2012. A digital storage device containing sensitive information on more than 11,000 employees was stolen. The university said it would pay for credit monitoring services for all employees affected. “It was interesting that this case did not involve customer credit card data, but rather employee information,” says

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COVER STORY

Cyber Surge Davies. “How many companies and organizations have this exposure?” Elaborate hacking schemes tend to dominate concerns about data security, but plain carelessness often leads to compromised personal information. “Cyber risk implies an online or strictly computer-based risk,” explains Timothy Boyle, senior underwriter of specialties and technical lines at Zurich Canada. “Policies can go beyond simply ‘cyber.’ They address breaches or a loss of personal information by other causes, whether due to a lost laptop, a missing USB or improper disposal of information,” he says. At a seminar sponsored by Chartis in April 2012 called Data Breaches, Coming to a Network Near You, Jason Straight, managing director of the risk consulting company Kroll Inc., said: “I cannot tell you the sheer volume of the cases that we have of laptops that have been left at a supermarket parking lot. There’s a patch for software, but there’s no patch for stupid.”

REGULATORY, LEGAL RESPONSES Other factors are also in play when it comes to heightened awareness around cyber liability. One is regulation. In Canada, Alberta is the only province that requires mandatory breach notification for private sector companies (federal legislation and provincial regulations require public sector organizations and health care institutions to automatically report loss of confidential information). Parliament is currently considering Bill C-12, an act that would amend the Federal Personal Information Protection and Electronic Documents Act (PIPEDA) to force organizations to notify the federal privacy commissioner of any “material” breaches of security surrounding their personal information. Similar mandatory breach notification legislation exists in 46 U.S. states and in many European countries. If Bill C-12 passes, some sources say there will be a sea change in the market for cyber liability insurance. “I think eventually you will see legislation in Canada with more teeth to it in terms of what has to be done if there 32 Canadian Underwriter June 2012

is a release of private information,” says Scott Schleicher, vice president and underwriting manager of technology E&O for XL Insurance. “When that happens, this will take off. Buyers, brokers and carriers will flood into the cyber insurance market.”

In the middle market space, the cyber policy has not reached the status of an ‘everyday buy.’ But many companies are kicking the tires and requesting both educational materials/sessions and premium projections. Michael Trendler, vice president of professional risk for ACE INA Insurance, agrees. “I think the insurance solutions. . . will become a more routinely sought coverage in Canada, particularly as more stringent notification laws develop and come into force both provincially and federally.” In April, the Office of the Privacy Commissioner of Canada and its counterparts in British Columbia and Alberta released a guidance document entitled, Getting Accountability Right With a Privacy Management Program. It outlines key steps that organizations must take to be in compliance with federal and provincial

privacy legislation, such as hiring a privacy officer, implementing policies and education and assessing risk. Davies calls this a “very important” document. “This document basically outlines how a breach will be investigated and what kind of things privacy regulators expect from a company,” he says. “Organizations should be looking at this carefully in terms of guidance and compliance on privacy and data breach protocols.” In addition to regulation, the threat of litigation is also creating a higher profile for data security and privacy breach issues. “In Canada, for any privacy issue that has been in litigation, the damages have been fairly low,” notes Davies. “But that does not take into account defence costs: it may have cost hundreds of thousands of dollars to get to that damage settlement. If you look at the United States, the litigation there has been much more aggressive. There are emerging theories and causes of damage for privacy breaches.” Rosenbaum cites an interesting case in Canada, Jones v. Tsige, which involved a bank employee whose personal information, including financial records, was spied on by another bank employee. In a January 2012 ruling, the Ontario Court of Appeal recognized the tort of “intrusion upon seclusion,” a particular type of privacy breach and common law cause of action. “It is interesting that the plaintiff did not have to actually prove any financial loss or damages for invasion of privacy,” Rosenbaum says. While the case is specific in its facts, he notes if the same principles apply to third-party liability, “it could be a whole new ball game.” In an article on the case, Tamara Hunter, associate counsel and head of the privacy group for Davis LLP, noted: “It would seem that the greatest potential for litigation arising from Jones v. Tsige lies in the possibility for class actions in situations where an organization intrudes into the private information of a large number of individuals in a similar fashion (in circumstances where the invasion would be highly offensive

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COVER STORY

Cyber Surge to a reasonable person). With this in mind, one wonders if some social media providers may be taking a closer look at some of their practices.” For Schleicher, one of the main sources of increased litigation on privacy issues, particularly in the United States, is customer anger. “There is a sentiment that has really taken root in the U.S. that companies and industries should be doing a much better job of protecting personal information,” he says. “There is a sense of: ‘They should pay if my personal data is compromised.’” All of these factors — reputation, regulation, litigation and customer sensitivity — have resulted in a much tighter focus on data security at many organizations, sources say. This is opening the door for brokers to have a more engaged discussion with clients about cyber liability insurance and related services for data breaches. “What should appeal to brokers is that this is new business,” Davies says. “It is not about making clients shift their existing business from another broker. Most organizations have this exposure; brokers just need to find it to generate new premium dollars.” Davies adds that an emerging trend is the requirement for cyber liability insurance in contractual obligations, as part of a legal or financing agreement. “Some parties are being asked to show that they have the backstop of cyber insurance. Brokers have presented this opportunity more and more in recent months.” Schleicher reports brokers or agents in the United States have been using cyber liability insurance as a point of distinction to compete in the market. “If you can discuss the exposures with clients and offer solutions, you are at a literal advantage in distinguishing yourself from another broker,” he says.

CHALLENGES TO INSURING CYBER With opportunities in cyber insurance come challenges. A key problem is spreading the knowledge base about data security risk from a smaller group of brokers to a much wider audience, Schleicher says. “Right now, 34 Canadian Underwriter June 2012

that expertise resides in a small pocket of brokers,” he notes. “It has to expand, especially to regional brokers across Canada.” Nate Spurrier, director of business development for IDT911, a provider of data risk management solutions and breach services, still observes a lack of awareness when it comes to data security. “People are aware of the cyber risk, but don’t necessarily know how to deal with it,” he says. “There are large knowledge gaps, not just for the organizations, but

I think eventually you will see legislation in Canada with more teeth to it in terms of what has to be done if there is a release of private information. When that happens, this will take off. Buyers, brokers and carriers will flood into the cyber insurance market. for brokers. More education is needed on what kind of solutions represent the best fit and why they are needed.” This education may be targeted to small- to mid-market clients, a segment of the marketplace that has not yet fully embraced cyber risk, according to several sources. “My opinion is that smaller,

Main Street clients don’t feel like they need to purchase more insurance,” says Schleicher. “Most still don’t see cyber risk as a huge exposure to their business.” Trendler agrees that in the middle market space, “the cyber policy has not reached the status of an ‘everyday buy’ as of yet.” Still, he adds, “many companies are ‘kicking the tires’ and requesting both educational materials/sessions and premium projections.” Spurrier observes that the biggest takeup in cyber insurance policies in Canada has been through endorsements to existing policies. Standalone coverage has been a tougher sell. “This goes back to the knowledge gap,” he says. “In some cases, buyers don’t understand what the product actually covers. For example, clients may think they have a limit of $1 million to $2 million, but in some policies there is a sub-limit on first-party exposure. If there is a privacy breach, that $2 million suddenly becomes $400,000. That won’t cover all the costs, such as credit monitoring. Another issue is very high deductibles,” Spurrier adds. While more comprehensive cyber security and privacy coverage is offered on a standalone, monoline basis, Zurich’s Boyle also notes that “a number of insurers are offering stripped down coverage as endorsements to Commercial General Liability for small- to mid-sized businesses. In these situations, limits are usually low and they may not provide coverage for breach notification costs.” Others share the same concern that endorsements may not provide the right kind of cyber security protection. “We always propose that standalone coverage is more comprehensive than an endorsement to another insurance platform,” Davies says. “If you introduce cyber risk, you are adding it to a whole set of other exposures. I think it can also stretch the aggregate limits of a policy. However, we also understand the reality that an endorsement may represent a more attractive premium for the client.” Arguably the biggest concern for cyber liability insurance is the lack of solid data on claims frequency and severity.

COVER STORY

Cyber Surge

I compare it to D&O coverage for private companies in Canada. It used to be fairly rare; now it is very common. You will see a similar development with cyber protection. The absence of hard figures on claims history may lead to challenges in pricing assumptions and coverage wordings. “I think underwriters are still struggling with what to charge for cyber insurance and finding the right rates for the exposures,” says Petersen. Davies says the media is not necessarily presenting a full picture of what is going on. “Those are just the companies that have been ‘outed,’” he says. “The media also focuses on the actual breach, not the months of credit monitoring and resolution. There have been claims paid in this area, but we don’t have a great deal of information about them. If you made only one or two bad bets in this line, your premium volume could be eaten by losses.” These “bad bets” represent a moving target for insurance companies when it comes to the increasing sophistication of hackers. In addition to denial of service attacks and malware, new concerns, such as advanced persistent threats (APTs), which are designed to steal intellectual property over a long 36 Canadian Underwriter June 2012

period, will pose potential problems for cyber liability insurance. “Risk will most certainly continue to evolve as hackers become more inventive and sophisticated,” Trendler says. “I think the insurance solutions will continue to match this evolution.” Davies predicts a future trend in cyber liability insurance of fewer but more specialist underwriters in the field. “I think in the next few years cyber liability insurance will be seen as one of the key coverages that organizations must buy,” he observes. “I compare it to D&O [directors and officers] coverage for private companies in Canada. It used to be fairly rare; now it is very common. You will see a similar development with cyber protection. It will be more of a standalone offering that can be customized, with brokers presenting clients with a range of options.” Rosenbaum also compares the evolution of cyber insurance to D&O. “In Canada, the market for professional liability was nowhere 20 years ago. People just weren’t interested,” he

says. “Now it is part of the internal toolkit of the risk manager. The same evolution is happening with cyber liability insurance.” Others see the market for cyber risk expanding into more industries and sectors of the economy. “I think that you will see cyber risk emerge as a key component of boardroom discussions,” says Lawrence, who adds data security will become a more prominent item for “critical infrastructure companies” in addition to non-profit organizations and charities. Ultimately, boardrooms and senior management will decide when and how their organizations need to take responsibility for data security and cyber risk, sources conclude. “Senior management is realizing this is a reputational and business continuity issue,” Davies says. “If you don’t have good privacy and data security practices and procedures, insurance will not be the solution. It should always be a contingency, not a replacement for sound risk management practices.”

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Making it

Happen Renee Durepos Vice President, Client Services, Keal Technology

Industry stakeholders are working together to achieve technology solutions in the spirit of SEMCI — solutions that will allow brokers to work in the same manner regardless of the carrier with which they work. As the old adage goes, the only factor constant in life is change. And as challenging and frustrating as this may be for businesses, it is up to each individual to turn these challenges into opportunities — and there are many such opportunities to be had. Two parties are present in every change initiative: leaders and adaptors. Leaders must ensure they are headed in the same direction to simplify the adoption process for the implementers. But as in every partnership, one party cannot do it alone. The support of the adaptors is crucial to the success of the outcome. “So what does all this gibberish mean?” you might ask. “Let’s get back to insurance!” Every business owner is in it to make money. To remain profitable, though, workflows need to

38 Canadian Underwriter June 2012

change constantly and incorporate new processes and technologies. The notion of Single Entry Multiple Company Interface (SEMCI), although a longstanding topic in the insurance industry, has changed over time. Different attempts have been made to bring it to reality; each effort needs to be viewed as a step toward the ideal solution. Although change leaders may not yet all agree on the path to get to true SEMCI, they all agree on the direction. The outcome should be a solution that allows brokers to work in the same manner regardless of the carrier with which they are working, uploading information directly from their broker management system (BMS) into different carrier portals, web services or directly into carriers servers. All of this should be done without any human intervention or having to leave their BMS.

E-DOCS Related to the SEMCI discussion, a current hot topic is the transmission of electronic documents (e-Docs) between the insurance companies and brokers. E-Docs is the process of downloading documents directly from carriers to brokers in the same manner as the Centre for the Study of Insurance Operations (CSIO) Electronic Data Interchange processes are run.

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Some carriers have recently stopped sending paper and only make documents — such as declaration pages, loss notices, insured’s notifications, payment schedules, etc. — available electronically to brokers. Many stakeholders are involved in this change process to make sure the end outcome positively affect the ability of brokers to serve their customers and does not compromise the files brokers maintain for them. Insurance Brokers Association of Ontario (IBAO), with the support of Insurance Brokers Association of Canada, is to be commended for making the e-Doc project a priority. CSIO moved to quickly establish the XML standard; almost seven months later, Keal is aware of seven insurers adopting this project. At our end, Keal has started testing with three insurers. It goes to show all stakeholders working together can further our end goal of reaching true SEMCI. The end result of e-Docs is brokers will now be able to select which documents they want to download and have

e-Docs allows brokers to select which documents they want to download and have these populated in their BMS without the need for human intervention. these populated in their BMS without any human intervention. On a side note, as the storage of electronic documents increases, brokers will need to start planning for more disk space. Preliminary calculations indicate disk space and backups will be an issue, so proper document management will be essential. What is the role of BMS providers in SEMCI? They should be committed to simplifying the processes for brokers and working with all stakeholders to make this happen. The BMS plays a critical role in any broker’s office. Among other things, the BMS provider is an important intermediary between the broker and insurance company; as such, the BMS provider must maintain an open dialogue with

40 Canadian Underwriter June 2012

all insurance stakeholders. To this end, over the past few years, Keal has invested hundreds of hours commissioning dozens of surveys with different stakeholders to assess situations and determine best courses of action. Not surprisingly, the results vary. But one commonality is the desire of all stakeholders to arrive at the same solution; that is, to achieve faster and less-complicated ways in which to work.The challenge is to work together to make it happen.

COST-EFFICIENT WORKFLOWS In a January 2012 Keal broker survey, clients recognized the need for direct connectivity technology solutions to compete with fierce competition. This became evident based on the cost of doing broker policy transactions. In general, survey results suggested that on average a brokerage’s pure policy change transactions accounted for 24% of all transactions. Of these pure policy change transactions, revenue accounted for less than 1% of the total commission revenue, or $5.41 per transaction. Since policy change transactions are the most time-consuming transactions, when brokers in our study applied their policy change transaction cost, the margins were very slim — if not negative. This begs the million-dollar question: “What solution allows brokers to minimize the time needed to complete transactions that bring the least revenue to the bottom line?” The answer is simple: automate them through SEMCI solutions, thereby reducing the time needed to complete transactions. In a nutshell, it is about doing more in less time, using fewer user clicks and fewer navigation screens, and needing to re-enter fewer data fields. Keal commissioned another broker survey in May 2012 related to doing business with Canada’s insurance companies. Our objective was to gauge the client’s current use of single sign on for portals, as well as the anticipated future use of direct upload connectivity (i.e., no need for portals) if it were to be made available. Results were very aligned. When we asked brokers if they cur-

rently used single sign on or inquiry for billing, claims and policy from their sigXP BMS to access the insurance portal in question, 58% responded yes. When asked if their brokerage was currently using any new business upload connectivity with that same insurance company, 56% answered yes. When asked if their brokerage would use new business or automated change policy upload connectivity from their sigXP BMS if such portal-less technology were to be made available, 89% answered yes. What does this mean? There is a 30% or higher margin of opportunity for pick up rate on automated processes. It just needs to happen.

When brokers were asked if they would use new business or automated change policy upload connectivity from their sigXP BMS if portal-less technology were to be made available, 89% answered yes. You may be thinking that these statistics are all great, but where to go from here? Technology will continue to change the way you do business with your clients and your carriers, directly contributing to your brokerage’s future success and profitability margins. Brokers need to take a second look at their workflow procedures and actively ask their carriers and BMS providers about existing technology tools and platforms that will allow them to do more with less. Do you know the position of your BMS provider and/or your main carriers on SEMCI? If you don’t, treat this as a ‘call to action’ for your brokerage to reach out and get those leaders to make direct connectivity processes a business priority. A reality in business is that if you wait for change to slow down for your business to catch up, you inadvertently fall behind. The desired and necessary end goal of true SEMCI will only become a reality through the concentrated and aligned efforts of all stakeholders.

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Angela Stelmakowich Editor

High-profile explosions at B.C. sawmills have seen some insurers bail out of the beleaguered market segment, although others seem poised to take advantage. Catastrophic explosions at two British Columbia sawmills earlier this year have kick-started safety inspections province-wide and ignited concerns about skyrocketing insurance rates and available capacity in this particular market segment. “The current situation is horrendous. There’s no other way to describe it,” says Larry Grant, vice president of Hub International’s national forestry practice division. Rates were already spiralling upward in response to the exits of insurers such as ACE,Travelers and Lumbermen’s Underwriting Alliance (LUA) over the last two years, Grant reports. Speaking generally, he offers an example in which a sawmill paying a 20-cent rate for total coverage two years ago may have seen its rate inflate to 40 cents at about 85% coverage a year ago.This year, the rate has ballooned to 80 cents

42 Canadian Underwriter June 2012

for roughly 30% to 40% coverage. “So, the rates have gone through the roof and the coverage limits have diminished or decreased significantly,” Grant says. Recent fires and explosions at two British Columbia sawmills has brought the issue into sharp focus.The first fire happened on Jan. 20 at Babine Lake Forest Products in Burns Lake, and the second on Apr. 23 at Lakeland Mills in Prince George. The incidents left four workers dead. Within days of the second blast, WorkSafeBC issued a directive that all mills in the province would need to complete a hazard identification, risk assessment and safety review, focusing in particular on combustible dust, dust accumulation and potential ignition sources. It was a “couple of extraordinary events at a particularly sensitive time that’s allowed things to go way over the top,” Mill & Timber Products Ltd. spokesperson David Gray says of recent events.

IN OR OUT? Does the current state of affairs serve as a harbinger for insurance companies to enter into or exit from the troubled sawmill marketplace? Certainly some insurers have taken conditions as a cue to exit the market altogether, the most

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Taking Cover

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recent and perhaps most public example being LUA. In an October 2011 letter to policyholders, excerpts of which were published in the Globe and Mail , LUA noted that despite steps taken by Canadian staff over several years — including higher rates, reduced capacity and enhanced attention to loss prevention — efforts “have not garnered the results we had hoped for, or needed, on our overall book of business.” A decision was made to wind down Canadian branch operations “through a smooth and orderly process, throughout the remainder of 2011 and 2012.” In the letter, LUA noted that the cumulative net loss in Canada — operations had not achieved an underwriting profit in six years — essentially erased positive results achieved south of the border. LUA has nevertheless maintained its A. M. Best rating of B+. With reduced capacity available, even before the explosions, new players began entering the market, driving up pricing. “This is a simple supply and demand scenario,” says Joe Hawk, senior vice president and strategic account manager of Western Canada for Aon Reed Stenhouse Inc.When a major market that provides significant capacity exits, “your supply is now reduced. So for insurers coming in, there’s a big demand for their supply and they’re going to charge accordingly,” Hawk says. But add a number of total loss events to the mix, and “it is going to cause markets that are considering playing in the space to pause and reconsider both their participation and pricing,” Hawk says.

TAKING COVER LUA’s departure left some sawmills scrambling for coverage in an already skittish market. Gray says some Mill & Timber Products operations were not insured by LUA, but rather by a major underwriter of industrial risk.These operations secured a renewal with the unnamed carrier, but the underwriter made it clear it was not entirely comfortable, Gray reports. Other company mills were with LUA. For these, Mill & Timber Products had been looking at an alternative source of coverage

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out of London, England when the second fire happened. “That really changed the tenor of the market,” Gray says. Facing a Sunday midnight deadline in late April, the mill received a last-minute quote that almost tripled the expiring rate. “So we did what I don’t think a lot of people did,” Gray says. “We declined. We went naked deliberately. The mills

When a major market that provides significant capacity exits, supply is now reduced. So for insurers coming in, there’s a big demand for their supply and they’re going to charge accordingly. were not running at that time. We put double security watch on them and we went to another broker.” The new broker came up with a more risk-based proposal. Once the coverage was made official in London, mill operations were back up and running a week later. Gray feels sawmill coverage should be taking a more a risk-based approach generally, but thus far, he believes, this has not happened.

MUTUALLY EXCLUSIVE? Players leaving the market have created the space and opportunity for new carriers to enter. “Somebody’s going to look at where the rates are going, and where they are at right now, and no doubt we’ll see somebody stepping in,” Grant predicts.

Hawk says when LUA began reducing capacity in 2010, new markets started taking a look at sawmill risks. They see an opportunity “because they believe now they will be able to get the pricing they need to reflect the risk,” he adds. Even if a market-based solution does not materialize to fill the vacuum left by exiting carriers, “there’s probably an opportunity now for sawmillers of a certain class to create a mutual or some kind of vehicle that replaces a big chunk of the market,” Gray suggests. “At the low prices, it didn’t make any sense. At the high prices, it does.The race will be: Do the premiums adjust, or do we as sawmillers adjust?” Grant is not so sure, citing the following scenario. Ten of the best sawmill operations get together and each one pays an average insurance cost of about $1.5 million annually. That produces a total fund in the first year of $15 million. A major loss happens in the $60million range. “That $15 million really isn’t going to do much,” he says. If those same 10 operations each contribute $6 million to the kitty to cover the $60-million loss, they would be out $4.5 million on an annual basis — or at least in their first year. “I think asking them to make that commitment would be tough in these times,” Grant says. “If premiums are too high to support on a mid- to long-term basis or there is a further retraction of insurers from this class, clients would probably look at some form of a buying pool or captive to manage the insurance,” Hawk says. But these are long-term ventures that require a big commitment from likeminded people. For the first year or two, this type of risk financing structure can be higher than buying insurance in the traditional markets, Hawk says. “I’m not hoping that will happen. I’m hoping things will stablize and normalize.”

DUST UP In a May 14 update on the explosions, WorkSafeBC informed employers of similarities that “may be coincidental, but they certainly cannot be ignored,” said Jeff Dolan, director of investiga-

June 2012 Canadian Underwriter

tions for the board. “The ignition sources appear to have been located at the conveyor level where electrical and/or mechanical equipment was in operation in areas contained by walls and equipment,” Dolan said. Fuel sources, including natural gas, propane and sawdust, “may, depending on their chemical makeup, settle to the lower areas of the mill,” he reported.

Hawk says dust or debris has always been a factor in sawmills. “We see this as something that can be managed and is obviously getting additional attention, which will refocus anyone who may not have been managing this at a high enough level.” That said, he adds, “insurers are asking for assistance in providing them with the right information that allows

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44 Canadian Underwriter June 2012

them to underwrite both the physical and human element risks.” Physical risks relate to the provision of sprinkler protection, with adequate water supply from a reliable dual fire pump system and good fire hydrant coverage. Human risks relate to, among other things, the inspection, testing and maintenance of fire protection systems; hot work management; debris removal and housekeeping; and preventive maintenance programs for electrical and mechanical. “If the human element side is not managed well, then a normal loss event could turn into a major event, or even a total loss scenario,” Hawk says. Through regular auditing and solid risk management, an insured must show “you’re different than the other guy, because right now the insurance markets are having trouble differentiating good operators from the others,” he says. “The insureds that manage risk and can demonstrate that will pay lower rates in any given market.”

HARD REALITY The sawmill segment of the insurance industry is in a “full-blown” hard market right now and hard markets typically follow cycles of 24, 36 and 48 months, Grant says. “Throw in another catastrophic incident, and all bets are off.” However, he remains hopeful that rates will not only stabilize over the next 12 to 24 months, but they will begin to decrease slightly. “No broker is leveraging volume on rate,” he says. “The only thing they may be able to leverage on is capacity.” Insurance companies are being very careful about how much capacity they are putting out, Hawk observes. “These are unprecedented losses. I’ve never seen anything like this,” he says. “I think that if we end up having the balance of the year normalize from a loss perspective, we get some time and distance and the markets get the information and data they need to gain some comfort in this segment, things can start to stablize from a pricing perspective,” Hawk says.

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Rowing in the Same Direction In the P&C insurance industry, true success in technology is achieved only when industry stakeholders are all rowing in sync â&#x20AC;&#x201D; and in the same direction. Opinion/Analysis

Rick Orr

President, Insurance Brokers Association of Ontario (IBAO)

Brokers succeeding without carriers or carriers succeeding without brokers is no success at all. A consensus is evolving that we need to succeed together, not individually, whenever delivering industry solutions. This shift became noticeable to me when Insurance Brokers Association of Ontario (IBAO) changed its mission and vision statements to say it wants to collaborate with all parties interested in delivering innovative solutions to the industry. Shortly thereafter, the Centre for the Study of Insurance Operations (CSIO) affirmed its mandate to deliver technology standards and solutions that will improve the competitiveness of the broker channel. With this new sense of purpose, we need to build standard solutions that will augment consumersâ&#x20AC;&#x2122; interactions with brokers and truly reduce industry expense ratios.

ROWING IN THE SAME DIRECTION One solution that has taken the industry by storm is Electronic Document Transfer or e-Doc. This allows renewals and documents to be downloaded into the broker management system (BMS) and attached directly to the client file automatically.This solution clearly demonstrates that when insurers, brokers, BMS vendors and CSIO all work together, we are able to develop a standard process that facilitates the electronic

46 Canadian Underwriter June 2012

transfer of documents in a very short period. e-Doc happened in less than one year. e-Doc sets the stage for future solutions and innovation. One example is the Insurance Brokers Association of Canada (IBAC) Data Exchange project, which would essentially eliminate the current dependency on insurance company portals. While e-Doc introduces significant cost savings by reducing the need for paper and simplifying the logistics of moving it around the country, Data Exchange stands to deliver exponentially more significant savings. It is premised on brokers using their own BMS as the sole system in which we transact all business. In my view, stakeholders would not have committed to pursue a more speculative project like Data Exchange if we couldnâ&#x20AC;&#x2122;t get our act together on e-Docs, which was very easy to justify from a cost savings standpoint. Another area of interest is measuring ongoing customer engagement. Many stakeholders have become aware of how changing buying habits of consumers have affected their satisfaction with and ongoing commitment to the broker channel. Recent research shows that broker customers are not as engaged as they once were. Historically, if carriers did any customer research at all, it remained proprietary and often not well-communicated or understood. The

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same could be said of research conducted by the few brokers that tried to gather their own customer feedback. More recently, carriers such as Aviva, AXA, Gore Mutual, Intact and Unica have recognized the critical importance of having accurate, reliable customer intelligence. IBAO has been able to collaborate with these carriers to create a standard measurement tool that helps to set credible benchmarks against which brokers can gauge their performance. This collective approach to broker customer research also allows for the development of sophisticated predictive models, which offer critical insight into what drives consumer preference for buying though the broker channel. We are running this study again in 2012. We have obtained significant ongoing commitment from both carriers and member brokers to continue supporting this critical initiative. We estimate that in 2012, at least 100 Ontario brokers will receive individual brokerage Risk Assessment and Performance Reports. The reports will support ongoing statistical aggregate analysis, performance benchmarking and the development of critical customer insights.

ROWING IN OPPOSITE DIRECTIONS Brokers must continue to convince insurers that collaborating as a channel on customer engagement is critically important. Unfortunately, even as we work collaboratively to learn more about consumer wants and needs, we still have insurers working at engagement solutions in one direction while brokers and their associations are working in another. Consider the examples below:

Mobile apps Brokers represent a number of insurers. Consumers appreciate both choice and expert advice, and they are demanding increased touch points with their brokers. Responding to this demand, our strategic partner, Independent Broker Resources Inc. (IBRI), developed a mobile app for brokers.The app is branded to individual brokerages, allowing clients to access information about their own insurers. If an insured is in a claim, 48 Canadian Underwriter June 2012

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the app will allow the insured to report the claim roadside.The app then directs the insured to the preferred repair centre of his or her insurance company. We are delighted with the success of the mobile app as it has been taken up not just in Ontario, but also in New Brunswick, Nova Scotia, Newfoundland, Quebec and Alberta. Quebec is very interested in a French version. Many insurers are providing to IBRI their preferred vendors lists for across the country.

Brokers succeeding without carriers or carriers succeeding without brokers is no success at all. A consensus is evolving that we need to suceed together. Hopefully, this too will become an industry solution helping to engage consumers. The app connects the consumer with his or her broker of choice, the consumer gets specific claims advice from the insurer and the insurer is able to direct more claims to their preferred network of suppliers which, in turn, reduces fraud and an insurer’s claims costs. Everyone wins with the broker mobile app and, yet, insurers are still releasing their own individual mobile apps.This will provide multiple, confusing messages and options to the client. We need to work together.

Online quoting Online quoting is another shiny object that seems to distract insurers. Four years ago, IBRI launched myinsuranceshopper.ca (MIS), an online branding exercise that allows consumers to find a local broker, get a price and engage them in a space where the broker brand did not have a presence as of 2008. We have invested significant resources to drive traffic to this site and have delivered a valuable online branding campaign. Recently, through some changes in the architecture of the site, MIS is much more likely to appear on the top of Google search pages, which present the outcome of keyword searches in order of relevancy.

Our hope is that when the keyword “insurance” is searched through Google, consumers will be directed to broker websites as the first option, followed by the MIS site. How is this a standard industry solution? Consumers tell us they like to shop online. However, they don’t like to make a purchase without consulting with a licensed professional. As a channel, we need to deliver an effective tool for consumers to do their online shopping. This tool must provide a solution for not just one insurer or broker, but for all insurers and brokers.We need to win the online traffic as a channel; we can’t as individual brokers or insurers. However, insurers continue to build their own individual online quoting tools. This runs the significant risk of fracturing the online marketplace. I believe MIS presents an opportunity for brokers and insurers alike to adopt an online tool that enhances the broker channel value proposition instead of clouding it with multiple direct access solutions. Working together is less expensive for each of us and delivers a better solution. So far myinsuranceshopper.ca has been endorsed by Ontario, New Brunswick and most recently Alberta. Other provinces are also investigating MIS and are likely to make announcements shortly.

COLLABORATION It is critical that insurers market online as well as brokers. A couple of insurers are doing a really nice job of online marketing and branding. If those insurers would add a call to action on each site visit for a consumer to “click here to get a quote,” and if that site traffic were driven to MIS (where the consumer can pick a broker), we are then marrying the consumer with an insurer’s national brand recognition and the trusted advice of his or her local broker. That is where we will find true success! We need to succeed together by finding broad industry solutions rather than narrow individual solutions.That is the place from which our long-term success will come.

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Providing the

Policy

Gregory D. Hardy

Chair, Patterson Law Insurance Group, Patterson Law (Halifax, Nova Scotia)

It seems like a basic Insurance 101 principle, but the insurance provider is obligated to provide the policy to the insured. The practice of insurance litigation often revolves around complicated issues of policy interpretation and application. However, some very basic aspects of policies of insurance can result in debate. It is valuable to reflect upon these “basic” issues to avoid unnecessary legal disputes. Perhaps the most basic of all of these is an insurer’s obligation to provide the policy of insurance to its insured, complete with all terms and conditions.

PROVIDING THE POLICY

Sandra L. McCulloch

Counsel, Patterson Law (Truro, Nova Scotia)

The law of insurance requires that all terms and conditions of a policy of insurance be fully set out in said policy, or else be set out in writing in a document securely attached to and properly referenced by the policy of insurance. The logical extension of this legal requirement is that the

50 Canadian Underwriter June 2012

policy of insurance — containing all of the terms and conditions — is provided to the insured following issuance of the policy. The precise legal requirements and the consequences of an insurer’s failure to comply with the applicable legal requirements vary from province to province. Stated in general terms, if an insurer fails to properly set out the terms and conditions, or fails to deliver the policy or to draw the terms and conditions to the attention of the insured, the insurer will not be permitted to rely on those terms and conditions to the detriment of the insured. Over the years, the common law has addressed various questions relating to this obligation upon an insurer. The fact that these questions have been subject to judicial scrutiny reminds us of the importance of an insurer’s obligation to fully set out the terms and conditions within a policy of insurance and to provide these to the insured promptly.

Insurer’s onus If an insurer wishes to rely on terms and conditions in a policy of insurance — such as exclusions or limitation periods — the insurer must be prepared to prove that the insurance policy and its contents were provided to the insured. The case of Janmohamed v. Co-Operators General Insur-

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It is abundantly clear from review of the case law that an insurer must fully set out the terms and conditions in a policy of insurance and promptly provide it to the insured, arguably one of the most basic aspects of the practice of insurance.

ance Co. demonstrates that standard or habitual practices may not suffice to prove that a policy was provided to an insured. The evidence of the insurer in Janmohamed was that it was customary practice to include the policy of insurance along with the summary letter (which had clearly been sent to the insured), but this did not satisfy the court. An insurer should thus expect to have to prove that the particular policy was in fact provided to the particular insured in question. It may not suffice for the terms and conditions to be part of the original policy upon issuance, if that original policy was not actually delivered to the insured. Similarly, if policy terms and conditions are not provided in full to the insured, then alerting the insured to the existence of terms and conditions such as exclusions may not suffice to enable an insurer to rely upon them. In Kompani v. Baile, even though the insured acknowledged that the existence of exclusions had been communicated by the insurer, the court determined this was not enough to substantiate that the insurance policy and its terms and conditions were provided to the insured as required by statute, such that an exclusion could be imposed upon the insured to his detriment. On renewal The cases of Youlden v. London Guarantee & Accident Co. and Hazan v. ING Insurance Company of Canada both provide that, upon renewal, the terms and conditions 52 Canadian Underwriter June 2012

contained in the original policy may be incorporated by reference into that renewed policy, and may not need to be fully set out in the renewed policy. However, if the original policy was never delivered to the insured, incorporation by reference will not be enough to impose the terms and conditions contained therein upon the insured.

If policy terms and conditions are not provided in full to the insured, alerting the insured to the existence of terms and conditions such as exclusions may not suffice to enable an insurer to rely upon them. Timing of delivery With respect to timing, an insurer need not necessarily provide the policy of insurance to the insured immediately upon issuance in order to rely on its terms and conditions. The Ontario case of International Movie Conversions Ltd. v. ITT Hartford Canada involved a policy of insurance that was belatedly provided to the insured. The policy was delivered after the insured experienced a loss that would have been limited by a statutory oneyear limitation period, but well before the expiry of that limitation period. The court held that the failure to provide the insurance policy until after the loss would not preclude the insurer from relying terms and conditions in

the policy, such as exclusions and limitation periods. The court indicated, however, that its ruling might have been different had the insurance policy been provided after the expiry of the limitation period. It should be noted that in Conversions, the court recognized other jurisdictions had arrived at a different conclusion. In Alberta and Manitoba, for example, case law holds that an insurerâ&#x20AC;&#x2122;s failure to deliver the policy of insurance until after the date of loss would prohibit the insurer from relying on its terms and conditions, contrary to conclusions reached in Conversions.

CONCLUSION It is abundantly clear from a review of the case law that an insurer must fully set out the terms and conditions in a policy of insurance and promptly provide it to the insured, arguably one of the most basic aspects of the practice of insurance. Since a policy of insurance contains essential terms and conditions that protect the insurer, such as exclusions and limitation periods, it is clearly in an insurerâ&#x20AC;&#x2122;s best interests to develop best practices to ensure that this obligation is not either overlooked or fulfilled haphazardly. Furthermore, this case law review highlights the fact that the nature of this obligation may differ from province to province. Therefore, it is important for an insurer to take the time to determine exactly what the law expects in the particular jurisdiction in which any given policy of insurance arises.

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The Leaky Bucket

Understanding the 21st Century Insurance Consumer, Insurance Brokers Association of Ontario (IBAO) workshop, Brockville, Ontario

David Gambrill Senior Editor

Brokers today may run the risk of losing their mature clients to a younger, more technically savvy generation that prefers the simplicity of dealing with direct writers — organizations that sell insurance by means of call sites or websites. This penomenon is called the “leaky bucket.” That means a key challenge faced by Canadian brokers will be to align themselves with the buying habits and preferences of the younger generation. In this way, when parents divest their assets and pass them down to their children, the insurance business related to those assets does not leak out of the broker channel altogether. Ontario brokers are discussing how best to overcome the “leaky bucket” phenomenon in an Insurance Brokers Association of Ontario (IBAO) workshop entitled Understanding the 21st Century Insurance Consumer. Presented by past IBAO chairman Bryan Yetman and Bill Morris of the research company Navicom Inc., the workshop has been presented to brokers throughout the province. Several market dynamics are leading to the gradual seepage of insurance business from the

54 Canadian Underwriter June 2012

broker channel to direct writers, IBAO research shows. Brokers sold 58% of Ontario’s property and casualty insurance premium volume in 2010 and 45% of the province’s insurance policies in 2011. Compare that to direct writers who sold 18% of the premium volume in 2010 and 25% of the policies in 2011. These numbers are in stark contrast to 1980, when broker sales accounted for 73% of the policies and premium volume. At that time, direct writers had no market presence worth recording. Brokers have thus steadily lost roughly 1% of their market share annually over the past 20 years. Every point of lost market share is worth $87 million in revenue to the broker channel. As it stands today, there is more than $15 billion worth of P&C insurance premium in the Ontario market. Therefore, at this rate of seepage, if brokers do nothing and watch the business leak away over the next five years, they can kiss good-bye almost $500 million in revenue good-bye.

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To prevent business leakage from the broker channel to direct writers, brokers should embrace technology and push for advanced consumer metrics to help keep tomorrow’s customers within the broker channel.

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THE LEAKY BUCKET IBAO has commissioned detailed research to identify “what tomorrow’s customer wants” in an effort to slow, halt or reverse the transfer of insurance business from the broker channel to other insurance distribution channels. Findings point to a situation in which insurance brokers serving an aging, mature customer base are increasingly out of alignment with the buying needs and expectations of younger consumers. IBAO research shows that customers dealing with brokers today are predominantly classified within the “mature” category. Broker clients are typically older than 40 years old, and 30% of them are older than 60 — with 10,000 more people in North America turning 60 each day. Clients who are working with brokers tend to be more educated than consumers who buy insurance outside the broker channel. They value a personal connection with their broker and their average household incomes are in excess of $75,000. But as these customers loyal to the broker channel approach retirement age, the proverbial bucket starts to leak. “They’re going to downsize, they’re going to start to shed assets,” Morris noted in the IBAO’s presentation to brokers in Brockville on May 22. “Who gets the cottage? The younger generation. Mom and Dad have a mid-life crisis, they have a Porsche, they’ve got a truck, they’ve got 6,000-square-foot house. Mom wants to travel more and doesn’t like to drive: the fast car becomes a Corolla shared by both of the parents. That big house is becoming more of a pain, and it becomes a condo.” Those assets get transferred to the children, Morris notes. But the assets are being passed down to a generation that lacks loyalty to insurance brokers and more likely views insurance as a commodity. This price-savvy generation, which likes technology and is comfortable with e-commerce, is more likely to buy its insurance through the direct channel. This largely younger market includes a higher proportion of Generation Y

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youth (born between the 1980s and 1990s) and new Canadians. “We’ve got an aging population that is going into its sunset years and the sunrise guys don’t like us, or don’t trust us or don’t want to do business with us,” Yetman said. The thing is, when younger generation takes over the assets, it is capable of bringing their parents’ generation along with them to the direct channel. “Grandma says to her grandchild,‘I’m going to give you my car.’ But the kid can’t have the car because it’s $7,000 or $8,000 a year [for insurance], so what happens?” Morris asked. “They start shopping around,” a broker called out. “They are taking their lives in their own hands,” Morris agreed. “They are finding out there are options. What’s the kid going to think if you in the

older generation are working with a broker that’s significantly more expensive than what they’ve got? If the kid finds cheaper insurance, he says: ‘Hey Dad, I just saved $1,000 — close to half the price your guy is quoting.’ “What does Dad say? ‘Take me with you.’”

PATCHING THE LEAKS How do brokers fix the holes in this leaky bucket? One fix involves knowing what “tomorrow’s customer” wants. Research suggests many brokers simply don’t know how to forge links with the younger generation and/or are out of tune with their buying habits or their preferences. “As an industry, this is not your proudest moment,” Yetman said to brokers in in Brockville.

One solution is obvious: consumer metrics. Brokers should be asking clients what they want and then deliver on that. Morris gave an example from his work with the hospitality industry. Integrated hotel reservation systems amass data on individual clients based on customer feedback surveys. So when guests stay in a hotel anywhere in the chain, the hotel will be aware of the customer’s preferences — say, for hypoallergenic pillows, extra blankets or certain bar fridge items — and all of these will be stocked in the room prior to the guest checking in. Brokers haven’t yet insisted on a way to manage identified consumer preferences through their broker management systems (BMS). “You are the customer with the BMS, but how much time did you guys spend talking to your BMS vendors about getting customer information that you can use?” Morris asked the audience. “Did it ever come up? No, so as a result, they weren’t thinking about it. But if you are truly customerobsessive, you have to have a connection to your customers. You guys have to care about wanting that information and wanting to use it.” Some brokers have made the point that insurance companies control the product, not brokers.Therefore, unlike the hotel situation, brokers cannot unilaterally change the insurance service or product even if they do collect all of this information on what the clients want or need. “Even though brokers don’t control the product, collectively they do have a voice,”Yetman responded.They can, for instance, approach insurers with information about potential high-growth areas, such as the immigration and Gen Y markets. Insurers could then use the information to design products to suit these particular markets. Insurers might, say, design a firstchance auto rating, which is not based on age or gender until there is a claim. “The idea is that you are innocent until proven guilty,”Yetman said. “That allows an insurance company to say to a 16year-old kid: ‘We’re going to treat you like one of the good ones. And if you mess up, we’re coming for you.’”

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(Protecting) Against E&O Claims

Letter to the Editor

Frank Cain

Michael Palermo & Associates Insurance Ltd.

I would like to comment on the March 2012 Canadian Underwriter article entitled,‘How Much is Enough?’ When I look at the question, I want to add: “...to avoid underinsurance and a possible broker E&O claim.” The possibility of an errors and omissions (E&O) claim should be uppermost in the mind of a broker in all things undertaken. But it should not create a sense of panic or paranoia that might block good and proper judgment. At the risk of too generously applying this as a panacea for the broker’s work ethic, I believe some conditions, if they are in place prior to the acceptance of new business, can have a positive effect on the broker’s ability to avoid the disaster of an E&O situation. In the following, my commentary is not to be taken as a critique of any comment made in the article, nor is it to be considered as having greater substance than the opinions expressed within that article.

58 Canadian Underwriter June 2012

CONDITIONS IN PLACE A proper mindset First and foremost, the broker must carefully consider whether or not the client is a potential one for the brokerage based on consideration of the extent of the client’s risk, the broker’s ability to examine exposure to risk and if coverage can be offered to minimize or eliminate financial loss. Here is a question to be asked: Is this a risk in which I should be involved? The answer should take into account market availability, coverage constraints for liability limits and whether or not my E&O insurer would frown upon me for venturing into a domain in which I have had no previous experience. If the response to any one of these points leaves any doubt at all, it is best to back off and rightfully inform the client. The client will respect your honesty more than he or she will appreciate the heart-stopping thrill of a premium reduction

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— especially if the reduction comes at the expense of the client’s protection and your E&O.

Client capitalization — deductible concerns It is highly unlikely that the owners of private companies will wear their financial reports on their sleeves. But the degree to which clients are capitalized can and should be the basis for considering the extent of client protection from a number of angles. For example, a high deductible may have some effect on premium, but it applies to property damage, not bodily injury (where a substantial loss is most likely to occur). Property damage for the most part has a measurable limit, but not so in an injury loss. Therefore, to a thinking insurance buyer, a high deductible may not be financially sound: the buyer may view the reduction in premium as being inversely proportional to the ascending deductible limits. Of course, that same buyer may be financially prepared to make an insurance investment in the protection of corporate assets, as he or she likely does with R&D and product improvement. But if initial conversations and observations cast any doubt on the client’s capitalization, the broker should be aware a careless agreement to a high deductible could cause the client serious financial difficulty. Is the client onside? Luckily for insurance brokers, fewer insurance haters buy insurance than potential clients who agree to work with you. When dealing with insurance haters, you will be in the unfortunate position of hearing the client emphasize premium saving. No amount of advocacy for viable protection will justify spending even a dolar more than the incumbent’s existing premium cost. Avoid this client at all costs. Limits agreed to for the sake of cost and that do not cover loss will come back to haunt you. In this situation, if the insurer does not cover the loss or the majority of it, the insurance broker most likely will. 60 Canadian Underwriter June 2012

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Top management — getting involved No quotation to be given to a prospective client should bypass the owner of the brokerage or the second in command. Much will depend on the size of the account, but that should not preclude observation and scrutiny by a higher authority. There are no “small accounts.” Every risk is subject to a catastrophe loss. Colleague critique In the process of preparing a quotation, during the stages of aligning coverage and premium to risk, have a meeting

Here is a question to be asked of potential clients: Is this a risk in which I should be involved? The answer should take into account market availability, coverage constraints for liability limits and whether or not my E&O insurer would frown upon me for entering into the domain. with your office colleagues to review what has been developed and initially put together for the eventual meeting with the client. Listen carefully to suggestions and be prepared to make changes that best suit the client, the quoting insurer and the guy at the top paying your commission. As an adjunct to this, do yearly critiques to avoid stale dating.While you’re at it, have a copy of the Directory of Directors on hand to determine from the recorded company profile if other divisions exist about which you haven’t been told. All of the limits in the world will not help if an associated, affiliated or subsidiary company is not named in the policy.

Umbrella liability Treaties may apply separately to this coverage, with rating leniency allowing some saving in premium. It may have a drop-down provision but most likely not, so it’s probably follow form. The client needs to know that a self-insured

retention is not a deductible: it is his portion of risk that applies before the ground of the liability limit, thus allowing full application of the limit. Umbrella liability is an essential unit of protection for clients with high liability potential — i.e. products liability.

Making the intangible tangible The point here is not to make the improbable probable, but more along the lines of possible. Effectively, the client holds a piece of paper, albeit a legal document, consummated through offer and acceptance to create contract. If I were David Copperfield, I would not have any difficulty in making that piece of paper something physical, much like a newly purchased dining room table. But I am not, and I can’t. However, we can try to have the client come away thinking that the piece of paper he’s holding is more than it is.The client must understand that the contract represents a potential physical reality beyond just the piece of paper on which it is written. It represents protection against the unfortunate spectre of a future injury — including personal injury — and/or property damage. It may be difficult for the client to accept that it has real value before a claim or loss event. In his mind, he’s paying for something that has yet to return value, unlike the dining room table he just bought. For him, the potential for injury or loss may, in fact, never materialize. If he does not accept the value you are attempting to explain, stop talking. Persistence will create aggravation. This is not the way to begin a broker/ client relationship.

CONCLUSION In terms of the probity, honour and rectitude in the acknowledgment of duty of care by the insurance broker, there is no real conclusion: it is ongoing.The daily practice requires constant honing, care and understanding. In the eyes of our clients, we are effectively teachers. Our fervent hope is that as a result of our dedication and the skillful management of our respective abilities, we’ll earn an ‘A’ on our report card.

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INSURANCE INTERNET DIRECTORY ASSOCIATIONS Canadian Independent Adjusters' Association (CIAA) "The voice of Independent Adjusters in Canada" www.ciaa-adjusters.ca Honourable Order of the Blue Goose—Ontario Pond Our fraternal organization has been dedicated to fellowship and charity since 1908. www.bluegooseontario.org The Insurance Institute of Canada The professional educational arm of the industry. www.insuranceinstitute.ca Risk & Insurance Management Society Inc. Dedicated to advancing the practice of effective risk management. www.rims.org

CLAIMS ADJUSTING FIRMS ClaimsPro Inc. Committed to providing leading-edge claims management services. www.scm.ca Crawford & Company (Canada) Inc. Enhancing the customer experience, every day. www.crawfordandcompany.com

PCA Adjusters Limited Adjusting to Meet your needs™ www.pca-adj.com

GRAPHIC COMMUNICATIONS Quelmec Loss Adjusters Identifying, Investigating, Resolving... for over a quarter century! www.quelmec.ca

Cameron & Associates Insurance Consultants Ltd. Insurance & Risk Management Consultants. www.cameronassociates.com Keal Technologies Complete technology solutions for insurance brokers. www.keal.com

CONSTRUCTION CONSULTANTS MKA Canada, Inc. Providing creative solutions to the Construction, Legal and Insurance Industries. www.mkainc.ca

DAMAGE COST CONSULTANTS SPECS Ltd. (Specialized Property Evaluation Control Services) Providing Innovative Solutions to Control Property Claim Costs www.specs.ca

EMPLOYMENT ONLINE I-HIRE.CA Canada's Insurance Career Destination. www.i-hire.ca

Cunningham Lindsey International independent claims services. www.cunninghamlindsey.com

ENGINEERING SERVICES

McLarens Canada International Loss Adjusters and Surveyors. www.mclarens.ca

Canadian Underwriter June 2012

Informco Inc. Integrated Graphic Communications Specialists. www.informco.com

INSURANCE SOFTWARE APPLICATIONS Kanetix Ltd. - SAAS Division We provide corporate clients with fast & reliable insurance quoting systems, web services, web systems and hosting. www.kanetix.ca/about_dev_services

INSURANCE COMPANIES CONSULTING FIRMS

CRU Adjusters Calm in the face of a storm. www.cruadjusters.com

Kernaghan Adjusters Doing What Is Right®. www.kernaghan.com

complex engineering incidents. www.waltersforensic.com

Giffin Koerth Forensic Engineering and Science Investigate Understand Communicate www.giffinkoerth.com Rochon Engineering Inc. Forensic Consulting Engineers & Code Consultants. www.rochons.com Walters Forensic Engineering Inc. Providing scientific answers to

Aviva Canada Inc. Home Auto and Business Assurance. www.avivacanada.com Catlin Canada Underwriting Ambition. www.catlincanada.com Chartis Insurance Company of Canada Your world, insured. www.chartisinsurance.com FM Global The leader in property loss prevention. www.fmglobal.com Grain Insurance and Guarantee Company Commercial Lines Underwriters www.graininsurance.com RSA Leading car, home and business insurer. www.rsagroup.ca Sovereign General Insurance Company of Canada Since 1953 www.sovereigngeneral.com The Guarantee Company of North America “Specialized insurance products...professional service” www.gcna.com

Keal Technologies Complete technology solutions for insurance brokers. www.keal.com

REINSURANCE Guy Carpenter & Company The world’s leading reinsurance intermediary. www.guycarp.com Munich Reinsurance Company of Canada Complete reinsurance coverage from Canada’s largest reinsurer. www.mroc.com Swiss Reinsurance Company Canada The leading P&C reinsurer in Canada. www.swissre.com Transatlantic Reinsurance Company For all your reinsurance needs. www.transre.com

RESTORATION SERVICES Winmar Property Restoration Specialists Coming Through For You! www.winmar.on.ca

RISK MANAGEMENT

Wawanesa Insurance Earning your trust since 1896. www.wawanesa.com

The ARC Group Canada Inc. Your Partner in Insurance Law and Risk Management. www.thearcgroup.ca

INSURANCE LAW

SPECIALTY INSURANCE

The ARC Group Canada Inc. Your Partner in Insurance Law & Risk Management. www.thearcgroup.ca

William J. Sutton & Co. Ltd. Insuring Special Risks since 1978 www.wjsutton.com

IBABC 64th Annual Conference & Trade Show (Kelowna, B.C.)

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B.C. brokers turned out in droves to a seminar discussing the twisted turns of applying strata insurance deductibles. Strata insurance deductibles and broker input into the Insurance Corporation of B.C. (ICBC)’s plans to shift to a risk-based pricing model dominated discussions at the 64th annual conference and trade show of the Insurance Brokers Association of B.C. (IBABC). The conference was held in Kelowna, B.C. on May 9-11. In a standing-room-only seminar, Krista Prockiw of Alexander Holburn Beaudin & Lang LLP delved into several legal issues surrounding strata insurance — including the murky world of applying deductibles — during her presentation on May 10, The Condominium Conundrum.

CONDOMINIUM DEDUCTIBLES Challenging fairness B.C. condo unit owners have yet to take a run at challenging the fairness of deductible downloading bylaws of strata corporations, although case law seems aligned for such an opportunity, Prockiw observed in her presentation.

First, B.C.’s Strata Property Act does not limit the ability of a strata corporation to sue a condo owner to recover a deductible, Prockiw noted. Such an action can proceed if the strata corporation has a valid bylaw or rule allowing the damage to be charged to a unit owner. Second, a strata corporation can sue a condo unit owner for the insurance deductible if “the owner is responsible for the loss or damage.” Prockiw suggested this scenario is akin to strict liability, meaning a condo unit owner can be found “responsible” for damage without requiring a finding of negligence on the part of the owner. Consider, for example, OSP KAS 1019 v. Keiran, Simkus and Wawanesa Insurance. In this case, the owner of a condo unit had a pipe burst in the bathroom wall because high acid levels in the water caused a coupling to break down. The court determined the owner had a duty to repair and maintain the unit, which was not common property, and therefore was “responsible for the loss, regardless of the absence of fault or negligence on their part.” Third, as Prockiw and brokers attending the seminar observed, policy deductibles for some strata corporations are substantial, running anywhere between $25,000 and $500,000. “If you live in a strata corporation, you share everything in proportionate shares,” Prockiw explained. “You share maintenance fees, you share liability, so this whole idea that one owner is responsible for the entire deductible could be seen as contrary to [the common expense philosophy],” she added.

June 2012 Canadian Underwriter

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Putting the pieces together.

Events and Seminars Calendar You work hard to protect your clients’ property. Now, it’s time to ensure that you apply the same kind of energy and commitment to your own success. CIP Society Events and Seminars give you the opportunity to learn, to network, to catch up on industry developments and to think about your career.

CIP Society Seminars & Events: Halifax – 14th Annual Golf Tournament . . . . . . . . . . . . . . . . . . . . . . . . July 10

Ottawa – 14th Annual Golf Tournament . . . . . . . . . . . . . . . . . . . . . . September 7

Riverview – Annual Golf Tournament . . . . . . . . . . . . . . . . . . . . . . . . August 9

London – Annual Golf Tournament . . . . . . . . . . . . . . . . . . . . . . . . . September 21

Edmonton – 24th Annual Golf Tournament . . . . . . . . . . . . . . . . . . August 13

Okanagan – 1st Annual Golf Tournament . . . . . . . . . . . . . . . . . . . . September 21

Hamilton – Annual Beach Volleyball Tournament . . . . . . . . . . . . . August 29

Edmonton – PROedge Seminar: Advanced Business Interruption . . . October 17

Regina – 13th Annual Golf Tournament . . . . . . . . . . . . . . . . . . . September 5

London – Annual Speakers’ Breakfast . . . . . . . . . . . . . . . . . . . . . . . . November 21

Keeping you at the forefront of the P&C industry. The CIP Society. MEMBERS BENEFIT. www.insuranceinstitute.ca/cipsociety

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“No one’s ever taken a run at it, but we are certainly waiting for the case in which you do have an exceedingly high deductible, a strict liability bylaw and no negligence on the part of an owner. The owner might then take a run at [the deductible download] being significantly unfair.” Four years ago, a case commenced relating to the Strata Property Act’s provisions on “significantly unfair” deductible downloads, Prockiw reported. But the case settled before trial, meaning B.C. courts still have not interpreted the standard of fairness. “The courts have held that ‘significantly unfair’ is a really high threshold to meet,” Prockiw said. “It might not be possible to meet that.”

Defining an ‘occurrence’ Here’s a quick math question for strata insurance experts: If there is a $50,000 policy deductible for each “occurrence” of a loss arising from illegal drug activity, and 29 out of 90 condo units in a single building are damaged because of marijuana grow-op activities, what is the total deductible? Is it a $50,000 deductible for one occurrence that is part of a series of related illegal drug activity losses? Or is it a $1.45-million deductible based on 29 separate occurrences? The answer seems to be who snitched on whom, based on the 2009 B.C. Supreme Court decision, OSP LMS 3904 v. Commonwealth Insurance Co. and St. Paul Fire. Prockiw referred to the case in her analysis of insurance deductible issues for strata corporations. Commonwealth involved 90 condo units in the Cranberry Lane complex in Richmond, B.C., approximately one-third of which were being used for marijuana cultivation operations known as grow-ops. The residential condo units used for grow-ops were discovered in a variety of ways. The most spectacular of these occurred in March 2005, when masked gunmen entered Unit #10. A subsequent police investigation revealed that they had selected the wrong door. They had intended to break into the grow-op located in Unit #9 instead.

Five days after the armed break-in, an anonymous tipster phoned police to suggest they should investigate growops in Units #7, #13, #14, #16, #21, #22, #44, #49 and #60 — nine units in total. Further investigation revealed a final tally of 29 units being used for grow-op purposes. The strata corporation made a total insurance claim for almost $471,000 to repair damage caused by the illegal operations. The strata’s insurance policy had a $50,000 deductible for each “occurrence” of illegal drug activity losses.

B.C. condo unit owners have yet to take a run at challenging the fairness of deductible downloading bylaws of strata corporations. The strata corporation sought a court declaration that all residential units serving as grow-ops constituted a single “occurrence” under the policy, for a total deductible of $50,000. Occurrence in the policy was defined as “a loss and/or a series of losses which are attributable directly or indirectly to one cause, disaster or occurrence.” In response, the insurer argued each of the 29 condo units counted as separate “occurrences,” which would have made the deductible slightly more than $1.4 million, exceeding total damages. The court found the tipster’s knowledge of nine grow-op units indicated he was likely part of a common criminal enterprise involving those operations. Therefore, only one deductible applied for all nine units. However, the court concluded the rest of the 20 units constituted 20 separate occurrences, since no evidence was introduced that they were related to the nine identified by the tipster.

AGREEMENT REACHED British Columbia’s public auto insurer, the ICBC, has committed to consulting with the province’s brokers about a proposed shift to risk-based auto insur-

ance pricing. The move represents one aspect of ICBC’s much broader plan to modernize its service model over the next six to eight years. ICBC’s commitment is contained in Accord 2020, an eight-year strategic agreement signed by IBABC, ICBC and the Credit Union Insurance Services Association (CUISA). “Really, the important element is to ensure the broker remains the sole distributor of Autoplan and the right choice for B.C. auto insurance consumers,” IBABC president Maurice Poulin said during a presentation to the IBABC’s annual general meeting in Kelowna, B.C. on May 9. In its 2014 Transformation Program, ICBC states that its intention to make a $400-million “reinvestment” towards a revamp of its service model, which will include shifting to a risk-based pricing approach, replacing aging technology, adopting new claims handling procedures and introducing more ways for consumers to interact with the insurer. The last will be achieved through the use of both paperless and electronic methods of communicating. Of particular interest is the stated intention to shift to a risk-based pricing model from the Claims-Rated Scale (CRS), which the ICBC has used since 1982. Under the CRS, all new drivers pay a base rate for auto insurance and their premiums are adjusted up or down on the scale depending on their number of claims. Some argue the CRS system does not differentiate effectively between highrisk and low-risk drivers. But under a risk-based pricing model, low-risk drivers would be offered lower premiums and higher-risk drivers would pay higher premiums. Accord 2020 commits the ICBC to consulting with insurance brokers with regard to any future risk-based pricing model. Accord 2020 — which follows previous accords signed by ICBC, IBABC and CUISA — is effective Mar. 1, 2012 to Jan. 1, 2020.

June 2012 Canadian Underwriter

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MOVES & VIEWS UPCOMING EVENTS: FOR A COMPLETE LIST VISIT

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AND CLICK ‘MY EVENTS CALENDAR” ON THE HOME PAGE

Susan McGrath [1] is the newest chair of the board of directors for LawPRO, the professional indemnity company for Ontario’s lawyers. As a sole practitioner in Iroquois Falls, McGrath has served as president of the Cochrane Law Association, the Ontario Bar Association for 1999-2000 and the Canadian Bar Association for 20042005. She succeeds Ian Croft, who will continue as vice-chair. Also at LawPRO, Dan Pinnington has been named vice president of the newly consolidated claims prevention and stakeholder relations department. Pinnington is credited with playing a pivotal role in growing the company’s risk management program and building the profile of its risk management initiatives within the legal community. He will oversee LawPRO’s extensive risk management initiatives and its evolving stakeholder relations portfolio. Ray Leclair will take on duties as vice president of public affairs.

Rick Swanarchuk [2] has been appointed vice president of sales, marketing and distribution at Grain Insurance & Guarantee. With 13 years of experience in the Canadian property and casualty market, Swanarchuk will lead the national sales, marketing and distribution team, with a strong emphasis on investing in broker relationships. Most recently,

Canadian Underwriter June 2012

1 Swanarchuk held the position of assistant vice president for Aviva Canada. Founded in 1920, Grain Insurance & Guarantee is a leading property and casualty insurer headquartered in Winnipeg.

John Rhuland has been named vice president of Totten Group’s Atlantic region. Charged with overseeing the operations of both the Moncton and Dartmouth offices, Rhuland will lead the rebuilding of Totten’s team in the Maritimes and will continue to support the brokers in eastern Canada. Daniel Moses, who has been with Totten since the company’s inception, is the new vice president for Ontario region. Moses has also served a stint in London with one of the company’s Lloyd’s brokers, gaining extensive knowledge that will serve him well in his new duties. James Ricci, most recently a senior underwriter in Totten’s casualty division, will take on the position of casualty manager in the Toronto office. And Melanie Pon has been appointed hospitality and property manager. Pon has a

2 background in the hospitality field and her strength is expected to help in what has become a very competitive arena. The appointments are the first of a number of changes that will take place this year in response to upcoming retirements and the need to change business structure, the company notes.

Sarina Visram [4] has been named manager of member relations and communications for the Centre for Study of Insurance Operations (CSIO). Visram will develop and implement programs and activities to improve membership engagement and promote CSIO’s technology standards and solutions. CSIO has a membership of more than 2,100 brokerages, 21 insurers, 43 mutual insurers and 25 vendors. Holding a bachelor’s degree in commerce from Queens University and an MBA in marketing and strategic management from the Schulich School of Business at York University, Visram has worked in various human resources, broker distribution and investor

4 relations positions at Intact Financial Corporation.

Aon Risk Solutions has named Bill Besse the new national leader for global and large business. Besse will work with large, global firms to deliver a wide array of Aon’s insurance, risk and health and benefits solutions. Also at Aon’s global and large business operations, Craig Gilmour will take on the role of executive vice president. Gilmour will oversee several key practice groups, including financial services, risk consulting, risk control, real estate and actuarial consulting. The construction services group will continue to report to him.

David Horner [6] has joined Kernaghan Adjusters’ Edmonton office. Working in the insurance sector for more than three decades, Horner’s past responsibilities have included serving as a claims representative for a large multi-line insurer, being a roads adjuster handling auto, bodily injury, property and fire claims, and investigating and settling

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6 property damage claims and large commercial losses. “David is adept at negotiating as well as mediating with insured parties,” notes a press release from Kernaghan Adjusters. “He has full knowledge of fidelity and fire loss claims. In addition, his experience includes total loss claims as well as claims on combines, livestock barns and commercial vehicles.”

EGI Financial Holdings Inc. has announced that Hemraj Singh, chief financial officer (CFO) for the company, will retire effective Dec. 31, 2012. Singh’s responsibilities will be gradually transitioned during the intervening period, and a search for a new CFO has been launched. “He has been a key member of our executive team, guiding the company in its initial growth, through going public, to our current solid financial position,” Steve Dobronyi, EGI's CEO, says of Singh. “He has gained the appreciation and respect from everyone he's worked with, both within the EGI team and throughout the insurance industry.” EGI Financial primarily focuses on non-standard automobile insurance and other

8 niche and specialty general insurance products.

Crawford & Company (Canada) Inc. has named five adjusters as leaders within the company’s global technical services (GTS) division. Paul Hancock [8], national director of GTS, called each of the new leaders “experts in their fields, knowledgeable about industry trends, competitive practices and the needs of their clients.” In her role as environmental leader, Lori Festarini will work with other adjusters and clients to assist with environmental losses. Festarini has 21 years of experience in environmental consulting and geoscience, which includes managing numerous Phase II site assessments and remediation projects at residential, commercial and industrial properties in Ontario. The other GTS leaders are: Bohdan (Bob) Krywiak (commercial property), a chartered insurance professional and certified fire and explosion investigator will handle major property, boiler and machinery losses; Lorne Montgomery (commercial property) will deal with

10 industrial property, boiler and machinery losses and associated production losses; Brad Cox (commercial transportation) is licensed in all lines and handles commercial transportation losses, including truck, rail and cargo claims, and physical damage to rolling stock and heavy equipment; Neil Gibson (media, entertainment and contingency leader) has concentrated on developing expertise in entertainmentand contingency-related losses, including motion picture and television production, non-appearance, music, photography, theatrical, prize indemnity and overredemption losses.

Western Financial Group, a subsidiary of Desjardins Group, has completed its first acquisition in Victoria, British Columbia with the purchase of Hodges & Company Insurance Services Ltd. Hodges & Company, a full service insurance broker specializing in the commercial insurance marketplace, will operate under Western’s banner. “By joining Western’s expansive network, with its wider variety

of insurers, insurance products and financial services, we will build the best possible client relationships and provide our customers with great insurance at more competitive premiums,” says Steve Hodges, owner and operator of Hodges & Company. Adds Western president and CEO Scott Tannas: “As we enter the B.C. capital for the first time, we look forward to offering Steve's customers more services at competitive prices.”

A familiar face, Jeff Purdy [10], will be returning to Canada, thanks to Applied Systems Inc.’s recent acquisition of Compu-Quote Inc., a Canadian provider of comparative insurance rating solutions (please see Page 8 for details). The two companies will be integrated into one unit under the name Applied Systems Canada. Purdy, who once ran Applied Systems’ Canadian business prior to his current position running the company’s U.S. sales force, will be returning to Canada as Applied System Canada’s general manager. “He will run Applied Systems Canada for us, which is the combination of Compu-Quote and Applied Systems Canada,” Applied Systems CEO Reid French confirmed in an interview.

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June 2012 Canadian Underwriter

GALLERY GALLERY

H&AForensic ForensicAccounting Accounting H&A held its Annual Accident held its Annual Accident BenefitsConference Conferenceatat Benefits TheBoulevard BoulevardClub Clubon on The Mar.29. 29.Highlights Highlightsofofthe the Mar. eventincluded includedaamock mock event trialconducted conductedby byKadey Kadey trial Schultz of Hughes Amys Schultz of Hughes Amys LLP. The event demonLLP. The event demonstratedthe thevarying varying strated perspectivesofofclaimants, claimants, perspectives adjusters,expert expertwitnesses witnesses adjusters, andlawyers. lawyers.The Thekeynote keynote and luncheonspeaker speakerwas was luncheon Phillippa G. Samworth, Phillippa G. Samworth, partneratatDutton DuttonBrock Brock aapartner LLP and who practices LLP and who practices exclusivelyinininsurance insurance exclusively defence. defence.

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CanadianUnderwriter UnderwriterJune June2012 2012 68 Canadian 68

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Crawford & Company (Canada) offered Canadian delegates at the RIMS (Risk and Insurance Management Society) Philadelphia Conference and Exhibition a little taste history on Apr. 14. Located within the First Pennsylvania Bank building in Center City Philadelphia, Del Friscoâ&#x20AC;&#x2122;s Double Eagle Steakhouse provided the backdrop for guests to mingle and sample drinks and hors dâ&#x20AC;&#x2122;ouvres before entering the giant Vault Room for a private dining experience.

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Risk professionals from around the world came to Philadelphia for the 2012 Risk and Insurance Management Society (RIMS) Annual Conference and Exhibition on Apr.15-18. The Opening Night Reception was held at the Philadelphia Please Touch Museum. Delegates gathered to celebrate the 50th anniversary of the conference. During the General Session, Oakland As general manager Billy Bean, the inspiration for Michael Lewis’s best-selling book Moneyball, shared strategic insights on the use of statistics in baseball in his keynote address on Apr. 16. At the

Canadian Underwriter June 2012

RIMS Award Luncheon on the same day, RIMS recognized chapters that increased their memberships in 2011. The Canadian 'SuperStar Chapters' — those that achieved a 9% increase in membership or more — included: British Columbia (almost 20% increase) and Northern Alberta (14.5% increase). 'Star Chapters' — those that increased their membership between 6% and 9% — included the Newfoundland and Labrador chapter (8.3%). Overall RIMS membership in Canada grew to 1,115 members at the end of 2011, an 8% increase over the end of 2010.

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APPOINTMENT

GALLERY See all photos from this event at www.canadianunderwriter.ca/gallery

Canadian risk management icon Marc Darby was named among the 2012 RIMS and Chartis Risk Management Hall of Fame inductees in Philadelphia. Darby’s career at Bombardier spanned almost 30 years, beginning when he joined the Valcourt office in the 1970s. He left for a short time to pursue a senior a role in property insurance underwriting and management. He later returned to Bombardier and retired in 1998 as the company’s director of risk management and insurance. In this role, he was vital in forming a multi-disciplinary risk management team to help the company’s evolve from a manufacturer of

recreational vehicles to a world-leader in the aerospace and rail transit industry. Darby was the president of Quebec Risk and Insurance Management Association (QRIMA) in 197576 and the president of RIMS in 1983-84. He was named to the Business Insurance Risk Management Honor Roll in 1992 and was the winner of the RIMS Harry and Dorothy Goodell Award in 1997 for his outstanding lifetime achievements in the field of risk management. Darby remains an ambassador of RIMS and QRIMA and still attends QRIMA events and proudly supports his local RIMS Chapter in Quebec.

Dave Picot BA, FCIP

John R. Mulvihill, President and Chief Executive Officer, and the Board of Directors of The Boiler Inspection and Insurance Company of Canada are pleased to announce the promotion of Dave Picot to the position of Senior Vice President of HSB BI&I. Dave Picot joined HSB BI&I in 1997 and has held a range of executive positions including responsibility for EB underwriting, engineering and claims. His current responsibilities, in addition to those as Corporate Secretary, include HSB BI&I’s branch operations across Canada, and the overall coordination of our Commercial EB business. Dave brings 31 years experience in the property and casualty business to this position. He holds a BA from the University of Western Ontario and is a Fellow Chartered Insurance Professional. The Boiler Inspection and Insurance Company of Canada is Canada’s leading equipment breakdown insurer. HSB BI&I helps insurance partners and brokers reduce policyholder risk through a unique combination of specialty insurance, engineering-based risk management and loss control services.

June 2012 Canadian Underwriter

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Hundreds of exhibitors filled the Exhibit Hall at the RIMS 2012 Annual Conference & Exhibition in Philadelphia. Held at the Philadelphia Convention Centre, the show floor bustled with thousands of delegates from throughout North America and around the globe. The booths offered unlimited opportunities for learning, networking and sharing.

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Canadian delegates of the 2012 RIMS Conference and Exhibition in Philadelphia gathered with their U.S. and foreign friends at Canada Night on Apr. 17, sponsored by SCM Insurance Services and the Canadian Litigation Counsel. The event provided a chance to catch up and share stories to the benefit of the William H. McGannon Foundation. Larry Shumka, president and CEO of SCM, presented a donation of $10,000 to McGannon Foundation president and director Joe Restoule. ORIMS also donated $15,000 to the foundation, bringing the total amount of donations for the evening to $25,000.

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GALLERY

Women in Cancer Crusade (WICC) Ontario held its 16th annual gala dinner, ‘Power in Plaid – Celebrating the Fabric of WICC,’ on Apr. 18, 2012 at The Westin Harbour Castle Hotel in Toronto. WICC dinner co-chairs and evening emcees Michael Butler and Marian Adamson introduced WICC executive director Barb Reddick to present a $250,000 cheque from WICC to Martin Kabat, CEO of the Ontario division of the Canadian Cancer Society. Gold Flame Awards, recognizing significant contributions to WICC, went to Magnes Group and Ottawa Valley Adjusters Association. Enterprise Rent-A-Car

was the 2011 WICC 'Hall of Flame' Award inductee. Carolyn Horan, president of Informco, received the Lew Dunn Memorial Award. Horan began volunteering with WICC Ontario in 2001. She served as co-chair of the WICC Ontario Board from 2004-11. Marilyn Horrick, past dinner chair, introduced WICC Relay for Life cochairs Paul Martin and Carla Smith, who spoke about the industry's commitment to the event and 2012 Relay for Life plans and goals. Since WICC's inception in 1996, the Canadian P&C insurance industry has raised more than $5.5 million for cancer research.

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SCOR hosted a client cocktail event at the Royal Ontario Museum (ROM) on Apr. 18, 2012. The ROM is Canada’s largest museum of natural history and world cultures. The event took place in The Michael-Lee Chin Chrystal Court and Currelly Court, combining bold visions of a modern crystalline shape and old world charm architectural designs. The theme of the evening was “SCOR Holds Its Course.” Denis Kessler, chairman and CEO of SCOR SE, and Henry Klecan, president and CEO of SCOR’s operations in the Americas, provided opening remarks and welcomed more than 250 guests, including senior executives from SCOR SE, SCOR Global P&C and SCOR Global Life.

Canadian Underwriter June 2012

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ProFormance Group Inc. hosted its 2nd Annual Wine Tasting & Charity Event on Apr. 19. The evening, held at the Drake Hotel in Toronto, included a silent auction, a 50/50 draw and great raffle prizes, including a weekend getaway. Proceeds went to the Jennifer Ashleigh Children's Charity. Wine tasting and hors d'oeuvres were available throughout the evening. Jennifer Valentyne of Breakfast Television emceed the event.

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The Insurance Institute of Ontario held its 8th CIP Society Symposium, entitled ‘Power of Information: Revolution or Evolution,’ at the Toronto Board of Trade on Apr. 26. The CIP Society symposium committee welcomed more than 100 current and future leaders. The full-day program provided a platform for learning about privacy issues, social media, consumer analytics, fraud management and more. This year’s keynote speakers included Fabian Richenberger, president of Northbridge Insurance, and D. Glenn Foster, B.Sc., M.Ed., author of The Kinesic Interview Technique, and How Can I Get Through to You?

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CCR's Annual Blues Night was held at Fionn MacCool's in downtown Toronto on Apr. 25. Guests were treated to an evening of good food and a musical performance by Danny Marks, who currently holds the Toronto Blues Society’s ‘Blues with a Feeling Award’ for lifetime achievement in music and broadcast. The iconic rocker’s roots go back to the sixties. He is currently in his fifth year as the radio host of JAZZ.FM91’s Saturday night blues show, bluz.fm.

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GALLERY

Canada’s insurance community raised $245,000 for Starlight Children’s Foundation Canada at the 18th Annual Starlight Insurance Gala – Wishes in Wonderland held at the Carlu in Toronto on May 12. Starlight Children's Foundation Canada is dedicated to helping seriously ill children and their families cope with their pain, fear and isolation through entertainment, education and family activities. Starlight's programs are designed to distract children from their pain, help them better understand and manage their illnesses and connect families facing similar

challenges so that no one feels alone. This year’s donation was the largest in the gala’s history; it brings the total funds raised to date to more than $3 million. “We are amazed and inspired by the insurance community’s generosity and commitment to Starlight over the past 18 years.” says Christopher Barry, president of Starlight Children’s Foundation Canada. “Starlight would like to sincerely thank all of the sponsors, committee members and volunteers who made this incredible evening possible. We are very proud to be partnered with such a caring and dedicated industry.”

Canadian Underwriter June 2012

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Risk managers from across Ontario gathered on May 15 for the Annual General Meeting of the Ontario Chapter of the Risk and Insurance Management Society (ORIMS). The AGM was held onboard the ship Capt. Matthew Flinders, located at Pier 6 on Queenâ&#x20AC;&#x2122;s Quay in Toronto. The ship cast off for a dinner cruise around Toronto harbor. During the event, ORIMS 201112 president Roman Parzei handed over the wheel to ORIMS 201213 president David Beal.

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A record turnout of almost 200 industry representatives attended the 53rd Annual Reception of the Quarter Century Club on May 17 at the Hilton International in Toronto. The event was a roast for claims industry veteran Gary Gardner, senior vice president with Crawford & Company (Canada) Inc. His insurance career began in 1981 as an adjuster with Crawford & Company in Toronto. Gardner became Canadian sales manager before moving on to Willis (then Willis Corroon Melling) in 1994. He subsequently moved to JLT (then Jardine Insurance Brokers Group) in 1995. Gardner moved back to Crawford July 2000 and is currently Crawfordâ&#x20AC;&#x2122;s senior vice president of sales and marketing.

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Intact Financial Corporation President Louis Gagnon spoke at the Insurance Institute of Ontario’s ‘At the Forefront’ Series on May 25 in Toronto. He predicted that about 25% of the existing property and casualty insurance market share will change

hands in the next five to 10 years. “There will be a reshuffle of a quarter of the market share,” he said. “So we believe that there’s still, definitely, some possibility in Canada to do some interesting things.” Gagnon said Intact has adopted a disciplined approach to consolidation, not wanting to upset the market. Responding

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Canadian Underwriter June 2012

to a question about whether or not Intact is nearing its maximum allowable limit of market share, he said it is not the company’s “intention to control the market.” Intact announced an agreement in May to buy JEVCO Insurance Company, a provider of specialty and niche products for individuals and businesses in Canada, for $530 million. Intact acquired AXA Canada – which offered home, auto, business and life insurance through a network of 1,300 brokerages and 2,700 insurance advisors – for $2.6 billion in 2011. Since acquiring AXA, Intact has been working to integrate the business into its systems. Claims processing began last November and Gagnon said he was encouraged the company is now more than halfway through the process. “When you look back, you say, ‘Wow, that was $2 billion of volume that is changing systems.’” With the acquisition of AXA, Gagnon said Intact has created a very solid organization. “We have now, I would say, a suite of products that is difficult to replicate. And that was the objective.”

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The Property Casualty Underwriters Club (PCUC) hosted its Spring Thaw Cocktail Reception at the Metropolitan Hotel in downtown Toronto on Apr. 19. The annual event provides an opportunity for insurers, reinsurers, brokers and other members of the property and casualty insurance industry to meet and network.

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We are pleased to announce that Mike Rau has joined Reed Research as Executive Vice President, responsible for the oversight of the company's operations in Southwestern Ontario. Mike comes to Reed Research after 24 years with a leading private investigation agency, where he was Executive Vice President and Managing Partner of their Southwestern Division. You can contact Mike at 1-888-958-0903, or email him at mike.rau@reedresearch.com.

This complements our geographic footprint from Ottawa to Windsor, including Hamilton, Kitchener-Waterloo, Guelph, Cambridge and London, where we offer comprehensive surveillance and investigative services in the largest insurance market in Canada. Head Office 402-55 Eglinton Avenue East Toronto, ON M4P 1G8 info@reedresearch.com 877 854 5888 Southwestern Ontario Region 503 Fox Cove Place Waterloo, ON N2K 4A7 mike.rau@reedresearch.com 888 958 0903

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APPOINTMENT

GALLERY See all photos from this event at www.canadianunderwriter.ca/gallery

Rick Swanarchuk Darryl Levy, President & Chief Executive Officer, is pleased to announce the appointment of Rick Swanarchuk, CIP, CRM as Vice President, Sales, Marketing, & Distribution of Grain Insurance & Guarantee. With 13 years of progressive responsibilities in the Canadian Property and Casualty market, Mr. Swanarchuk will lead the National sales, marketing and distribution team with a strong emphasis on investing in broker relationships. Most recently, Mr. Swanarchuk was an Assistant Vice President at Aviva Canada. Mr. Swanarchuk will draw upon his proven abilities to develop and build an effective customer focused organization. Founded in 1920, Grain Insurance & Guarantee is a leading property and casualty insurer. Headquartered in Winnipeg, this 100% Canadian owned and operated company serves its customers in all 10 Provinces and 3 Territories and is rated “A (Excellent)” by A.M. Best. www.graininsurance.com

Canadian Underwriter June 2012

The B.C. chapter of RIMS Canada (BCRIMA) recently marked its 50th anniversary with a cocktail party on May 16 at the exclusive Headframe lounge in Teck Resources Limited’s head office in Vancouver. Guests were welcomed on the rooftop patio, where they were treated to a picture-perfect view of downtown Vancouver and the waterfront. The chapter says its milestone achievement is a testament to the dedication and passion exhibited by BCRIMA members over the last 50 years to promote risk management in British Columbia.

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