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
M AY 2 0 1 2 A Business Information Group Publication #40069240
The Future of Cars BY DAVID GAMBRILL
When the Dam Bursts BY JAMES CAMERON
Accidental Tourist BY JILL McCUTCHEON
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VOL. 79, NO. 5, MAY 2012 CANADA’S INSURANCE AND RISK MAGAZINE. PUBLISHED BY BUSINESS INFORMATION GROUP
www.canadianunderwriter.ca
COVER STORY
The Future of Car Repair
26 FEATURES
12
50
A defence lawyer and claims vice president consider how to apply risk management principles to prevent auto insurance fraud.
Mediation Backlog
Travel Insurance
22 Fighting Fraud
Are insurers prepared to execute measures proposed by Ontario to reduce the province’s estimated backlog of 35,000 mediation cases?
Licensing requirements for travel insurance are devilishly complex, varying across insurance classes, delivery channels and regulatory jurisdiction.
Analytics can make fraud prevention efforts especially effective at two key points — underwriting and claims intake.
BY JIM CAMERON
BY JILL McCUTCHEON
54
BY RICK HOEHNE AND CHRISTINE HAEBERLIN
38 Duty to Disclose Sound business decisions do not always bode well for client relations. When they don’t, is the broker duty-bound to tell the client? BY THE CIP SOCIETY
Vehicle Safety Systems
People Power
42 Seismicity Research
Insurers should become aware of how accident avoidance technology might affect their business in the future.
Attracting and retaining highly skilled and motivated employees gives companies a competitive advantage during times of lean underwriting margins.
The Canadian Seismic Research Network (CSRN) details its current research projects with the overall goal being to reduce urban seismic risk in major cities across Canada.
BY PETER MORRIS
BY DENNIS MITCHELL
BY GREG HORN
BY DAVID GAMBRILL
16 Auto Fraud Prevention 46 Pushing the Limits
BY CHRIS RAIN AND KADEY B.J. SCHULTZ
20
Advanced vehicle technology, mainly associated with safety features, has developed to the point that vehicles may soon be driving themselves. How might this affect auto claims in the future? And how will this prospect affect the relationships between insurance companies and car collision repair centres?
Does an insurer have a duty to a third party to finish an environmental clean-up even in cases when the policy limits have been exhausted? BY MICHAEL TEITELBAUM AND WILLIAM WEST
52 CIP Designation The P&C insurance industry should insist that its employees, both current and prospective, obtain a CIP designation. BY CLINTON D’SOUZA
58 Building Dialogue Successful restoration contractors are good communicators who ask all of the right questions, convey the answers faithfully and make efficient, cost-effective recommendations. BY DAVID SHEPPARD
May 2012 Canadian Underwriter
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VOL. 79, NO. 5, MAY 2012
PROFILE
Senior Editor David Gambrill david@canadianunderwriter.ca (416) 510-6796 Editor Angela Stelmakowich astelmakowich@canadianunderwriter.ca (416) 510-6793
10 Leading the Way Marilyn McLaren of Manitoba Public Insurance (MPI) was named among Canada’s 100 most powerful women by The Women’s Executive Network (WXN). BY ANGELA STELMAKOWICH
SPECIAL FOCUS
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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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EDITORIAL
Theatre of the Absurd
The mandate of Ontario’s new select committee should be much more focused. Members should zero in on aspects of auto insurance that haven’t already been discussed ad nauseum. David Gambrill, Editor david@canadianunderwriter.ca
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Canadian Underwriter May 2012
We witnessed something akin to Theatre of the Absurd in April long-awaited revamp of Ontario’s auto insurance product. At roughly the same time executives at the Insurance Bureau of Canada (IBC) were urging the provincial government to complete unfinished portions of the 2010 auto insurance reforms, politicians at Queen’s Park were establishing a new, select committee that will effectively beat a dead horse. Remarkably, the broad mandate of the new select committee is to hold public hearings and propose recommendations on aspects of Ontario’s auto insurance system that have already been exhaustively reviewed — including a new catastrophic impairment definition (already on the government’s priority list), the adequacy of the $3,500 cap on minor injuries (already part of a government study on claims costs) and the impact of auto insurance fraud (the mandate of a government task force that has already released an interim report). Most people in the Canadian property and casualty insurance business, especially those outside Ontario, probably wish the province would simply move forward with reforming its auto insurance product and be done
with it. Whether inside or outside Ontario borders, though, everyone keeps talking about it, perhaps because this line of business represents a quarter of all P&C premium collected in Canada. So it’s important to get it right. That said, there has been too much talking about the product already. It has now been three years since the Financial Services Commission of Ontario (FSCO), which regulates the accident benefits portion of the auto product, first submitted its report to Ontario finance minister Dwight Duncan summarizing its mandatory five-year review of the product. Some would argue that this five-year review took seven years, because FICO was quite deliberate and thorough in all of the public consultations leading up to this report. On the basis of the report, the government proposed far-reaching reforms to the product, including introduction of a $3,500 cap on minor injuries, reducing mandatory medical rehabilitation benefits from $100,000 to $50,000 and converting mandatory benefits like housekeeping and caregiving benefits to optional benefits. It remains to be seen whether or not the entire
reform package will actually reduce insurers’ accident benefits claims costs. Soaring costs are the main reason why insurers were taking a loss on the auto insurance product in the first place. These losses resulted in premium increases, causing the government to reform the product. The government’s 2010 reforms aren’t finished yet. Pending initiatives include — stop me if you have heard this one before — a new definition of catastrophic impairment, a new anti-auto insurance fraud task force, a closed claims study of insurers’ med-rehab costs and a new minor injury treatment protocol, among other projects. Why, then, is the government establishing a new select committee to review these same topics? At the very minimum, the mandate of the select committee should be much more focused. It should zero in on aspects of auto insurance that haven’t already been discussed and reviewed ad nauseum. The inevitable retread isn’t doing anyone in the public any favours. The time for discussing many of these items on the select committee’s agenda is over. The time to get moving and act on them is now.
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MARKETPLACE Sign-up to receive Canadian Underwriter’s free Insurance Headline News Email Alert: http://bit.ly/cuenews
Claims INSURED LOSSES FOR CATASTROPHES REACHED $1.5 BILLION LAST YEAR Canadian insurers saw total insured losses due to catastrophes soar to $1.5 billion in 2011. The total is substantially higher than the $860 million in 2010, Joel Baker, president and CEO of MSA Research Inc., told attendees at CIP Society Symposium 2012 in Toronto on Apr. 26. Catastrophes in Canada numbered seven in 2011, up from five in year-over-year comparisons. In 2010, 88,250 claims produced an estimated insurance payment of $815 million while 99,550 claims in 2011 led to an estimated $1.58 billion payment, Baker said.
SAWMILL EXPLOSION IN B.C. HITS BELEAGUERED INDUSTRY An explosion and fire at the Lakeland Mills sawmill in Prince George, B.C. on Apr. 23 was the second such incident in four months and will contribute to an already difficult insurance market for lumber operators in the province. The explosion killed one and injured 24 workers. No damage estimates were available at press time. The blast was similar to one that claimed the lives of two people and gutted a sawmill in Burns Lake, B.C. in January. These incidents will bring more challenges to a sector already hit hard by fire losses, reduced insurance capacity
8 Canadian Underwriter May 2012
and higher rates. The sawmill and wood product manufacturing industry has a combined ratio of 150% and has already seen two major insurers exit the business — ACE INA in April 2011 and Lumberman’s Underwriting Alliance (LUA) in November 2011, reports to Larry Grant, vice president of the forest practice division at Hub International. “There are only a small number of insurance companies (or markets) that have any interest in this class of business,” Grant noted in a recent issue of Logging & Sawmilling Journal.
CARELESSNESS WITH WORK DATA A MAJOR SOURCE OF DATA BREACH LIABILITY ‘Hacktivists’ randomly exposing millions of dollars worth of personal and corporate information may grab media headlines, but more common forms of data breaches relate to everyday carelessness with non-encrypted work data, according to a panel of experts discussing the topic on Apr. 11. The Chartis-sponsored event, Data Breaches, Coming to a Network Near You, was held in Toronto on Apr. 11. Panelists at the event said companies need to do a better job of creating a “climate of security” regarding the everyday handling of sensitive work information that includes employee and client records. In a presentation, Jason Straight, managing director of risk consulting company Kroll Inc., observed that companies are still too casual about dealing with their
sensitive information, unnecessarily exposing them to potential data breaches. “I cannot tell you the sheer volume of the cases that we have of laptops that have been left at a supermarket parking lot,” he said. “We had one guy, he worked for the IT department of a major company, he left a laptop in his car when he went into the supermarket. It was stolen. And of course the data was not encrypted. “You’d be amazed how many times that situation plays out.”
Risk Management RISK MANAGERS CAUTIONED TO PREPARE FOR POSSIBILITY OF HARD MARKET Risk managers should start preparing for a hard market insurance cycle that they haven’t seen for a while, a panel of senior U.S. insurance company and broker executives told delegates of the 2012 Risk and Insurance Management Society (RIMS) Annual Conference & Exhibition in Philadelphia on Apr. 17. Panelists agreed the insurance marketplace is not a “classic” hard market stage yet. Hard insurance markets typically feature higher insurance prices and a lack of capacity to underwrite risks, leading to issues of insurance availability. The current market seems to be in a transitional state, with pricing firming up in some lines and not in others, and capacity still available to
underwrite current risks. Still, based on current trends, it’s conceivable that the market could start entering a hard market phase in three years’ time, suggested John Lupica, president of ACE U.S.A. And if this turns out to be the case, then are risk managers ready? “The reality is, if the market gets more challenging over the next 12 months... no one will be budgeting more money for insurance,” said Eric Andersen, CEO of the Americas for Aon Risk Solutions. “And if the prices are going up, you’ve got to figure out: Where do you need it? Where do you like it? And where can you do without?”
Canadian Market SALES TAX ON INSURANCE WILL HIT MANITOBA CONSUMERS: IBC A new 7% retail sales tax on home, business and auto insurance is an unfair burden on Manitoba consumers, according to Insurance Bureau of Canada (IBC). The tax, introduced in the Manitoba provincial budget Apr. 17, will be added to “embedded” premium taxes and the fire tax of 4.25%, creating an effective tax rate of 11.5% on insurance premiums, IBC reports. The bureau estimates the additional tax will cost provincial residents an extra $48 million. “IBC is very disappointed by this tax decision, which will
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MARKETPLACE Sign-up to receive Canadian Underwriter’s free Insurance Headline News Email Alert: http://bit.ly/cuenews make insurance — an essential product — less affordable for consumers like homeowners, tenants and business owners,” says Lindsay Olson, IBC’s vice president for Manitoba. The sales tax will take effect July 1, 2012, but it will not apply to Manitoba Public Insurance’s Autopac policies.
Reinsurance EARTHQUAKE MODELS SHOW “BLIND SPOTS” ON TSUNAMI AND CBI LOSSES Earthquake models generally did a good job estimating the property and building damage due to the seismic shocks arising from earthquakes in 2010-2011, but “blind spots” included loss estimates related to tsunamis and contingent business interruption. Erdem Karaca, vice president and earthquake specialist at Swiss Re, assessed the performance of catastrophe models at the Insurance Bureau of Canada (IBC)’s 2012 Financial Affairs Symposium in Toronto on Apr. 18. His presentation evaluated how the models performed following earthquakes in Japan, New Zealand and Chile. In his presentation, Karaca observed that the effects of the tsunami after the March 2011 Tohoku earthquake in Japan were far worse than the damage caused by the actual ground shaking in the country’s coastal zones. He said tsunamis were a key driver of losses follow-
ing earthquakes occurring in Japan, Chile, Peru and the Pacific Northwest. Each of the earthquake events of Magnitude 9 or higher since 1900 have created a damaging tsunami, including
Chile’s Magnitude 8.8 earthquake in 2010. And yet, “none of the commercially available cat models actually model tsunami [damage],” he said. Similarly, contingent busi-
ness interruption losses arising from the Japan and Chile earthquakes were not explicitly captured in the models, and their exposure is not fully understood, Karaca added.
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PROFILE
A Lifer’s Journey Angela Stelmakowich Editor
Marilyn McLaren, president and CEO of Manitoba Public Insurance, says people need to stretch themselves because that is when accelerated growth happens. For Marilyn McLaren, happenstance has been transformed into life’s design. Having recently had a baby and looking for part-time seasonal work in 1979, McLaren thought a temporary job supervising data entry on the evening shift at Manitoba Public Insurance (MPI) would be ideal. “I had an opportunity to work evenings for three to six months of the year and spend the rest of the time home with him. It was perfect.” Part-time has long since become full-time and temporary supervision has grown into allday decision-making at the highest ranks of MPI, a nonprofit Crown Corporation that provides basic automobile coverage to Manitobans. Now president and CEO of MPI, McLaren would agree she’s a lifer — but one seemingly content with the sentence.
10 Canadian Underwriter May 2012
That sentence has not gone unnoticed. She was recognized in December 2011 as a recipient of The Women's Executive Network (WXN)’s 2011 Canada’s Most Powerful Women: Top 100 Awards.
CHALLENGING COMFORT Comfort, support and continual learning emerge as running themes in McLaren’s more than 30 years at MPI. “I think people who are really wanting to get ahead in their careers need to find the sweet spot between ‘never take on more than you can really truly succeed at,’ and ‘be willing to push yourself and take on more than you can do comfortably at the beginning,’” she says. Feeling supported can help drive performance. Too much comfort, though, threatens to undermine effectiveness. “You need to really stretch yourself, because that’s when accelerated growth happens,” she says. “You don’t want to be comfortable all the time, but you don’t really want to be out on a limb where you’re not legitimately able to succeed.” McLaren certainly succeeded at supervising evening data entry. After about six years of that, a full-time opportunity to supervise on the day shift presented itself and McLaren was quick to apply. She got the job and a few years later, secured
her first management position. McLaren progressed, eventually having a number of managers report to her, before being promoted to a directorlevel position. There, she was responsible for implementing MPI’s new online, real-time computer system used in brokers’ offices. “That gave me exposure to broker relations, broker man-
We are now saving about $30 million a year in terms of what we otherwise were spending or would be spending now in terms of auto theft. agement responsibilities, to really understand a lot about policy development and making sure that our own internal efforts to be more efficient and responsive to customers also worked well for our business partners.” As all this was under way, McLaren worked as part of the design team for the “no-fault injury compensation system that was introduced here in Manitoba in the mid-90s.” She joined the executive team — both the youngest and the only female at the time — as a vice president in 1997, and became president and CEO in 2004.
McLaren’s step-by-step climb helped her get comfortable with a full spectrum of tasks, demands and responsibilities at MPI. Still, it was not always smooth sailing when it came to balancing work and home. “There were a number of times when I just spent a ton of time at work because that’s particularly what the job required.” Fortunately, these stints were usually short term. The saving grace may have been that she “was in a marriage that really allowed each of us, when the time was required to focus more on work, to have the other pick up the slack.” Not everyone has that opportunity. “I think it’s really important for workplaces to be sensitive to that,” McLaren suggests, adding that they at least seem to be starting to embrace the concept.
PUBLIC ADVOCATE As for McLaren, she fully embraces the model of public auto insurance. Asked if she ever considers moving into the private sector, she responds that she has occasionally been called a public auto insurance zealot, “in the nicest possible way,” she adds with a laugh. “I really believe in the model. It makes perfect sense to me. I think we can do so much more for what basically every government in this country has decided is an absolute essential requirement.”
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PROFILE
MPI does not determine mandatory coverage or rates. That said, “We do have a lot of control over the service we provide, the access that we provide and I believe that by really working effectively, we can enhance the value that MPI provides to Manitobans.” McLaren points to progress in the war on auto theft. When she was hired as president in 2004, Manitoba had a huge auto theft problem, 90%
of which was in Winnipeg. Working with the provincial government, the corrections department and police agencies, MPI developed a multi-faceted plan. Part of the initiative involved funding the installation of aftermarket immobilizers into the most at-risk vehicles. These included vehicles used in Winnipeg or to commute to the city, those that had been stolen or that
someone tried to steal, and those imported into Manitoba from another jurisdiction. At one point, there were 10,000-plus vehicle thefts in Manitoba, McLaren reports. That number is forecast to drop to about 1,200 next year. “Theft has been lowered by more than 80% in Manitoba since about 2005 or 2006,” she says. “We are now saving about $30 million a year in terms of what we otherwise were spending or would be spending now in terms of auto theft,” McLaren says. She counts this progress as among the biggest accomplishments at MPI under her tenure. Manitoba has since made immobilizers mandatory and Transport Canada requires the equipment in all new vehicles manufactured for sale in Canada after Sept. 1, 2007. McLaren says she is perhaps most proud of how MPI has been redesigned as an organization to emphasize the value in strong team players. Being a woman in insurance decades ago could have been a tougher slog had it not been for the support McLaren received at MPI. She was the willing recipient of an organizational approach that afforded opportunities for growth and promotion from within. “I finished off my B.A. and actually earned my Master’s degree [both in Public Administration]
with the company’s help while I was working here,” McLaren says. She hopes to foster the same approach under her own stewardship. “I think there was a real lack of opportunity in the early years for anybody — not just women, but younger men as well,” she says. When MPI launched in 1971, many people who started there were men in their early or mid careers. “But once that turnover started to happen, there have been all kinds of opportunities,” she says. “Particularly in the public sector, there are expectations and requirements to have very transparent and objective human resource policies. You just can’t sustain an old boys’ network, even if you wanted to.” The seven-member executive now includes five women and two men. Much of how McLaren views things now and likely in future may have its genesis in “the huge role that the Y played in my teenage years,” she says. “I value leadership and I value the concept of helping people grow and develop and accomplish objectives,” she says. “It’s about a balance, but it’s always about understanding what makes people tick, what makes organizations tick. How are they different today than they were yesterday? Where do they think they’re going in the future? It’s really dynamic and it’s really exciting for me.”
May 2012 Canadian Underwriter
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Ontario mediations have reached a backlog of 35,000 cases and counting. Are insurers prepared for government measures being taken to prevent the flood? Jim Cameron
President, Cameron & Associates Insurance Consultants
Thirty-five thousand cases and counting: What happens when the dam bursts? Currently, under Ontario’s Insurance Act1, if you have a dispute with an insurer involving the payment of accident benefits under the SABS (Statutory Accident Benefits Schedule), you must file for mediation with the Dispute Resolution Practice Group (DRPG) at FSCO (Financial Services Commission Of Ontario). The mandate of FSCO’s DRPG is to provide a fair, timely, accessible and cost effective process for resolving claimant disputes over entitlement to accident benefits. This mediation must have taken place and failed before you can proceed to the courts through a lawsuit or by arbitration (again to be filed with the DRP).
12 Canadian Underwriter May 2012
The act provides that such mediation shall take place within 60 days of the filing date with FSCO. The commission has found itself facing a marked increase in the number of mediation requests filed, coupled with government-imposed staff freezes. The result is a backlog of about 35,000 mediations. The auditor general observed that in the 2010-2011 fiscal year, the last figures available show no mediations were completed within the 60 days required by law. The number of mediations pending at the end of the FSCO fiscal year rose from about 3,000 in 2007 to 27,000 in 2011, a 645% increase. The situation is only getting worse. Assuming 3,000 new cases per month, if nothing were to be done, the backlog could reach 48,000 cases by the end of this year. Ontario auditor general Jim McCarter commented on this situation in December 2011. Citing increased demands and constraints on resources, he noted it is taking between 10 and 12 months to resolve mediated disputes instead of the legislated requirement of 60 days. He also commented that FSCO does not capture information to allow it to assess the reasons why
Illustration by Dave Whamond/www.threeinabox.com
When the Dam Bursts…
the number of mediations has sharply increased by 135% over the past five years. Surprisingly, his report stated about half of all injury claims end up in mediation. In addition, 80% of all mediations originate in the Greater Toronto Area, even though only 45% of the injured auto accident victims live there.
THE VICIOUS CIRCLE
mediations electronically and conduct settlement “blitz” days for certain cases. But the backlog continued to mount. After a consultation process to determine the availability of external private sector dispute resolution services with the requisite capacity and expertise, FSCO posted a Request for Proposal (RFP) on MERX, the province’s electronic tendering system. In its Jan. 13, 2012
The report openly questioned FSCO activities in ensuring that insurance companies apply standard due diligence in adjusting or questioning benefits claims under the SABS. In response, FSCO indicated it had issued bulletins to companies to respond to the September 2010 changes by more proactively challeng-
update, FSCO announced it was seeking up to four outside firms to attack the backlog of mediations and the anticipated increased demand in arbitrations. FSCO originally expected to have contracts with qualified service providers by May 2012. At the time of writing, however, no awards of contracts have been announced and the May target da te seems unlikely.
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Assuming 3,000 new cases per month, if nothing were to be done, the mediation backlog could reach 48,000 cases by the end of this year. ing questionable claims.2 The problem is, however, that when insurers challenge payments, more disputes over payment of benefits arise — and, therefore, claimants seek mediation more often.
THE RESPONSE FSCO implemented a procedure in which the insurer and claimants could consent to fail a mediation and then move on to the next step — litigation or arbitration. This was unpopular with both claimants and insurers. Insurers pay $500 for each mediation; they felt this money might be wasted if mediation could be bypassed without any chance to talk to the claimant and discuss or offer settlement. Claimants, who are not charged for the cost of mediation but have to pay their representative, often want to mediate and obtain a settlement without going through the next very expensive steps of litigating or arbitrating. FSCO also recently implemented eCalender to help the parties schedule
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JUSTICE DELAYED In the interim, the judicial and arbitral systems have recently addressed the rights of claimants stymied by the backlog.Two court decisions and an arbitration decision found that the FSCO Dispute Resolution Group did not comply with the requirement of completing mediation within 60 days of the date of filing. In Leone and State Farm, FSCO arbitrator Jeffrey Rogers concluded on a preliminary motion that the case could proceed to arbitration without mediation. He reasoned that Nicholas Leone faced the potential of irreparable harm as a result of delay in recovery of benefits to which he is entitled. “The erosion of statutory rights to a speedy dispute resolution process can have serious consequences for both sides,” Rogers wrote. “My ruling brings little comfort to applicants as a group, since it potentially moves the backlog from mediation to arbitration.” In Cornie v. Security National, Ontario Superior Court Justice James W. Sloan heard four cases on the issue of whether or not a mediation is deemed to have failed if not heard within 60 days of filing. He concluded: “The SABS are for the benefit of injured motor vehicle victims and are often required in a timely fashion. It makes perfect sense that the legislation refers to a 60-day time limit to deal with such disputes. The insurance companies take the position that the accident victims must simply wait.... I find that submission preposterous.” In Younis v. State Farm, the insurer sought a stay of proceedings because the plaintiff had not completed a mediation as required by Section 280 (1) (2) and (8) of the Insurance Act and Section 19(1) of the DRPC. The action started more that seven months after the submission of the application for mediation. Ontario Superior Court Justice Guy DiTomaso found that the mediation had failed both on an interpretation of the Code, ss. 280(4), 280(7) of the act and s. 10 of O.Reg. 664. The arbitration and all of the decisions above are under appeal.The first of the appeals is expected to be heard sometime this summer.
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Let’s assume that claimants with mediations pending can bring either a court or an arbitration case more than 60 days after filing for mediation. Using the number of 35,000 to estimate the backlog, this means insurers would be billed $500 per mediation (deemed failed) for a total of $17.5 million. The cases would then have to either be arbitrated or tried. Arbitration cases automatically cost the insurer $3,000. If half of the above cases end up in arbitration, that would result in $52.5 million in FSCO costs, plus most likely $5,000 in counsel fees
(another $87.5 million), and these numbers completely ignore any settlement or benefit loss payment costs. If half the cases proceed to court, there would be no FSCO costs, but the defence costs per file would most likely exceed the figures noted above. Since a large number of these disputes involve sums of less than $25,000, insurers may find themselves in Small Claims Court, a scenario with which insurers have dreaded over the years due to the unpredictability of results and the significant costs of defending there. The bigger problem is how either the arbitration system or the court system, both of which are already stretched, will find the resources to deal with this huge influx of cases.
PRACTICAL PROBLEMS Should the appeals succeed, or be further appealed or delayed, huge issues still arise out of FSCO’s attack on the backlog. Some industry sources suggest a large portion of the current backlog consists mainly of cases in which treat-
ment providers are seeking the costs of their examinations, and insurers consider those costs to be exorbitant and not reasonable and necessary. It is unlikely that these disputes are going to settle at mediation. Similarly, any cases involving the new changes to “incurred expenses” definition or the Minor Injury Guideline, or other novel issues, are not going to be settled at mediation. Insurers will demand a decision by a court or arbitrator on the critical issues affecting entitlement going forward. Statistics cited in the auditor general’s report suggest that 70% of the cases have settled historically. Maintaining that rate going forward will be unrealistic. If it drops to 50%, an additional 12,000 new cases would appear annually before the courts or at arbitration starting as early as this fall. FSCO has cautioned insurers, law firms and paralegals to begin planning to ensure adequate staffing levels so that there are no scheduling delays due to unavailability of the parties. Of course, nothing in the legislation precludes an insurer from settling the case at any time. No requirement exists for a claimant filing for mediation to notify or copy the insurer; indeed, the insurer’s first official notice may be when the mediator is finally appointed. The adjuster should, however, be aware of files denied when their position led to the dispute. FSCO CEO and superintendent of financial services Philip Howell, in response to a question posed at the CIP Symposium on Apr. 26, 2012, stated that it was clear the current DRG is not working. He declined to speculate on what is next, but referred to the caption of the recent Ontario budget to “engage in a review of the auto insurance dispute resolution system.”3 One question remains: With claims counts down and staffing levels rationalizing, are insurers ready? 1 Section 281 (2) of the Insurance Act. 2 See FSCO Bulletin A 02/11, issued 22 March 2011). 3 The Ontario budget proposed regulatory amendments in this area.
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Managing Question and Answer Session
Auto Fraud A defence lawyer and vice president of claims consider how to apply risk management principles to prevent auto insurance fraud.
Chris Rain
Vice President, Claims, ARCH Insurance
Canadian Underwriter talked to Chris Rain (CR), vice president of claims at ARCH Insurance, and Kadey B.J. Schultz (KBJS), partner at Hughes Amys LLP, asking for their opinions on applying risk management principles to accident benefits claims in Ontario. The province is currently undertaking a number of measures to prevent fraudulent auto insurance benefits claims. Q: How do you apply risk management principles to accident benefit claims?
Kadey Schultz Partner, Hughes Amys LLP
CR: Our goal is to pay benefits to people who are legitimately injured, while protecting the insurer from opportunistic exaggeration of claims or outright fraud. I cannot stress enough that our goal is to rehabilitate those who are le-
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gitimately injured in a timely fashion. However, in the past, tight timelines have not allowed for a reasonable investigation before payment was due, exposing the system to exaggerated and fraudulent claims. Now we are in a position to investigate matters efficiently before confirming coverage. For instance, if we move quickly from the outset of the claim and receipt of the initial OCF-1 and OCF-3 claims forms, we are able to conduct an examination under oath (EUO) and withhold specified benefits pending the claimant’s submission to an EUO. Where appropriate, we are able to withhold all benefits if a claimant fails to submit to an EUO. We are able, if not obligated, to obtain a statutory declaration and to review original documents from purported service providers in order to ensure that the accounts and invoices which are submitted are legitimate. Q: Why are people in the process of criminal activity entitled to payment of accident benefits? KBJS: A recent priority case, Minister of Finance and Lombard Insurance Company, involved a man on a bicycle who was being pursued by mall
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security for suspected shoplifting. He collided with a parked car in the mall lot. As a result of his sustained injury, he received benefits. Police attending the scene took no action. The claimant would be excluded from entitlement to IRBs, NEBs or benefits under ss. 21, 22 or 23 of the Statutory Accident Benefits Schedule (SABS) if he was charged and convicted of a criminal offence, including criminal offences not related to the operation of a motor vehicle, by application of s. 31(d) of the SABS. A person who is convicted of a criminal offence remains entitled to medical/rehabilitation benefits, due to the idea that OHIP is otherwise responsible for payment and, therefore, the Ontario taxpayers pay. Q: What are considered “best practices” when adjusting an accident benefit claim? CR: Whether a claim is handled by an independent adjuster and overseen by an examiner (as happens with many of our AB claims at ARCH) or handled by an in-house adjuster, best practices always begin with knowing your file, knowing the claimant and paying particular attention to all the details. Strong technical skills (knowledge of SABS’s intricacies) and an ability to keep an open mind while thinking strategically — i.e. what impact could this adjusting decision have on the claim in the short and long terms both positively and negatively? — are critical to accurate, efficient and costeffective adjusting. KBJS:One challenge is the cost associated with proactively adjusting a file. On files in which the circumstances of the loss or legitimacy of the claims is suspect, an adjuster can use numerous tools to investigate the matter quickly and prevent further leakage. Unfortunately, 18 Canadian Underwriter May 2012
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AB claims are often not handled proactively: it costs money to conduct surveillance, investigate documents and corporate relationships and to conduct an examination under oath.
It is one thing for adjusters to see red flags, but it requires quite a different skill set altogether to investigate further and either confirm coverage or put together supporting materials to deny an accident benefits claim. However, without that early effort, we see many files reach tens of thousands of dollars worth of cost of assessments and insurer examinations, with benefits being paid all the while, only to end up in dispute at the Financial Services Commission of Ontario or before the courts. Often in these instances, frontend loading the file might have shut down the entire illegitimate claim.The first six months are critical. Q: On what basis can an adjuster deny a claim in which fraudulent activity has taken place? KBJS: There must be more than the presence of a few ‘red flags,’ or a feeling that it is fraud, before an insurer can deny a claim without facing bad faith consequences. This regulation is in place to pay benefits to individuals injured in an accident; it is a peace of mind contract. Claimants who have legitimately been involved in a motor vehicle accident — whether by colliding with a vehicle or by hanging upside down on a ‘stripper pole’ in a party bus (yes, there is a very broad definition of ‘accident’) — deserve to be paid benefits to which they are
entitled. That being said, a huge difference exists between an accident and a staged collision. If an adjuster can obtain evidence through reconstruction reports, forensic information and witness statements supporting the theory that the accident did not occur as described — or at all — then they are in a strong position to deny a claim. My recommendation is always to serve a Notice of Examination to submit to an examination under oath under s. 33 under these circumstances; insurers can, thus, obtain sworn evidence from claimants themselves prior to denying the claim. CR: One big challenge for adjusters is to take their impressions or intuitions of a claim and work strategically to obtain objective evidence to confirm (or refute) the veracity of said claim. It is one thing to see red flags, but it requires quite a different skill set altogether to investigate further and either confirm coverage or put together supporting materials to deny an accident benefits claim.
Q: To you both, what would you recommend to any AB adjuster or insurer? This is really about teamwork. It involves work between the adjuster, the examiner, the insurer’s agents — lawyers, private investigators, police and the Insurance Bureau of Canada — and, in the case of third-party claims, the insured, to ensure what is covered under the policy is paid. We need to protect injured people, our shareholders and the public at large, because they pay premiums based on how much we pay out. We need to make sure that payments for “harvested” claims are minimized and payments for legitimate claims are as accurate as possible.
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No Drive-by Trend
Greg Horn
Vice President, Industry Relations, Mitchell International
The property and casualty claims industry has seen its share of trends in auto collision claims throughout the years. Design fads like the tail fin craze of the 1950s, the landau tops of the 1970s and the pop-up headlights of the 1980s all challenged automobile insurance claim handlers, who were tasked with incorporating these new vehicle technologies into the claims management and settlement process. If you’ve been around long enough, you might remember many Cadillac models in the 1950s and 1960s that sported a headlight-dimming system controlled by an autotronic eye that reduced emitted light when it sensed oncoming traffic. It was revolutionary at the time, but time has since marched on. Most recently, accident avoidance technology has advanced exponentially.Typically, this includes some combination of the following: • Telematics: a broad range of technology that combines mobile/broadband telecommunications and computing. It produces raw vehicle data that is overlaid with GIS map data, such as road type and speed limits. • “Black box”Technologies: One example is on-board diagnostics parameter IDs. OBD-II PIDs codes request data from a vehicle, which is used as a diagnostic tool. • EDRs: Event data recorders, which developed out of vehicle air bag technology, have made impressive strides.
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The impact on automotive claims is and will continue to be significant. Although accident avoidance technologies hold the promise of reducing crashes, and therefore frequency of claims, the complex technologies that are now part of the modern automobile have great potential to increase claims severity. Vehicle sensors are a good example of the potential for lower claims frequency, but higher claims severity. Carmakers are making them a standard feature of all vehicles going forward. Sensors are located in the rear bumpers of a vehicle. Ideally, they are placed both to detect and prevent accidents before they happen. But they are also well-placed to receive the brunt of the damage. Sensors might help prevent fewer fender benders, but those collisions that do occur will be more expensive and complex to repair.
WHY LEARN? Estimates suggest about 70% of 2011 vehicles are equipped with these technologies, which means a lot of auto claims involving telematics will be coming your way.You might think only luxury vehicles like Volvo are equipped with these high-tech systems.True enough,Volvo has pioneered technology in the accident avoidance arena for several years now, particularly advanced driver assistance systems (ADAS) like au-
Illustration by Dave Whamond/www.threeinabox.com
The insurance industry should keep an eye on trends in accident avoidance technology, because the safety features are here to stay.
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tonomous emergency braking (AEB), which is associated with the manufacturer’s “City Safety” initiative. Since 2010, Volvo has outfitted the XC60 — also known as “the car that stops itself” — with this system, which is designed to address low speed, front-into-rear accidents like tailgating that commonly occur on our roads. AEBs use a group of sensors — radar, lidar (light detection and ranging) or camera-based — to monitor the road ahead and identify possible collisions. AEBs play a major role in our tech-saturated society, because they can provide some relief to today’s drowsy or distracted drivers who are tempted to text and tweet via their smartphones while driving. If a situation is beyond the driver’s control or the driver submits to digital temptation, the system will sense a potential collision. Some systems will first emit a verbal, visual or haptic warning. (A haptic warning describes when the system’s sensor detects a collision is imminent and issues both audio and visual warnings to the driver.) If the driver does not respond to the warnings, the systems will automatically apply the brakes in an attempt to prevent the collision. In some instances, the system can completely prevent a collision, even at high speeds. IT can also help reduce accident frequency in situations in which speeds are excessive. Next generation systems in the works will even be able to detect pedestrians and animals and help prevent these collisions as well.
WHO SAYS? The Highway Data Loss Institute (HDLI) and Thatcham, the leading authority in collision repair research for European and Asian vehicle nameplates, believe in the proven ability of AEBs to reduce accident frequency.Thatcham estimates AEBs could prevent a staggering amount of claims for injury and damage (approximately 800,000). HDLI examined AEB effectiveness by conducting its own insurance claims study of Volvo’s X360, which found that the midsize SUVs equipped with City Safety are less likely to be involved in low-speed crashes
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compared to vehicles without this system. Additionally, study results show property damage liability coverage claims were filed 27% less often for the X360 than for other midsize luxury SUVs. HDLI plans to conduct more of these studies as original equipment manufacturers (OEMs) increasingly adopt these systems across all segments, not just luxury vehicles. Although Volvo is known to be a leader in this area, other carmakers outside the luxury segment — such as Honda,Toyota,Volkswagen and Ford — are also offering these systems in some capacity. Most manufacturers offer them as trim options, but Ford is making this technology available to masses of blue oval drivers.
Ford’s “Active City Stop” system, which is similar to Volvo’s City Safety, is now offered as an option on the new Ford Focus — bringing AEB technology to millions of drivers. Active City Stop is just one portion of the company’s techpacked “driver assistance” option, which includes a lane departure warning, lane-keeping aid, driver alert, auto high beam, traffic sign recognition and blind spot information systems. And how do all of these systems work? In a word: sensors. Consequently, although advanced accident avoidance technologies have a great deal of potential to decrease auto claim frequency, claim severity will correspondingly rise.This is due in large part to all of the sensors involved in making these systems tick. Sensor placement also plays a large role in the claim frequency/severity dynamic: many sensors are placed in bumpers, where most collision damage occurs. The countless collision claims
resulting from common, everyday lowspeed collisions make returning a vehicle to pre-accident condition even more complex, and pricier as well.
EFFECT ON CLAIMS HANDLING No doubt telematics are changing the industry and, correspondingly, how auto claims are handled. Leveraging telematics data can potentially shorten the claims life cycle and further reduce losses. Data contained in black box technologies can potentially offer insight into driving behavior, thus creating a better match between auto insurance policy risk and pricing. In the meantime, on the front lines of claims handling, claims professionals must become familiar with how advanced accident technologies can change the claims frequency/severity dynamic. Unfamiliarity with the new inner workings of vehicles is a risk. It could result in a lack of awareness among claims handlers about the real cost of time and labor needed to return policyholder’s vehicle to pre-accident condition. Accident avoidance systems are expensive to repair. The rear brake light could be perceived as the first example of accident avoidance technology. A rear tail lamp/brake lamp assembly is made up of perhaps an average of $210 in new parts and costs about $60 to replace.Today’s telematics systems, such as AEBs and other accident avoidance systems, can cost upwards of $2,200.
WHERE CLAIMS HANDLERS CAN TURN Collision repairers take full advantage of educational opportunities, including online classes that can be scheduled at suitable times or attended during down time. Many insurance companies offer the same options for collision claims handling personnel. Companies also take the time to make telematics part of their industry updates to employees. Other resources include schools and associations that offer claims-focused courses and seminars. Believe it or not, blogs and social media sites also have telematics content that you can check out on your smartphone — of course, not while you are driving, right?
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Smart Way P
Fighting Fraud the Rick Hoehne
Entity and predictive analytics can make fraud prevention especially effective at two key points — underwriting and claims intake.
Christine Haeberlin
At first, it looks like any other auto accident at a busy intersection, with the total insurance payout amounting to thousands of dollars. Later, both cars are found to be part of a carefully staged collision orchestrated by players known to have engaged in insurance fraud. But recovering the money will not be easy. In the war against fraud, the criminals are winning. Fraudulent acts against insurance companies are on the rise, and most go undetected. Fraud accounts for as much as 10% of losses incurred by insurance companies. It takes many forms. For example, an organized crime ring may take advantage of no-fault clauses in policies, or a distressed property owner may see no other way to pay off his or her loan. For too long, the insurance industry has accepted fraud as a cost of doing business. Historically, pinpointing claim fraud required a significant amount of staff hours that could not be justified based on the returns. However, with combined ratios climbing well above 100%, operational costs already cut to the bone
Global Insurance Industry Leader, Business Analytics and Optimization, IBM
Business Development Executive, Insurance Financial Services and Insurance, IBM
22 Canadian Underwriter May 2012
and 0% interest rates all but eliminating investment income, insurance carriers can no longer opt for acceptance. Fortunately advances in technology and affordability, coupled with skyrocketing combined ratios, have changed the cost equation. Now, finding fraud — and more important, preventing it — is not only feasible, but necessary. Carriers can now implement technology previously available only to deep-pocketed, crimefighting organizations such as the CIA, FBI, National Security Agency and RCMP. Indeed, more than 35% of property and casualty auto insurers name fraud detection as a top investment priority in 2012. Change is already underway. In its April 2011 budget, the Ontario government signaled its intention to arm insurers with the tools to combat fraud and excess billing. By adopting a proactive analytics approach, Manitoba Public Insurance realized almost $10 million in total fraud savings last year.
TARGETING FRAUD OVER THE LIFECYCLE Fraud prevention is especially effective at two key points: underwriting and claims intake. Fraud can be prevented if the identities, entities or behaviours of the perpetrators buying the policy can be identified. Entity analytics and predictive analytics make this possible.
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Underwriting If the named insured, vehicle or lien holder has been involved in previous claims, technology can identify which policies are being purchased for the purpose of conducting a staged accident. In real time, the script used by underwriters and intake specialists can be changed to let fraudsters know they are exposed. It may not be enough to prosecute, but might drive them to other carriers with less sophisticated means of detecting fraud. Claims Intake The same technology can confirm a person’s identity, the relationships between claimants, and the activities and names of individuals and businesses involved in the claim. Armed with insight about the individuals and intent, one could change the questions asked of risks or claimants to determine if the claim is fraudulent. If the claimant knows you suspect him or her, this may be enough to discourage the party from proceeding. If it is a legitimate risk or claim, the party will consider these questions part of the normal process.
The time has come to leverage available and affordable technology to implement a comprehensive, smarter claims fraud program. Fraudsters are very good at masking their identities from underwriters. However, technology can examine hundreds of elements across millions of records to provide real-time alerts. Similarly, predictive analytics can look at hundreds of rules and conditions in real time that might indicate fraud. To take a fictitious example, Bill Smith reports a claim. B.J. Smith was a witness in a separate, similar claim last month. John Smith was a passenger in a claim three months ago. Each has similar, but slightly different addresses and phone numbers, but the same date of birth. By examining these entities, it can be reasonably determined ‘the Smiths’ are in
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fact the same individual.The intake specialist might miss this information, but entity analytics will not. An alert is fed into a predictive engine along with other data to determine if sufficient evidence exists to challenge the person reporting the claim with a few more details. The intake specialist can determine whether this is the same ‘Bill Smith’ involved in a previous claim, or ask him if he would like to update to a single address. Organized fraudsters are very sensitive to unusual responses. They would likely drop the claim and go to easier marks rather than risk that they have been identified. These two activities alone can dramatically reduce fraud at the point of submission, before it even gets to the adjuster. Once these connections become known, the carrier might be removed from an organized fraud ring’s hit list.
ACROSS THE CLAIM EXPERIENCE A smarter, more holistic claim fraud program will not stop at the above. If the claim does reach the adjuster, tools can be attached to existing claims administration systems that assist in analyzing a wide array of data sources — both internal and external, including social media and public data — to determine if anything is out of the ordinary. These can be run in the background, thereby reducing the adjuster’s workload and providing alerts if anomalous activity is detected. Carriers should regularly churn their data to search for patterns and associations in the data. As a carrier becomes more equipped at finding fraud, it will develop a richer set of rules and known networks to identify fraud that has already been reported.This helps find additional fraud, and provides a better set of rules for searches to prevent fraud. As fraud is identified, modern visualization and investigation technology can accelerate the time it takes investigators to piece together the elements of a fraud ring. This can often happen during an afternoon, as opposed to requiring 18 months of painstaking analysis. The final element of a smarter claims fraud program is in the reporting, mon-
itoring and visualization of claim fraud data. A powerful tool is geo-spatial mapping. Here, the ratio of bodily injury insurance claims to non-bodily injury claims is established to identify where a fraud ring might be operating (claims fraud involves more soft-tissue injury claims than a carrier would see under a normal baseline). Once identified, the claims can be examined to find a network of interconnected enti-
Organized fraudsters are very sensitive to unusual responses from claims intake specialists. They would likely drop the claim and go to easier marks rather than risk that they have been identified. ties. Carriers can then establish the behaviour rules and individuals involved, alerting them to situations in which these individuals buy new policies or report new claims.
CONCLUSION In today’s challenged market, carriers can no longer accept that 10% of their incurred losses leaked via fraud are just a cost of doing business. The primary defence against fraud should no longer be limited to educating the adjusters on what to look for and staffing a special investigation unit. These activities are still needed, but they are not sufficient to reduce the significant cost of fraud. The time has come to leverage available and affordable technology to implement a comprehensive, smarter claims fraud program. Such a program would not only identify fraud, it would predict, and ultimately prevent, fraud from occurring in the first place. Having sufficient data to prosecute is not always required to prevent fraud. Sometimes just letting the perpetrators know that you are aware of them will cause them to shift their attention to lower-hanging fruit, including those carriers that do not have the same level of sophistication.
Appointment Notice RSA Travel Insurance Inc. (RSA Travel) is a top three travel insurer in Canada, providing specialized travel and health insurance plans for individuals, groups and businesses. We are pleased to announce our investment in a new regional sales structure to better serve our partners, with leadership based in Vancouver, Toronto and Montreal as part of our commitment to local delivery. The appointment of this dedicated Regional Sales leadership team ensures we have the right local talent in place to reach our ambitious growth goals. The team’s experienced sales professionals bring an in-depth understanding of the travel insurance market and will be integral in supporting RSA Travel’s goal of becoming ‘Canada’s Travel Insurer of Choice’. Sean Dalton, Senior Vice President, Distribution Sean brings more than 20 years of experience in the areas of strategic planning, sales and marketing across Canada, Ireland, UK and US. Sean has held senior positions with Bell Aliant, Microcell Telecommunications (Fido) and Diners Club International. Sean is responsible for leading the marketing, sales and distribution strategy.
Lorraine Bullock, Regional Vice President of Sales, Western Region Lorraine joined RSA Travel with extensive experience in the travel insurance industry, most recently as Senior Product Manager for Travel & Life Insurance with British Columbia Automobile Association. Her in-depth understanding of the travel insurance industry and wide range of experience are great assets for the sales team. Reporting to Lorraine is Debby Austin, Strategic Account Manager.
Andrew Munroe, Regional Vice President of Sales, Central Region With 18 years of experience in the insurance industry, Andrew’s focus is on health, travel, and stop-loss insurance, and developing cost containment strategies in close relationship with brokers, benefit consultants, MGAs, and TPAs. Reporting to Andrew are Lyle Sample, Strategic Account Manager, Individual Products, and Maryann Brabers, Strategic Account Manager, Group Products.
Richard Devito, Regional Vice President of Sales, Eastern Region Richard joined RSA Travel following several years’ experience in the group insurance industry, most recently as Vice President & General Manager for Quebec-based Premier Medical Inc. His considerable sales expertise and strong knowledge of business processes and practices within several different industries anchor his focus on the continued growth of sales in the Eastern region. Reporting to Richard is Josie Guerrera, Strategic Account Manager.
Anne Belleau, Strategic Account Manager Anne joined the company in January of 2011, after a career spanning more than 18 years as a pharmaceutical sales representative. Anne leads the relationship of a number of strategic partners where she is working to develop and grow long-term relationships and ensuring success through a wide range of sales and marketing activities.
About RSA RSA Canada includes Roins Financial Services Limited, Royal & Sun Alliance Insurance Company of Canada, Quebec Assurance Company, Johnson Inc., GCAN Insurance Company, Western Assurance Company, Ascentus Insurance Ltd., Canadian Northern Shield Insurance Company, RSA Travel Insurance Inc./Assurance Voyage RSA inc., and is part of the RSA group of companies headed by RSA Insurance Group plc. RSA Canada employs approximately 3,700 people and is represented by a large network of brokers across the country. In 2010, the Canadian Group wrote $2.1bn in direct premiums with assets exceeding $5.8 billion. Internationally, RSA Insurance Group plc employs about 22,000 people and has the capability to write business in 130 countries and in 2010 its net written premiums were £7.5bn. RSA is a trade name of Royal & Sun Alliance Insurance Company of Canada.
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The Future of Cars Once a science fiction fantasy of decades gone by, fully autonomous, driverless cars are emerging as a distinct possibility sometime over the next 10 to 20 years. How will this influence insurance claims and underwriting trends? And how will insurers work with collision repairers to fix these new, futuristic vehicles when they break down? DAVID GAMBRILL
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omewhere in Nevada, Google is testing a car that drives itself. “Self-driving cars have the potential to significantly increase driving safety,” a Google spokesperson told Mashable.com, a news source dedicated to covering digital culture and technology. “We applaud Nevada for building a thoughtful framework to enable safe, ongoing testing of the technology and to anticipate the needs and best interests of Nevada citizens who may own vehicles with self-driving capabilities one day.” And how exactly do cars drive themselves? Simply put, the cars are equipped with a variety of advanced vehicle technologies, including sensors, radar, lidar (a rooftop-ranging system consisting of 64 lasers that paints a 360-degree picture of the car’s surroundings, accurate to 2 cm.), infrared cameras and GPS systems, to name a few. Theoretically, these systems will navigate the vehicles while human passengers sit back and enjoy the ride. The introduction of fully autonomous cars is forecast for 20 years down the road, although it is debatable whether or not the technology will actually take that long to arrive.
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COVER STORY
The Future of Cars In the meantime, semi-autonomous vehicle technology is being tested in the United Kingdom. A project called ‘SARTRE’ (Safe Road Trains for the Environment) is exploring “road trains,” in which drivers latch onto a ‘platoon’ helmed by a professional driver in a lead car. Once attached to a platoon, the following cars enter a semiautonomous control mode. The lead car directs the driving actions of the cars in the platoon, allowing the ‘motorists’ in following vehicles to do other things that would normally be prohibited for reasons of safety — think, for example, operating a phone, reading a book or watching a movie. Volvo recently completed the first successful test of the road train concept in Sweden. SARTRE suggests the new technology will be ready for introduction in Europe sometime during the next 10 years. Quite a bit of media hype has surrounded these new technologies, although autonomous cars have been predicted since the 1950s. And while it may be reassuring to think accidents will end because human error has been eliminated, anyone who uses technology is well aware that it can fail. And when it does, there will be several questions for the insurance industry. How will insurance companies insure cars without drivers? Will the new technologies be complicated to repair, thus driving up claims costs and consequently, insurance premiums? And how will the introduction of truly advanced vehicle technologies affect the relationships of insurers with their partners in the collision repair industry?
EVOLUTION OR REVOLUTION? Sources contacted for this story note that autonomous vehicle technology is still a long way down the road. Therefore, insurers and collision repair centres have some time to prepare. Many observe that autonomous technology borrows largely on the types of accident avoidance technologies that are becoming standard in some vehicles today. These include, for example, air bags, wheel 28 Canadian Underwriter May 2012
sensors, cameras and blind spot warning systems that aid in lane changing or backing up, high-strength steels, aluminum, carbon fibre, welding and bonding techniques, batteries in hybrid cars, etc. Given the presence of these technologies already, it’s an open question whether or not Google’s cars represent a revolutionary change or an evolutionary development. “The image you
The image you have in your mind is of the latest Tom Cruise movie, in which the cars are zipping along by themselves. The Google experiment really does seem futuristic, but I think from the collision repair side, this is still an evolution. have in your mind is of the latest Tom Cruise movie, in which the cars are zipping along by themselves,” said Andrew Shepherd, director of the Automotive Industries Association of Canada, which runs I-CAR training programs for collision repair centres. “The Google experiment really does seem futuristic, but I think from the collision repair side, this is still an evolution. As high-strength steels are put in vehicles for fuel economy and safety, crash-avoidance technologies and other things, I think the Google car is only one aspect of the very rapid evolution of the collision sector.”
For Greg Horn, vice president of industry relations at Mitchell International, a provider of property and casualty claims technology solutions, the key shift revolves around the decreasing amount of control human beings will have over the driving process. Already, he notes, advanced vehicle technology is warning drivers when they need to take evasive action to avoid a collision. “In some cases, these are warning systems and not autonomous systems,” he says. “That is a key difference. The warning system is really that: it flashes a light on the dashboard and it may put an audio warning through the radio speakers, telling me that the driver should pay attention. It still requires interaction from the driver. There may be a delay, because the radio is not very loud, for example, or the person is distracted by texting. The autonomous system does the action for you. It actually steps on the brakes. In some events, it slows the car; in others, it brings it to a complete stop. There is no human interaction required.” Eliminating human error is thought to be a key element in improving driving safety. “It’s kind of exciting to think about the possibilities,” suggests Dick Luedke, a spokesman for State Farm in the United States. “We don’t pretend to know a lot about that technology and how soon it might actually be functional for a lot of us. But we do know that anything that will make the driving of vehicles safer is something about which we’re very excited.” All the same, no one believes autonomous cars will be perfect. “When you look at how quickly the technology is changing right now, insurance companies should be thinking about a strategy of how we underwrite this,” Horn says. “Is it truly, completely devoid of accidents? Probably not.”
FREQUENCY V. SEVERITY Declining frequencies How often accidents may happen with autonomous or semi-autonomous vehicles is anyone’s guess. On the plus side of the ledger, some express confidence
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COVER STORY
The Future of Cars that advanced vehicle technology will reduce the frequency of collisions. “Sensors in fenders certainly make replacement of the fender more costly, but at the same time, presumably it’s inhibiting a lot of accidents from occurring,” says Luedke. “I have no idea what the trade-off is there, whether it’s positive or negative, but we do know that auto manufacturers’ technology has reduced the frequency of auto insurance claims and that’s a good thing.” Horn agrees, citing a recent study of Volvo’s City Safety Technology. Volvos equipped with City Safety can monitor vehicles in front using a laser sensor built into the windscreen at the height of the rearview mirror. Between 2 mph and 19 mph, the car automatically brakes if the driver does not respond in time when the car in front slows down or stops, or if the driver is driving too fast towards a stationary object. A newly published analysis from the Highway Loss Data Institute and the Insurance Institute for Highway Safety indicates that Volvo XC60s, which use the City Safety Technology, get into fewer low-speed crashes than comparable vehicles. Collision claim frequencies for the XC60 were found to be 22% lower than for all other midsize luxury SUVs. Claim frequencies for injuries involving the XC60 were also filed about half as often compared to all other midsize luxury SUVs.
Increasing severity A reduced number of crashes, however, may be offset by the expense required to repair the new vehicle technologies. “Depending on the severity of the accident, those forward-looking radar units or scanners that really are the integral part of the accident avoidance technology are extremely expensive,” says Horn. “They are like buying two more air bags, for example. That’s about a $1,200 hit if a radar unit is damaged. That’s just for the unit, not re-calibrating it or installing it. Is it enough to offset the frequency? I wonder. What we are going to see is, you will have a lower frequency, but you will have a higher repair cost.” 30 Canadian Underwriter May 2012
From the collision repair perspective, the new technology makes repairs more complicated, time-consuming and costly, reports Terry Bradimore, president of C.K. Collision Centre (Oshawa) Inc. Bradimore gives one example of how car manufacturers are putting air pressure sensors in tires now, a way to help meet regulated fuel economy targets “This is all good, until it goes to the bodyshop,” he says. “The car comes into the shop. We take the wheel off to do the repair, put the tire down on the ground, and maybe it dropped on the side on the ground. We put the tire back on, and now we have a wheel centre that doesn’t respond to
When you look at how quickly the technology is changing right now, insurance companies should be thinking about a strategy of how we underwrite this. Is it truly, completely devoid of accidents? Probably not. the car,” Bradimore says. Now the sensor, which costs about $85, needs to be sent out, remounted and balanced. “You put it back on the car. ‘Oh no,’ now you have to get it programmed, so you take it to the dealer. One hundred dollars later, we’ve fixed this tire pressure valve. So now how do you charge that to the insurance company?” he asks.
Fixing a new hybrid car provides yet another example of how much all this new technology can cost. “In the hybrid vehicles, the cost of a battery for a Ford Fusion is $8,000,” observes Ken Boulton, manager of auto claims programs at The Dominion. “If you have to replace that as a result of an accident, it’s going to affect whether the vehicle is reparable or a total loss.” New technology is expensive. But will the cost remain high, even as it becomes more ubiquitous in the marketplace? It’s an open question, Boulton says. “A lot of these technologies are certainly initially very expensive. But like any new technology, such as laptops and iPads, they seem to come down in price as they age or as more of them come into the market.” Speaking generally, Canadian insurers have seen claims costs severity increase marginally between 2006 and 2010, although the numbers fluctuate from year to year. It’s difficult to pinpoint what’s driving these numbers. Statistics from the General Insurance Statistical Agency show the average property damage claim for Ontario private passenger vehicles averaged $4,674 over that timeframe. Claims costs were above this average in 2009 ($4,768) and in 2010 ($4,921). In Alberta, the average property damage cost per claim for private passenger vehicles between 2006 and 2010 was $4,590. Severity figures reached the $5,093 mark in 2010. The numbers fluctuated in Atlantic Canada, where the four-year average was $4,403 per claim and the 2010 cost was $4,647. It’s almost impossible to say whether these claims severity trends correlate with the introduction of advanced vehicle technology, the Insurance Bureau of Canada (IBC) notes. The above figures do not include hybrid vehicles, for example. And the percentage of existing new technology vehicles is so small that these vehicles may not be influencing the numbers at all. Many other factors can influence the severity of claims costs. “The challenge is that it’s often difficult to measure what caused the change,” Boulton says.
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COVER STORY
The Future of Cars “Was it just the mild winter we had this year that had both the frequency and the severity down? Or was it actually the technology itself?”
UNDERWRITING NEW TECHNOLOGY Insurers note that they can’t underwrite cars that don’t exist. “This technology is still in the very early stages and a lot of it is just being tested now, so we aren’t seeing these vehicles yet,” says Neal Muschett, national leader of product development in personal insurance at RSA Canada. “We will definitely be looking to get guidance from the VICC [Vehicle Information Centre of Canada] on how to rate these vehicles. Many of the considerations we look at now in terms of underwriting would still be relevant for these new vehicles, such as the value of the car, driver age, safety mechanisms and theft rates.” Currently, insurers are using the Canadian Loss Experience Automobile Rating (CLEAR) system to assess the likelihood that any given make, model and model year of car will be involved in a claim — and what that claim is likely to cost. As IBC puts it: “Simply put, every model of car and light truck for every model-year is grouped according to assessed risk — expected claims frequency and cost, and the likelihood the vehicle will be stolen.” Data to CLEAR is provided by the IBC, le Groupement des assureurs automobiles, the Insurance Corporation of British Columbia, Manitoba Public Insurance Corporation, Saskatchewan Government Insurance, and Société de l’assurance automobile du Québec. Horn said his understanding, based on discussions with people at Google, is that Google’s autonomous vehicle technology can be retrofitted to existing vehicles. That means data on existing cars would remain relevant when underwriting autonomous vehicles. “People don’t have to think: ‘Gee I really love my Prius, but I have to trade it in if I want this technology,’” Horn says of the Google technology. “This basically says, ‘I’ve got to go out and spend the extra $1,000, $2,000 or what have you, to get this technology retrofitted.’” 32 Canadian Underwriter May 2012
As advanced vehicle technology filters into the market, more collision data becomes available. This, in turn, bolsters insurers’ confidence when it comes to things like underwriting autonomous cars. “In order to get enough data to make some determinations about what
Sensors in fenders certainly make replacement of the fender more costly, but at the same time, presumably it’s inhibiting a lot of accidents from occurring. I have no idea what the trade-off is there, whether it’s positive or negative, but we do know that auto manufacturers’ technology has reduced the frequency of auto insurance claims and that’s a good thing. their tendency is for collisions claims and what the liability implications are, it takes a year’s worth of data or so,” says Luedke. “Before that, we treat a car neutrally. When the folks at Honda made the Accord, they made some design changes and implemented a safety
device. We already have all kinds of data on the Honda Accord and the various types of Honda Accords, so we use the rating that we have until we have reason to change it.” Autonomous cars also present some intriguing issues in determining liability. “What happens in the instance of a computer malfunction?” Horn says. “We have all had our computers and PCs crash on us. What happens if that happens on the road, unexpectedly? The interesting thing is: where is the liability? Who do I go after to make myself whole? Is it the manufacturer? Google, for example? Or is it the folks who installed it that are potentially at fault? Or is it the carmaker that had some kind of faulty wiring pack? It opens up a whole new idea: ‘Where do I go to subrogate?’”
REPAIRING THE NEW CARS Beyond the influence on accidents, underwriting and liability, advanced vehicle technology raises interesting issues regarding the relationships between insurers and their partners in the collision repair industry. Some have openly questioned how the technology will affect the relationships between insurance companies and collision repair centres participating in the insurance companies’ direct repair programs (DRPs).
Conflicting parts standards Under a DRP, an insurance company solicits repair shops, promising to send these shops customers in exchange for the shop’s contractual commitment to discounted repairs using parts and repair guidelines established by the insurance company. In an effort to keep claims costs down, insurers often ask that collision repair centres in their DRPs repair vehicles using more cost-effective aftermarket auto parts, manufactured by companies other than the Original Equipment Manufacturers (OEMs). But OEMs often insist that collision repairers use the manufacturer’s original parts when repairing vehicles with advanced vehicle technology. Whose
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COVER STORY
The Future of Cars repair guidelines and standards will carry the day in a conflict between the insurers’ guidelines and OEM standards? “There’s a bit of a storm brewing,” says Tom Bissonnette, chairman of the Canadian Collision Industry Forum (CCIF). “Whose decision is final on repair processes? Is it the OEM that has the final say? Are collision repairers going to do what the OEM tells us to do? Or are we going to do what the insurance company wants us to do?” “I’ll tell you who wins,” replies Bradimore, who recounts a recent conversation he had with the representative of one OEM. “He was telling me: ‘For me to do business with you, this is how you need to repair the cars.’ “I said, ‘I’m sorry, but if you sincerely want me to do that, we won’t be doing business.’ “He said, ‘What? What do you mean?’ “I said: ‘I can do an awful lot more work with an insurance company than I can with you. Not that I don’t want your business, but I cannot put brand new parts on every one of your cars, because that goes against my agreement with the insurance company.’” However, as an increasing number of OEMs introduce advanced new technology into their vehicles, collision repair centres may not have the same option in the future to turn down the business. For example, if an individual OEM accounts for only 5% of a collision repairer’s business, it is relatively easy for the repairer to forego the business rather than jeopardize its relationship with an insurer that accounts for the remaining 95% of its business. But what happens when more OEMs begin to enforce their repair part standards as they start to introduce new technologies in their vehicles? asks CCIF administrator Michael Bryan. “What happens when it’s Honda, and then it’s Toyota, and then it’s Ford, and then it’s somebody else?” Bryan says. “Your opportunities [as a collision centre] are narrowing because you have chosen to exclude some brands from your business.” 34 Canadian Underwriter May 2012
Investment and Training In order to repair new technologies, collision repair centres have to invest in new technologies to make the repairs. One investment might be in information technology, notes Bissonnette.
The education and the amount of reading collision repair technicians have to do in a day, and the amount of electronics they deal with — not only in the car, but in their repair equipment — is really quite astonishing. Insurers have a vested interest in the skill capacity of the shops. “We’ve noticed in the past few years that the repairs are getting quite a bit more complex. We are finding ourselves having to buy subscriptions to different web-based systems like All-Data, or sometimes we have to go right to the dealers, to the manufacturer, and pay a fee to get information.”. Other investments come in the form of new equipment. Bissonnette says his company bought a new spot welder for about $25,000 that determines the kind
and thickness of the metal to be welded. The new machine takes technicians right out of the loop, he notes, freeing them to do other work. Similarly, Bradimore says his company bought new frame equipment years ago. In doing so, he may have unintentionally penalized his own company, he said, because the insurer factored the shorter time estimates into its payments for the collision repairer’s labour. In addition to investing in equipment, collision repairers also invest heavily in training, so that their employees can make safe repairs. “One aspect that comes closest to my heart is the amount of training required in the shops right now,” says Shepherd. “Up until the advent of the unibody [frame construction] 25 or 30 years ago, this was really a craft operation. You learned it in your father’s garage and the bodywork and the refinishing work really had an artistic, craft element to it. Frame welding was really chaining it up to a tree and eye-balling it as it straightened. “The difference between that 30 years ago and now is — well, they are called ‘technicians’ for a reason. The education and the amount of reading they have to do in a day and the amount of electronics they deal with — not only in the car, but in their repair equipment — is really quite astonishing. They [insurers] have a vested interest in the skill capacity of the shops.” And yet, who is responsible for supporting this training and investment? The insurers or the collision repairers? “Basically, when we reinvest in our company, insurers just say it’s a cost of doing business when we talk to them,” says Bradimore. “I’ve been frustrated over the years because I would reinvest, reinvest, reinvest and other shops wouldn’t, and they were still on the insurance [DRP] list, making the same labour rate that we were making. What I decided in my own mind, quite frankly, is to do what I needed to do to fix cars properly. And if the insurance company chooses to do business with the gentleman down the street that doesn’t do it, there’s not much I can do about that.”
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COVER STORY
The Future of Cars
Should the insurer have some sort of responsibility, not just through its DRP choices, but perhaps by narrowing these choices a bit, to really work with the shops that are investing and equipping themselves to be able to do a good job on behalf of that insurance company? Like other collision repairers, Bryan wonders if insurers can use their DRP lists in a manner that supports collision repairers that do make substantial investments in training and equipment. “Should the insurer have some sort of responsibility, not just through its DRP choices, but perhaps by narrowing these choices a bit, to really work with the shops that are investing and equipping themselves to be able to do a good job on behalf of that insurance company?” Boulton notes The Dominion does offer some compensation for collision repair shops in its direct repair program if they are I-Car Gold Class. And The Dominion is responsible for making sure its own inspectors are at an I-Car Platinum level. But ultimately 36 Canadian Underwriter May 2012
collision repair centres must bear some responsibility for their own training and investment, he says. Certainly it would be nice if insurers could compensate collision repair centres for the financial burden required to repair increasingly advanced vehicle technology, but collision repairers make up only one portion of a larger claims universe. Ultimately, the issue comes down to fairness for all of an insurer’s claims vendors, Boulton says. “It would be nice for us to be able to support [collision repairers] for the entire amount [of training], but I have to look at it and say: ‘Am I required to do the same thing for contractors, doctors, lawyers, paramedics, therapists and all of the other vendors that we support?’”
Despite these and other issues still open for discussion, Boulton expresses confidence the collision repair industry is well-suited to adapt to the upcoming changes in technology. “When unibody construction came in the 80s, people were saying: ‘The sky is falling, the sky is falling,’” he says. “And to give repairers credit, they are very adaptable. The sky hasn’t fallen, and they have found ways to correct or repair unibody construction. As another example, they’ve adapted well to water-based paints. In fact, quite often I think it’s the repair facility and not the OEM that actually finds the solution to some of these problems. I have every confidence that progressive collision repair facilities will continue to do the same.”
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The CIP Society Ethics Series
The CIP Society Insurance Institute of Canada
The CIP Society represents more than 16,000 graduates of the Insurance Institute of Canada’s Fellow Chartered Insurance Professional (FCIP) and Chartered Insurance Professional (CIP) Programs. The CIP Society, through articles such as this, is working to bring ethical issues to the forefront and provide learning opportunities that enhance the professional ethics of all insurance professionals.
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Duty to Disclose Sound business decisions may not always bode well for client relations, and when they don’t, is the broker duty-bound to tell the client? Business decisions that seem sound may not always be good for client relations. Here is one such scenario: A longstanding broker with an excellent track record is in the midst of a business rationalization exercise, looking for efficiencies and an overall competitive edge. He determines he should trim his insurance markets from four companies to three.The nature of his client base suggests that retaining three smaller insurers would allow him to offer a good product mix. The clients currently with the large, dropped company would then be rolled into one of the three remaining companies. The smaller firms could meet the needs of each of these new clients. In this scenario, one large commercial client represents an important piece of business for the
38 Canadian Underwriter May 2012
broker. The client met with the broker a few years earlier when transferring his policy to the brokerage. At that time, he suggested he was happy with the advice and service he received. But one condition existed to earn his business, and this condition wasn’t covered by any of the questions on the application form. Specifically, his board of directors insisted the company’s insurance carrier be of a certain size, bond rating and profitability. Before the rationalization process, the brokerage always met this condition. But now that the broker was rationalizing his markets, none of the remaining three companies met all of these requirements.The broker began pondering his next move. Is it necessary for the broker to mention this fact to the client? It is not on the application form or any of the paperwork. In fact, this condition is not recorded anywhere except in the broker’s memory. Should the client not investigate this matter on his own in due course? What is the broker’s responsibility?
FIRST WORD... Industry professionals commenting on this scenario all stipulated, albeit paraphrasing, the situation is covered in the Insurance Institute of Canada’s Code of Ethics, which governs Chartered
Insurance Professionals (CIPs and FCIPs). The code states: • Institute graduates shall not wilfully misrepresent or conceal material fact in insurance and risk management business dealings in violation of any duty or obligation. • Institute graduates shall use due diligence to ascertain the needs of their client or principal and shall not undertake any assignment if it is apparent that it cannot be performed by them in a proper and professional manner. • Institute graduates shall not fail to use their full knowledge and ability to perform their duties to their client or principal.
COMMUNICATE AND INFORM Roberta Zurrer, CIP, CCIB Commercial Lines Manager, McDougall Insurance & Financial It is definitely necessary for the broker to discuss the change in markets to the client.This particular client is responsi-
ENSURE FULL DISCLOSURE
The code states: Institute graduates shall not wilfully misrepresent or conceal material fact in insurance and risk management business dealings in violation of any duty or obligation. ble to his board of directors, so by moving his account to a market that does not meet the conditions outlined, the broker is not only risking letting down the client, but also the board of directors. In this situation, the broker can do his best to communicate the issue and try to retain the client. Even if the broker is forced to refer his client to another broker as a last resort, the customer is likely to respect the broker not only for his honesty, but also for his ability to take care of the customer.
Thomas Newby, CIP, CRM, CAIB Commercial Account Executive, T.G. Colley & Sons Ltd. One role of commercial insurance brokers is to provide every piece of relevant information to their clients, allowing the clients to make an informed decision. Full disclosure works both ways: brokers rely on clients to divulge details pertinent to the business and insurance, and so brokers must reciprocate as well. Whether a client bases its decision on the insurance company’s bond rating, profitability or the types of coverage or limits it offers, the client relies on the broker to be his or her trusted advisor and assist with these decisions. If the brokerage is no longer a proper fit for the client because of the change in insurance markets, the broker has a duty to inform the client and make suggestions or offer a solution. The deci-
D ECE M B E R 2 N D, 3:52 P. M .
An insurance broker, Sophia Reynolds,
THE R IGHT REL ATIONSHIP MAK ES ALL OF THE DIFFERENCE
contacted CNA about an account that
I N A N I N S TA N T, SOPHIA REYNOLDS K N E W S H E CO U L D DO MORE FOR HER CLIENT
didn’t fit the standard risk profile. After Sophia went over the details with her CNA underwriter, she was happy to deliver a customized coverage package to her client — which ultimately helped her retain an important relationship. Way to put together a winning team, Sophia.
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sion cannot be made on behalf of the insured without his knowledge.
IDENTIFY MATERIAL CHANGE TO RISK Tracy Makris, CAIB, CIP President, Bryson & Associates Insurance Brokers Ltd. As insurance professionals we should understand that full disclosure is fundamental to our business and the broker’s responsibility. Professional insurance brokers separate themselves by understanding their clients’ needs and meeting their requirements. In this scenario, the client provided clear information that the size, bond rating and profitability of the market was a requirement for his business. A material change is not a one-way term; it is the broker’s ethical duty to inform and educate his client of any change of which he becomes aware. The ultimate decision on how to use that information must come from the client, not the broker, although the broker is there to provide appropriate guidance. For best practice, the broker should initiate client communication that involves, for example, changes in the status of insurers, restrictive trading areas, and coverage lines.
ENSURE APPROPRIATE CHOICE AND COVERAGE Nadine Austin, FCIP Senior Investigator, Complaints & Investigations Department, RIBO In this situation, the requirement for markets is two-fold. For obvious reasons, a brokerage has to be able to offer product comparisons, and these comparisons represent a choice for the client. The broker also has an onus on them to be candid and honest, which is a fundamental to what is considered good conduct in the industry. If the broker has any hesitation that the market he has chosen may not be able to respond 40 Canadian Underwriter May 2012
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to a catastrophic need should it arise, the broker has a duty to disclose any facts that he may have as well as the nature of the problem. The broker has an obligation to investigate the capacity of the markets and inquire further about the requirements set forth by the board of directors.With this information, he may be better able to assess the compatibility of the markets he is offering and communicate this to the client. If his markets can’t fit the bill for the client, he should disclose this to the client and look for an alternative solution. One such solution would be to set up a sub-broker situation. The broker
If the brokerage is no longer a proper fit for the client because of the change in insurance markets, the broker has a duty to inform the client and make suggestions or offer a solution. The decision cannot be made on behalf of the insured without his knowledge. won’t get all of the commission, but he may be steering away from what can ultimately end up being a very sticky situation in a claims scenario.
The broker’s knowledge of the client’s expressed interests, and that of his board of directors, is as relevant and material as what is written down on paper, or anything else noted in his computer system. It is a known fact and has to be part of the conversation. There are then a few options to discuss with the client: • If the broker can identify an MGA that can continue the insurance program with the existing insurance company, will the client accept the amended paperwork? • Does the client want to stay with the broker if the brokerage decides to change insurance carriers? • Is the client willing to discuss with his board of directors the insurance company selection criteria to see whether or not it will reconsider and be satisfied with one of the insurance companies the broker has selected? • Is the client willing to recommend any of the above options, if he so chooses, to the board? • Does the client want the broker to present his argument to the board? • If all else fails, does the client want the broker to recommend another brokerage which can then continue his insurance program with the existing insurance company? I truly believe that our part of the relationship with our clients is to be their trusted advisor — so we better live up to those words.
LAST WORD . . . ASSESS OPTIONS Ray Arndt, BA, CIP President, Lyon & Butler Insurance Brokers Ltd. If the broker has made a final decision to rationalize his markets, as suggested in the scenario, he should provide his client with any recommendation he has in regards to the change in insurance carrier. He should discuss the pros and cons of the change, and present any benefits should the client decide to stay on with one of the remaining companies.
At the end of the day, the insurance professional’s fear of losing the client should be superseded by the fear of that client having a loss for which they are not covered due to miscommunication, non-disclosure or negligence. By applying an ethical standard to business decisions and not relying merely on legal requirements or the information requested on an application, the broker will have provided a higher duty of care to his clients, his contracted companies and the industry.
TM
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Unite with friends
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Support WICC’s biggest event Celebrate survivors
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Be part of something big Motivate Have Fun Make a difference Crusade
WICC + Relay For Life = a moving experience Sign up your teams through WICC and help us reach our goal of $378,000 • The Canadian Cancer Society’s North York Relay For Life at Esther Shiner Stadium is now one of the biggest industry events in the GTA. • This year it takes place on Friday, June 22. Save the date! • RFL celebrates cancer survival and commemorates lost friends and family members from 7:00 pm -7:00 am. Walk or run round the track in a non-competitive relay.
WICC at Relay For Life For more information and to register your team(s) go to wicc.ca
Design compliments of
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Researching Seismic Risk
The Canadian Seismic Research Network (CSRN), formed with funding from the federal government, has the overall goal of reducing urban seismic risk in major cities in Canada. Professor Denis Mitchell Department of Civil Engineering and Applied Mechanics, McGill University
A significant earthquake poses the greatest potential for a natural disaster for Canada. A high percentage of the country’s urban infrastructure was constructed prior to the introduction of modern seismic provisions in the mid-1980s and, thus, a large inventory of deficient infrastructure needs to be identified and upgraded. It is essential that Canada’s deficient infrastructure be improved, especially critical urban infrastructure such as hospitals, schools and bridges.These critical facilities and structures must remain operational after a seismic event.
Figure 1 Other municipalities
Québec
Vancouver Toronto Victoria
Montreal RESEARCHING SEISMIC RISK The Canadian Seismic Research Network (CSRN) was formed with funding from the federal government (NSERC) and has the overall goal of reducing urban seismic risk in major cities in Canada. The work of the CSRN is focused on the major urban centres that dominate our national seismic risk:Vancouver,Victoria, Montréal, Ottawa, Toronto and Québec City (Please see Figure 1). The CSRN consists of 26 researchers from eight universities: University of British Columbia, Western University, University of Toronto, University of Ottawa, Carleton University, École
42 Canadian Underwriter May 2012
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Polytechnique de Montréal, McGill University and the University of Sherbrooke. Aside from producing research, the network is also training highly qualified personnel, including more than 150 Masters and PhD students carrying out research on different aspects of earthquake engineering, seismology and risk engineering. CSRN is collaborating with about 40 research partners from industry and federal, provincial and municipal government agencies. The Insti-
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process known as ‘microzonation’); and • studies of the seismic risk in cities listed above. Theme 2 involves the development of more sophisticated techniques for the evaluation of seismic vulnerability of existing structures.The vulnerability assessment techniques are being developed for steel, concrete and masonry buildings as well as for bridges.
Theme 3 involves developing innovative techniques for upgrading deficient structures to mitigate damage by improving their seismic performance capabilities.
Microzonation studies One example of a microzonation study is the preparation of the microzonation mapping of Ottawa, a joint project between the CSRN and the Geological
Figure 3
Northbridge. Your new insurance partner with a 200-year-old family tree. tute for Catastrophic Loss Reduction (ICLR) has a major role in the network activities, providing two yearly scholarships for graduate students, collaborating in the research projects and playing a key role on CSRN’s board of directors. CSRN researchers have made site visits following recent earthquakes in Haiti (Figure 2), New Zealand (Figure 3) and Chile (Please see Figure 4, on Page 45) to study several aspects of the events: the details of the ground motions; the influence of soil conditions on ground motion amplification; damage to structures, including buildings and bridges; and the deficiencies in current and past codes of practice.
GOALS OF THE CSRN Three interrelated research themes have been developed to achieve the goals of the network. Theme 1 involves the assessment of seismic hazard, including: • the development of probable ground motions to help evaluate the structural response of existing structures; • the subdivision of potential seismic or earthquake-prone areas into zones within key cities such as Vancouver, Victoria, Montreal and Ottawa (a
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May 2012 Canadian Underwriter
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GOLF FORE THE CURE
13th Annual
WICC Ontario Golf Tournament on July 9th, 2012 Held at the prestigious Angus Glen Golf Club For entry and sponsorship opportunities,
go to www.wicc.ca to register Design donated by
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APPOINTMENT
Survey of Canada. These maps provide valuable site-specific information for the city. Similar microzonation studies are currently being conducted for Vancouver and Montreal.
DEFICIENT STRUCTURES CSRN researchers are carrying out a number of testing programs involving simulated earthquake loading on components of structures. These experiments include the shake-table testing of a multistorey concrete shear wall, reversed cyclic loading testing of masonry walls and the testing of steel braced frames.This experimental evidence permits the development of a better understanding of the deficiencies in older structures.
Innovative retrofit techniques Experimental research is being conducted on the seismic upgrading or retrofit of existing deficient structures using innovative approaches such as the use of carbon fibre wrapping to improve the behaviour of reinforced
concrete elements. Researchers are testing the effects of using carbon fibre wrap on masonry walls (Figure 5) and concrete shear walls (Figure 6). This cost-effective retrofit technique provides a means of improving the seismic performance with minimum intervention. It is ideally suited to existing structures that must remain in use. This retrofit technique resulted in significant improvement of the reversed cyclic loading performance, including an increased strength and improved ability to undergo large deformations without failing in a brittle manner.
Developing retrofit guidelines CSRN is currently developing Guidelines for the Evaluation and Retrofit of Structures. This document will provide a unified, state-of-the-art methodology for assessing the seismic performance of existing structures. The results of CSRN’s research from the three different themes noted above will form the basis of the retrofit guidelines.
David Gambrill, Senior Editor, Canadian Underwriter magazine – Insurance Media Group, is pleased to announce the appointment of Angela Stelmakowich to the position of Editor of Canadian Underwriter magazine and The Ontario Broker magazine. An award-winning editor, Angela joins Canadian Underwriter from her previous position as Editor of OHS Canada magazine (ohscanada.com), which she has held since 2003. She leaves an amazing team and feels fortunate to join another one. Angela has been a dedicated employee of Canadian Underwriter and OHS Canada’s parent company, Business Information Group (bizinfogroup.ca), a division of Glacier Media Inc. (glaciermedia.ca), since 1989, having also served as Editor of Canadian Occupational Health & Safety News and a member of the June-WarrenNickles Energy Group (nickles.com).
Figure 4
Figure 5
Angela Stelmakowich
Figure 6
Since 1934 Canadian Underwriter magazine, Canada’s leading insurance and risk journal has provided insurance professionals with an award-winning package of articles, features, news and events. The Canadian Underwriter group of insurance industry media products has grown and developed to cover a wide range of information vehicles, both in print and online. Canadian Underwriter’s Insurance Media Group is committed to providing the most timely and relevant news, information and resources to insurance professionals from all segments of the property and casualty insurance market.
INSURANCE MEDIA GROUP www.insurancemediagroup.com May 2012 Canadian Underwriter
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the Limits
Kawartha Lakes (City) v. Gendron et al, an Ontario court decision concerning an environmental clean-up claim, is particularly interesting given its potential impact on insurers and their service providers. Simply put, does an insurer have a duty to a third-party claimant to finish an environmental clean-up in a situation in which the policy limits have been exhausted?
The court found the allegations made against Farmers, Pepper and DLS did not constitute a new cause of action and that, applying the Anns test, it was not plain and obvious that no duty of care was owed to the plaintiff, the City of Kawartha Lakes, in negligence. The Anns test establishes a duty of care of one party to another if there is a “sufficient relationship of proximity based on foreseeability” between the two parties, and consideration has been given to why there should not be a duty of care. Citing Combined Air, the court said it was too early to have a full appreciation of the evidence to find Farmers, Pepper and DLS owed no duty of care. MacDougall, however, did dismiss the claim for breach of statutory duty under the Environmental Protection Act (EPA) against the aforesaid defendants.
BACKGROUND
FACTS
The claim in Kawartha is based on an oil spill on a residential property in Ontario that migrated to an adjoining property and then into Sturgeon Lake. Ontario Superior Court Justice Barry MacDougall allowed an amendment of the statement of claim to include allegations against the homeowners’ insurer, Farmers’ Mutual, in negligence for improper clean-up. The judge dismissed the summary judgment motion to dismiss the action against Farmers, R. Ian Pepper Insurance Adjusters Inc. and D.L. Services (DLS) Inc.
The defendant, Thompson Fuels, delivered approximately 700 litres of furnace oil to the home of the defendants, Wayne and Liana Gendron (the homeowners) on Dec. 18, 2008. On the same day, Wayne Gendron determined that the oil was leaking from the furnace. He notif ied Thompson Fuels, which in turn notified the defendant, the Technical Standards and Safety Authority (TSSA).The TSSA visited the site on Dec. 22, 2008 and issued a remediation order. On Dec. 29, 2008, the homeowners reported
An Ontario court considers if an insurer has a duty to a third party to finish an environmental clean-up despite the fact that policy limits have been exhausted. Michael Teitelbaum
Partner, Hughes Amys LLP
William West Student-at-Law, Hughes Amys LLP
Hughes Amys LLP is a member of The ARC Group Canada.
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the spill to their insurer, Farmers, which in turn assigned the matter to its adjuster, Pepper. Pepper consulted the defendant, DLS, to investigate the cause of the spill and assess its remediation. DLS determined on Dec. 30, 2008 that the spill had migrated from the homeowners’ property onto adjoining property and into Sturgeon Lake. DLS then notified Ontario’s Ministry of the Environment (MOE). DLS gave a preliminary estimate that the cost of remediation would exceed the homeowners’ $1-million policy limit with Farmers. From January to June 2009, DLS was actively engaged in remedial activities both on the homeowners’ property and off site, involving various measures in and on the shoreline of Sturgeon Lake. On or about Mar. 20, 2009, DLS and Pepper notified the MOE that the homeowners’ policy limits had been exhausted. The ministry responded by issuing an order three days later for the City of Kawartha Lakes to remediate the contaminated public property. In response to the order, the city commenced an appeal before the Environmental Review Tribunal, which was subsequently dismissed.The city has sought judicial review of the tribunal’s decision in the Ontario Divisional Court, which is still outstanding. The city initiated investigative and remedial efforts on its property and retained the services of Golder Associates Ltd. on or about Mar. 29, 2009. On July 30, 2010, the city commenced this action against multiple parties, including the homeowners, Thompson, Her Majesty the Queen (MOE), the TSSA, DLS, Pepper, Farmers and the fuel tank manufacturer, Granby. Prior to completion of the exchange of documents and examinations for discovery, Farmers brought a summary judgment motion seeking an order that the city’s claim against it be dismissed. By way of a notice of cross-motion, the city moved to amend the statement of claim to include an allegation of negligence against Farmers, and to add the words “and/or cost-efficient,” so the
Does the theory advanced by the plaintiff — that is, we could have done something to keep the claim within the policy limits had we known about the need for remediation — have any merit? amended paragraph in the statement of claim would read as follows: “The defendants, Gendrons, Thompson Fuels and Les Reservoirs d'acier de Granby Inc. are strictly liable in nuisance. The Gendron defendants, the TSSA, Thompson Fuels, DLS, Ian Pepper, the MOE, Farmers Mutual and Les Reservoirs d'acier de Granby Inc. are also liable in negligence for causing the spill or failing to respond to the spill in a timely and/or cost-efficient manner causing the city to incur remediation costs.” Subsequently, DLS and Pepper also brought motions for summary judgment.
AMENDMENTS REQUESTED Technically, the plaintiff did not require the consent of the parties or leave of the court to amend its statement of claim, since the motion was brought before the close of pleadings. However, the judge decided to deal with the issues raised by the responding defendants because these issues would likely be before the court on a motion to strike out the amended pleading as disclosing no reasonable cause of action. With respect to adding the words “and/or in a cost-efficient manner,” the responding defendants’ arguments were as follows: • The addition amounts to a new cause of action and is not a clarification or a further particular of negligence; • As a new cause of action, since the plaintiff was aware of the underlying facts as of Apr. 2, 2009, more than two years before the amendment request, the proposed amendment is barred by the Limitations Act, 2002. • The proposed amendment is not tenable at law.
Upon reviewing the statement of claim, the court found that: allegedly resulting from an oil spill that migrated from the homeowners’ property onto public property, the city was required to incur costs to complete the remediation that was not completed by the remediator DLS, retained by the adjuster of the homeowners’ insurer, because the homeowners’ policy limits had been reached. Consequently, the court rejected the responding defendants’ argument that the factual matrix pleaded related only to the “delay issue” and not to the “remediation issue.” Although the respondents were not specifically named, the plaintiff did raise the allegation that if the homeowners, the TSSA and the MOE had acted differently, the cost of remediation would have been well within the homeowners’ policy limits. Adding the words “and/or in a cost-effective” manner was considered to be a further particular of negligence that allegedly caused the city to incur remediation costs. Having found this requested amendment did not assert a new cause of action, it was not necessary for the court to consider the limitation issue. With respect to the amendment adding an allegation of negligence against Farmers, the court determined the plaintiff was simply proposing an alternative theory of liability based on the same factual matrix. Therefore, the court granted the amendment and left the argument that the proposed amendment did not raise a reasonable cause of action to the summary judgment portion of the motion.
SUMMARY JUDGMENT MOTIONS The moving parties on the summary judgment motions, Farmers, Pepper and DLS (the applicants), were successful on their motion to dismiss the city’s statutory claim under Part X of the EPA, because they were not “owners of the pollutant” or “the person having control of the pollutant.” In response to the city’s negligence claims, the applicants submitted there is no recognized duty between an insurer
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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
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McLarens Canada International Loss Adjusters and Surveyors. www.mclarens.ca
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Informco Inc. Integrated Graphic Communications Specialists. www.informco.com
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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
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INSURANCE LAW
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The ARC Group Canada Inc. Your Partner in Insurance Law & Risk Management. www.thearcgroup.ca
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The court does not go so far as to say a duty exists between an insurer or its agents and a third-party claimant. However, it found it was not plain and obvious that no duty of care can be recognized in these circumstances. and a third-party claimant. Since there is no duty of care owed by the insurer’s agents to a third-party claimant, the city’s claim of negligence against each of them is not tenable at law. Moreover, if the city’s claim succeeded, the court would be extending the categories of duty of care that exist under the common law to include this type of relationship. The city argued that since the case involved multiple parties and voluminous documents, combined with the fact that the exchange of documentation had not been completed and examinations for discovery had not been held, the issue of the defendants’ negligence could not be fully appreciated at this stage. The City of Kawartha Lakes also submitted the defendants owed the city, as an adjoining property owner, a duty of care with respect to the remediation carried out on municipal property. Furthermore, the city submitted that, if the court reached the second stage of the Anns test, an analysis of “policy considerations” would be best understood in the context of the relationships among all parties that were involved and could not be fully appreciated without a complete record.
ADDITIONAL CONTEXT Apart from the issue of whether or not the insurer or its agents owe a duty of care to a third party, the court found the duty of care issue in these circumstances could arguably be considered from an additional context. For example, as a result of the MOE’s order against the homeowners, Farmers and/or Pepper retained DLS to go onto the city’s property to try and effect a remediation of the oil spill that originated on the homeowners’ property.
Given the case law presented, the court determined this matter could be considered a “novel case,” since the duty of care did not fall within an established category or within a category analogous to an established category. Accordingly, the Anns test was required. The court held the issue is not whether a duty of care will be recognized, but whether it is plain and obvious that no duty of care can be recognized. Furthermore, when dealing with policy concerns that might exclude liability, if it is not plain and obvious, the issue will be determined at trial. Upon applying the Anns test to the case at bar, the court found a sufficiently close relationship between the parties existed that carelessness on the part of the defendants might cause damage to the plaintiff. Specifically, the court found, the applicants could foresee they would create a risk of harm to the city if the remediation of the city’s property were to be handled carelessly. Turning next to proximity, the court looked at several factors: • the MOE had ordered the homeowners to remediate the public lands adjacent to the homeowners’ land; • the homeowners’ insurer had retained a remediator for that purpose; • the homeowners’ insurance policy had an off-site limit of $1 million; and • the remediator spent several weeks on the city’s property performing remediation services. Given these factors, the court concluded, a sufficient proximity existed to make it just and fair that a prima facie duty of care could be imposed on the moving parties to the city. Accordingly, the court found it was not plain and obvious that no duty of
care could be recognized in these circumstances. Furthermore, the court had no hesitation in determining that any potential policy considerations negating the duty of care must be left for the trial court to decide in this case. Finally, given the very early stage of litigation, the court was not able to have a full appreciation of the evidence and the issues to make a finding on the negligence claim with respect to whether or not these defendants have a duty of care to the City of Kawartha Lakes. For the foregoing reasons, the motions for summary judgment on the city’s negligence claims were dismissed.
COMMENT This decision is particularly interesting given its potential impact on insurers and their service providers. The court does not go so far as to say a duty exists between an insurer or its agents and a thirdparty claimant. However, it found it was not plain and obvious that no duty of care can be recognized in these circumstances. It is an intriguing question whether or not liability will be ultimately found given that policy limits were exhausted. Can an insurer be forced to complete a task, notwithstanding that the contractual obligation fueling the undertaking of the job had been fulfilled (i.e., the policy limits were exhausted in endeavouring to remediate the damage)? And what happens if it is known this exhaustion of limits is likely to occur? Does the theory advanced by the plaintiff — that is, we could have done something to keep the claim within the policy limits had we known about the need for remediation — have any merit? For now, the case has been allowed to proceed, but we understand Farmers is seeking leave to appeal.
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Accidental Tourist Licensing requirements for travel insurance are devilishly complex, varying across insurance classes, delivery channels and regulatory jurisdictions.
Partner, Borden Ladner Gervais LLP (Toronto)
50 Canadian Underwriter May 2012
POST-CLAIM UNDERWRITING Typically, the product involves little or no underwriting. If individual assessment of risk occurs, it tends to be a self-underwriting process, whereby travellers respond to various categories of health questions on the application for insurance to determine eligibility and premium rating. The answers furnished by the applicant on the application are not investigated unless there is a claim filed. Dubbed “post-claim underwriting,� this common insurance approach to scrutinizing evidence of insurability in tandem with the typical travel insurance exclusion for unstable pre-existing conditions has attracted criticism from consumer advocates and some regulators. The other side of the story is that the product does not lend itself to a lengthy, fully underwritten application process. The travel insurance industry has applied a degree of ingenuity to
Illustration by Dave Whamond/www.threeinabox.com
Jill McCutcheon
Canadians made 20 million overnight trips to the United States in 2010 and travel to overseas countries reached a high of 8.7 million overnight trips. Travel to overseas countries has increased 86.2% since 2002.1 A recent survey suggests 37% of Canadians travel to the United States without emergency medical insurance2 despite their intended destination being one of the highest medical cost jurisdictions in the world. Odd, given that next to home and auto insurance, travel insurance is the most important consumer insurance purchase for anyone who engages in travel. Travel insurance is one of the few product lines in which both general insurers and life insurers compete against each other. There are short trip, long trip, snowbird, comprehensive, single trip, annual plan, group and individual products available through licensed intermediaries and travel agencies, Internet aggregators, associations, transportation companies, banks,
credit unions and others. Consumers can buy emergency medical insurance or a comprehensive product that includes trip interruption and cancellation insurance, baggage loss and coverage for other travel-related occurrences. They can buy across the kitchen table, on the Internet or through the grocery store with little or no human interaction.
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APPOINTMENT
delivery of the product through the leveraging of every available distribution channel while maintaining premium rates at affordable levels. Behind the scenes, specialized expertise and processes have developed supporting the product through sale, customer service, travel assistance, claims handling, medical cost management, patient evacuation and repatriation and cost recovery from government health insurance plans. All of these functions are unique to the product. It may be difficult to appreciate that travel insurers maintain: • facilities to provide 24/7 multilingual assistance services; • preferred provider arrangements to ensure medical cost management; • expertise to repatriate insured travellers to Canada and to ensure appropriate return travel and an available hospital bed at home; • ability to make direct payments to providers so that insured persons aren’t out of pocket or unable to obtain care; • systems to allow efficient and timely recoveries of contributions from government health insurance plans; and • medical staff, including nurses and doctors, to liaise with health care providers in foreign jurisdictions.
REGULATORY FRAMEWORK All of this occurs without any legal or regulatory foundation, recognition or assistance. A comprehensive travel insurance policy is part general insurance and part accident and sickness insurance. It is a hybrid not recognized as a distinct class of insurance. As such, no part of the Insurance Act is dedicated to the parameters of the travel insurance contract3 and appropriate to the hybrid nature of the policy. Insurers simply must sort it out by fitting the product into often less-than-exact legislative pigeonholes. For example, an insured may find the fire insurance statutory conditions in their travel insurance policy because the policy covers baggage loss. Licensing requirements are also devilishly complex.They vary between delivery channels and provincial jurisdictions, leading not only to confusion,
but to ridiculous results. On a technical reading of Ontario’s insurance laws, for example, a travel agent can sell travel insurance having met the requirements set by the Travel Industry Council of Ontario. At the same time, a licensed insurance intermediary should hold multiple licences for both general and accident and sickness classes of insurance from the Financial Services Commission of Ontario or otherwise satisfy the Registered Insurance Brokers of Ontario (RIBO) requirements for travel insurance. The Canadian travel insurance industry is sophisticated and evolved and serves a travelling public increasingly on the move. The industry does not need more regulation: for the most part, travel insurance is now regulated as both a general and an accident and sick-
It would make sense to recognize the coming of age of travel insurance as a fundamental product by creating a distinct and uniform class. ness product in multiple jurisdictions with less-than-uniform approaches. It would make sense to recognize the coming of age of travel insurance as a fundamental product to the protection needs of Canadians by creating a distinct and uniform class of travel insurance. Presumably, this would be a starting point for lawmakers and regulators in moving toward a framework that is flexible and yields sensible, rather than sporadically odd, results. 1 International Travel Statistics Canada (2010). 2 Ipsos Reid & RBC Insurance 2008. 3 This is the case for general and accident and sickness insurance.
Craig Harris Paul Aquino, Publisher, Claims Canada magazine (claimscanada.ca), is pleased to announce the appointment of Craig Harris for a one-year term to the position of Editor of Claims Canada magazine. With a Master’s Degree in Journalism from Carleton University, Craig brings more than 20 years of business reporting experience in the insurance and financial services industry to Claims Canada. He has edited several industry trade journals and currently operates a freelance writing and editing business, Edit Insight Ltd. He has won more than eight industry awards for his business journalism, including four KRW awards. Published bi-monthly by the Canadian Underwriter magazine – Insurance Media Group, Claims Canada magazine is the Official Journal of the Canadian Independent Adjusters’ Association (CIAA). Through its editorial content and circulation, Claims Canada brings together the entire property & casualty insurance claims market nationally with information and insight into the profession, business and people of insurance claims and loss adjusting. The Canadian Underwriter group of insurance industry media products has grown and developed to cover a wide range of information vehicles, both in print and online. Canadian Underwriter’s Insurance Media Group is committed to providing the most timely and relevant news, information and resources to insurance professionals from all segments of the property and casualty insurance market.
INSURANCE MEDIA GROUP www.insurancemediagroup.com May 2012 Canadian Underwriter
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The
Importance of Being Educated
Opinion/Analysis
The P&C insurance industry should insist that its employees, both current and prospective, obtain a CIP designation. Clinton D’Souza Senior Consultant, Business Development
At a recent insurance symposium held at Seneca College in Toronto, it was encouraging to see the number of new entrants coming into this industry. It was also refreshing to see that these new entrants view the completion of the Chartered Insurance Professional (CIP) designation as a natural pathway for entry into the property and casualty insurance sector. The CIP signals a commitment to the insurance profession. It also represents an accomplishment and expertise in a selected career choice. Participants in the symposium asked if taking CIP courses would help them gain employment in the property and casualty insurance sector.To answer this question, let’s look at the recent January 2012 Principles and Practice course at
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Seneca College: four students in a class of 15 were hired by The Dominion, Travelers, Desjardins and Cunningham Lindsey. All of these students were new to the industry and entered the CIP program to help them prepare for their insurance career. The Insurance Institute of Canada (IIC), which administers the CIP Program, and various colleges such as Seneca and others have all contributed in making a formal insurance education the norm today. Colleges such as Seneca should be commended for designing business programs that allow students to earn credits toward their CIP designation. Industry initiatives such as combining the CIP with a business diploma, in addition to the IIC’s efforts to go to schools and promote the CIP, have proven to be successful. These efforts to help recruit new members to the industry should be commended. No longer will it be the norm, as it was many years ago, for people to fall haphazardly into the insurance industry.Today, we see new entrants making a conscious decision to embark on a career within the insurance insurance.
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An individual’s work experience should no longer be the sole foundation for gaining entry into or sustaining an insurance career. Employers should continue to encourage pursuit of a CIP designation for all new and existing employees. Having said that, the industry needs to encourage more people who are already working within the property and casualty industry to pursue a CIP designation. The CIP designation prepares current and prospective employees to manage the challenges of a demanding risk management and insurance marketplace with confidence and professionalism. Having a CIP-designated employee is a benefit for the employer, and the designation will also help the employee from a career perspective. A person’s work experience should no longer be the sole foundation for gaining entry into or sustaining an insurance career. Employers should continue to encourage all new and existing employees to pursue a CIP designation. The educational programs upon which the CIP designation is based serve an important need. CIP courses provide insurance professionals with knowledge about insurance industry practices in areas as broad as administration, marketing and underwriting. Other professional industries require that their employees have a professional designation, and the insurance industry should be no different.Whether you are selling insurance, doing an inspection, independently managing a claim on behalf of a company or underwriting/ managing a claim within a company, a CIP designation is essential. Today’s insurance consumer is much more educated about the insurance process. A recent interim report by Ontario’s Auto Insurance Anti-Fraud Task Force includes a recommendation for more public education. The task force
realizes the entire industry needs to make greater efforts to help educate and engage the consumer in a better understanding of insurance. In Ontario, this education should not be left solely to organizations such as the Insurance Brokers Association of Ontario and the Insurance Bureau of Canada, which are working with the task force. This education needs to be delivered by every single person working within the property and casualty insurance sector.
REMAIN ON MESSAGE The message is only as effective as the messengers who are delivering it. If you are working within the insurance industry, you are the messenger.This is true whether you are working in administration, underwriting, claims, the broker channel, the direct agent distribution channel, the file clerk pool, IT, accounting, call centers, etc. Our industry is concerned about risk. We can help mitigate our own risk by having people working in this sector obtain the professional designation. CIP courses are practical and encompass all aspects of the contemporary business process of insurance, including underwriting, claims, risk management, fraud detection, specialty underwriting, business process accounting and reconciliation, to name a few.
It is becoming evident that the property and casualty industry is diverse. It includes wide-ranging support services provided by contractors, rehabilitation companies, IT companies and others. People in these service industries also work on their CIP designation. For example, if you are working in an auto repair facility, a claims course can help an employee understand how a claim gets assigned during a first notice of loss. If you are working for an IT company as a business analyst, CIP courses can help define a business requirement for clients who may have reinsurance or facility reporting. If you are working in the rehabilitation industry, achieving a CIP designation will increase your knowledge about the entire process of applying for accident benefits coverage in the event of a vehicle collision. In a recent Principles and Practice course at Seneca College, an auto accident injury victim was taking the course to understand the claims process better. In January, in the most recent Principles and Practice course at the college, one-third of the students were currently working in peripheral industries supported by the insurance sector, another third were looking to enter the industry, and the remaining third were new to the industry.
Correction Notice In Albert Wallrap’s article, ‘Seeking Summary Judgment,’ (Canadian Underwriter, April 2012), the article incorrectly begins with the words “Insurance companies have provided coverage.” These words did not appear in the author’s original submission and should have been deleted from the final version of the article. Canadian Underwriter apologizes to the author for this making this editing error.
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People Power Attracting and retaining a pool of highly skilled and motivated employees gives a company a competitive advantage during times of lean underwriting margins.
Vice President, Strategic Resource Consultants
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vantage that would be difficult for competitors to replicate. In order to put together a pool of superior employees, it is necessary to attract the talent to the organization in the first place.Then, having attracted the talent, the objective is to retain people with those superior skills.
RECRUITING TALENT There are only two sources when recruiting new talent to an organization: employees new to the industry and those who are already in it. Attracting new talent to the industry is important at all times, but it is particularly relevant now: demographic studies indicate a significant portion of the existing workforce will be retiring in the next few years. Most graduates do not consider insurance a career choice. Only a very small percentage of people are able to say they grew up dreaming of working in general insurance. With the exception of those who have a connection to a family-run brokerage, most of us stumbled into the industry.
Illustration by Dave Whamond/www.threeinabox.com
Peter Morris
Canada’s property and casualty insurers recorded an underwriting profit of $368.7 million based on $48.5 billion of written premiums in 2011, according to MSA Research, representing an underwriting profit of less than 1% for every dollar of premium. While certainly better than recording an underwriting loss, it does underscore how thin the margin of underwriting profit can be. The general insurance industry in Canada is both highly competitive and tightly regulated. This makes it very difficult to stand apart from the crowd when it comes to the ‘Four Ps’ of marketing: price, product, promotion and place. Given the nature of the market, even if a carrier makes a successful change in any one of these four areas, chances are good its competitors will quickly follow. As a result, whatever competitive edge was gained will prove to be temporary. On the other hand, if an employer is able to create a highly skilled and motivated workforce, it stands to achieve a sustainable, competitive ad-
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In the report, Building a Talent Magnet, McKinsey & Company notes that the property and casualty insurance industry faces a number of challenges when it comes to attracting high-quality talent: a poor reputation, a limited understanding of the industry’s career opportunities and a limited pool of trained talent. This particular study was conducted south of the border, but it is fair to assume that the same problems exist in Canada, to some extent. There is much to recommend a career in general insurance. As the McKinsey study shows, the industry offers many qualities sought by young job-seekers: stability, a good work/life balance, intellectual challenge, strong professional development possibilities and the chance to make a difference. At a time when many sectors of the Canadian economy have been hard hit by a global economic downturn, the issue of stability takes on new meaning. The property and casualty industry is not recession-proof, but it is certainly recession-resistant. During an economic downturn, consumers will take a hard look at discretionary spending such as travel, but the need to insure homes, businesses and automobiles remains. In promoting the merits of general insurance as a career choice for new graduates, it is worth mentioning the economic impact of the industry. A Conference Board of Canada study released late last year by the Insurance Bureau of Canada estimated the industry accounts for $7.5 billion in direct and indirect contributions to GDP in Ontario alone. The study noted that Ontario insurers directly employ 22,000 people with an additional 41,000 jobs created indirectly.
ATTRACTING TALENT Given the stability and sheer size of the property and casualty industry, the industry has much to offer young graduates. On the other side of the equation, the industry needs new entrants to fill the jobs that are being created, in addition to existing jobs that will be vacated by retirees.
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Whether attracting new talent to the industry or recruiting existing talent from within the industry, it is important that recruitment efforts be well thought out. As noted by the Society for Human Resource Management (SHRM) in its report, Recruiting and Attracting Talent, a poorly managed recruitment process can produce unqualified job applicants and a lack of diversity, or result in good prospects declining job offers.
Attracting new talent to the industry is important at all times, but it is particularly relevant now: demographic studies indicate a significant portion of the existing workforce will be retiring in the next few years. Also, a poorly conceived process can fail to attract the right job candidates — including those who work for competitors — because these potential candidates never find out about the position in the first place. The SHRM report defines a model recruitment process as containing the following steps: • establish recruitment objectives; • develop a recruitment strategy; • carry out recruitment activities; and • evaluate recruitment results. The first step includes establishing the number of positions to be filled, the date by
which the positions should be filled, the number of applicants desired, the qualifications of applicants being sought, the job performance goals of new hires and the expected retention rate of new hires. The second step, developing a recruitment strategy, involves answering such questions as where to look for suitable candidates, how best to reach these candidates, what recruitment message to deliver, what type of recruiter to use and what to include in the job offer. The third step, carrying out the actual recruitment, may involve internal or external resources or possibly a combination of both. This step will necessarily include making the openings known; identifying, screening and interviewing the candidates; and, finally, filling the open positions. Once the recruitment effort is completed, the final step of evaluating the program should include metrics such as time-to-hire, the cost of filling the position, the retention rate of new employees, the performance level of new employees, the hiring manager’s satisfaction with the recruitment process and the applicant’s perceptions of that process. This final step should also allow the human resources department to demonstrate to functional managers that the entire recruitment process is of net value to the organization.
RETAINING TALENT In his report entitled, Retaining Talent: A Guide to Analyzing and Managing Employee Turnover, David G.Allen, PhD, SPHR, makes the point that turnover is expensive. Direct replacement costs can run as high as 50% to 60% of an employee’s annual salary. If indirect costs are included, the total costs associated with turnover range from 90% to 200% of an employee’s annual salary. Although these costs may not create a problem for an employer if an employee leaves due to poor performance, these costs only add to the problem if a valuable employee decides to leave. When analyzing retention, it is worth considering why good staff opt to leave current employers. One model identifies four different paths to turnover:
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CU Seminar ad May 2012_Layout 1 12-04-20 11:13 AM Page 1
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: Vancouver – 10th Annual Golf Tournament & Dinner . . . . . . . . . . . . . . . . . . . . . . May 31
Yarmouth – South Shore Soiree . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .July 19
Montréal – 39th Annual Golf Tournament . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . June 4
Moncton – Annual Golf Tournament . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . August 9
Toronto — Annual Fellows’ Golf Tournament . . . . . . . . . . . . . . . . . . . . . . . . . . . . June 11
Edmonton – 24th Annual Golf Tournament . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . August 13
Ottawa – PROedge Seminar: Defamation Actions in a Social Media Environment . . . . . . . . . . . . . . .June 21
Hamilton – Annual Beach Volleyball Tournament . . . . . . . . . . . . . . . . . . . . . . . . . . . August 29
Victoria – 6th Annual Golf Tournament & Dinner . . . . . . . . . . . . . . . . . . . . . . . . . .June 22
Ottawa – Annual Golf Tournament . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . September 7
Halifax – 14th Annual Golf Tournament . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . July 10
London – Annual Golf Tournament . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . September 21
Regina – Annual Golf Tournament . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . September 5
Keeping you at the forefront of the P&C industry. The CIP Society. MEMBERS BENEFIT. www.insuranceinstitute.ca/cipsociety
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• dissatisfaction with the current job; • leaving for something better, even though there may have been no dissatisfaction with the current job; • following a plan — examples of this type of pre-planned departure include leaving in the event of pregnancy, being accepted into a desired educational program or departing following receipt of a bonus; and • leaving without a plan — this typically occurs following a negative shock, such as being passed over for a promotion or having a family member suffer a critical illness that requires the employee’s care. Reviewing the above list, clearly employees voluntarily depart for reasons that may or may not be related to what goes on in the workplace. Sometimes employees leave jobs they like. As a result, it is unrealistic for an employer to expect to retain all good staff. Nevertheless, employers consciously strive to retain as many of their valuable employees as possible. In some instances, it is fairly easy to determine which employees are valuable and that should be retained. Many times, however, it can be difficult to make the right selection. Subtle biases may come into play as we make judgments. A marginal employee with an engaging personality may be misjudged as more valuable to the organization than a highly productive employee who happens to be somewhat acerbic. In the same way, an eloquent employee may be seen as more valuable than an employee who struggles with words. However, even though the second employee may not say much, his or her few words may have more value to the organization than all of the fine speeches of the first. Here in Canada, the difficulties associated with determining the value an employee brings to the firm are particularly acute in multicultural communities, where cultural influences may cause some employees to keep to themselves. It may take an effort to gather insights and suggestions for improvement from employees whose culture teaches them to be quietly respectful of authority. But
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the effort can pay big dividends. In his report, Allen outlines this fourstep retention management plan.
Is turnover a problem? Turnover of poor performers might allow a firm to come out ahead and, therefore, may not be a problem.Turnover becomes a problem when it involves a company’s best employees, or when the turnover rate becomes so high that the
Turnover is costly. Direct replacement costs can run as high as between 50% and 60% of an employee’s annual salary. If indirect costs are included, the range is between 90% and 200%. accompanying costs and instability outweigh benefits.To determine if turnover is a problem, an organization should start by analyzing its turnover in terms of how many people are leaving, who is leaving and the relative costs and benefits of current turnover. Benchmarking to the industry helps put a given turnover rate in perspective, with different benchmarks for different levels in the firm.
How to proceed If the first step reveals turnover is not a problem, the best course may be to maintain the status quo and continue to
monitor turnover. If turnover is a problem, the employer may turn to broadbased strategies and/or targeted retention strategies, depending on the situation. Broad-based strategies are directed at either the whole organization or large parts of it and are intended to address overall retention rates. These might include across-the-board, market-based salary increases or improvements to the work environment. As the name suggests, targeted strategies are focused on specific areas within an organization. Data sources for creating the strategy include exit interviews; post-exit surveys; currentemployee focus groups; research that compares cross-company employee survey data to survey results within business units; predictive studies that identify direct relationships between individual survey responses and individual turnover decisions; and qualitative studies that attempt to uncover the complex, harder-to-measure decision-making processes that may underlie departures.
Implementing the plan Specific actions involved in this step will depend on the strategies being pursued and the unique circumstances of the organization. As with any program involving organizational change, it is important to obtain support from top management. It is also important to develop a communications plan that ensures front-line managers understand the plan and support it. Evaluating the plan Retention efforts may involve a substantial investment. As such, when assessing if a retention plan has accomplished its objectives, it is important to assess the impact of the plan relative to its cost. Admittedly, attracting and retaining top-quality talent requires management time and attention. But as insurers, brokerages and other industry-related organizations look for ways to obtain a sustainable competitive advantage, it is worth considering the rewards a pool of superior talent can deliver.
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Talking through Reconstruction
Opinion/Analysis
David Sheppard Director, Canstar Restorations, Disaster Kleenup Canada
Successful restoration contractors are solid communicators who ask the right questions, convey the answers faithfully and make efficient, cost-effective recommendations for everyone involved in a claim. In a recent article in Canadian Underwriter (‘It’s Not in the Textbook,’ September 2011), Keith Edwards, senior vice president of training and development for SCM Adjusters, wrote an excellent piece on how the basics of adjusting remain as vital today as they were in his grandfather’s time. The means by which adjusters communicate may be evolving, but the content of the communications and service requirements remain constant.The ability to ask the right questions and to convey the answers faithfully — all while making recommendations — is still the ultimate measure of a good adjuster.
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“An adjuster is in the communication business,” Edwards wrote. “He or she collects, analyzes and reports information. Despite great changes in communications technology… nothing has changed.” Similarly, restoration contractors need to ask all the right questions and provide the right answers to be reliable members of the claims-handling team.Whether they work in emergency services, reconstruction or contents restoration, these contractors are well aware that their work could generate many potential outcomes — and even more options for achieving their project goals. Like the adjuster, the restoration contractor should be defining requirements and options, and should offer alternatives for the adjuster’s consideration.The more comprehensive the options, the easier it will be for the adjuster to expend available policy funds judiciously or save them appropriately. In emergency services, options might include top-down drying of carpet to avoid disruption of occupancy, thereby reducing or eliminating additional living expenses (ALE). Large water losses might be better handled by installing large ther-
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The restoration contractor should be defining requirements and options, and should offer alternatives for the adjuster’s consideration. The more comprehensive the options, the easier it will be for the adjuster to expend policy funds judiciously or save them appropriately. mal dryers instead of conventional dehumidifiers. Manipulating contents from room to room to facilitate work might be more economical than removing them and storing them elsewhere. A little overtime might be better than multiple trips. These kinds of considerations should be discussed at the outset of the claim, to ensure that tasks are not simply completed in the way they always have been without exploring potentially more efficient options. Similarly, reconstruction can take many forms. If time is of the essence, as it is when ALE or business interruption is running at a high daily cost, it might be preferable to proceed on a cost-plus basis — either on an agreed price schedule, or with all subtrades double or triple bid. The most frustrating part of a claim for insureds and insurers alike is when costs are accumulating during a prolonged bidding process and no work is being done. Other options include various engineering solutions. For example, doing accent tiling at entries instead of replacing whole floors, or relocating matching ceiling tiles from a small room to patch a large room’s ceiling and then doing a much more economical replacement in the smaller room. Contents restoration is often a component of both emergency services and reconstruction. It provides many opportunities to give the adjuster and the insured options to direct policy funds intelligently. For contents in particular, we strongly recommend a checklist. There are many opportunities to reduce costs, presuming that the adjuster has
retained a restoration company with the ability and resources to do all the things that can be done. Items on the checklist could generate discussion, which should be considered before work begins. For example: • Laundry:The basement was wet for two days before the loss was discovered and everything smells. Is test cleaning warranted? Should you have all the laundry washed or just what was touching the water? Will your customer accept that it might have smelled musty before the loss? Good contractors can clean it, but decide early how much to clean. Returning one garment that smells will taint the insured’s perception of all the laundry, and can result in a debate about expensive replacement of clothing. • Electronics: Contractors that can clean electronics can save the television. Will you write it off or give them back what they had? That should be decided before costs are incurred for the repair. • Listing: Your customer has a limit on the insurance policy and sometimes it’s low. Is the cost to list the damaged contents a file expense or part of the indemnity payment? Should you pay the restoration company to list all the contents that are taken away? Should the restoration company just list the non-restorable contents? Should the adjuster list, should the customer list or should no one list? Consider the time it takes to list 25 items in a box, complete with the type of article, manufacturer and condition. Multiply that by 100 boxes and the time required is significant. Although part of a premium service offering, it comes at a cost.
• Storage: It is expensive to keep warehouse space available to store contents. Removing contents means packing, travelling and binning — and then all the same steps in reverse when the contents are returned. If the goods don’t need to be cleaned, would it not be more economical to store customers’ goods in containers on their driveways? Or perhaps at a self-service storage facility in their neighborhoods, so they can access their possessions at their convenience? Would they be agreeable to that?
PRUDENT USE All of these considerations require decisions that have cost implications. Adjusters and contractors alike want to have a happy customer at the end of the day. The best way to do that is to make sure available resources are used prudently. Whether discussing policy limits, manpower or equipment, waste is the result of not consistently asking the right questions and making decisions that efficiently direct the resources available to where they are most needed. Good adjusters and contractors take the time to get agreement on what is “best” for and expected of everyone, and then delivering service efficiently. Efficiency equates to saving money for the insurer (because the money didn’t need to be spent) and for the customer (because it did). Edwards’ earlier statement is as true for contractors as it is for adjusters: “Hasty reports can lead to a lack of vision, confusion, a need for clarification and perhaps backtracking. This is not an efficient or effective way of doing business.”
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MOVES & VIEWS
UPCOMING EVENTS: FOR A COMPLETE LIST VISIT
www.canadianunderwriter.ca
AND CLICK ‘MY EVENTS CALENDAR” ON THE HOME PAGE
1
On Side Restoration Services Ltd. is continuing to expand, most recently opening its doors in Atlantic Canada. The company acquired A&R Services Ltd. on Apr. 1, completing On Side’s stretch from coast to coast. “This is the first acquisition in Atlantic Canada,” says Mike Sully, vice president of On Side. Rick Hickey of A&R added: “We are excited to be a part of this growing business and cannot wait to see the new and improved A&R Services.” On Side will offer A&R Services — now A&R Services, a division of On Side Restoration — the ability to expand its skill sets while taking advantage of existing technology.
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John Emory [2] has been appointed as regional vice president of the Eastern region for Travelers Canada. Emory is an industry veteran who began his career with Travelers in Montreal almost 40 years ago. He worked his way up to regional general manager in Quebec over his 14 years with the company. Subsequently, he held senior leadership positions with a number of other Canadian insurance companies, and most recently The Guarantee Company of North America. “John is a strong and collaborative leader with broad experience in all areas of our business — finan-
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Canadian Underwriter May 2012
2 cial and professional services, surety and business insurance,” says George Petropoulos, president and CEO of Travelers Canada. “He is the ideal person to work with our broker partners and to lead our business in Quebec and Atlantic Canada.”
3
Aviva plc is eliminating its regional layer in an effort to simplify the company and sharpen its business focus. As part of its revised structure, Aviva is appointing the leaders of its three major businesses to the Group Executive Committee (GEC). The three CEOs joining the GEC include David Barral (CEO U.K. & Ireland Life Insurance); David McMillan (CEO UK&I General Insurance); and Philippe Maso (CEO France). They will all report directly to Aviva plc group chief executive Andrew Moss, as will Chris Littlefield, CEO of Aviva U.S.A. In his role as executive director of developed markets, Trevor Matthews will chair the UK&I board and be directly
3 responsible for Canada, Italy and Spain. Matthews will also take on duties to develop the group-wide capabilities of underwriting, pricing and claims management. Igal Mayer [3], Richard Hoskins and Alain Dromer are leaving Aviva.
4
Hagerty Canada LLC, a U.S.-based insurer of classic cars, has entered the Canadian market. Through a partnership with Aviva Insurance Company of Canada, Canadian brokers gainaccess to classic car in surance through the Hagerty Silver Wheel Plan. Brokers now have the opportunity to provide “agreed value” coverage for their clients’ antique and collector vehicles through the world’s largest specialty provider of classic car insurance. The company also possesses the lar gest database of collector vehicle owners.
5
Donna Kinnaird became chief operating officer (COO) of Reinsurance Group of America Incorporated
6a (RGA) on Apr. 2, 2012. With more than two decades of strategic leadership experience at major global organizations in the life insurance industry, Kinnaird most recently served as president of Swiss Re Life and Health America Inc. and president and CEO of its Reassure America Life Insurance Company. “Donna brings a wealth of knowledge and experience in all facets of the life reinsurance industry, as well as a broad and deep understanding of business and regulatory environments,” says Greig Woodring, RGA’s president and CEO.
6
The ACE Group has announced new leadership appointments in its Canadian operations. Andrew Hollenberg [6a] has been appointed as country president of ACE Canada. Hollenberg, who joined the company in 2000, will oversee the property and casualty, life and accident and health (A&H) insurance operations in Canada. In his most recent role as regional senior vice president of A&H and life for ACE Europe, he successfully
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MOVES & VIEWS
set-up,” he points out. Additional features include accident reporting assistance at roadside and the ability to report property claims and to transmit photographs.
6b
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led the company’s A&H and life operations in Europe, the Middle East and Africa. David Brosnan [6b] has been appointed division president, as well as property and casualty and chief underwriting officer for ACE Canada. With more than 25 years of insurance industry experience, Brosnan previously served as country president of ACE Canada for more than three years. Before that, he was the division president of ACE Casualty Risk.
claims and inspection data nationwide, iClarify uses the proprietary information to generate 14 critical construction data elements for brokers and provide accurate, geo-coded streetscape and satellite imagery. Brokers can “see the risk” related to a property, driving accuracy, transparency and a solid understanding of the risk at point of sale. The service is now available to 90% of brokers across the country through the two platforms.
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Manitoba and Alberta brokers now have access to residential data validation platforms from SCM Risk Management Services. Using Compu-Quote and PowerQuote, iClarify will initially be launched in Alberta in Calgary, Edmonton, Lethbridge, Red Deer and Medicine Hat. In Manitoba, the focus will be on the Greater Winnipeg area and the province’s most heavily populated centres. Enhanced data and imagery services will continue to go live throughout 2012. Derived from repositories of total loss
Farhan Mohamed [8] has joined Burns & Wilcox Canada as a personal insurance underwriter. As part of his duties at Burns & Wilcox, He will lead the company’s High Net Worth Personal Insurance Centre of Excellence. He has more than a decade of experience as a financial planner, insurance advisor and underwriter, bringing to Burns & Wilcox Canada a proven track record in client service and assisting brokers placing large premium accounts for their high net worth clients. “As the specialty insurance industry has evolved, we at
9 Burns & Wilcox Canada recognized a clear need for highly skilled individuals to handle difficult-to-place risks within specialized areas of expertise,” says Gary Hirst, the company’s executive director.
9
The Insurance Brokers Association of Ontario (IBAO) is poised to introduce a mobile application that will offer consumers access to individual brokers and their represented insurance companies, as well as reporting assistance for auto and property claims. The app can be used on Blackberry, iPhone and Android platforms, and will cost $500 for the first year and $300 for each year at renewal, says IBAO president Rick Orr [9]. “Once you’re in my app, you can access me and configure the app to any of my companies, since I represent more than one insurer,” Orr notes in the April issue of The Ontario Broker magazine. The soon-to-be-released app will be “insurance company-neutral, allowing (consumers) to select their insurer during the initial
10
Quebec-based Industrial Alliance has introduced a new way of insuring younger drivers by tracking behaviour behind the wheel. Mobiliz employs telematics technology to monitor distance travelled, speeding, forced acceleration and hard braking. Quebec drivers aged 16 to 24 who join the initiative will be provided the GPS-type module for free. As part of the web-based auto insurance program, motorists will also be able to access information on their driving habits, the effect on premiums and safety tips. Mobiliz will enable younger drivers who drive responsibly to benefit from the lowest rates in the industry, says Michel Laurin, president and CEO of operations at Industrial Alliance Operations, Auto and Home Insurance Inc. For those who currently have extreme driving habits, Laurin adds, the device “will offer them the necessary financial incentives so that they can adopt more responsible driving habits.”
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May 2012 Canadian Underwriter
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APPOINTMENT
GALLERY
CAA Insurance held a workshop at its head office in Thornhill, Ontario on Mar. 21 to discuss career opportunities with students
of the Seneca College Insurance program. The students were introduced to a number of CAA Insurance associates, who pro-
The insurance and risk management community sent skiers to Mont Tremblant, Quebec on Feb. 6 and 7 for a major fundraiser, the Ronald McDonald House Charities Ski Challenge. The social and sporting event
brings together a few hundred participants from businesses of all kinds to take part in a dinner and friendly dual slalom races on the slopes of Mont Tremblant. The event raised more than $170,000 for Ronald
vided career insights. The workshop was wellreceived, as evidenced by the students’ positive feedback.
Colin Smith Greg McCutcheon, President of SCM Risk Management Services (RMS), is pleased to announce the appointment of Colin Smith, B.Math, C.Dir. to the position of Senior Vice President of Operations, Information & Analytics. Reputed for his ability to leverage technology in the creation of business solutions, Colin is a perfect fit for RMS, a company known in Canada for its commitment to innovative technological solutions for the risk management industry. Colin has more than 18 years of experience in business planning, execution, operations, and information technology in management positions. He is recognized for his creative and collaborative approach, and brings a well-rounded perspective to the business of insurance. He has held the positions of CEO, COO, and CIO at several insurance-related corporations, and was most recently the CIO at The Economical Insurance Group. “In each of his roles, Colin has consistently driven profitable growth by motivating and engaging his teams to find creative applications for technology” shares McCutcheon, “we are very pleased to welcome him to our team and believe that our clients are the ones who ultimately benefit.” RMS is Canada’s largest and leading provider of inspection, loss control, valuation services, and other specialized risk consulting solutions. Colin’s appointment demonstrates RMS’s commitment to creating innovative technological business solutions for its clients
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McDonald Houses across Canada, with special recognition to expanded Houses in Montreal and Quebec City. The ski challenge at Tremblant is one of RMHC’s longest-running and most successful fundraisers. Cedric Gyles, senior vice president and director at Aon Reed Stenhouse, arranged the insurance community’s involvement and reported that industry teams did well at the finish line. Zurich Canada, Global Corporate returned to the podium, finishing first place in the top tier flight. The team included skiers Urs Uhlmann, Sylvain Hamel, Luc Labrecque and Stéphane Chapdelaine.
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More than 200 senior insurance industry executives gathered in Toronto for the Swiss Re 2012 Canadian Outlook Breakfast on Mar. 29. Attendees learned about trends in the 2011 P&C market results. Speakers included Sharon Ludlow, president and CEO of Swiss Re Canada; Eric Smith, president and CEO of Swiss Re Americas; and Gregor Robinson, senior vice president and chief economist of the Insurance Bureau of Canada.
Lilia Fernandes Senior Underwriter, Environmental Lines Premier Marine Insurance Group is pleased to announce the appointment of Lilia Fernandes to the position of Senior Underwriter, Environmental Lines. Premier is one of Canada’s largest specialty insurance underwriters for Environmental, Casualty, Property, Personal, and Marine lines. Premier’s success is attributed to industry leading niche products, in-house underwriting and claims services. Lilia’s experience and expertise in Environmental Insurance include underwriting a broad range of environmental risks while at a multinational insurer and obtaining certification in Environmental Studies. Lilia holds a bachelor of commerce with Ryerson University and certification in Risk Management. To learn more about one of Canada’s fastest growing Environmental practices, or to obtain fresh terms on one of your EIL or Contractors Pollution Liability accounts – contact Lilia in our Toronto Branch.
Lilia Fernandes, B.COMM, CRM T: 416 365 0444 F: 416 365 0446 40 University Ave, Suite 201 Toronto, Ontario lilia.fernandes@premiermarine.com
Don’t let our name fool you . . . There’s more to Premier than Marine
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Maurice Tulloch The Property and Casualty Insurance Compensation Corporation (PACICC) is pleased to announce the election of Maurice Tulloch as Chair of the Company’s Board of Directors. Maurice is President and CEO of Aviva Canada, representing the Property and Casualty (P&C) business for Aviva in North America. He is also a member of the Insurance Bureau of Canada (IBC) Board of Directors.
Crawford & Company (Canada) Inc.’s senior vice president of corporate markets and administration, Steve Anderson, presented a cheque for almost $83,000 during a luncheon hosted in honour of the Women in Insurance Cancer Crusade (WICC) on Mar. 27. Crawford’s annual donations have significantly increased over the years, with the average donation increasing from around
$50,000 to more than $80,000. “This year more than any other year, our employees completely embraced WICC and Crawford Cares,” said Anderson. “They jumped in whole-heartedly and participated in various fundraisers, payroll deductions, the Relay for Life and other activities.” Crawford Cares has raised more than $500,000 for WICC since Crawford Cares was first established in January 2004. Crawford & Company
(Canada) CEO John Sharoun commented: “Crawford employees threw their hats into the ring and raised the bar this year. The addition of the Relay for Life event really boosted our employees’ enthusiasm and fundraising efforts. We had a wonderful time staying up all night, honouring friends and loved ones. For that event alone, employees and Crawford branches across Canada raised more than $60,000.”
Fred De Francesco of Fairview Insurance Brokers Inc. has established the Michael Joseph De Francesco Memorial Award in honour of his late son, Michael. Fred De Francesco had been giving lectures to brokers in northern Ontario about various insurance topics when he traveled to Michael’s alma mater in Sault Ste. Marie, Sault College of Applied Arts & Technology, to establish the fund, which is now active. Fred’s son Michael graduated as a
pilot at Sault College in 2000. Recipients of the award include students who have completed the first year of studies and require financial assistance to continue their studies as graduate commercial pilots. Steve Hause, now chief flight instructor for the Sault College program, was Michael’s first employer at Adler Aviation in Waterloo. Ben Mears, now academic coordinator and assistant chief flight instructor at Sault College,
was a close friend of Michael’s. The fund was started with donations from family, brokers and a generous contribution from Maurice Tulloch, president and CEO of Aviva Canada Inc. Anyone wishing to donate to the fund can send cheques made payable to ‘Sault College.’ Cheques can be sent to: Terry Ableson, Financial Aid Administrator, Chair, Scholarship, Bursary and Awards Committee, Sault College of Applied Arts and Technol-
Prior to his appointment as Aviva Canada’s CEO (on January 1, 2010), Maurice held the role of EVP and COO, Aviva Ontario and Specialty Distribution. In that role, he had overall accountability for developing and executing Aviva’s commercial lines and retail personal lines strategies in Ontario. Maurice is a Certified Management Accountant and holds a Master’s Degree in Business Administration. Established in 1989, PACICC is a non-profit corporation serving as the P&C insurance industry’s financial guarantee fund in Canada. PACICC’s mission is to protect eligible policyholders across Canada from undue financial loss in the event a member insurer becomes insolvent. PACICC is funded entirely by its member insurance companies.
For more information about PACICC visit www.pacicc.ca
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A.R.S. Assessment Rehabilitation Services Inc. held an Open House on Apr. 12, 2012. A.R.S. staff greeted and hosted dozens of company partners and clients.
Mo Kaur Vice President, Operations Troy Moreira, President and CEO of Premier Marine Insurance Group is pleased to announce the appointment of Mo Kaur to the position of Vice President of Operations. Premier is one of Canada’s largest specialty insurance underwriters for Environmental, Casualty, Property, Personal, and Marine lines. Premier’s success is attributed to industry leading niche products, in-house underwriting and claims services. Mo’s role will focus on the Canadian insurance operations and strategic initiatives to help drive the continued growth
ogy, 443 Northern Avenue, P.O. Box 60, Sault Ste. Marie, ON P6A 5L3. In the memo section of the cheque, donors should identify that the money is to go towards the Michael Joseph De Francesco Memorial Award (or attach separate note). Further inquiries can be directed to: Fred De Francesco, CIP: fdefrancesco @fairviewinsurance.ca
With over 20 years of commercial underwriting and leadership experience, Mo has worked for reputable insurers in the United Kingdom and Canada. She is a graduate of the University of London, UK with a BSc Mathematical Studies and is an Associate of Chartered Insurance Institute UK. Please join us in welcoming Mo Kaur to the Premier senior executive team. Mo Kaur, ACII, BSc(Hons) mo.kaur@premiermarine.com
Don’t let our name fool you . . . There’s more to Premier than Marine
Left to right: Fred De Francesco, Ben Mears and Steve Hause.
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Robert Wilson Vice President, Commercial Lines, Central Region
Mr. Michael Shore, Regional Vice President, Central Region of Berkley Canada is pleased to announce the appointment of Mr. Robert Wilson as Vice President of Commercial Lines, Central Region. Robert will head up Commercial Lines within the Central Region. He will be responsible for driving profitable growth, underwriting results, product development and broker relations. Mr. Wilson brings with him over 30 years of underwriting experience in Property Casualty business. He has held various senior management positions with a leading Canadian Property and Casualty underwriting company. Robert is an honours graduate of York University. Berkley Canada Inc. underwrites on behalf of the Canadian branch of the Berkley Insurance Company, a 100% owned subsidiary of W.R. Berkley Corporation. The W.R. Berkley Corporation, founded in 1967, is one of North America’s premier commercial lines property casualty insurance providers. As a member company of W.R. Berkley Corporation, Berkley Canada provides customers access to the financial resources and stability of a global corporation with the flexibility and understanding of a local company. Robert Wilson 416-594-4801 rwilson@berkleycanada.com
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WICC Ottawa Breakfast Committee held a Sugar Bush Breakfast at the National Arts Centre on Mar. 30. More than 250 industry supporters enjoyed sugar bush food fare, live music and even maple taffy on snow — in the middle of the city. Special guests Dr. Roberta Auer and Dr. John Bell outlined various cancer research projects spearheaded in Ottawa, including grant-funded research led by Dr. Auer, all made possible thanks to donations through WICC Ontario. WICC Ottawa presented a cheque for $30,000 to the Canadian Cancer Society, representing funds raised during the 2011 WICC Ottawa events. WICC’s breakfast event raised approximately $8,000.
“Aviva’s w produc ts ide range of the need helps me mee t so Protec tin f my customers . g them w RV polic y from th ith an compan e s am e y th home is at insures their ver y rea s to them suring .”
Where others see a policy...
...we see people
Burke Neale President & COO McFarlan Rowlands Insurance Brokers Norwich, ON
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.
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