Canadian Underwriter June 2013 by Annex Business Media

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

JUN E 2 0 1 3 A Business Information Group Publication #40069240

Well in Hand BY ANGELA STELMAKOWICH

Model Muddle BY KAREN CLARK

Road Worthy BY CRAIG HARRIS

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VOL. 80, NO. 6, JUNE 2013 CANADA’S INSURANCE AND RISK MAGAZINE. PUBLISHED BY BUSINESS INFORMATION GROUP

www.canadianunderwriter.ca FEATURES

COVER STORY

Well in Hand

Risk Management The current approach to risk modelling precludes customization. A more advanced level of catastrophe risk understanding is needed to move risk modelling to true risk management. BY KAREN CLARK

20 Road Safety Analytics More municipalities are using predictive analytics to enhance road safety. Analyzing digital data is seen as a key tool to identify high-risk locations and make engineering changes.

Combatting Bias Claims adjusters must treat all insureds fairly and carry out unbiased investigations, even when things such as a person’s reputation and past actions make it tough to keep suspicions at bay. BY THE CIP SOCIETY

BY ANGELA STELMAKOWICH

55 Cloud Computing There seems to be a growing unease among some about the risks of cloud computing. This at the same time others say cloud computing is the way forward and may reduce risk.

28 Commercial Insurance Forms

52 Damage Awards

The Centre for Study of Insurance Operations released a number of commercial forms in 2012 and a few more already this year, all of which seek to help brokers protect their commercial book of business.

A Saskatchewan court’s order that two insurance companies pay $5 million in punitive damages to an insured could be overturned on appeal, but also shows the frustration of courts with the actions of some insurance companies.

BY CATHERINE SMOLA

BY DONNA FORD

30 Representations and Warranties

58 Flood Mitigation

Representations and warranties insurance is currently being actively used as an integrated transaction solution on various types of mergers and acquisitions in Canada.

Flooding regularly occurs in certain parts of the country. How can information and technology be employed to better assess risk and, in turn, be used by underwriters to price products accurately?

BY DANE HAMBROOK

BY BERKLEY CHARLTON

48 Severe Weather

62 Broker Market Share

The values of used vehicles appraised in Canada are down. And it is thought that total loss percentages of claims will rise a full point in 2013.

There is plenty of severe weather in Canada, but Alberta is playing host to a disproportionate amount. Loss figures signal the need for governments, businesses and consumers to create a strong culture of adaptation.

With brokers losing market share to direct writers, it is critically important to step up and use the technology that is available. Failing to do so puts all in jeopardy of falling to the directs.

BY GREG HORN

BY HEATHER MACK

BY GREG MECKBACH

BY CRAIG HARRIS

Use of mobile devices, from smartphones to tablets, is now commonplace. With that, customer expectations around accessing brokers and insurance information, while on the go, is starting to be seen as the norm. Are brokers ready to take the mobile leap?

16 Usage-Based Insurance Desjardins General Insurance Group has launched a usagebased insurance program in Ontario and Quebec, a move the company says will lead to safer driving and rate savings. BY SYLVIE PAQUETTE

24 Aftermarket Parts

BY PAT DUREPOS

June 2013 Canadian Underwriter

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VOL. 80, NO. 6, JUNE 2013

PROFILE

Editor Angela Stelmakowich astelmakowich@canadianunderwriter.ca (416) 510-6793 Associate Editor Greg Meckbach gmeckbach@canadianunderwriter.ca (416) 510-6796

10 Volunteer at Heart Karin McDonald is no stranger to risk management or to volunteerism. The two recently combined as a single honour in the Heart of RIMS award, a recognition she has accepted with humility, gratitude and an eye toward the future. BY ANGELA STELMAKOWICH

SPECIAL FOCUS

Editorial

Marketplace

64 Moves & Views 66 Gallery

Online Editor Harmeet Singh hsingh@canadianunderwriter.ca Twitter: @CU_Harmeet (416) 442-5600 ext. 3652

Senior Publisher Steve Wilson steve@canadianunderwriter.ca Twitter: @InsuranceMedia (416) 510-6800 Art Director Gerald Heydens Art Consultation Sascha Hass Production Manager Gary White (416) 510-6760 Subscriptions/Customer Service Gail Page gpage@bizinfogroup.ca (416) 510-5187

Associate Publisher Paul Aquino paul@canadianunderwriter.ca Twitter: @InsuranceCanuk (416) 510-6788 Account Manager Michael Wells michael@canadianunderwriter.ca (416) 510-5122 Account Manager Christine Giovis christine@canadianunderwriter.ca (416) 510-5114 Account Manager Elliot Ford eford@canadianunderwriter.ca (416) 510-5114

Circulation Manager Mary Garufi mgarufi@bizinfogroup.ca (416) 442-5600 ext. 3545 Print Production Manager Phyllis Wright President Bruce Creighton Vice President Alex Papanou

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EDITORIAL

Pretty Ugly

One explanation for the increase in malware is large-scale compromises of Canadian sites built on vulnerable content management platforms. Angela Stelmakowich, Editor astelmakowich@ canadianunderwriter.ca

Canadian Underwriter June 2013

Everyone likes to feel attractive; everyone enjoys having a “clean” reputation. However, being viewed as attractive because one’s unsullied reputation (so far) makes one an easy target for cyber crime can take some bounce out of the step. That is where Canada now finds itself, at least if a report card from IT security company Websense reflects the bigger picture. It seems that Canada is becoming tantalizingly attractive as a welcome spot for cyber criminals Apparently, the country’s clean reputation has insulated it from businesses avoiding having their computers communicating with an IP address in Canada. But, perhaps, those days are over. Websense cites a 25% hike in sites hosting malware since 2012, and an 83% increase of command and control servers, through which hackers direct malware what data to look for. One explanation for the rise is large-scale compromises of Canadian sites built on vulnerable content management platforms. Worse still is the fact that more foreign cyber criminals are setting up virtual bases in the country to co-ordinate corporate attacks. Last year, “Canada hosted the third largest volume of servers communication with the type of highly sophisticated malware responsible for stealing valuable corporate data,” notes the report, putting the country “ahead of Korea, Gemany, Russia and even China.”

These can be expensive matters, so preparedness is critically important. Unfortunately, preparedness against cyber crime among Canadian businesses is wanting, the International Cyber Security Protection Alliance (ICSPA) notes in a report released in May. “Across business communities, there is a general lack of strategy, procedures and trained personnel to combat cyber crime.” Citing results from the survey of 520 small, medium and large Canadian businesses, ICSPA notes that 69% reported some kind of attack within a 12-month period. Malware and virus attacks were cited by 51% of surveyed businesses, while phishing and social engineering was reported by 18%. “The distribution of application-based malware for mobile devices using cloud-based services for both personal and business use will become a new threat vector of the future.” The reported cyber crime attacks over the past 12 months resulted in financial losses of $5.3 million on average, with financial fraud accounting for approximately $1.9 million, theft of devices containing company information for around $850,000, malware and virus attacks for about $772,000; and sabotage of data and networks for approximately $584,000. Beyond costs was a number of other disconcerting findings. In all, only 22% of surveyed business employed risk assessment processes,

and about seven in 10 organizations do not have formal procedures in place to follow in the event of a cyber crime. Willis North America noted in June that more than half of Fortune 500 companies in the United States reported that their firms would face “serious harm” or be “adversely impacted” by a cyber attack. Among their top risks, respondents identified loss or theft of confidential information, loss of reputation and direct loss from malicious attacks. Although some companies are actively taking steps to assess and mitigate cyber risk, others continue to overlook critical exposures. In all, only 6% of companies reported they had purchased insurance to cover cyber risks. A.M Best notes in a recent report that pricing strategies and the evolving nature of cyber risk make effective underwriting a challenge. Projecting the cost of losses is difficult, as exposures evolve quickly, there is a short claims history around losses and there is not much data reported for cyber risk-related losses, the report states. Failing to be prepared, however, will not do. Notes Websense, “As countries come under scrutiny for known malicious attacks, the bad guys are simply shifting criminal activities to countries like Canada that have strong infrastructure and traditionally have had better cyber reputations.”

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MARKETPLACE Sign up to receive Canadian Underwriter’s free Insurance Headline News Email Alert: http://bit.ly/cuenews

Canadian Market TRAVELERS TO ACQUIRE THE DOMINION Travelers Companies Inc. has agreed to acquire The Dominion of Canada General Insurance Company from E-L Financial Corporation Limited for about $1.1 billion in cash, subject to adjustment. The transaction is expected to close in 2013 Q4, subject to regulatory approvals and other customary closing conditions, Travelers notes a statement. Travelers will fund the transaction, subject to market conditions, through a combination of debt and/or preferred stock financing and internal resources. The Dominion and Travelers’ Canadian operations will be integrated, with the combined organization headquartered in Toronto. “This is a very good opportunity for Travelers to significantly improve its market position and scale in a meaningful market,” says Jay Fishman, chairman and CEO of Travelers, adding that the transaction will have no significant impact on 2013 earnings per share. Brigid Murphy, president and CEO of The Dominion, will continue in these roles at the combined organization, while George Petropoulos, president and CEO of Travelers Canada, will help Murphy lead the new organization as vice chairman and executive vice president, Bond and

8 Canadian Underwriter June 2013

Financial Products. The combined business “will substantially enhance Travelers’ product breadth in Canada by coupling The Dominion’s commercial and personal portfolios with Travelers Canada’s surety, management liability and commercial middle market products,” Petropoulos adds.

INSURERS, BROKERS ADVISED TO DIVERSIFY In a world with extreme weather patterns, protests that can shut down cities and sudden economic downturns, insurance carriers and their brokers should consider expanding their offerings, Bob Dempsey, president and chief operating officer of The Guarantee Company of North America, suggested in May. “We’ve never seen weather patterns like we’ve seen in the last decade. We’ve never seen such a sinusoidal curve to the world’s economy, where we’re riding high and then all of a sudden, within two years due to some over-leveraging of mortgages of houses in the U.S., the whole economy goes to hell in a hand basket worldwide,” Dempsey said during a presentation hosted by the Insurance Institute of Canada. “The only way the insurance industry, in my mind, can survive that is to diversify, to make sure you’ve got a spread of products” to guard against one of those extremes affecting results, Dempsey said. Brokers will also need to diversify offerings, he said, for both property and casualty, and for life and health.

Regulation TISSUE MAKER APPEALS TO CANADA’S HIGH COURT A manufacturer of paper towels and tissue sought to appeal to the Supreme Court of Canada after a ruling by British Columbia’s Court of Appeal barred the company from making a subrogated claim against the operator of a warehouse where unprocessed paper was destroyed in a 2001 fire. In June, Canada’s high court dismissed the application for leave to appeal with costs. Kruger Products, formerly Scott Paper, had sought to overturn the B.C. appeal court’s ruling barring the company from making a subrogated claim against warehouse manager First Choice Logistics. The court earlier ruled a lease agreement required Kruger to maintain property and inventory insurance, and to name First Choice Logistics as an insured. The B.C. court found that when a lease agreement requires a “bailor” who owns goods to buy insurance, the bailee who is responsible for storing those goods should benefit from it, unless the lease agreement says otherwise. After a fire at the warehouse, Kruger sued, among others, First Choice Logistics alleging that it breached its agreement to maintain the warehouse in such a way as to minimize the risk of damage to Kruger’s inventory. One issue was the interpretation of agreements between

Kruger and First Choice on who was responsible for liability, property and inventory insurance, and who was supposed to benefit from those agreements. In 2010, the Supreme Court of British Columbia ruled Kruger could make a subrogated claim against the warehouse operator. But the B.C appeal court overtruned that verdict, finding that a clause in the warehouse agreement requiring Kruger to hold insurance was intended for the benefit of First Choice Logistics.

CHILD IN UNINSURED VEHICLE COVERED The Court of Appeal for Ontario ruled in May against Economical Insurance in determining a woman injured as a child 20 years ago while riding in an uninsured vehicle owned and driven by her father is entitled to benefits from her mother’s uninsured coverage on two vehicles not involved in the accident. Ashley Jubenville, then 5, was injured in 1993 while a passenger in a car driven by her father that was involved in a single-vehicle crash. Her mother was a named insured under an Economical Insurance policy in 1992-1993 for two vehicles other than the one involved in the accident. In 2011, Ashley Jubenville commenced legal action for accident benefits under the uninsured auto coverage under her mother’s policy. Economical argued that Jubenville should look to the Financial Services Com-

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MARKETPLACE

mission of Ontario’s Motor Vehicle Accident Claims (MVAC) Fund for coverage. It further submitted Kelly and Kevin Jubenville were spouses at the time of the collision and that Ashley, as a dependent of Kelly, was excluded by Section 265(2(c) of Ontario’s Insurance Act. Among other things, the section notes when a person is claiming damages as an occupant, an uninsured vehicle “does not include an automobile owned by or registered in the name of the insured or his or her spouse.” Ontario’s Superior Court of Justice ruled last October against Economical, a ruling upheld by the appeal court. The “legislative intent” of the Insurance Act is to “internalize the costs to the activity of driving, and not externalize it to the general public who would fund the MVAC Fund.” The high court also ruled the definition of “insured” can have the broader definition in Section 224 of the Insurance Act, or the more narrow definition in Section 265(2).

Claims ALLEGED STAGED AUTO CRASH SPURS CHARGES Four individuals have been charged in connection with an alleged staged auto collision in January 2012. The insurers involved, Aviva Canada and The Dominion, retained engineers to reconstruct the reported collision and contend the vehicle rammed the other multiple

times and deliberately. The Aviva-insured vehicle contained two occupants who both had medical treatment costs submitted on their behalf by a Toronto clinic. Evidence collected during the investigation shows occupants were asked to sign multiple treatment plans by clinic employees. The charges include fraud over $5,000, attempted fraud under $5,000 and conspiracy to commit an indictable offence. None of the charges have been proven in court. Aviva Canada notes related claims cost for the two insurers was more than $45,000.

TELEMATICS PILOT FOR MOTORCYCLE RIDERS Saskatchewan Government Insurance (SGI) has issued an Advance Contract Award Notice looking for a vendor to help shape a usage-based insurance program for motorcycle drivers in the province. “Simply put, those who drive responsibly [will] pay less and those who don’t, pay more,” says Donna Harpauer, minister responsible for SGI. Several hundred riders will be sought to volunteer to have a telematics device installed on their bikes. No rating changes will be made during the pilot.

Technology INSURER WEBSITES GOOD FOR POLICY SERVICES Auto insurance customers in the United States find it easier to use insurance company

websites to service their existing policies than for shopping for coverage, says a J.D. Power & Associates survey. Customers were asked to rate their experience when doing shopping and servicing tasks on a scale of 1 to 5. The ratings of functional tasks were then used for an overall experience index based on a 500-point scale. The study included 7,000 evaluations of 20 insurer websites. J.D. Power reports the industry average for shopping experience was 347, and 414 for overall servicing. When customers find it easy to perform servicing tasks, such as viewing their policies and changing contact information, they are more likely to return to the site and recommend both the site and the insurer to friends and colleagues.

Risk Management INSIDER THREAT NEEDS TO BE ASSESSED: REPORT While almost two-thirds of surveyed Canadian organizations reported being prepared to handle “insider threats,” only about one in seven have developed an internal definition of what those threats could be, the Conference Board of Canada reports. In all, executives at 115 organizations were surveyed. An insider threat is “any person who has the potential to harm an organization for which they have inside

knowledge or access,” notes a conference board report. That person could have a negative impact on an organization’s reputation, financial results, business continuity and other aspects. Only 14% of organizations surveyed have a specific working definition of insider threat, and only about 19% of respondents said they have employee training on managing internal threats. Threats noted by respondents included privacy/ information breaches, fraud and theft/loss/damage.

Reinsurance UNITED NATIONS CALLS LOSSES OUT OF CONTROL The United Nations Office for Disaster Risk Reduction reports direct losses from disasters are about $2.5 trillion to date this century. The office issued a warning to the world’s business community that economic losses linked to disasters are “out of control” and will continue to escalate unless disaster risk management becomes a core part of business strategies. “Direct losses from floods, earthquakes and drought have been underestimated by at least 50%,” UN SecretaryGeneral Ban Ki-moon says. Noting that losses can only be reduced in partnership with the private sector, the report calls for the principles of disaster risk reduction to be taught at business schools and become part of the investor’s mindset.

June 2013 Canadian Underwriter

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PROFILE

Volunteer at Heart Angela Stelmakowich Editor

Karin McDonald, recipient of the “Heart of RIMS” Award in recognition of her years of work with ORIMS, is humbled, touched and still a bit emotional about the honour — a sure sign the course was well worth taking. Ask what Karin McDonald would consider a satisfying legacy, and the recipient of the Ron Judd Heart of RIMS Award would likely respond to give what she has received. McDonald was exposed to heart and passion about risk management early on in her career while working with Brian Carmody, a founding father of the Canadian Capital Chapter of the Risk Management Society (RIMS) Canada. “He acted as a mentor to me,” says McDonald, now director of risk and insurance at Hydro One Networks Inc., where she is responsible for the procurement and administration of insurance, loss prevention and claims management programs. Carmody’s passion for risk management, coupled with a

10 Canadian Underwriter June 2013

deep belief in serving the discipline through volunteerism, proved infectious. Twenty-eight years after she began in the cash management department at Atomic Energy of Canada Ltd. (AECL) in the 1980s, McDonald is still passionate and still a volunteer. “I do it hoping to inspire other people and what greater reward than to have been acknowledged by my peers,” she says. Recipients of Heart of RIMS are nominated by chapters for furthering risk management at the chapter level. For McDonald, that recognition follows her many roles and many years of work on behalf of the Ontario chapter of RIMS (ORIMS). “Karin’s professional decorum directly promotes the risk management profession and sets a very positive image of the Ontario chapter and RIMS amongst its membership, as well as the outside community,” notes one comment in the nomination submission. “I have worked with a number of strong leaders in the past, and rarely have I met someone that I have such uncontrived respect for,” adds another. “It just touched me beyond words,” McDonald says. “You do what you’re very passionate about. I do it for my own personal reasons, not expecting to receive anything for it.” List McDonald’s service to ORIMS and the list quickly grows long: president, 20022003; social director, 2005-

2010; co-chair of industry and exhibit, RIMS Canada Conference, 2008; and cochair, ORIMS 50th Anniversary Committee, Gala Celebration, 2010. Today, McDonald is involved at the RIMS national level, serving on the RIMS Canada Council and as chair of the council’s National Conference Committee. She is also shadowing the secretary position on the council, a position she will assume in 2014.

McDonald touts the benefits of volunteering. “To me, I think you get far more out of volunteering than anyone ever puts into it,” she says. LONG-TERM VALUE McDonald touts the benefits of volunteering, both for the person specifically and for risk management generally. “To me, I think you get far more out of volunteering than anyone ever puts into it,” she says. McDonald notes she has met many, many people, both north and south of the border, as part of her involvement in RIMS. “When you call upon people and they see you in a volunteer role, they often share more information with you,” she says. “You’re investing in your future.” Consider the value of volun-

teering at the registration desk for an event, having an opportunity to meet and chat with all attendees. Consider also that planning an event is not solely about the resulting lunch, meeting, conference or gala. Bringing an event to fruition demands many things: chairing meetings; holding board members and vendors accountable; budgeting; taking part in contract negotiations; project management; problem solving; recruiting; fundraising for charities; and building sponsorship and exhibitor opportunities, to name a few. The value in volunteering is a message McDonald would like to send to all, but perhaps especially to young people. “It’s easy for people who have been around forever to step up to the plate; it’s hard to sell to the young ones coming up that volunteering to advance your career is an important step.” That may be why McDonald works toward mentoring and onboarding new chapter, board and RIMS Canada Council volunteers and members, as well as takes on risk management co-op students through work experience programs.

LEARNING CURVE McDonald gained plenty of her own experience while working with Carmody. When she first started, she says, “I had no experience. I was completely green — didn’t know anything about insurance.”

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PROFILE

That all changed under Carmody’s tutelage. He “loved to sit there and draw diagrams and dummy (risk management) down and show me,” she recalls. “He would spend hours explaining things in detail so that I understood it.” The more McDonald got involved and the more she learned, the more Carmody would give her, including full authority. That taught her to move more cautiously — not to go “gang-busters” just because she could — and to consider

everything. “Sometimes the short-term solutions seem right, but when you look at it in totality, you say, ‘Hmm, no we can’t do that,’” McDonald says. “I really attribute a lot of successes to my early days, to the way I was mentored and taught.” McDonald eventually was responsible for managing domestic coverages at AECL. She left the organization in 1990 amidst massive layoffs. McDonald then took on the task of director of risk management for Minto Developments,

a landlord and land development company with home construction, light industrial, office towers and thousands of rental properties. As would be expected, the risk portfolio at Minto was completely different than that at AECL. The focus shifted to include managing a larger claims portfolio, ranging from construction losses to residential claims. This breadth served to further enhance McDonald’s claims understanding. “I had to figure out how to deal with this, and we had different groups that needed to be dealt with in different ways,” she says. In December 1999, McDonald moved again, this time to Toronto for her current position at Hydro One. “It’s not atomic energy and it’s not a real estate company, but we do have a lot of customers,” she says, all of whom have different needs and must be treated fairly in a consistent manner. Risk management is a lot of different things, too, and is ever-changing. McDonald says she expects her risk management education will continue, pointing out that the entreprise risk management group recently joined Hydro One’s treasury and risk department. “Having both enterprise and operational risk groups within one department — and communicating together — I think is going to provide some synergies, and certainly it’s

going to broaden my knowledge of enterprise risk management.” Then there are considerations around emerging areas, such as cyber and climate change. “A lot of insurers are still in the infancy stages of product development, and are not sure where they’re going to take it, what the losses might be. So it’s an area that’s much under development, both from an organizational perspective, as well as an industry perspective in their responses on how to deal with it,” she says of the former. With regard to the latter, “as our environment changes, as weather changes, we become more technologydriven and products need to be developed,” McDonald adds. Ensuring that risk is always part of the conversation — whatever the particular risk or department involved — stems from the C-Suite, McDonald says. “For it to work and grow, you need to have the buy-in at the most senior level of the corporation,” she emphasizes. McDonald will do her part to keep the risk management conversation going through volunteering at the RIMS national level and espousing the benefits of getting involved. “I’m still learning new things after all of this time,” she says. What would Karin McDonald consider a satisfying legacy? To inspire, to teach and to hear someone else say, “I’m in it, I’m in it for the right reasons and I love what I do.”

June 2013 Canadian Underwriter

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Karen Clark

President and CEO, Karen Clark & Company

The one-size-fits-all approach of current risk modelling precludes customization for specific books of business. What is needed is a more advanced level of catastrophe risk understanding, which will move risk modelling to true risk management. It has been a little over 20 years since Hurricane Andrew, with its US$15.5 billion in losses, ushered in the industry-wide adoption of catastrophe models, forever changing the landscape of the property and casualty industry. For two decades, catastrophe models have been the primary tools used by insurers and reinsurers to assess and manage catastrophe risk. Catastrophe modelling has become synonymous with catastrophe risk management, but companies require a lot more information than probable maximum losses (PMLs) and exceedance probability curves to effectively manage risk.

12 Canadian Underwriter June 2013

Being black boxes, however, vendor models have limitations, notably depriving users of insight into the true drivers of their loss estimates. Model loss estimates are volatile because many model assumptions are based on little or no data. As more complexity is added to existing models, the likelihood of major mistakes and human error increases significantly. And the one-size-fits-all approach precludes customization for specific books of business. Despite awareness of these shortcomings, and in the absence of alternatives, the industry has been relying too heavily on the vendor models. Recent events and model updates have not provided encouragement that accuracy is improving and uncertainty around the loss estimates is much wider than many previously understood. Because catastrophe losses now dominate many of the property lines and are continuing to grow, the market is looking for additional tools. Insurance and reinsurance executives and board members need more insight into companiesâ&#x20AC;&#x2122; global exposures and risk concentrations. Rating agencies and regulators have growing expectations with respect to how well companies understand and can explain their catastrophe loss potential.

Illustration by Dave Whammond/threeinabox.com

Risk Modelling to Risk Management

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A NEW APPROACH The model-only approach is not enough for effective risk management. While the models produce a lot of numbers, they do not necessarily provide insight into the risk. What is needed is a more advanced level of catastrophe risk understanding, as well as more intuitive and credible information for important risk management decisions. Insurers and reinsurers need to be able to build their own proprietary views of risk. In the past, this has been done by licensing one or multiple models and then making adjustments to the model output based on underwriter judgment and other expertise. But model-blending is an inefficient and ineffective way to build a proprietary view of risk. Because the models are black boxes, companies spend enormous amounts of time and resources trying to infer what is going on inside the models by looking at what comes out. Making blended frequency and severity assumptions is not feasible using existing models, so companies typically resort to simplistic weighting formulas. Newer tools and risk management platforms are better suited to building a proprietary view of risk. Open platforms provide flexibility and enable the major assumptions to be properly peerreviewed and customized. In addition, these new approaches offer transparent,

14 Canadian Underwriter June 2013

consistent risk metrics for measuring and managing risk over time.

Delivering consistency Volatility in model-generated loss estimates can be highly disruptive to business strategies. Many companies have developed sophisticated marginal pricing and portfolio management strategies that are highly dependent on the model output.

Since there will never be answers, a consistent set of scenarios representing the likely probabilities of events of different magnitudes in each peril region can be developed. These events can then be floated over portfolios of exposures to estimate the resulting losses. Much of the model volatility is caused by changing assumptions, sometimes in the absence of scientific data in most peril regions. For example, there have been only seven hurricanes to impact the Northeastern United States since 1900, and the last major storm was the Great New England Hurricane of 1938. Because of the paucity of data, scientists cannot pinpoint the probability of a ma-

jor storm in this region with any degree of accuracy. For other perils, such as earthquake, there is typically even less data. Since there will never be answers, a consistent set of scenarios representing the likely probabilities of events of different magnitudes in each peril region can be developed.These events can then be floated over portfolios of exposures to estimate the resulting losses. This is the flip side of the model output â&#x20AC;&#x201D; the probabilities are based on the hazard rather than the loss. There are several advantages to this new approach. While providing probability information, it also clearly identifies exposure concentrations and offers intuitive information for decisionmakers, including boards and CEOs.The scenarios stay the same from year to year, providing consistent risk metrics for measuring and monitoring risk over time. A stable set of scenarios gives an operational advantage because the event losses can be drilled down to individual policies for marginal impact analyses, pricing and portfolio management.

Transparency Traditional vendor models are opaque, meaning users cannot see the assumptions underlying the model outputs.They do not know what mistakes or unique biases might be informing the model calculations. Users can never be certain what drove the significant change in their

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PMLs with the most recent model update. Newer platforms for catastrophe risk management help address the transparency issue. All components of these platforms, including event intensity footprints and damage functions, are visible to the user. With their truly open architecture, these tools allow insurers and reinsurers to utilize the knowledge of scientific organizations around the world. And the open environment means important assumptions can be properly peerreviewed, thereby helping companies better comply with regulatory guidelines and directives.

Flexibility Open platforms also afford greater flexibility because they allow companies to customize key risk management components, such as vulnerability curves,

Making blended frequency and severity assumptions is not feasible using existing models, so companies typically resort to simplistic weighting formulas. Newer tools and risk management platforms are better suited to building a proprietary view of risk. to a specific book of business based on the internal expertise of the user and other external experts. For example, companies with sufficient loss experience can conduct their own detailed claims analyses to fine tune damage functions to more accurately reflect their unique portfolio. And users can â&#x20AC;&#x153;mix and match,â&#x20AC;? using event sets from one scientific organization and damage functions from another for a particular peril region.

A NEW PERSPECTIVE Catastrophe models provided by a small number of vendors have been the dominant tools for making risk management decisions over the past 20 years.

However, newer technology offers insurers and reinsurers more insight into the risk and more control over their risk management strategies, specifically by providing more consistent and transparent risk metrics in an open platform environment. Open platforms can be customized and enable companies to build proprietary views of risk more scientifically and efficiently than model-

blending or adjusting model output. These new tools can be used by companies to build their pricing, underwriting and portfolio management systems around platforms that are informed by, but not based on, existing models. A more complete toolkit enables companies to move from simply modelling the risk to better understanding and managing the risk.

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Turning the

President and Chief Operating Officer, Desjardins General Insurance Group

Desjardins General Insurance Group has launched a new, widely available usage-based insurance (UBI) program in Ontario and Quebec, with plans to expand to Alberta and the Atlantic provinces in the near future. Canadian insurers have been watching the development of UBI in the United States and Europe for some time. In Canada, Aviva Canada ran a limited UBI pilot, but disbanded its Autograph program as of August 2011; Industrial Alliance launched its Mobiliz program (focused on drivers aged 16 to 24) last year in Quebec. Although UBI has been around for at least a decade, only in the past few years has it really taken off thanks to advancing technology, and better and less costly wireless networks. Gone are the days when a device would have to be professionally installed and the consumer would need to periodically unplug it from his or her vehicle, and then plug it into a computer to upload driving information to his or her insurer. Today’s technology allows our customers to plug a cellphone-sized telematics device into

16 Canadian Underwriter June 2013

Corner

Sylvie Paquette

In many ways, it is an ideal time to introduce usage-based insurance (UBI) into the Canadian market. Consumers are currently looking at ways to better control their auto insurance premiums.

the diagnostic port in their vehicles.The customer can then register online to access a personalized, secure online dashboard, which can be used to track driving behaviour and potential savings. UBI programs are now available in most U.S. states, with eight of the 10 largest insurers having UBI offerings. Progressive, the leader in the field, has over 1.4 million UBI customers and last year alone generated US$1 billion in premium volume from its “Snapshot” program. In many ways, this is an ideal time to introduce UBI into the Canadian market, particularly in Ontario, where there is political pressure to reduce what are the highest auto insurance rates in the country. But even in other parts of the country, consumers are looking at ways to better control their auto insurance premiums. Certainly, there is a growing dissatisfaction with some of the traditional predictive factors, such as age, gender, type of car and postal code — not to mention some of the more contentious variables, including insurance or credit score.

There are other factors behind the growth in UBI programs. In Europe, for example, using gender as a ratemaking variable is no longer allowed, and all new cars must be fitted with imbedded telematics by 2015. Although the telematics requirement is aimed at improving safety — enabling drivers to automatically contact the nearest emergency services in the event of an accident — it does provide an opportunity for insurers to piggyback and cost-effectively expand their UBI programs. Another factor supporting UBI growth is the fact that consumers are increasingly comfortable in sharing personal information on social networks and through the use of cellphones and online transactions.

earned based on his or her driving behaviour. We expect about 25% to 50% of new customers will sign up for our two UBI programs — one for Desjardins Insurance customers; the other for customers of our group insurer. A few weeks into the program, roughly 35% of our customers are signing up for the two programs. Of course, customers can opt out at any time without penalty.

UBI programs are popular for a number of reasons. Obviously, good, low-mileage drivers can save substantial amounts. Those good drivers in highrisk categories — such as young males in densely populated urban areas — have the potential to save the most because their premiums are the highest. In addition, there is plenty of evidence that having a telematics device in the car, and receiving regular feedback on driv-

Canada’s Leading speCiaLty insurer

THE RESPONSE Based on the experience of UBI programs elsewhere, low-mileage, low-risk drivers in Canada will be attracted to the potential savings from UBI offerings. As we say in the business, these drivers will self-select. For our program, Desjardins is using a telematics device from Montreal technology company iMetrik that relays driving data over Bell’s wireless network. The telematics device stays in the vehicle for as long as the customer is enrolled in the program. This differs from Progressive’s Snapshot program, which determines the customer’s discount based on six months of monitoring, after which time the customer removes and returns the device. The telematics device used by Desjardins collects information on three key driving behaviours, each of which will influence potential discounts for the user: annual mileage (as much as a 10% discount if under 15,000 kilometres); extent and frequency of hard braking and acceleration (up to 10%); and time of day the vehicle is most likely to be driven (as much as 5% if the vehicle is mostly driven during the daytime at non-rush hour times). A 5% discount is available upon signup, with this being replaced on renewal by whatever discount the customer has

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Not surprisingly, employees with the greater potential discounts (10% or higher) indicated that they were much more likely to sign up for the program when their policy renewed. It is anticipated that early self-selecting customers would probably earn a somewhat higher discount.

ing behaviour, results in better driving. Various studies have shown a big drop in fleet accident rates (93% for Iron Mountain; 56% for the Pepsi fleet in Iceland) following the implementation of a telematics program. In addition, the U.K. company, insurethebox, analyzed more than 300 miles of driving data and determined that the use of telematics encouraged better driving and reduced accidents involving young motorists by 35% to 40%. Another important advantage is the aggregate driving data that is collected. Progressive reported last year that it had collected data on more than five billion real-time driving miles through its UBI.

•

THE CUSTOMER Before launching our two programs, Desjardins ran a four-month pilot with about 200 employees in Ontario and Quebec. Feedback during the program offered insight on how customers would view the technology and potential benefits. Some highlights from the pilot project are as follows: • Installation — Some users were initially intimidated by having to install the device in their vehicle’s diagnostic ports. Clear instructions with graphics helped alleviate this concern. • Driving feedback — Participating employees regularly checked their per-

18 Canadian Underwriter June 2013

•

sonalized dashboards to track driving behaviour records (updated daily), particularly hard braking, acceleration and potential savings. Behaviour changes — Many employees reported that feedback prompted them to change their driving for the better. Some pilot participants even said they drove less, particularly during higher-risk times, because of the financial incentives associated with lower mileage and time of use. Perception — Virtually all pilot users viewed actual driving behaviour as a fair and reasonable way to determine a driver’s premium — even employees who did not earn that large a discount. Young drivers — Employees with teenage drivers said they valued having information about the way their teens drive, and used the information to reinforce good (and safe) driving behaviours. Although there were some concerns about “spying” on their children, the financial savings provided a good reason for highlighting any potentially worrisome driving behaviours. Privacy — Pilot participants (employees) expressed some reservations about having their driving information collected and used. Reassurance was needed to explain that information would only be used to determine savings, and not for any other

purpose, for surcharges or to be shared with any other group. The pilot participants were on track to realize average savings of about 12%, in addition to any other discounts they were receiving. Not surprisingly, employees with the greater potential discounts (10% or higher) indicated that they were much more likely to sign up for the program when their policy renewed. It is anticipated that early self-selecting customers would probably earn a somewhat higher discount.

THE FUTURE It is clear that UBI will mean big changes to Canada’s auto insurance industry over the next several years as more and more insurers introduce their own programs. This will help reduce the industry’s reliance on traditional, less accurate predictive variables, give drivers greater control over their insurance costs, and deliver social dividends in the form of safer and possibly less-congested roads. But that is only the beginning. Telematics offers tremendous potential for use in managing claims, fighting fraud and providing a wide range of value-added services, such as roadside assistance, automatic emergency calls, theft prevention and driver feedback, to name a few.

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Information Highway The insurance industry has used predictive analytics for underwriting, rating and claims for years. Now, a growing number of municipalities are using the same techniques for a different purpose: road safety. Freelance Writer

Data is the new game changer in traffic safety and design of municipal roadways, especially at intersections and on major corridors. While much has been written about vehicle design, analyzing digital data is increasingly seen as a critical tool in identifying high-risk locations and making structural engineering changes to improve safety. Some cities have taken an active role in gathering data, using the latest business intelligence tools to schedule road retrofits according to cost-benefit analysis. And more are looking into providing real-time information for drivers to promote “situational awareness.” Through digital message boards and even wireless devices, cities can flag drivers about certain conditions, such as inclement weather, unexpected traffic back-ups and construction. The City of Edmonton is a Canadian pioneer in applying data analytics to road safety. It created the Office of Traffic Safety (OTS) in 2006, with the twin goals of reducing collisions and improving the flow of traffic on municipal roadways. The city has seen a drop in collisions per year from slightly more than 28,520 in 2007 to 23,238 in 2012 — a reduction of more than

20 Canadian Underwriter June 2013

18%. Moreover, municipal statistics indicate Edmonton has witnessed a decrease of 11,606 in injury and fatality collisions, with an estimated cost savings of $780 million. “We take an evidence-based approach to traffic safety,” says Gerry Shimko, executive director of the city’s OTS group, which has 27 staff, including a seven-member data analytics team. “We are using historical data to predict what is going to happen, and then introducing countermeasures to reduce collisions, injuries and fatalities. To do this, we have to be very diligent in data collection and data analysis.”

DIGITAL FOOTPRINT In terms of data collection, Shimko says the city gathers a range of information from traffic cameras, roadside devices and road sensors that create a “digital footprint.” Then analysts use software to examine various factors, such as rates of accidents, where specifically accidents occurred, time of day, conditions and causation, among others. “At the start, we relied on manual processes to analyze the data, but now we use business intelligence solutions to look at the data, integrate it and use it for decisions,” Shimko says. “We can

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then put that data on top of a city road map and identify the intersections and corridors that have the higher number of collisions.”

RIGHT AND WRONG One example that stood out was the prevalence of collisions at urban intersections with dedicated right-hand turn lanes, with 30% of accidents occurring at these “hot spots.” The concern involved a single geometric standard for all right-hand lanes that likely contributed to higher than average rearend collision rates, potential reduced visibility for drivers and increased vulnerability for other users (pedestrians, cyclists) at busy intersections. The solution was to develop alternate guidelines for several different righthand geometric treatments that road designers could tailor to specific intersections. “We have made infrastructure changes through a targeted program that, for example, alters the angle of the turn,” Shimko observes. “We have seen a 75% reduction in collisions for each one changed.”

Robert Merritt, the region’s traffic operations and safety co-ordinator. “We get collision data from the police, and we input that into our system. We have data from all four municipalities within the region, and all of that data resides on one system.” Halton has also implemented red light traffic cameras at two intersections, and plans to add five more this year. “So far, we have seen an 80% decrease in rightangle collisions, the kind of ‘T-bone’ accidents that cause significant injuries,

DESIGN FLAW Another issue involves traffic cameras that record red light violations at certain intersections. Edmonton has more than 50 “intersection safety cameras,” which monitor both red light running and speeding. But in some cases, the design of the intersection may be a contributing factor to violations, Shimko points out. “We are trying to reduce those other factors that may have been overlooked,” he says. “For example, we noticed a lot of vehicles were running the red light at a certain intersection, so we looked at it in more detail. We got our traffic engineers involved and we changed the profile of the light at the intersection.There were some visibility issues that contributed to the problem at this intersection.”

DATA-DRIVEN ROAD SAFETY Other municipal regions across Canada are embracing data analytics.The Region of Halton in Ontario is taking a “datadriven approach to road safety,” reports

22 Canadian Underwriter June 2013

Weather plays a role in specific types of accidents, like follow-too-close collisions when there is precipitation. The idea is to use data to create situational awareness and communicate real-time with drivers through digital messaging devices on roads. fatalities and damage,” Merritt says. The red light traffic cameras are separate from a broader campaign in Halton Region, known as the Comprehensive Road Safety Action Plan. Through this program, the region focuses on education, engineering and enforcement. It uses measurements called “safety performance functions” and conducts “network screening” to identify key locations,

such as major intersections or highvolume traffic corridors, Merritt says. “This gives us a list of higher-risk locations and we can prioritize based on safety performance,” he says. “Then we can look at engineering changes, which may involve things like pavement conditions (skidding) or advanced turn signals.”

BRINGING DATA TOGETHER Halton Region has worked with TES Information Technology, a firm that helps cities improve data collection and analysis for road safety. TES president Greg Szrejber suggests that Halton Region is fortunate to have data residing on one system, which is not always the case in large municipalities. “To do proper analytics, you need data from three areas — traffic count, collisions and infrastructure,” Szrejber says. “Several cities have this data in different systems, so it is hard to put together.We integrate all three into one corporate database, and this can then be analyzed through software tools to make improvements to road safety.” Szrejber explains that once the data is together in one source, “you can do all sorts of different analysis — by historical records, by types of locations, such as intersections with stop signs versus signalized traffic lights, by types of collisions, such as right-angle versus rearend collisions.“ He also notes more cities are using data analytics not just for infrastructure improvements, but also for core road and highway construction projects. Referring to construction of right-hand turn lanes on rural highways and roads that previously did not have such lanes, Szrejber says “if it costs $20,000 to put in a right-hand turn lane, but that results in a 20% reduction in collisions, many cities are saying: ‘We should just do it.’ There is that level of input into construction projects.”

SMARTER CITIES The City of Edmonton has also benefited from an alliance with a technology provider, in this case IBM through its “Smarter Cities Challenge.” Launched

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by IBM’s Corporate Citizenship division in 2010, this is a competitive grant program in which $50 million in technology and services is given to 100 municipalities worldwide over three years. In Edmonton, IBM worked with its traffic safety office on data analytics and road safety. In particular, IBM’s focus on road transportation involves “real-time data that’s already being gathered by RFID tags, GPS devices, road sensors and smartphones to paint a very detailed picture of what’s happening across a complex transportation system at any given moment in time,” reports IBM spokesperson Carrie Bendzsa. “The wave of the future in transportation is to move from today’s reactive model — in which we discover a traffic problem in real time and then scramble to fix or avoid it — to a predictive model, which uses advanced analytics to model what traffic patterns are likely to be in the near future,” Bendzsa notes. Shimko credits IBM with improved turnaround time in data integration and a focused approach to using — and verifying — one true source of data. From this, the City of Edmonton has become an innovator in driver communication and road safety, what Shimko calls “situational awareness.” “In Edmonton, as in most northern cities, weather is a huge factor, so we are trying to predict how weather will play a role in specific types of accidents,” he

says. “On days with precipitation, we see a significant increase in ‘follow-tooclose’ collisions. We want to create that situational awareness and communicate real-time with drivers through digital messaging devices on the roads.” The city is also looking to share data more openly with other municipal departments and agencies, including the police. As part of its “speed management continuum,” Shimko says the OTS has

Rates of road accidents, where accidents occurred, time of day, conditions and causation are among the data considered before it is integrated and used for decisions. The data can then be put on top of a city road map to identify intersections and corridors that have the higher number of collisions. collected data on licence plates through intersection safety cameras and other digital devices, giving this information on high-risk drivers to police. “We see in some of our data a lot of overlap between crime and traffic incidents in high-problem areas or hot spots,” he says. “For police, they can use this information to allocate limited resources.” Shimko adds that a process known as

Data-Driven Approaches to Crime and Traffic Safety (DDACTS), which integrates location-based crime and traffic collision data, is becoming more prevalent in cities in the United States and will likely emerge in Canada in the near future.

SETTING DESIGN STANDARDS Police are not the only group interested in data analytics and road safety. Szrejber notes that organizations, such as the National Highway Traffic Safety Administration in the U.S., are publishing guidelines on data and road safety improvements. These manuals are setting standards for road design — something that lawyers have noticed. “Lawyers are increasingly researching safety manuals and using them in collision-related lawsuits,” Szrejber says. “They are asking cities if they follow the guidelines and holding them accountable.This is a significant liability issue.” Another potentially interested party may be the insurance industry, which could use road safety and collision statistics as underwriting and rating factors for auto insurance in municipalities and regions. Is it possible to align insurance premiums, at least to some extent, with the degree to which cities have adopted the latest safety measures in roadway and intersection design? That is a question with a moving target, as data analytics and traffic safety continue to evolve in municipalities across Canada.

June 2013 Canadian Underwriter

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Aftermarket

Overhaul Greg Horn

Vice President, Industry Relations, Mitchell International

The economic bubble has burst, with the values of used vehicles being appraised in Canada down significantly over the last two quarters. But conditions may be ripe for better parts supply at competitive prices and a solid delivery infrastructure in more provinces. A frequently asked question at industry events dealing with the auto market in Canada is, â&#x20AC;&#x153;What has changed since last year?â&#x20AC;?The answer lately has been one of the biggest changes is the softening of used vehicle values, largely as a result of the dramatic drop in new vehicle sales in the country since the financial troubles of 2009. Statistics Canada reports that sales that year were the lowest in a decade, and sales in the following two years, 2010 and 2011, were not as robust as those seen in previous years. Those conditions set in motion a kind of domino effect that led to an increase in the value

24 Canadian Underwriter June 2013

of used vehicles, which was further driven by two additional factors: financial institutions restricted leases; and rental car and fleet companies (the major suppliers of late model two- to four-year-old used vehicles to the used market) kept vehicles in service longer. The law of supply and demand kicked in, increasing resale values across the board. Eventually, the effect of diminished supply bled over into the claims environment, causing an increase in the values of vehicles being appraised. As a result, instead of being declared total losses, more and more borderline vehicles fell into the repair category. Canada saw total loss rates tumble to percentages not seen in more than 10 years. However, all economic bubbles have to burst some time, and that time is now for used vehicles. In the last two quarters, the values of vehicles being appraised have fallen more than $500 from the preceding quarter, signalling an increase in the number of damaged vehicles that will be declared total losses. Based on these trends, it is anticipated that total loss percentages of claims made will increase by a full percentage point or more in 2013 compared to 2012. The second condition worth examining when discussing total losses is the value of salvage and

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New Motor Vehicle Sales 2008

2009

2010

2011

20121

Seasonally Unadjusted Vehicles New Motor Vehicles

1,674,145

1,484,856

1,584,499

1,620,577

1,716,803

894,506

747,671

710,214

691,079

759,024

North American

557,422

426,709

392,970

433,452

473,018

Overseas

337,084

320,962

317,244

257,627

286,006

779,639

737,185

874,285

929,498

957,779

North America

667,139

639,306

761,332

783,041

797,516

Overseas

112,500

97,879

112,953

146,457

160,263

Passenger Cars

Commercial Vehicles

: revised. Source: Statistics Canada, CANSIM, table 079-0003 and Catalogue no. 63-007-X.

Canadian Dollar to Euro Exchange Rate 2008-2013 YTD 1.7

1.6

1.5

1.4

1.3

1.2 2008

2009

2010

2011

2012

Source: advfn.com

the factors influencing them.The second chart above tracks the Canadian dollar to Euro exchange rate over the last five years, illustrating the strengthening value of the former. That stronger rate means fewer Canadian salvage vehicles will be sold to international buyers, reducing competition and inevitably lowering salvage values.

STAYING PUT Ultimately, the stronger Canadian dollar should benefit alternate parts supplies, both aftermarket and recycled. With fewer vehicles going overseas, the salvage for harvesting parts will also stay in Canada, increasing supply and lowering salvage part prices. A stronger Loonie will also benefit

26 Canadian Underwriter June 2013

the aftermarket parts supply. Because the vast majority of aftermarket parts come from Taiwan, favourable exchange rates against the recession-weakened Chinese Yuan will likely result in more attractive aftermarket parts pricing. Add to these factors LKQ Corporation’s plans for greater expansion in the Canadian market in coming years, and the industry could see a better parts supply at competitive prices with a solid delivery infrastructure in more provinces, something that has been lacking in the past.When one considers how Canadian insurance claims parts performance in repairable estimates has been lagging against companies in the United States, the lack of ability to supply alternate parts beyond the

major metropolitan cities is seen as one key reason for the performance gap. The second area to examine regarding Canadian aftermarket parts performance is actually an advantage for the Canadian market. When looking at the market share of top-selling nameplates in the country, the Honda Civic has had a 15-year run at the top. On the truck side, the F-150 is tops in sales and the remaining spots are taken by the Corolla, Silverado and Dodge Caravan. Why is this important? These vehicles all have fairly long styling cycles that are very attractive to aftermarket parts producers. The vehicles are very popular in the U.S., Canada and Mexico, meaning there are fewer parts — or in parts distribution terminology, “stock keeping units” or SKUs. The fewer SKUs to warehouse to serve a large market, the better. Longer product cycles mean a longer selling life for a particular part, so the cost of development and stamping of the part can be amortized over a longer run of parts, lowering the cost of production and increasing the cost advantage over the original equipment manufacturer (OEM) part. While OEMs may counter with putting more of their OEM parts on “beat the competition” pricing programs — and have in recent years — the advantage is still on the aftermarket part producer’s side. The ability of the aftermarket parts producers to “cherry pick” the most profitable parts to replicate is an undeniable advantage. The aftermarket producers can also eliminate production of a part when they find it to be less profitable, a luxury that the car makers are prohibited by law from doing for a period of time after the car model styling edition ends.

TRUE WORLD VIEW The OEMs have long used the term “world car” to describe new model launches (Ford used the term to launch the North American version of the Escort in 1980, though it was vastly different from the European model). But as time progresses, large car makers are actually developing true “world car”

platforms that share sheetmetal, also creating an advantage for the aftermarket parts producers. Suddenly, the top-selling Ford model is not only a North American model, but the sheetmetal is the same in the Americas, Europe and Asia and Australia. Also as quickly, the market for aftermarket parts for the vehicle has tripled, as the fenders, hood and grille are identical in four continents, increasing the demand and lowering the per part production price because larger production runs can be done. An interesting outlier to this comes in at Canada’s 7th best-selling car, the Volkswagen Jetta. In order to increase sales in the U.S. and Canada, the company has introduced two models that are unique to North America. The North American models have unique sheetmetal from their Europeanmade counterparts. The combination of being unique to North America and smaller sales volume compared to the

While OEMs may counter with putting more of their OEM parts on “beat the competition” pricing programs — and have in recent years — the advantage is still on the aftermarket part producer’s side. The ability of producers to “cherry pick” the most profitable parts to replicate is an undeniable advantage. Japanese and domestic nameplates noted above, make them a much less likely target for aftermarket parts production.

BREAKING THROUGH Looking out at the next five years in the Canadian collision repair market, a few conclusions can be drawn. Because of falling resale values related to the

increase in new vehicle sales, the percentage of claims made that result in a total loss will climb. The repairable average severity will likely also go up because of labour rate increases brought about by an improving economy. To help offset this, parts will become an increasing area of focus for cost containment, pressuring the production, supply and distribution networks of both aftermarket and salvage parts to break through the barriers limiting the increase in the Canadian market. The improvement of the distribution infrastructure in Canada of alternative parts can be seen today by the advent of online salvage parts sourcing and the increased presence of LKQ/Keystone in Canadian provinces through the acquisition of Cross Canada collision parts specialists. With these pieces in place, the alternate parts performance in the Canadian market can only increase. The question remains — by how much?

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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.

To learn more about our comprehensive portfolio of insurance products and services, and the industries we serve, visit www.cnacanada.ca.

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ommercial ommitment

Catherine Smola President and CEO, Centre for Study of Insurance Operations

The importance of commercial insurance cannot be underestimated in the broker channel. Brokers need to reinforce and protect their commercial book of business with workflow efficiencies and technology advancements.

The Centre for Study of Insurance Operations (CSIO) has made excellent progress over the last year on meeting the objectives detailed in its three-year strategic plan, launched at the start of 2012. Efforts included supporting commercial lines advancements and helping improve commercial lines efficiencies in the broker channel. Improving efficiencies of the broker channel is the core of the CSIO strategic plan, which defines the organization’s key objectives. These include the identification of four strategic pillars designed to deliver on a number of new measures to move beyond the maintenance of standards and forms. CSIO is committed to providing members with increased standards implementation support, facilitating collaboration to determine industry best practices, and identifying new technology initiatives. Targeted efforts seek to meet ongoing and emerging challenges, including those in commercial insurance. The importance of commercial insurance cannot be underestimated in the broker distribution channel. Today, Canadian brokers have a commanding commercial lines market share of 91%, but direct writers have been looking to capture a greater share of this market. Although the erosion of commercial lines business to direct writers has been much slower than personal lines, brokers still need to reinforce and protect their commercial books of

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business with workflow efficiencies and technology advancements. Directs have been able to develop harmonized systems of data collection through significant investments in technology. Using CSIO standards and forms, brokers can harmonize data collection and delivery without such a significant financial investment. Because most brokers have access to multiple insurers and trading partners, they can even achieve this harmonized data collection on a much larger scale than directs. “Often on the broker side, you have a number of different companies that want their own specific forms, but having one comprehensive form that encompasses all the information you’re looking for is very helpful and streamlined for the broker,” suggests Jennifer Soper, director of corporate underwriting at Northbridge, one of the largest commercial insurers in Canada. “The client would then only have to complete that form once, rather than multiple forms from other companies. CSIO forms give us the ability to make sure what we use outside of CSIO is current and comprehensive,” Soper says.

EXPERT VIEWS Over the last year, CSIO has been working on bringing key industry experts with the right expertise and knowledge to its working groups. The idea is to ensure consistent implementation

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of standards and forms across the industry. These volunteers have been vital in bringing key industry concerns to the table and ensuring standards and forms are kept up to date. This is especially true in the commercial market, where less regulation exists than in personal lines, allowing insurers to ask their own set of questions, which can cause inconsistencies and inefficiencies. Soper points out, “When we do receive CSIO forms as part of a package from brokers, the staff here at Northbridge are comfortable that we participated in structuring those forms as part of the membership of CSIO.” The expertise of working group volunteers, coupled with a focus on commercial lines, allowed CSIO to release seven commercial forms in 2012, and another three significant commercial forms to date in 2013. Beyond that output, CSIO has also implemented a number of changes to speed up the standards-development process, including changing the working group format from an in-person meeting to a web conference, allowing for increased participation and a national presence.

ENHANCED COMMUNICATION The new commercial forms come with a new mode of delivery, meant to enhance communication of standards and forms releases to members. In line with its key value to be proactive in recognizing industry challenges, CSIO has worked with volunteers to ensure the latest emerging trends are addressed in its standards and forms releases. This is reflected in CSIO ’s decision to send out releases with enhanced communications that clearly outline highlights. In this vein, CSIO has been developing webinars and videos to educate members on the benefits of consistent implementation of standards and forms across the industry. Though consistency is a goal, it is essential that CSIO standards be flexible enough to be adapted to a variety of business contexts. It is through this flexibility that standards have contributed to important emerging trends

in the commercial insurance market. The use of insurance-related mobile applications, for example, is becoming increasingly popular with customers in both personal and commercial lines. Policy Works used CSIO standards to develop its innovative Producer app — the industry’s first commercial lines mobile app — which helps brokers prospect for commercial insurance policies in the field. “The Producer app is the first mobile implementation using a data set based on CSIO standards. Having the standards in place is largely responsible for where we are in commercial lines connectivity today as an industry,” says Kevin Campbell, president of Policy Works, which develops commercial management systems for the Canadian insurance industry.

Beyond data capture, CSIO forms will also allow members to quickly identify errors and omissions in forms using data validation rules, and can be extended to easily integrate form data with enterprise databases and applications through XML standards. GREEN ASSETS CSIO’s recent form releases also speak to another emerging trend in the commercial market: eco-friendliness. More and more customers are paying attention to the environmental reputation of companies when making their purchasing decisions. Brokers need to be able to protect their customers’ allimportant green assets, which are increasingly becoming key elements in a business’s competitive success. CSIO incorporated green aspects into the new Commercial Insurance Application, released in May, including questions about green roofs and use of alternative energy, such as geothermal, solar and wind. Eddy Chung, forms analyst at CSIO, facilitated the effort needed to simplify the commercial forms, which had a lot

of overlapping elements, and to reduce duplication. “Instead of duplicating our efforts, there was a call to thoroughly investigate these sections and reuse them in various forms for consistency and ease of implementation,” Chung says of the working groups. At the Commercial Insurance Application working group, for example, “everyone came together and decided the entire liability/casualty portion of the form should be replaced by the revised CGL application.”

SMART FORMS Another of CSIO’s strategic pillars is to deliver leading-edge technology standards and solutions for the broker channel. One such innovation is the smart form, which holds the potential to allow CSIO members to capture data more efficiently and accurately. Commercial lines could benefit the most from implementing smart forms because this line of business still relies heavily on manual processing of industry applications. Beyond data capture, CSIO forms will also allow members to quickly identify errors and omissions in forms using data validation rules and can be extended to easily integrate form data with enterprise databases and applications through XML standards. CSIO plans to continue working on the release of new commercial forms in 2013, including the Inland Marine, Builder’s Risk and Contractor’s Equipment Applications, the Crime Insurance Application and the Welding Warranty Application. CSIO has also initiated a project on another technology solution that will benefit commercial lines, eSignatures, which promises to enhance customer experience by enabling straight-through processing. “With eSignatures, the ease of electronically sending an application to a client, having them complete it and then having them attach an eSignature to it and send it back to the broker will definitely speed up the process of getting information to and from the broker, and then to the company,” suggests Soper.

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Facilitating the Transaction Representations and Warranties insurance, as an integrated transaction solution on mergers and acquisitions, is becoming a more viable alternative among intermediaries for closing a deal. Dane Hambrook Vice President, IronPro and Mergers & Acquisitions Insurance, Ironshore Canada Ltd.

Representations and Warranties (R&W) insurance has undergone a dramatic evolution in execution and perception over the last few years and is now being actively used as an integrated transaction solution on various types and sizes of mergers and acquisitions (M&A) in Canada. Once regarded as expensive, slow and too intrusive of an underwriting process to be a valueadded M&A risk transfer solution, awareness around the potential uses, benefits and features of R&W insurance is increasing. After a brief slowdown in Canadian M&A activity in the first part of 2013, enthusiasm for Canadian M&A activity, especially in the private middle market segment, has been renewed by continued uncertainty in the global economy and the perceived recovery and resurgence of the debt markets. But many transactions face

30 Canadian Underwriter June 2013

challenges en route to closing, whether the issue is a specific transaction-related risk attribute or a value consideration, and some will fail where others succeed. In this tight M&A market, buyers and sellers have a diminished appetite for risk, which is driving an increased appetite for creative risktransfer and deal-facilitation solutions such as R&W insurance. The current state of the Canadian R&W insurance market â&#x20AC;&#x201D; with competitive premiums and improving awareness levels among corporate lawyers, private equity and specialty insurance professionals â&#x20AC;&#x201D; has a similar feel to when private company director and officers (D&O) liability insurance began taking off.

EVOLVING PRODUCT The key drivers for R&W insurance in 2013 will be economic conditions with distressed sellers who have weak financial covenants, a diminished appetite for risk by cautious buyers, corporate refocusing leading to sales of non-core assets, continued appetite of foreign strategic buyers and foreign private equity for Canadian assets, and a desire by Canadian corporations and funds for international diversification. Although available in the Canadian market for

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more than a decade, R&W insurance here remains a relatively under-utilized solution on M&A transactions. Since R&W insurance started being actively utilized in the late 1990s, the majority of this business being in the United Kingdom, the specialized insurance product has undergone an evolution. Having evolved from its sell-side liability risk transfer roots to an integrated deal facilitation solution, the insurance is commonly used (and is sometimes automatically built into the sale and purchase process) in jurisdictions such as Europe, the United States,Australia and now Asia. It is estimated that approximately 5% of international corporate or strategic M&A transactions, and approximately 75% of private equity transactions, use R&W insurance. It is anticipated the adoption and utilization of a local, “Canadian” underwriting approach to this insurance segment will continue to improve the

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solutions, service, process and perceived value within this marketplace.

BUILDING PROTECTION R&W insurance can protect either the seller or the buyer for financial losses resulting from breaches of representations and warranties made by the seller in the sale and purchase agreement (SPA). Such policies cover the unknown, but can be specifically tailored for a transaction where there are identified issues, including tax or outstanding litigation. Regardless of the structure of an M&A transaction, all SPAs have two important sections that are heavily focused areas of negotiation: R&W and indemnification. As net liabilities are identified during the due diligence process and the buyer tries to determine the scope of the exposure, understandings are reached between the buyer(s) and seller(s) as to whether — and to what extent — each party is responsible for the liability. Often, the SPA calls for the seller to in-

demnify the buyer for some or all of the liability; sometimes, the seller is asked to post a sum of money in escrow to provide security for its agreement to indemnify. These SPA provisions are called “representations and warranties.” If either the scope or duration of the indemnity, or the amount of security provided in connection with the indemnity, becomes a point of contention, this can delay, or even derail, a transaction. Although not a substitute for proper disclosure by the seller or proper due diligence by the buyer, R&W insurance is available in connection with exposures associated with many transactions, including but not limited to, cross-border deals, fund exits and strategic purchases. As R&W insurance policies are customized to each deal, they will often mirror time limits and de minimis values in the SPA, and can be written so that either a buyer or seller of the M&A transaction is the insured. The most obvious utilization of an R&W policy

Open minds. Better solutions. At Sovereign General, we believe that open minds create better solutions. Our experienced professionals are able to create innovative solutions for technology companies because we realize that no two companies are the same. We have brought together a dedicated team of underwriters who are focused on understanding the industry and finding creative solutions to address your client’s needs. So the next time you are trying to navigate cyberspace when faced with an IT risk, contact Robin Hylands at (416) 673-5077 or Ivan Au at (416) 673-5062. sovereigngeneral.com

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These SPA provisions are called “representations and warranties.” If either the scope or duration of the indemnity, or the amount of security provided in connection with the indemnity, becomes a point of contention, this can delay, or even derail, a transaction.

occurs when a seller is unable to provide adequate levels of indemnification, or where the buyer feels the seller has a weak financial covenant. Insurance can offer easier access and a better financial covenant than some protection offered by sellers. Under a seller-side R&W policy — which offers third-party liability protection, such as defence costs and damages, to the seller — the insured is the seller and coverage is triggered once the buyer submits a claim against the seller for a breach. Seller policies provide protection to sellers for unknown breaches and can ensure severability from other warrantors (even in the event of fraud) and be a strategic consideration in eliminating transaction obstacles, expediting the sale, reducing contingent liabilities and potentially increasing the return. Under a buyer-side R&W insurance policy, which offers first-party protection to the buyer for loss resulting from a breach of warranty, the insured is the buyer and submits claims for a seller’s breach directly to the insurer to obtain coverage. Buyer-side policies offer such benefits as protection against seller fraud, enhanced warranty protection, extended warranty duration and/or easement of indemnity collection concerns, especially in transactions with multiple sellers potentially located in multiple locations. There is sometimes an assumption made that a D&O insurance policy will cover a client for the contractual risks

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of selling the business (i.e., representations and warranties given in a SPA). However, an R&W insurance policy is specifically tailored to the risks of selling a business, and is designed to protect buyers or sellers for the full survival period of those obligations (as long as seven years). Transaction parties usually wish to settle their disputes privately, without the attention of the media or their shareholders or competitors. As such, few proceed as far as the courts, with most settling privately.Those that reach the courts are often high profile and may involve actual or alleged fraud.

CLAIMS MATTERS Premiums for R&W insurance policies — calculated as a percentage of the policy limit, usually a small proportion of sale proceeds — generally range from 1% to 4%, depending on the size of the insurance policy limit compared to the size of the transaction. In most cases, this can be an accretive proposition in comparison to a large indemnity and associated holdback or escrow with an extended survival period. To illustrate, a $100-million transaction with a 25% indemnity cap provision ($25 million) and a 10% escrow requirement ($10 million) may purchase a R&W policy of $25 million, which may have a premium of approximately $500,000 (2% of policy limit, but only 0.5% of the transaction value). The R&W insurance policy deductible

will generally be equal to 1% to 3% of the value of the transaction or purchase price (or approximately $1 million in this example). In many cases, the insurer will charge an upfront underwriting fee ($10,000 to as high as $35,000) since considerable due diligence is required in the underwriting process. Some insurers may be willing to refund the underwriting fee off the premium should the policy be eventually purchased; however, this is not always the case and may be dependent on the transaction and the insurer In addition, most insurers are willing to offer a non-binding indication on a prospective transaction so the client can make a more educated decision with regard to whether or not to pay the underwriting fee and move forward with the formal underwriting process. The uncertain economic conditions have led to an arduous M&A market as of late, which has driven buyers and sellers to employ new facilitation tools that will continue to evolve. Over the long term, R&W insurance is expected to help improve efficiency and flexibility in the sale and purchase process. Although not a solution for every transaction, where transactions contain a party who wishes to transfer liability or the parties involved encounter an insurmountable obstacle prior to closing, R&W insurance can be the very solution to aid in removal of these obstacles and to help facilitate the transaction.

NAVIGATE YOUR WAY TO VICTORIA BC ON OCT 6–9 2013 TO DISCOVER THE FUTURE OF RISK MANAGEMENT. The BC Chapter is excited to invite you to a city proud of its rich heritage, historic downtown, gorgeous gardens and parks, and scenic Inner Harbour. It’s the perfect backdrop for this voyage of discovery, chart your course for 2013 RIMS Canada Conference in Victoria, BC. The organizing committee has its sails fully furled as it navigates past the buoys marking the final months. Our program committee is putting together an exciting nautical map with ports of call at ERM, Claims, Legal and Insurance, with 25 concurrent sessions over 6 blocks. Our exhibit hall is already 75% full; be sure to meet your friends and colleagues on the exhibit hall floor starting on Sunday. Tuesday night’s first port of call is our Rose Compass Reception followed by the Discovery Regatta. The Convention Centre is connected to the historical Fairmont Hotel overlooking the pictureseque Victoria Inner Harbour. There are six conference hotels, Fairmont Empress Hotel, Marriott Inner Harbour, Hotel Grand Pacific, Executive House, Inn at Laurel Point, Chateau Victoria Hotel & Suites; all accommodations are within walking distance. Look to our website www.rimscanadaconference.ca for all the latest information. The local organizing committee and all our volunteers look forward to seeing all delegates and industry partners.

Join other risk and insurance professionals on a voyage of Discovery at the 39th Annual RIMS Canada Conference.

OCTOBER 6–9, 2013 The Victoria Conference Centre

Well in Hand There appears to be little argument: mobile devices have become a normal part of everyday life and incorporating their use into the business side of insurance is not only advisable for brokers, it is imperative. But are brokers ready to take a mobile leap toward real-world business applications? And what must be done to successfully ride the wave of customer expectations? ANGELA STELMAKOWICH

34 Canadian Underwriter June 2013

he use of mobile devices has become so inextricably intertwined in daily living that it seems odd when devices are not in plain sight — whether at work, home or play. The near-panic induced by a chosen device being out of reach, followed by the relief of its return to a familiar grasp, signals a combination of reliance and preference that is fuelling user expectations in an on-the-go culture. Expectations around access and ease of use touch all facets of life. Those providing insurance-related services are no exception. Whether a customer’s chosen mobile device is a smartphone or a tablet — and everything in between — expectations are increasing and show no signs of abating. With customer expectations, however, come questions that need to be asked and decisions that need to be made: What information should be available? How do current systems mesh with going mobile? And do groups of customer have different preferences that demand different solutions? At the end of it all, there must be solid customer service — that is, being available with whatever information is needed to answer whatever question is posed.

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COVER STORY

Well in Hand GREAT EXPECTATIONS Regardless of whether the mobile device is a smartphone, laptop or tablet, all are designed to be close at hand. To understand how important that is to users, consider these survey results from Ipsos Open Thinking Exchange and Ipsos Global @dvisor: 67% of respondents reported they never or rarely turn off their mobile phones or smartphones. “There is no denying that the world is going mobile. More than 15% of the world’s Internet traffic comes from a mobile device (which includes tablets), and brokers must accommodate this,” says Brett Boadway, director of broker relations and communications for Insurance Brokers Association of Ontario (IBAO) in Toronto. “It’s not unreasonable to assume that more than half of the prospective or current customers are interacting with the brokerage website while they’re on the go,” Boadway says. “We need to be multi-modal. We need to be able to do business the way the consumer wants to do business at that moment,” says Peter DaSilva, president and chief operating officer of Cornerstone Insurance Brokers Ltd. in Woodbridge, Ontario. Bill Redford, director of development at Keal Technology in Toronto, would likely agree. “Customers want to be connecting with insurance brokers in multiple ways. It will be the broker’s ability to use all of the technology available to meet the needs of the ‘new customer’ so they will continue to use the broker insurance stream,” Redford says. “The consumer is looking for ways to do things by themselves, self-fulfill, if you will,” DaSilva notes. “We have to be able to interact with them via chat, via text and give them the ability to look at their own stuff in their pajamas, from their house, from their tablet, if that’s what they want to do.” Redford sees consumer online selfserve built on the foundation of automated real-time policy change as one of the next technology waves for insurers and brokers. “Currently in development, this offering will give brokers the ability to offer their existing clients a 36 Canadian Underwriter June 2013

broker-branded website, built into the broker’s existing site, to view, get quotes and, in some cases, change their information in real-time,” he reports. “The data would move from the website, through the broker management system (BMS), to the carrier and back to the policyholder in real time. Available transactions are 100% determined by the broker and the relationship with each client and carrier,” Redford says.

“The consumer is looking for ways to do things by themselves, self-fulfill, if you will,” Peter DaSilva notes. “We have to be able to interact with them via chat, via text and give them the ability to look at their own stuff in their pajamas, from their house, from their tablet, if that’s what they want to do.” Applied Systems offers a browserbased product, so it form fits to the device being used, meant for the end-user, says Jeff Purdy, the company’s senior vice president and general manager for Canada. It enables the end-consumer to

have access to their information stored in certain Applied Systems products so they can, for example, view renewal documentation, upcoming billing and, claim status, Purdy says. The option “basically allows the broker to brand itself on the mobile device of the customer,” he says, and enables that customer to take an action. An end-consumer can now initiate a change, but Purdy says looking forward, he can see a time when the consumer will be able to complete the change. In general, Brenda Rose, vice president/partner at FCA Insurance Brokers in Toronto and technology champion at Insurance Brokers Association of Canada, says customer requests can certainly be sent, but changes should not be bound until reviewed by a licensed individual. “We’re not talking about buying a book from Chapters here. This is a financial transaction that could impact your financial security,” Rose says. Customers must understand the consequences of any such change, and brokers will be able to provide that, she emphasizes.

DOWN TO BUSINESS The need to expand offerings in platforms of customers’ choosing is a message that is starting to be heard, at least by some. Massachusetts-based FirstBest Systems reported in May that a survey of global insurance carriers and managing general underwriters in the United States shows that using smartphones and tablets to provide customer service has increased. “Mobile functionality is no longer just a personal convenience — it’s viewed as a valuable and strategic business tool,” John Belizaire, founder and CEO of FirstBest Systems, which offers underwriting systems and insurance-related software, says in a release. “As the use of smartphones and especially tablets displaces the use of desktops and laptops in more areas of personal and professional life, support for these platforms is becoming critical to insurers’ abilities to communicate electronically across the value chain,” Matthew Josefowicz, a partner at Novarica, notes in a statement.

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COVER STORY

Well in Hand “Avoiding mobile today is like avoiding web browsers in the late-90s,” adds Chad Hersh, also a partner at Novarica. With enhanced customer service being the goal, Purdy says Applied Systems offers a product for broker staff to do just that when they are out in the field. The option provides mobile access to all information resident in the BMS, pushing that information to the mobile device, he explains. “I really believe mobile extends the value of the broker to the consumer in the consumer’s time of need,” Purdy says, whether that need revolves around, among other things, a claim, payment or contact.

ing up the phone,” says Aube. That said, platforms must meet the needs and wants of the full range of customers. It is important to remember that mobile and online is “not a different distribution channel. It’s just another means of people communicating with one another,” Rose emphasizes.

NEW GENERATION “Embracing technology is something that the broker world in general, but every business, needs to do now to continue to grow, to continue to attract that new generation. And it’s really about trying to make it easy,” suggests Jeff Aube, vice president of commercial lines for Cornerstone Insurance Brokers. While 20-somethings grew up with a mouse in their hand, making them good at interacting with computers directly, children today are growing up with a smartphone and a tablet in their hand, and are touch screening, DaSilva says. “That is the way they experience the world, and we have to, if we expect to survive as brokers, adapt to that because in just a few years, those people will be our customers.” Consider the findings of a Time Inc. survey last year, one that considered the impact of digital natives. Defined as those who have grown up with mobile technology throughout their everyday lives, the study found that digital natives switch their attention between media platforms — i.e. televisions, magazines, tablets, smartphones or channels within platforms — 27 times per hour. As such, a multi-platform sales approach may be the best way to engage these consumers. “The younger generation — the Ys and the Xs — are more apt to at least look for a digital solution before pick38 Canadian Underwriter June 2013

Digital natives have grown up with mobile technology throughout their everyday lives. The study found that digital natives switch their attention between media platforms 27 times per hour. As such, a multi-platform sales approach may be the best way to engage these consumers. In Accenture’s report, The Digital Insurer, 4,000 personal lines property and casualty customers in the U.S. were asked by which channel they would prefer to have an insurance quote sent: • through a mobile app — customers between the ages of 18 to 24, 10%; 25 to 44, 5%; and 45 to 64, 1%. • in person — 18 to 24 years of age, 32%; 25 to 44, 18%; 45 to 64, 26% and 65 to 74, 39%. • from websites — 18 to 24 years, 37%; 25 to 44, 53%; 45 to 64, 41%; and 65 and older, about 20%.

Cornerstone Insurance Brokers recently introduced an online portal where clients have access to their personal lines (home and auto) insurance information. The portal follows the company’s launch of Insurance Companion in late 2012, a mobile application developed by IBAO to provide insurance information from a client’s smartphone. Aube calls the portal “just another element of trying to provide that ease of doing business and communicating with customers in their preferred method.” Kevin Campbell, president of Policy Works Inc., speaks to the commoditization of personal lines making low price a primary customer demand for all but the most discerning clients. “In a commoditized market, the only way to compete effectively is to drive costs out of the system and this is where direct writers excel, which will lead to further erosion of broker market share,” Campbell says. “To buck these trends, we see brokers and insurers looking towards commercial lines as a way to compete on the value rather than price.” Boadway suggests the fruit is ripe for picking. “Being mobile-friendly is now the minimum expectation. Consumers may soon start to select against those that are not present in the mobile space, versus reward those who are,” she says.

FITTING THE DEVICE But to turn offering into advantage, presentation is key, as is guarding against visually or practically erecting barriers. “While Flash animation and fancy graphics look great from a desktop computer, some mobile devices such as the iPhone are not able to display this information at all. It may also slow down loading time, leaving your customers impatient,” Boadway cautions. DaSilva says there should be two types of websites: one for the non-mobile world and one for the mobile world. A website should contain plenty of real content, information that people actually want to read, he suggests — the Accenture survey shows 72% of respondents had a strong or moderate preference to go to a carrier’s website

All software solutions are not created equal. Insurance carriers in Canada all need – or soon will – technology solutions which enhance connectivity with their brokers, the lifeblood of their business; solutions which are resilient to market changes, and easily adapted to future growth; solutions which integrate quickly, easily and completely into their existing architecture; solutions which have the deep functionality needed to encompass present and future demands, which deliver outstanding performance. The generation of the best such solutions takes a level of insight, innovation, expertise, experience and commitment to excellence that only the best of providers can offer. Which is why so many carriers look to iter8 for a proven range of advanced strategic products that solve their business problems and satisfy their technology needs seamlessly and cost- effectively. With a portfolio of complementary solutions to insurers software needs, such as in statistical reporting, broker connectivity, real-time broker/carrier interaction, and consumer and commercial portals, iter8 turns a problem into a solution, and a solution into a benefit. And now as part of the Quindell Portfolio PLC companies, iter8 products, services, strength and depth are enhanced. Quindell offers a new paradigm of claims, policy and life cycle management, a perfect complement to iter8’s industry leading technology. Because when it’s worth doing, it’s worth doing right.

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COVER STORY

Well in Hand to get information about products and prices — while the mobile site should cuts down on content and graphics, and offer big buttons to click on. For people using a phone, they are likely looking to make contact by phone so it is necessary to have quick-to-call technology right on that first screen that they land on, DaSilva says. For a person using a tablet, he or she may be using that to research a quote. “So what your landing page has to look like is very different; it has to go directly into quote because that’s what they’re looking for.” The FirstBest Systems survey identified the top-ranked tasks insurance carriers and managing general underwriters performed on mobile devices: 87% of respondents noted looking up information; 75% reported checking claim status; 75% cited checking the status of an application; and 73% noted showing information to a client.

MIXING IT UP Meeting customer expectations will likely require integrating both online and offline channels.“I would suggest that brokers view mobile technology as an important complement to their service, but to keep all other forms of contact proportionality balanced. Don’t throw away the opportunities that a face-to-face conversation can bring,” Boadway recommends. “We need to make sure that we are available for those clients who want to have a fulsome discussion, but also that we are accessible and find a way to convey our advice to a customer who wants to keep it brief in a text message,” Rose says. It will likely be necessary to change existing operating models — perhaps providing 24/7 monitoring of website traffic or offering live chat, with the calls recorded, she notes. “There will need to be innovations to respond to customer expectations,” she suggests. “It’s not necessarily a 9 to 5 job anymore.” Competitive companies must invest in understanding customer needs, notes Top Insurance Industry Issues in 2013, released by PwC in the U.S. “It is important for 40 Canadian Underwriter June 2013

insurers to tap into technological advancements to stay current, but also have an open line of interaction with clients,” says Jamie Yoder, co-leader of PwC’s U.S. Insurance Advisory Practice.

“I would suggest that brokers view mobile technology as an important complement to their service, but to keep all other forms of contact proportionality balanced. Don’t throw away the opportunities that a face-to-face conversation can bring,” says Brett Boadway. APP FOR THAT Boadway sees two ways to offer insurance information/services in a mobilefriendly format: optimizing the website for visitors via their choice device, or developing a mobile app. “A mobile app is faster, more interactive and can integrate with all kinds of other phone features,” she says. “A mobile site can simply be navigated on a user’s whim, without download. The ultimate strategy is to have both.”

When it comes to apps, functionality is king. Redford sees insurance-related apps becoming more important to customers. “Consider that there are 900,000 apps in the Apple App store, and 93% are downloaded monthly.” Certainly, there are insurance-related apps that are currently available: • Kanetix’s mobile app allows iPhone users to, among other things, compare auto insurance quote estimates, scan in car VINs for quote updates, save quote and vehicle details and receive policy renewal reminders; • the McLennan Group Insurance Inc., a nationally licensed personal lines brokerage owned by Northbridge Insurance Company, offers a mobile app for CARP members to, among other things, browse product information, rates and applications, and organize insurance information; • Zurich Canada’s app, available for Apple and Android smartphones and tablets, offers brokers and businesses such things as information on coverages and relevant risk management tips by industry segment, as well as information-sharing capabilities for brokers and customers; • Applied Systems’ MobileProducer software — which runs on Apple’s iPad and wireless devices running Google’s Android operating system — works on the company’s system to allow users to access client accounts, activities, contacts, prospective customers and insurance policy information, among other things; and • the Insurance Companion — for iPhone, BlackBerry and Android devices — allows brokers to have their own branded mobile app available to clients, and offers, among other things, the ability to create accident reports on their phones. The Guarantee Company of North America demonstrated its support of Insurance Companion with the announcement last November that the insurer would subsidize the cost of the app to Ontario broker association members contracted with its personal lines business. “We strongly believe that by

COVER STORY

Well in Hand

Commercial lines may be an area where brokers and insurers are able to compete on the basis of value rather than price, Kevin Campbell notes. That said, “insurers are hamstrung by disparate legacy systems while broker systems do not store or exchange commercial lines information.” enabling brokers with innovative technology, we can offer clients better customer and claims service,” said company president and COO Robert Dempsey. Boadway notes about 500 brokerage offices are using the technology, but emphasizes “this is a tool that more brokers need to consider adopting.” “Mobile apps, such as our Policy Works Producer app, have been developed to extend the reach of the automation and connectivity efforts to the point of sale,” Campbell says. “When executed well, real-time allows the broker channel to achieve efficiencies rivalling those of direct writers,” he adds.

SYSTEM SUPPORT The challenge is putting together data in broker and insurer systems so it is of use. “A brokerage may be extremely efficient and technologically advanced — working in a paperless office with integrated telephony, call recording, online quoting and chat, and offer their clients a mobile app — but that brokerage will be limited by what services their carriers offer,” Redford says. Until more carriers offer truly automated real-time policy change that starts and ends in the BMS, “brokers are wasting time,” he suggests. “All of the major BMSs are working on building (mobile access to some BMS information) functionality right now,” 42 Canadian Underwriter June 2013

Rose says. “The key thing is that brokers need to have good information in their systems. It’s not just about having the system available, but you have to have good information in the system. That means that brokers need to pay more and more attention to the quality of the information that they have and that they have received electronically from insurers.” There are perceptions around risk, says Purdy, such as a self-serve customer being able to see everything in the brokerage’s BMS. But products exist to allow the broker to “actually identify what they want their end-consumer to see.” Insurers are replacing disparate legacy systems with modern systems where data flows seamlessly between quoting, rating and policy administration systems, Campbell says, which opens the door for providing a broad spectrum of real-time transactions to brokers. That said, “insurers are hamstrung by disparate legacy systems while most broker systems do not store or exchange commercial lines information,” he adds. Redford points out that “many carriers are dealing with legacy systems that may not offer the agility required to respond to rapidly changing technology.” For a broker, errors and omissions exposure “begins the moment a producer sets foot in a prospect’s office and follows the flow of data from producer to

marketer to insurer and back,” Campbell says. “Together, mobility, automation and connectivity dramatically increase efficiency and reduce errors by eliminating re-keying of risk information.” Purdy has heard concern among some brokers who believe enabling customers to self-serve will disassociate brokers from customers. “I don’t believe for a second that enabling a mobile customer is a bad thing. I think if you enable a mobile customer and then forget about your requirements to add value in the relationship, as it relates to the insurance products that you’re representing, then I think that’s a problem.” Says Boadway, “As the world goes digital, we’re only just beginning to see the potential for how insurance and insurance brokers can further integrate in the mobile space.” Telematics will offer abundant opportunities for social touchpoints and value-added opportunities; weather-related losses could be minimized simply by sending real-time warnings; education and information could be shared during real-life situations,” she says. “A couple of generations ago, there was this thing called the telephone and it changed how business was done. Some people adapted their business models; other people did not,” Rose says.

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6/18/13

The CIP Society Ethics Series

The CIP Society Insurance Institute of Canada

The CIP Society represents more than 17,000 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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Suspicious Minds What happens when a claims adjuster becomes suspicious while going through a claim. Hearing about the insured’s reputation, the adjuster cannot shake his suspicions, and starts treating the insured differently. Is this behaviour unprofessional or unethical? While engaged on a file involving a large loss, a claims adjuster, feeling that something is not as it should be, becomes suspicious of the insured. Despite the paperwork being in order — each of the necessary bits of required information has been provided, and the cause of the loss appears to be reasonable — this does not remove the adjuster’s suspicions. The insured has a reputation, mainly for unscrupulous dealings and for behaviour that has come close to skirting the law. The reputation reaches the claims adjuster, who begins observing the insured through this lens. The adjuster questions whether or not he is treating the in-

44 Canadian Underwriter June 2013

sured fairly, and feels a different tone creeping into his conversations with the insured. Is the adjuster being unprofessional and/or unethical?

Luc Aucoin, BBA, FCIP Adjuster Plant Hope Adjusters Ltd. The role of an independent adjuster is to remain objective at all times and to conduct evenhanded investigations. A seasoned adjuster will deal with facts only, and at all times remain unbiased. All investigations must be performed in good faith and with fairness. An adjuster has a duty to investigate, negotiate and settle claims, but as loss adjusters, it is also necessary to verify, verify and verify all information and determine what is factual. The adjuster in this case allowed innuendos to cloud his judgment and emotions as reflected by his tone in dealing with the insured. This, in turn, may affect his objectivity.The temptation to reach conclusions on “gut feelings” can lead to difficult outcomes. A good and experienced loss adjuster must avoid such pitfalls and remain purely objective in the assessment of a loss. Anytime a suspicion arises, it should not be ignored and should be explored. However, if

Illustration by Dave Whammond/threeinabox.com

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that suspicion leads to nothing and cannot be reinforced with factual evidence, the adjuster must focus on the facts. True professionalism and ethical conduct is required in the handling of all investigations, and insureds with questionable reputations are entitled to the same treatment as any other, unless the facts support otherwise. An adjuster should protect the insurer from a fraudulent claim by reporting all facts made known throughout the investigation. As such, it is necessary for the adjuster to walk a fine line between collecting information that may determine if a claim is fraudulent and ensuring fair treatment of the insured. If the authorities are involved in the investigation of a suspicious loss, it is crucial that the adjuster allow the authorities to do their job without interference. Once the authorities have reached a conclusion, facts surrounding their findings can be ascertained and conveyed to the insurer. As professional loss adjusters, it is necessary to always reach conclusions or provide recommendations based on facts, and any decision to honour or decline a claim can only be based on what the evidence supports.

Miles Barber, B. Comm. (Hons.), FCIP, CRM, RF Executive Adjuster Network Adjusters Ltd. In the aforementioned scenario, the adjuster is handling a large loss, presumably a fire or burglary. Although everything seems to be in order, when the adjuster becomes aware of the insured’s reputation, his interactions with the insured start to change. Is the adjuster acting in an unprofessional or an unethical manner? Admittedly, the insured’s reputation has caused the adjuster to take a different tone during conversations between the two, which is unprofessional. Contracts, by their nature, imply a covenant of good faith and fair dealing that no action of one party will affect the rights of the other party. An insurer is expected to act in good faith and deal fairly when handling its insured’s claims. By extension, that duty falls on the adjuster representing the insurer. To consciously breach the duty of good faith and fair dealing by ill will or misconceived prejudice may open the door to a bad faith claim against the insurer and/or adjuster in the future. Regardless of whether or not the adjuster’s “spidey senses” are tingling during adjustment of the claim, the adjuster would be well-advised not to rely on subjective and unfounded rumours when making decisions regarding coverage or quantum evaluation of the claim. To do so could see the adjuster ride the slippery slope from unprofessional conduct to unethical conduct. In the event the origin and cause of the loss are verified, and the damage arising therefrom is properly documented, the claim adjustment should not be impeded simply by perceived reputation of the insured.The adjuster has a variety of investigative tools available to determine the origin June 2013 Canadian Underwriter

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and cause of the loss. Reports from police and fire officials, as well as privately commissioned forensic engineering reports, may be used. Similarly, the adjuster has other means to examine the damage claim advanced by the insured. Building appraisers and contents evaluators may be used to assist in the development of the proper quantum associated with the damage claim. In this manner, whether or not the adjuster “senses” that something is not as it should be, the adjuster will be conducting an objective investigation and handling the claim professionally. Whether the investigation reveals some level of hard or soft fraud on the part of the insured will be determined as a byproduct of a thorough and objective investigation and handling of the claim. As a professional, the adjuster should not allow his adjustment of the claim to be clouded by his perception of the insured’s reputation.

Marie Gallagher, FCIP, CRM Branch Manager Granite Claims Solutions Independent adjusters are often asked by insureds, “Who are you acting on behalf of — me or my insurer?” My view is that an adjuster’s job is to gather facts to help the insurer determine whether or not the loss is one covered by the terms of the policy of insurance and, if so, to help quantify the covered loss. Each policy provides for various coverages, and each type of coverage is subject to certain exclusions. If the loss is one that is covered, the job of both the adjuster and the insurer is to indemnify the insured as per the provisions of the insurance contract. In the scenario provided, it would appear there is no question that the loss arose from an insured peril and, therefore, one to which the policy would respond.What appears to be of concern is whether or not the loss may have been caused by an intentional act (an exclusion under the policy) or, possibly, exaggeration of the value of the claim. It would appear the adjuster was suspicious of the loss from the get-go. 46 Canadian Underwriter June 2013

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To balance his suspicions with the facts, the adjuster should maintain a sense of awareness to things that do not make sense, ask questions and obtain facts. If the facts do not make sense, the adjuster should communicate that to the insured and ask more questions if need be. If something still does not make

Adjusters are only human, and perhaps all are a tad suspicious as a result of having dealt with fraudulent and/or exaggerated claims over the course of their careers. While there may be situations that get “spidey senses” tingling, most claims that adjusters deal with are not suspicious.When that does happen, that investigation should be handled the same way as any other. It may simply be that the regular process is a little more in-depth, requires asking more questions and may take longer to complete.

THE FINAL WORD

The adjuster must keep in mind that both the insurer and the insured are parties to the insurance contract and their interests are equally weighted. The adjuster must proceed in a way that maintains a good relationship with both sides. sense, more questions should be asked, documents obtained to substantiate and quantify the loss, and more information requested until things are clear. Throughout the process — from the initial investigation to explaining the claims procedure, communicating to the insured what needs to be done to satisfy policy requirements, following up to check progress, and verifying and validating information and documentation provided — it is essential to keep an open mind while still questioning what does not make sense.

To treat all insureds fairly, adjusters must walk a fine line to ensure hearsay and other unverified information do not interfere with the ability to conduct an unbiased investigation. In this scenario, the adjuster stepped over that line by treating the insured differently based on his unsavoury reputation alone. The adjuster must keep in mind that both the insurer and the insured are parties to the insurance contract and their interests are equally weighted. The adjuster must proceed in a way that maintains a good relationship with both sides. Ideally, a thorough claims investigation will reveal all that is required for the claim to be processed fairly, and any fraudulent behaviour will surface where it exists. In reality, not all investigations require equal resources, and it is often the adjuster’s experience that determines what is appropriate for the investigation at hand. There are many investigative tools available to help the claims process progress smoothly, and the adjuster must figure out which tools will ensure a fair outcome for both the insured and insurer, while treating both parties with consistency. In the end, the adjuster’s experience can help with determining when to investigate further, but any judgments must be reached based on facts revealed by the investigation. By sticking to the facts, the adjuster avoids any conflicts that can lead to unfounded decisions and less than optimal outcomes for the insured and insurer.

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Adapting to Opinion/Analysis

Heather Mack

Director of Government Relations, Alberta & the North, Western & Pacific Region, Insurance Bureau of Canada

Change From flood to hail, Alberta is playing host to some of the most expensive severe weather in the country. Failing and over-capacity infrastructure is responsible for a significant portion of insured losses in the province, illustrating the need for government to include adaptation in its climate change plans. I have warm memories of cold prairie winters. Some of my favourite recollections are of skating on outdoor frozen rinks, rivers and ponds with family and friends. As I grow older, it seems that opportunities for outdoor fun are shrinking and I often lament that today’s weather is not the weather of my childhood. For once, perception is reality. A study released by Concordia University last year demonstrates

48 Canadian Underwriter June 2013

there are fewer days capable of keeping rinks frozen and the chance of an even shorter outdoor skating season grows more likely as the climate continues to change. This is just one example of how, within our own lifetimes, the environment is shifting. A recent public opinion poll conducted by Pollara and Feedback Research, commissioned by Insurance Bureau of Canada (IBC), found that 91% of Canadians surveyed have noticed a change in weather in the last 10 to 15 years. Poll results indicate more than half of respondents believe that their homes will sustain damage because of climate change-induced weather in the next 10 to 15 years. Despite that belief, only 8% of those surveyed thought Canadians, in general, are very actively preparing for severe weather.

THE ALBERTA EXPERIENCE Between 1983 and 2008, Alberta averaged approximately $100 million a year in catastrophic losses. But in the past four years — from 2009 through 2012 — when Canada was hit by more than a billion dollars a year in insured losses, Alberta suffered the most.The province averaged

June 2013 Canadian Underwriter

aa whopping whopping $673 $673 million million aa year year in in ininsured losses from natural catastrophes. sured losses from natural catastrophes. Below Below are are some some of of the the recent recent examples: examples: •• in 2012, hailstorms in 2012, hailstorms wreaked wreaked havoc havoc across across the the province, province, causing causing about about $530 million million dollars dollars in in damage; damage; $530 in November November 2011, 2011, officials officials had had to to •• in shut down the downtown core of shut down the downtown core of Calgary Calgary during during high high winds; winds; •• in 2011, fire ravaged in 2011, fire ravaged the the community community of Slave Lake with losses of Slave Lake with losses pegged pegged at at more than $700 million; and more than $700 million; and •• in in 2010, 2010, aa hailstorm hailstorm pounded pounded CalCalgary with with hailstones hailstones of of almost almost five five gary centimetres in in diameter. diameter. The The storm storm centimetres registered registered damage damage claims claims totalling totalling $500 million. $500 million. Alberta Alberta was was at at the the centre centre of of 62% 62% of of all all catastrophic insured losses in the councatastrophic insured losses in the country try last last year. year. Extreme Extreme weather weather events events that that used to happen every 40 years used to happen every 40 years can can now now be expected expected to to happen happen every every six six years. years. be Higher claims claims costs costs in in Alberta Alberta may may Higher be the result of a number of factors, be the result of a number of factors, inincluding cluding greater greater frequency frequency of of extreme extreme

weather weather events events and and the the increase increase in in population, meaning more population, meaning more property property that that can can potentially potentially be be damaged. damaged. Some insurers in Some insurers in Alberta Alberta have have reresponded by increasing the deductible sponded by increasing the deductible for weather-related weather-related claims claims to to as as much much as as for $3,000.This compares compares to to an an average average $200 $200 $3,000.This deductible deductible in in the the province province 20 20 years years ago. ago. There are also underwriting There are also underwriting changes changes to to deal deal with with the the staggering staggering claims. claims. These policy changes These policy changes have have aa direct direct impact impact on on consumers consumers and and it it is is indusindustry’s try’s responsibility responsibility to to educate educate the the pubpublic about about the the reasons reasons for for change change and and lic what they they can can do do to to mitigate mitigate losses. losses. what In In the the coming coming months, months, IBC IBC will will initiinitiate a conversation — that we ate a conversation — that we hope hope will will be be ongoing ongoing — — with with Albertans Albertans to to edueducate cate and and manage manage expectations expectations about about property insurance. property insurance. In In late late May, May, IBC IBC president president Don Don ForgForgeron spoke spoke to to the the Calgary Calgary Chamber Chamber of of eron Commerce about about our our severe severe weather weather Commerce challenge challenge and and the the need need to to adapt. adapt. “Insur“Insurers could take the lazy way. ers could take the lazy way. We We could could

cluding greater frequency of extreme be the result of a number of factors, inHigher claims costs in Alberta may be expected to happen every six years. used to happen every 40 years can now try last year. Extreme weather events that catastrophic insured losses in the counAlberta was at the centre of 62% of all $500 million. registered damage claims totalling centimetres in diameter. The storm gary with hailstones of almost five • in 2010, a hailstorm pounded Calmore than $700 million; and of Slave Lake with losses pegged at • in 2011, fire ravaged the community Calgary during high winds; shut down the downtown core of • in November 2011, officials had to $530 million dollars in damage; across the province, causing about • in 2012, hailstorms wreaked havoc Below are some of the recent examples: sured losses from natural catastrophes. a whopping $673 million a year in in-

ers could take the lazy way. We could challenge and the need to adapt. “InsurCommerce about our severe weather eron spoke to the Calgary Chamber of In late May, IBC president Don Forgproperty insurance. cate and manage expectations about be ongoing — with Albertans to eduate a conversation — that we hope will In the coming months, IBC will initiwhat they can do to mitigate losses. lic about the reasons for change and try’s responsibility to educate the pubimpact on consumers and it is indusThese policy changes have a direct to deal with the staggering claims. There are also underwriting changes deductible in the province 20 years ago. $3,000.This compares to an average $200 for weather-related claims to as much as sponded by increasing the deductible Some insurers in Alberta have rethat can potentially be damaged. population, meaning more property weather events and the increase in

simply simply raise raise premiums premiums to to meet meet these these mounting payouts,” Forgeron mounting payouts,” Forgeron said, said, but but emphasized, emphasized, rather, rather, IBC’s IBC’s commitment commitment to to the the kind kind of of leadership leadership that that solves solves problems. problems. The Pollara/Feedback Pollara/Feedback Research Research poll poll The found that that 41% 41% of of Albertans Albertans surveyed surveyed found believe believe that that climate climate change change should should be be aa high priority for the provincial high priority for the provincial govgovernment. ernment. Insurers Insurers are are now now calling calling on on the government to continue this the government to continue this leaderleadership ship and and include include adaptation adaptation in in their their climate change plans. climate change plans.

TOMORROW’S TOMORROW’S WEATHER WEATHER

The The IBC-commissioned IBC-commissioned study study by by GorGordon McBean, Ph.D., Telling the don McBean, Ph.D., Telling the Weather Weather Story Story,, looked looked at at the the current current environment environment and future weather and future weather patterns. patterns. Dr. Dr. McBean McBean noted that, with temperatures noted that, with temperatures rising, rising, there there will will be be more more intense intense rain rain within within much shorter shorter time time periods, periods, putting putting much pressure on on infrastructure infrastructure built built to to aa pressure climate that no longer exists. climate that no longer exists. In In Calgary Calgary there there may may be be water water scarcity scarcity

In Calgary there may be water scarcity climate that no longer exists. pressure on infrastructure built to a much shorter time periods, putting there will be more intense rain within noted that, with temperatures rising, and future weather patterns. Dr. McBean Story, looked at the current environment don McBean, Ph.D., Telling the Weather The IBC-commissioned study by Gor-

TOMORROW’S WEATHER climate change plans. ship and include adaptation in their the government to continue this leaderernment. Insurers are now calling on a high priority for the provincial govbelieve that climate change should be found that 41% of Albertans surveyed The Pollara/Feedback Research poll problems. to the kind of leadership that solves emphasized, rather, IBC’s commitment mounting payouts,” Forgeron said, but simply raise premiums to meet these

June Canadian Underwriter Underwriter June 2013 2013 Canadian

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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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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

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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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Index 2004 = 100

Home and Mortgage Insurance (Stats Can) 380 3 360 340 320 300 280 260 240 220 200 180 160 140 120 100

2006

I 6

2007

2008

Direct Claims Incurred by Volume

2009

2010

Insured Losses $CDN – % Distribution per Province

60% 50% 40%

2009-2012

30%

1983-2008

20% 10% 0%

n ta ba Alber skatchewa Manito Sa

io Ontar

ec Queb

tic Atlan

Source: IBC with data from IBC Facts Book, PCS

issues, as water levels in the Bow and Elbow rivers decline. On the other end of the scale, Alberta will continue to see flooding issues. Flooding has been the second most frequent cause of claims in the province. In 2005 alone, flooding in southern Alberta resulted in $300 million in insured payouts for sewer back-up. And then there is Alberta’s “hail alley” — the most active and dangerous hail zone in North America.Those little balls of ice are the farmer’s foe and insurer’s nightmare. Insurers fund a hail suppression program based in Red Deer that has managed to reduce some of the damage. Now it is time to look at building code and construction materials to find ways to make homes more resilient. Even the best cloud seeding program in the world cannot completely wipe out hail.

The Pollara/Feedback Research poll found 41% of Albertans surveyed believe climate change should be a high priority for the provincial government. Insurers are now calling on the government to continue this leadership and include adaptation in its climate change plans. THE INFRASTRUCTURE CHALLENGE Failing and over-capacity infrastructure is responsible for a significant portion of the insured losses in Alberta. Even as

Written Premiums by Volume

2011

2012

Canada’s economic leader, Alberta municipalities face fiscal challenges and are under significant pressure to allow new housing developments to support a booming population. Municipalities must prioritize repairs and make thoughtful decisions about where they allow new development. In response, IBC is developing what is called a municipal risk assessment tool — MRAT for short — which will allow municipalities to identify their greatest sewer and storm water vulnerabilities. With that analytical tool, communities will be able to fund, plan and build according to their risk. It is important to note that this year Premier Alison Redford made an important decision in the 2013 provincial budget, with the government’s threeyear, $15-billion capital plan rising to the infrastructure challenge. In order to support the five million new Albertans expected in the next two decades, the plan will use alternative financing tools as well as leverage Alberta’s triple-A credit rating for direct borrowing. The storms and snow in Alberta will not subside in the foreseeable future. That means governments, businesses and consumers can — and must — work together to create a strong culture of adaptation.

June 2013 Canadian Underwriter

MVASeminar(June13)AS_GM.qxp

Oatley-McLeish Guide to Motor Vehicle Litigation Seminar Law Society of Upper Canada

Donna Ford, LL.B., CIP Freelance Writer

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D Damage

Control

It remains to be seen whether or not the $5-million punitive damage award ordered by a Saskatchewan court against two insurers will be upheld on appeal. But a lawyer speaking at a motor vehicle litigation seminar suggested the ruling signals the frustration of courts with the actions of some insurance companies. Does a $5-million punitive damage award against two insurance companies sting? Perhaps, not as much as one would think. “It’s still pocket change as far as I’m concerned,” Alfred Kwinter, a partner at Singer, Kwinter in Toronto, commented during the Oatley-McLeish Guide to Motor Vehicle Litigation, a seminar presented by the Law Society of Upper Canada over two days in April.

52 Canadian Underwriter June 2013

Speaking to an audience of mostly plaintiff and defendant lawyers, Kwinter was referring to the record punitive damage award made in March by a judge of the Saskatchewan Court of Queen’s Bench. Sitting without a jury, Justice Murray Acton found in favour of Luciano Branco against two insurance companies following the plaintiff’s work-related injury while employed overseas by a Saskatchewan company. American Home Insurance Company, the insurer that provided workers’ compensation equivalent insurance to Branco, was ordered to pay $1.5 million in punitive damages and $150,000 in aggravated damages. For its part, Zurich Life Insurance Co. Ltd., the plaintiff’s disability insurer, was ordered to pay $3 million in punitive damages and $300,000 in aggravated damages. It remains to be seen whether or not the punitive damage award in Branco will be upheld on appeal, but “the case clearly demonstrates the court’s frustration with the insurance companies abusing their financial advantage to force the insureds to settle earlier and for less than they deserve,” Kwinter argued in a paper that accompanied his presentation.

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“Where the line will get drawn on the extent of the injury that’s necessary to establish the ‘forum of necessity’ is something that remains to be seen, but I think will be very important to personal injury actions,” Adair added. How easy is it to get punitive damages, or punies as Kwinter calls them? Perhaps, tougher than one would think. “It ain’t easy at all. It’s very, very tough,” Kwinter told seminar attendees. Explaining the purpose of punitive damages is deterrence, Kwinter distinguished between punitive damages and aggravated damages. He said the latter are compensatory, while characterizing the former as “a windfall. They are not compensation,” he added. Should a person plead punitive damages? “My answer to that question is, ‘Yes, plead them.’” Plead, especially, in cases involving insurance policies related to life insurance, disability claims and fire claims, Kwinter advised, “because you don’t know what evidence is going to come out.” Without pleading punitive damages, he noted it is likely questions about how a file was handled at the underwriting, adjuster or claims level will be stopped.

HISTORY LESSON After the Supreme Court of Canada upheld a $1-million punitive damage award in the 2002 decision, Whiten v. Pilot Insurance Co. — which involved the claim of a plaintiff whose home and its contents were destroyed by fire — “plaintiff counsel were dancing in the street,” joked Kwinter. “We have a million dollars and we figure all awards after that are just going to fall into place and we’re going to see million-dollar awards all over the place. Well, it didn’t happen.” That said, he suggested “if you want punitive damages, always, always, always file a jury notice. Judges are much less inclined to give you punitive damages, notwithstanding the recent decision that came out of Saskatchewan.”

Punitive damages have been awarded where there is evidence an insurance company has acted in a harsh and outrageous manner, and/or has taken an unnecessarily adversarial approach to a plaintiff, Kwinter wrote in his paper. “They are less likely to be awarded where an insurer has obtained valid medical information on which it chooses to rely.” Citing McIntyre v. Grigg, released in 2006, Kwinter said this “key case” illustrates the difficult battle that plaintiff counsel faces in obtaining a significant punitive damage award in a motor vehicle case. In McIntyre v. Grigg — which involved a pedestrian struck by a car driven by a drunk driver — the Court of Appeal for Ontario ultimately reduced the $100,000 jury award of punitive damages to $20,000, Kwinter reported. Kwinter — who acted for the plaintiff husband and wife in a case in which the insurer alleged arson, but failed to prove it — said he believes the $350,000 punitive damage award in Plester v. Wawanesa Mutual Insurance Co., a 2006 ruling by Ontario’s appeal court, is the highest award against an insurer upheld by the province’s high court. Commenting on the Supreme Court of Canada’s 2006 decision, Fidler v. Sun Life Assurance of Canada, on appeal from British Columbia’s Court of Appeal, Kwinter suggested the ruling “really set us back.” Kwinter noted that Fidler had been cut off benefits for five years, based only on surveillance, and the insurance company paid all of her benefits just before trial. She proceeded to trial in a bid to obtain punitive and aggravated damages. Kwinter commented disapprovingly on Fidler, noting that what once was regarded as outrageous and high-handed

and callous had been watered down to “extremely troubling,” he said, using language within the decision.

JURISDICTIONAL MATTERS The country’s highest court injected a greater level of certainty around jurisdictional analysis with two recent companion decisions released in 2012. At the seminar, John Adair, a partner at Adair, Morse LLP in Toronto, spoke about jurisdiction and the effect of Van Breda v. Club Resorts Ltd. and Charron v. Club Resorts Ltd. Adair was one of three lawyers who was acting on the appeal for the plaintiffs in the Charron case. Both cases involved an Ontario resident who was injured while in Cuba and who commenced an action in Ontario against parties in Ontario and Cuba. Also in both cases, the decision of the Ontario court to assume jurisdiction was upheld by the Supreme Court of Canada. The high court came down firmly on the side of creating more predictability and certainty in jurisdictional analysis through the creation of presumptive connections, Adair reported. In his paper accompanying his presentation, he noted that in a case concerning a tort, the following factors are presumptive connecting factors that, prima facie, entitle a court to assume jurisdiction over a dispute: (a) the defendant is domiciled or resident in the province; (b) the defendant carries on business in the province; (c) the tort in question was committed in the province; and (d) a contract connected with the dispute was made in the province. The presumption that arises from the presence of any of those factors is rebuttable, Adair pointed out. For example,

June 2013 Canadian Underwriter

where the connecting factor is a contract made in Ontario, the presumption can be rebutted by showing that the contract had little or nothing to do with the subject matter of the litigation. “If you can’t fit yourself within one of those four categories, you’re out of luck,” Adair told seminar attendees. The court indicated the list is not closed, “but it’s not a matter of cobbling together a few other facts. You would

have to find a new analogous ground on which to establish jurisdiction, which I think is unlikely in the short term.” Adair noted the court chose not to comment on the “doctrine of the forum of necessity,” which had been endorsed by the Court of Appeal for Ontario. Explaining the doctrine, Adair suggested “even though there’s no sufficient connection” to Ontario, if a person is critically injured and returns to the

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54 Canadian Underwriter June 2013

province for treatment, the argument can be made that it is necessary for the person to litigate in Ontario. “Where the line will get drawn on the extent of the injury that’s necessary to establish the ‘forum of necessity’ is something that remains to be seen, but I think will be very important to personal injury actions,” Adair added. Warning that the bar for establishing jurisdiction is “now much higher than it used to be,” he suggested the high court “has basically said you can’t just take basic fairness into account in deciding whether to assume jurisdiction.” In cases involving accidents in foreign jurisdictions, Adair said there are two primary tactics plaintiff lawyers are using to get their clients within presumptive connecting factors: adding Ontarioresident parties; and adding underinsurance claims, which involve a contract connected with the dispute and made in Ontario. Referring to three recent Ontario jurisdiction decisions that involve motor vehicle accidents in New York State, Adair commented in his paper that the decisions are inconsistent among themselves and, in his view, “inconsistent with Van Breda, thus demonstrating that courts continue to struggle with this type of case.” In one decision from last year, Cesario v. Gondek, a wife sued her husband in order to create an Ontario defendant “which was a purely tactical move that had no merit whatsoever because the New York defendant was not contesting liability — it was a rear-end accident,” Adair said. He recommended, as a first step, to provide a simple “Yes” or “No” to the question of whether or not a presumptive connecting factor, such as an underinsurance claim, exists. It would then be necessary to consider the strength and importance of that aspect of the case and decide if the defendant could successfully rebut the presumption. If counsel is willing to analyze the real substance of the facts on which they will be relying, they should avoid fighting hugely expensive jurisdictional motions that are not going to clear the hurdle, Adair suggested.

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Greg Meckbach Associate Editor

Cloud computing is not a new way of doing business, but concerns seem to be growing among some about perceived risks. This at the same time that others are touting cloud computing as the way forward and an approach that can actually help to mitigate risk. There is no shortage of opinions when it comes to cloud computing: some information technology vendors say it is the way of the future; a recent survey of corporate information technology managers finds the practice risky; at least one commercial broker reports that some underwriters are introducing endorsements intended to reduce related exposure; and some technology

vendors and brokers contend it can actually reduce the risk related to business interruption and security breaches. Services such as IT outsourcing, web hosting and data hosting predate the “cloud” moniker, notes Thomas Srail, senior vice-president of financial and executive risks and the cyber and errors and omissions team at Willis Group Holdings plc’s North America unit. “Everything old is new again,” Mike Strople, chief operating officer of Allstream Inc., the Toronto-based telecommunications carrier formerly known as AT&T Canada, says of cloud computing, essentially using someone else’s computer server and storage hardware for their own applications. Cloud computing is similar to mainframe computing, Strople suggests. “If you think about some of the risks that you have... it’s the failure of hardware, failure of software or a security event.” Also new is that prices are dropping for access to the high-speed networks that can connect companies to the servers and computer storage devices held in the cloud providers’ data centres, and that underwriters are taking a harder look at to whom policyholders are outsourcing computer services.

June 2013 Canadian Underwriter

Illustration by Dave Whammond/threeinabox.com

Clouds on the Horizon

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Frost & Sullivan, a San Antonio,Texasbased market research and consulting firm, breaks cloud computing into two categories.The first, public cloud infrastructure as a service, involves an organization outsourcing the equipment it would use to support computer operations — including storage, hardware, servers and networking components — while the cloud provider would host, run and maintain the equipment, as well as allocate resources among clients who run their own software on the provider’s servers.The second, software as a service, is similar, but the cloud computing company also provides the software. A 2012 survey from Frost and Sullivan’s Stratecast division, based on interviews with 308 information technology decision-makers about the risks posed by cloud computing compared to the risk of using their own infrastructure, identified five different risks, says Michael Suby, Stratecast’s vice-president of research. The risks were as follows: cyber attacks; data loss; weak access control; an inability to perform compliance audits; and an inability to support forensic investigations. “What we’re finding from the survey of IT decision-makers is they are less confident that the cloud represents less risk than hosting their own servers in

Also new is that prices are dropping for access to the high-speed networks that can connect companies to the servers and computer storage devices held in the cloud providers’ data centres. their own private data centres,” says Suby. “The fear is that as you move outside your own, on-premise private data centre, the risks for those vulnerabilities increase… you have less control as to who has access,” he adds. “No matter what it is, as soon as you can’t have something that you can go into the corner and hug, you tend to be uncomfortable,” suggests Mike Sharun,

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managing director for Canada for EMC Corp., a vendor based in Hopkinton, Massachusetts whose products include disk arrays that store electronic data. “It takes time for people to change and accept new ways of doing things.”

LEVEL OF SERVICE Sharun advises that companies considering cloud computing should do some research on their prospective vendors if they want to get a handle on potential business interruption risk. “Make sure that you get the service level agreements (SLAs) that you want in writing,” he cautions. “If it’s going to be up 99.999%

Risk Solutions’ professional risk solutions practice, says the company has found “that cloud providers have much better IT security and much lower exposure on an individual basis than an individual company does.” Notes Kalinich, “That goes for each one of the exposures, such as a security breach, a privacy breach, downtime, business interruption, the forensics investigation and notification costs.” This is the case because a cloud computing firm’s core business is information technology, but IT is a “sideline” for policyholders whose core business is not technology, he suggests.

There is concern among some carriers that such a situation could increase their exposure from one incident if they insure the cloud provider and several of its clients. “That could be a catastrophic loss for one underwriter who doesn’t pay attention to that,” Srail warns.

of the time, how are they ensuring that? What’s their track record against that SLA and also, what are the penalties that they’re willing to stand to if they don’t meet their SLAs?” Strople agrees that SLAs are critical, especially when there could be several different providers responsible for different parts of the telecommunications network that connect a customer to a cloud provider. Policyholders who are outsourcing critical computer services should ask for SLAs that guarantee a certain level of “uptime,” not only for the servers and storage on the cloud provider’s site, but also for the telecommunications networks in between. Kevin Kalinich, vice-president of Aon

Zeus Kerravala, founder of ZK Research in Westminster, Massachusetts, agrees. “Obviously, if you’re going to go to a public cloud service, you have to consider security and privacy issues,” says Kerravala. “If somebody hacks into the cloud, then they, of course, have access to your information,” he says, but adds the same argument can be made if someone hacks into a company’s network. This is especially true for a client who is not very thorough with regard to “daily hygiene,” or installing security updates as soon as the software vendors provide them, suggests Kashif Ansari, EMC’s manager of presales for Canada. “Patches come up constantly, so if your staff is small, and you’re busy with other stuff, those are the things that get overlooked, and it’s when (a security problem with one type of software) gets exposed that you realize you’re behind in keeping your systems up to date,” Ansari cautions.

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FAR-REACHING BREACH With cloud computing, a policyholder can mitigate some risks, says Srail, but suggests a client could be in trouble if either its cloud computing provider — or one of the cloud provider’s other clients — suffers a computer security breach. “Because they use the same cloud, they may get attacked, and so your cloud provider, in theory, could suffer a denial of service attack,” he explains. “You could be impacted by that security and outage risk, just because you went with a vendor who happened to host others customers who were a target.” There is concern among some carriers, he adds, that such a situation could increase their exposure from one incident if they insure the cloud provider and several of its clients. “That could be a catastrophic loss for one underwriter who doesn’t pay attention to that,” Srail warns. To mitigate clients’ security risk, Kerravala advises asking cloud providers about their hiring practices; to mitigate their business interruption risk, he suggests that clients ask providers what they do to back up their clients’ data and how quickly they can “fail over” to a disaster recovery site. That site should be redundant with the primary site and far enough away so that one natural disaster, such as a

tornado, will not destroy both the primary and the back-up, suggests Dan Petlon, chief information officer of Enterasys Networks Inc., whose products include computer networking switches and routers. Petlon points out his company’s data centre is located in Salem, New Hampshire, as is corporate headquarters, but the disaster recovery site is almost 3,000 kilometres away in Irving,Texas. “I would say the public cloud service provides higher uptime than using an internal private server,” Kerravala says. “The security risks can be higher as well. I don’t necessarily know if one is

better than the other. I just think there are different risks and it comes down to which one the insurance company is willing to take on,” he adds. For example, carriers are covering the risk of business interruption caused by incidents in which data and computer applications become unavailable, says Srail. But some underwriters are limiting coverage to failures of the policyholders’ systems rather than those of their service providers, he reports. “In practice, those lines begin to blur very quickly.” Commercial brokers need to “take a close look” when underwriters are limiting coverage for losses caused by what carriers consider to be the outsourced computer system, rather than the policyholder’s system, he says.This will help to ensure underwriters are not “inadvertently adding sub-limits or restrictions on our available business interruption and data restoration coverage that otherwise might be there.” Despite the perceived risks, more and more companies are moving to the cloud, reports Sharun. “They can turn up their own server environments, grab their own network resources, provision their own storage and really operate independent from IT,” he says. “It’s just like plugging something into a wall... and that’s how IT is going to be over the next few years.”

June 2013 Canadian Underwriter

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used to help transform flood risk management in Canada. In 2012, flooding in Manitoba, New Brunswick and British Columbia alone saw an estimated 1,500 people forced from their homes, with government and insurers left to pick up much of the bill. Coast to coast, 2012 was a devastating year for flooding in Canada. In June, weeks of rapid snowmelt and wet weather caused flooding in British Columbia, resulting in 700 people being forced from their homes; in May, 300 residents of Manitoba had to evacuate their homes following a breach in the dike along the Assiniboine River; and in late March, when the St. John River spilled its banks, the fast-rising water pushed 500 residents out of their homes to higher ground.

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Referring to the flooding in New Brunswickâ&#x20AC;&#x2122;s Perth-Andover area, Premier David Alward noted in early April that recovery efforts were continuing.The province reported that almost 200 applications for disaster financial assistance had been received, with residential property owners possibly eligible for as much as $80,000 for repairs to structural damage, while small businesses could be eligible for more, depending on the scale of the damage. Already this spring, dozens of communities in central Ontario, Manitoba, Saskatchewan and New Brunswick, among others, have been hit by flooding. Some communities have applied to their respective provinces for disaster relief assistance, including a number in Ontario, where assistance is provided â&#x20AC;&#x153;when damages are so extensive that they exceed the financial resources of the affected individuals, the municipality and community at large.â&#x20AC;? Although overland flooding is not covered by home insurance policies, it can contribute to sewer back-up, coverage for which is usually available and can be purchased as an add-on to home insurance policies.

Flood damage, whether resulting in insurance claims or government assistance, continues to rise every year. Floods are the most frequently occurring natural hazard in Canada. Public Safety Canada’s Canadian Disaster Database from 2007 indicated 241 flood disasters occurred in Canada between 1900 and 2005, representing almost five times as many as the next most common disaster, wildfire. Flooding incidents can happen anywhere, although the majority, 62%, happen in four particularly flood-prone provinces: Ontario, New Brunswick, Quebec and Manitoba. In April, the Manitoba government announced a planned 1% increase to the provincial sales tax in its 2013 budget, as part of a strategy to fund critical infrastructure and flood mitigation projects.The measure would expire in 10 years.

ASSESSING RISK While very little can be done to prevent flooding altogether, it is possible to make calculated evaluations of flood risk to pre-empt disaster. Technological advancements have vastly improved the ability to assess risk. Until recently, flood data was only available in hard copy format, but legacy records about flooding have now been digitized. By collating historical data from gov-

ernment agencies and insurers, it is now possible to perform more robust analysis that includes known factors that contribute to flood risk. Data about risk factors can then be integrated into mapping and location intelligence software to produce very precise assessments about specific areas and properties that are at risk. For instance, very detailed elevations can be accessed, thereby allowing users to determine if a particular parcel is

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CONTRIBUTING FACTORS Managing flood risk is a particular challenge to insurers and flood managers because so many diverse and uncontrollable factors contribute, everything from forest fires to sudden snowmelt. Below are some of the most common ways that flooding can occur globally: • Hurricanes and tropical storms, with a devastating combination of rain, flying debris, high winds and tidal surges, can cause serious damage in coastal areas, bringing floods inland and threatening millions of people. • Flash flooding — rapid flooding in low-lying area caused by thunderstorms — can roll boulders, tear out trees and destroy buildings, bridges and dams in a matter of hours. • Mudflows, or rivers of flowing mud on the surface of normally dry land, are generally caused by brush loss followed by heavy rains. This thick downward-flowing liquid can lead to a unique form of flood damage. • Wildfires sharply increase flood risk, as the burnt ground where vegetation has been destroyed cannot easily absorb rainwater, increasing the risk of flooding and mudflows over a number of years.

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Putting the pieces together.

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

CIP Society Events:

CIP Society Seminars:

Halifax – Annual Golf Tournament . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . July 9

Kitchener – Environmental Losses . . . . . . . . . . . . . . . . . . . . . . . . . September 10

Hamilton – Wheels & Wine Cycling Tour . . . . . . . . . . . . . . . . . . . . . . . . . . July 13

London – Financial Literacy for Insurance Professionals . . . . . . . September 10

Edmonton – 25th Annual Golf Tournament . . . . . . . . . . . . . . . . . . . . . August 19

Hamilton – Financial Literacy for Insurance Professionals . . . . . . September 12

Hamilton – Beach Volleyball Tournament . . . . . . . . . . . . . . . . . . . . . . August 28

London – Social Media Workshop

Saskatoon – Annual Golf Tournament . . . . . . . . . . . . . . . . . . . . . . . . . August 29

for Insurance Sales Professionals . . . . . . . . . . . . . . . . . .September 17

London – Annual Golf Tournament . . . . . . . . . . . . . . . . . . . . . . . . September 20

Grande Prairie – Advanced Business Interruption . . . . . . . . . . . . . . . . October 2

Kelowna – Annual Golf Tournament . . . . . . . . . . . . . . . . . . . . . . . September 20

London – Leading Insurance Coverage & Liability Cases 2011-2013 . .October 25

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

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Technological advancements have vastly improved the ability to assess risk. Until recently, flood data was only available in hard copy format, but legacy records about flooding have now been digitized.

above or below the flood zone. This offers a 3D understanding of risk, providing a quick way to evaluate the true flood risk of a particular business or a home. These innovations in flood risk assessment have major implications for the insurance community. Having highly accurate risk assessments allows insurers to better manage costs and stay ahead of their competitors. Without such a high degree of accuracy, underwriters often must overestimate risk to ensure they are not subject to big losses. With precise risk assessments, underwriters can price products accurately. These savings should not be underestimated. One of the most important factors for both consumers and businesses when choosing insurance providers is price. Products are currently available that allow both insurers and underwriters to integrate this intelligence and analysis into their existing systems. Apart from building their own software and databases, it is also possible to integrate third-party software into existing systems to create customized flood risk scores that, in turn, can be used to develop region-specific flood risk indication systems. Of use would be cities and towns

along Canadaâ&#x20AC;&#x2122;s major rivers that have had a significant historical flood risk. This geolocation information is integrated with the Canadian Digital Elevation Data, which is produced by Natural Resources Canada (NRC). Said data consists of an ordered array of ground elevations at regularly spaced intervals, extracted from the hypsographic and hydrographic elements of NRCâ&#x20AC;&#x2122;s National Topographic Data Base. Sophisticated elevation and proximity data improves the determination and management of potential flood risk, allowing insurers to underwrite and rate properties with greater accuracy. Some currently available software is updated in real time, which means it is possible to assess risk immediately, improving risk awareness and exposure monitoring. Flood risk data can also be combined with information about other insurance risks, such as fire, ground sinking, hurricane and severe weather.These various disasters are often related, so being able to see the big picture is crucial to managing risk.

ENHANCING CUSTOMER SERVICE While it is valuable to offer customers affordable pricing, it is also important

not to underestimate the value of customer service. Customers value swift and efficient interactions with companies.They are likely to be loyal to insurance companies that respond to their needs in a time-sensitive manner. Risk assessment software not only reduces cost, but also expedites underwriting decisions, thereby allowing insurers to offer customers a quicker turnaround time. Software can also be integrated into customer service systems to allow front-end staff to resolve issues effectively. In addition, it allows insurers to initiate contact with customers to inform them of changes in policy or new developments in their risk assessment profile. Canadian insurers have a range of challenges ahead.The industry is growing slowly and price competition is driving down rates. All of this is compounded by the swiftly changing needs of policyholders and distributors. The key for insurers is to differentiate their businesses by having the quickest and the most accurate means of underwriting. To successfully compete and thrive in this competitive industry, it is necessary to be prepared and implement technological solutions to these issues.

June 2013 Canadian Underwriter

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Getting

TECH-Ready Brokers would be well-advised to pay close attention to a number of industry trends if they hope to thwart market share being lost to direct writers. It is essential to adopt technology solutions that allow brokers to capitalize on their biggest asset: being regarded as trusted advisors.

Patrick Durepos President, Keal Technology

Brokers continue to lose market share to direct writers.With the number of brokerages being reduced, primarily through mergers and acquisitions, brokers’ profitability is threatened at the same time that consumer demands continue to escalate. Amidst these challenges, both brokers and insurers struggle with new technology rollout. The good news is that brokers still offer choice and are considered to be the consumer’s trusted advisor, providing a level of advisory service unmatched by direct writers. But is this enough? Will choice and service stop brokers’ market erosion and swing the pendulum in the other direction? If the past 25 years are any indicator, the answer is no. The two main reasons direct writers continue to erode brokers’ market share are enhanced service and lower price. Directs offer real-time accessibility to information, which speeds service levels and, ultimately, customer satisfaction. Most offer insureds self-serve capabilities for 24/7 access to their information and communicate with consumers in their desired method, whether that be by traditional phone, the web or smartphone. In its 2013 Canadian Auto Insurance Satisfaction Study, J.D. Power & Associates reports that as much as one-third of all consumer interactions with their providers are non-traditional. This is an increase of 7% over 2012. Communicating with consumers how and when they want is critical. With a streamlined distribution channel, direct

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writers can typically offer consumers 10% lower premiums compared to a broker.The technology exists today for the broker channel to compete on the same technological playing field as directs. Some brokers and carriers are competing — and winning — yet most are not. Why not? Because available broker technology is grossly underutilized. Until the industry as a whole steps up, everyone involved is in jeopardy of being obliterated by the direct writers.The status quo has not, and will not, cut it. Consider the following: • less than 50% of brokers are paperless; • less than 20% of brokers have telephony integration; • less than 1% of brokers transact with insurers in real time; and • no brokers offer 24/7 consumer access via call centres, websites and mobile devices.

CARRIER AND VENDOR RESPONSIBILITY Recently a large insurance company shared its brokers’ adoption of eDocs across all broker management system (BMS) vendors. It was not as high as the insurer had projected during its launch phase. As a result, the insurance company was seriously considering halting further development and diverting allocated funds elsewhere, a move that was contrary to Keal’s beliefs and experience with the project to date. Our experience has been that our mutual broker partners are saving hours each day per

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carrier offering eDocs, and are anxious to add more markets. After surveying mutual broker partners, Keal confirmed that 98% of its brokers who had been offered eDocs by the carrier were using eDocs with tremendous benefit. Even more compelling, 100% of Keal brokers who had not yet been offered eDocs by the carrier wanted them. Sharing the survey results prompted the carrier to open the floodgates and offer eDocs to all Keal brokers. There is no question insurance companies selling through the independent broker distribution network have more technological challenges than directs — a challenge that is hardly unique to carriers alone. Not only must they modify their internal systems, they also have to integrate with numerous BMS vendors, each in unique ways, to reach their broker partners. The aforementioned carrier was evaluating the eDocs project as a whole, not by each vendor. The problem with the approach is that not all BMSs or their workflows are created equally. Yet from the carrier’s perspective, the vendors were being evaluated as such. Keal’s hands-free eDocs process automatically attaches each eDoc to the correct customer and policy, saving hours each day per carrier. But simply stated, the advantages differ from BMS to BMS, and without the hands-free automatic attaching, as in sigXP, the broker benefit is almost non-existent. So why change workflows for little gain? If brokers do not see value in adopting new technology, they will not. Vendors and carriers each have a responsibility to develop efficient, beneficial broker tools to streamline processes if the broker channel is going to start winning back market share from the directs. Brokers have a responsibility to openly evaluate the offering and either use it, or demand an alternative.

REASONS FOR OPTIMISM A big shift is occurring, with insurance companies identifying, developing and offering broker beneficial streamlined transactions. eDocs is one example; auto-

mated real-time policy change is another. In a Keal broker study, on average, pure policy change accounts for 24% of a brokerage’s daily transactional volume. This important — yet time-consuming — transaction only represents an average of 1% of commission revenue. Implementing an automatic, real-time policy change transaction offers more benefits to brokers than it does to the carrier. Brokers will continue to take policy change orders from their clients; it is part of the service relationship. An important question to insurers is this: Why is this not part of your priorities? The message to brokers and provincial associations is that this will only happen if brokers make their col-

If brokers do not see value in adopting new technology, they will not. Vendors and carriers each have a responsibility to develop efficient, beneficial broker tools to streamline processes if the broker channel is going to start winning back market share from the directs. lective voice heard and demand through business relationships with insurers that they make automated real-time policy change part of their priorities. If brokers start moving business to forward-thinking, tech-savvy insurers, things will change. A handful of BMS vendors simply do not carry the same weight.

THE FUTURE LOOKS BRIGHT Integrated real-time rating A few insurers have the capability of providing real-time, guaranteed rates directly to BMS vendors. This would bypass the current need for brokerlicensed rating software. Brokers could push quote requests to multiple insurers, complete with 100% of the required information, and offer insureds

comparative guaranteed quotes in real time — another significant time and money savings for brokers, provided that insurers step up and invest in this approach.

Consumer self-serve If one listens to consumers, the majority of whom use the broker distribution network, they want a number of things: to have their trusted advisors available when they deem it necessary; to access their brokers for simple transactions 24/7; and to complete transactions by smartphone, web, e-mail, telephone, mail, etc. In development now, the Keal CAP (Consumer Access Point) will offer these capabilities by the end of the year. This arms brokers with the same technology direct writers are using now. A broker-branded section built into the broker’s existing website, secured and configured by the broker, will allow whatever transactions the broker wishes to move from the consumer directly into the BMS and on to the insurer (provided the insurer has adopted Keal Connect) for such functions as inquiries, policy changes, real-time rating and claims reporting. Another trend gaining significant momentum is UBI, or usage-based insurance. Insurers and brokers need to adopt the existing technology and support the evolution.

FINAL RESULT Insurance Brokers Association of Canada has prepared the guiding principles on most technological enhancements, the Centre for Study of Insurance Operations is establishing the standards and brokers must convince carriers to accelerate their development so the broker distribution network can compete more effectively with directs. Only then will market share in personal lines change favourably toward the brokers. If the cost of doing business is reduced — while at the same time offering 24/7, real-time service to insureds — it will deepen loyalty, increase retention and lead to increased profitability for brokers.

June 2013 Canadian Underwriter

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Economical Insurance announced in May that two vice-presidents, Dianna Fioravanti and Scott Campbell, have left the company to “pursue other endeavours.” Fioravanti was vice president of sales, distribution and underwriting operations, while Campbell was vice president for Ontario. Robert Gow [1a] will fill the position vacated by Campbell, Jorge Arruda [1b], appointed chief transformation officer last fall, will become senior vice president of sales, distribution and underwriting operations, and Chris Weber [1c], formerly vice president of analytics, is now vice president for the Western Region.

The Insurance Bureau of Canada announced in May that Amanda Dean has been appointed as its regional vice president for Atlantic Canada. In her new role, Dean, who has been with IBC since 2006, will work on an “advocacy strategy” for the property and casualty industry. The goal of that strategy will be to achieve priorities such as “coordinating consumer outreach programs on injury prevention and working on adaptation to severe weather initiatives.”

Western Financial Group Inc. of High River, Alberta has reached an agreement to purchase Coast Capital Insurance

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Services Ltd. (CCIS) for an undisclosed amount. The deal is expected to close in July. “This is the largest deal we’ve negotiated to date and will help us solidify our presence throughout the B.C. market,” Scott Tannas [3], president and CEO of Western Financial, says in a statement. A subsidiary of Coast Capital Savings Credit Union in Surrey, British Columbia, CCIS offers property, casualty, commercial, life and disability insurance products through 32 retail insurance offices across B.C. Under the new deal, its life and disability insurance business will remain with Coast Capital. CCIS branches will continue to operate under the CCIS name and branding for at least two years. Western Financial will continue to employ all of CCIS’s 242 staff members.

Allianz SE of Munich has named Kevin Leong [4] as the new chief agent for its global corporate and specialty business in Canada. As of August 1, Leong will take over the chief agent position from Thomas Paap, and will be based in Toronto. Leong, who began his career in Hamburg, Germany and relocated to Singapore seven years ago, is currently chief executive officer of Allianz global corporate and specialty’s Singapore branch. Paap will assume the position of global practice leader, heavy industries and manufacturing within Allianz’s property line of business. Allianz’s business in Canada includes aviation, engineering, energy, financial lines, liability, marine and property.

Granite Claims Solutions of Mississauga, Ontario recently announced the company has acquired HR Leiher Insurance Adjusters, a Collingwood, Ontario firm founded in 1991 by Harold Leiher, an independent adjuster since 1980. Beyond “increased coverage” in the Collingwood area, the acquisition “provides a substantial increase in Granite’s municipal claims skill set,” the company reports.

Intact Financial Corp. has two new members of its Board of Directors, while the remainder were re-elected by the company’s shareholders at Intact’s annual general meeting in May. The terms have ended for both Paul Cantor, a senior

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advisor for law firm Bennett Jones LLP and chair of the Toronto-based Global Risk Institute in Financial Services, and for Marcel Côté, who founded Montreal consulting firm Secor Inc. in 1975 and served as an Intact board member from 1997 to 1999 and then from 2004 until 2013. Cantor and Côté will be replaced by Janet De Silva and Frederick Singer. Singer is chief executive officer of Dulles, Virginia-based educational software maker, Echo360Inc. De Silva is a former Sun Life Financial executive who now works in Hong Kong as Dean of Ivey Asia, a campus of Western University’s business school. Other existing directors elected May 8 include: Chairman Claude Dussault [6a], CEO of Intact from 2001 until 2007; Intact president and CEO

Charles Brindamour [6b], an actuary who has been at Intact for 21 years; Yves Brouillette, CEO from 1993 until 2001; and Robert Crispin, former vice chairman of The Travelers Companies Inc.

Toronto-based EGI Financial Holdings Inc. has appointed Michel Trudeau [7] as its chief actuary. EGI, which operates in Canada through Echelon General Insurance Company, offers property and casualty coverage, including non-standard auto. The company also has subsidiaries in the United States and Europe. Trudeau, a Fellow of the Casualty Actuarial Society and a Fellow of the Canadian Institute of Actuaries, has more than 30 years in the actuarial and p&c industry, EGI notes in a statement.

Grain Insurance of Winnipeg will now be known as Wynward Insurance Group. The Wynward brand “more closely aligns with our business plan, our products and services, our dynamic team, our broker partners and our commitment to our customers across the country,” Darryl Levy, the president and CEO of Wynward Insurance Group, notes in a press release. In addition to agriculture, Wynward offers other commercial coverage, such as liability and equipment breakdown.

Commercial brokerage Burns & Wilcox Canada has hired Kim Neale [9] as a senior environmental underwriter working out of Toronto. An environmental engineer, Neale had been an underwriter at Elliott Special Risks, where she worked on policies such as pollution liability and environmental errors and omissions. She has an engineering degree and is working toward her Chartered Insurance Professional (CIP) designation.

The Ontario Trial Lawyers Association (OTLA) has elected personal injury lawyer Charles Gluckstein [10], who has been on the OTLA Board of Directors since 2001, as its president for 2013-2014. Gluckstein’s specialties include disability, occupier’s liability, product liability and medical malpractice. OTLA will continue to work with the insurance industry and other stakeholders to “encourage dialogue about the serious issues surrounding automobile insurance in this province,” says Gluckstein, whose firm, Gluckstein Personal Injury Lawyers, is based in Toronto.

DAS Legal Protection Insurance Company Ltd. of Toronto, also known as DAS Canada, recently announced that former Zurich Canada head Robert Landry [11] is now on the firm’s Board of Directors. Landry, who has previously served as chair of the Insurance Institute of Canada and as president and CEO of Zurich Insurance Company (Canadian branch) from 2002 through 2007, is on the boards of Wawanesa Mutual Insurance Company and software vendor Symbility Solutions Inc.

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On Apr. 10, the BC Women in Insurance Cancer Crusade (WICC BC) board hosted their third annual spring gala. The sold-out fundraiser was held at the Vancouver Art Gallery and aptly named “Springtime at the Gallery”. WICC BC proudly presented a cheque for $40,000 to the Canadian Cancer Society at the gala and guests stayed long into the night enjoying food, art and wine! WICC BC’s annual golf tournament is scheduled for September 9, 2013 at the Vancouver Golf Club and registration has begun. Contact Kerri Brown at specialevents@ onside.ca for more info.

66 Canadian Underwriter June 2013

To Read the Full Story for Each Press Release visit insPRESS.ca

Burns & Wilcox Canada Strengthens Professional Liability Offering with New Hire by Burns & Wilcox Canada – Jun 19

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CRDN Announces New Owners in Toronto and Promotion of a New Charity Clothing Drive by Certified Restoration Drycleaning Network (CRDN) – May 31

Stephen Scullion joins Granite Claims Solutions as Kitchener/Waterloo Branch Manager by Granite Claims Solutions – Jun 13 PAUL DAVIS SYSTEMS Network Gets Together to Celebrate Another Great Year! by Paul Davis Systems – Jun 13 CFC Takes on Cyber Crime with Major Upgrade of its Cyber Policy by CFC Underwriting – Jun 12 Cira Medical Services Applauds Federal Government Announcement to Revamp Workplace Absenteeism Policies by SCM Insurance Services – Jun 11 DKI Canada Education Session Held By Parker Construction DKI in Windsor, Ontario by Disaster Kleenup Canada Ltd. (DKC) – Jun 11 Travelers to Acquire The Dominion of Canada General Insurance Company by Travelers Canada – Jun 10 Burns & Wilcox Canada Expands West with New Branch Manager in Calgary by Burns & Wilcox Canada – Jun 7 DKI Canada Expands With New Member In Stayner, Ontario by Disaster Kleenup Canada Ltd. (DKC) – Jun 5 DKI Canada Welcomes Adam Tzarik to the Head Office Team by Disaster Kleenup Canada Ltd. (DKC) – Jun 5

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HSB BI&I launches All Systems Go Plus ™ equipment breakdown coverage bundled with Data Compromise & Identity Recovery by HSB BI&I – May 29 Granite Claims Solutions Welcomes Henry Scullion as Branch Manager of our New Ajax Location by Granite Claims Solutions – May 29 Travelers Canada Launches IndustryEdge® Products for Mid-Sized Companies by Travelers Canada – May 22 FIC Welcomes Richard Somers as a Senior Investigator in Moncton by SCM Insurance Services – May 21 STRONE and Itech Increase Service Coverage with New Belleville Branch by STRONE-Itech – May 21 Cira Medical Services Opens Discussion on IME Industry-Wide Change by SCM Insurance Services – May 21 Burns & Wilcox Canada Strengthens Environmental Expertise by Burns & Wilcox Canada – May 16 Granite Claims Solutions Acquires HR Leiher Insurance Adjusters, Inc. by Granite Claims Solutions – May 15

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Risk professionals from around the world came to sunny Los Angeles, California for the 2013 Risk and Insurance Management Society (RIMS) Annual Conference and Exhibition on Apr. 21-24. The Opening Night Reception was held Hollywood-style on April 21 at L.A. Live! At the open-air reception, Canadian delegates connected with peers and contacts from around the world.

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Iris Brown, CIP The Ontario Mutual Insurance Association (OMIA) has announced the appointment of Iris Brown as Chair of the Board. Iris is the President of Yarmouth Mutual Fire Insurance Company in St. Thomas. Iris began her career in the insurance industry in 1972 with Lumberman Insurance in Hamilton working in the claims department. She launched her mutual career in 1991 when she first joined Germania Mutual in Ayton as an Underwriter and later as the company’s Financial Administrator. In her words, “the mutual way of doing business, the values that are honoured and our history is what drew me to the Mutuals and has kept me here.” She and her husband live in St. Thomas and have three grown children and five grandchildren. Iris loves to cook, garden and spend dock time relaxing at the cottage. Located in Cambridge, OMIA provides member companies with services including government relations, regulatory compliance, pension and benefits, training, education, marketing and product development. OMIA member companies are proud supporters of the Canadian mutual movement whose core values are policyholder ownership, community involvement and sustainability. The non-profit trade association serves 44 mutual insurance companies in Ontario, commonly referred to as Ontario Mutuals™ or the farm mutuals. OMIA also provides services and support to associate members across Canada.

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More than 400 exhibitors filled the Exhibit Hall at the RIMS 2013 Annual Conference & Exhibition Apr. 2124 in Los Angeles. Held at the Los Angeles Convention Centre, the show floor bustled with thousands of delegates from throughout North America and around the globe. The booths offered unlimited opportunities for learning, networking and sharing.

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The Ron Judd “Heart of RIMS” Award pays tribute to the legacy of Ron Judd, who served as RIMS executive director for 22 years. Individuals are nominated by chapters for outstanding performance in furthering risk management at the chapter level. This year, there were two “Heart of RIMS” Awards winners presented with the award at the RIMS 2013 Annual Conference

& Exhibition in Los Angeles on April 22. Karin McDonald, Director of Risk & Insurance for Hydro One Networks Inc., was presented with the award for her work with the RIMS Ontario Chapter (ORIMS). Scott B. Clark, risk & benefits officer for the Miami-Dade County Public Schools and former RIMS President (2011), was presented with the award for his work with RIMS Greater Miami Chapter.

Photo: RIMS Executive Director, Mary Roth, and RIMS President, John Phelps presents Karin McDonald (centre) with the Ron Judd “Heart of RIMS” Award June 2013 Canadian Underwriter

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Canadian delegates of the 2013 RIMS Conference and Exhibition in Los Angeles gathered with their U.S. and international friends at Canada Night on Apr. 23, sponsored by SCM Insurance Services and the Canadian Litigation Counsel. The event provided a chance to catch up and share stories to the benefit of the William H. McGannon Foundation. RIMS Canada Council Chair Betty Clarke, on behalf of the RIMS Canada Council, presented a donation of $10,000 to McGannon Foundation president and director Joe Restoule.

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June 2013 Canadian Underwriter

GALLERY

The Insurance Institute of Ontario held its 9th CIP Society Symposium, entitled ‘Insurance Without Borders!’ at the Toronto Board of Trade on Apr. 25. The CIP Society symposium committee welcomed more than 100 current and future leaders. The full-day program provided a platform for learning about a variety of issues, including session topics: Regulations: What’s Keeping You

Awake At Night?; The Direct Writing Landscape; Think Global, Act Local; Bringing Innovative Products To Market; Your Customers Are Talking. Are You Listening? In addition to a CEO Leadership Panel that included a half dozen CEO’s from a variety of organizations, this year’s luncheon speaker was Alister Campbell, CEO of The Guarantee Company of North America.

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Kirk McIntyre President of Group Insurance Services OTIP (Ontario Teachers Insurance Plan) is pleased to announce the appointment of Kirk McIntyre as President of Group Insurance Services. OTIP recently experienced a CEO change when Randy McGlynn retired and Vic Medland, OTIP’s former President of Group Insurance Services, assumed the CEO role. McIntyre is a client-focused, collaborative executive who most recently held the position of Vice President, Group Business in Ontario at Medavie Blue Cross. In this role, he successfully repositioned the office for exponential growth, resulting in Medavie’s largest ever group benefit sale in Ontario. In addition, he has held several other key leadership roles with various organizations in times of transition and growth. With over 30 years of senior management experience within the insurance industry, McIntyre brings a strong and relevant balance of proven strategic and operational leadership skills that will enable him to successfully lead OTIP’s Group Insurance Services business.

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APPOINTMENT

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

The Ottawa Insurance Brokers Association (OIBA) held its 5th Annual ‘Charity of Choice’ Poker Event on Feb. 8, raising $30,500 in total for local charities (this figure includes $10,000 to charities chosen from the top four finalists). 180 players registered to compete with prizes for the win-

ners and big money for their charity of choice. This year’s winners and charities were: 1st place: Sophie Lapointe: $5,000 for La Fondation (Gus Group table); 2nd place: Jeff King: $2,500 for Project Upstream; 3rd Place: Scott Sleightholm: $1,500 to Ride for Dad (Smith Petrie Carr &

Scott table); 4th Place: Trudy Deline: $1,000 to WICC and (Economical table). OIBA notes that this charity fundraiser would not be possible without the generous support of our Corporate Sponsors and individuals who participated in this one-of-a-kind spectacular industry event.

Stephen Freedman

The LAWPRO Board of Directors is pleased to announce the appointment of Stephen Freedman as the company’s General Counsel & Chief Privacy Officer. As Director of Compliance Risk & Chief Privacy Officer for the past five years, Mr. Freedman directed LAWPRO’s compliance with both federal and provincial privacy legislation by developing strategies, and implementing policy and legal compliance, which he will continue to manage. Mr. Freedman graduated from Osgoode Hall Law School in 1994, and was called to the Ontario Bar in 1996. He received an LL.M. in e-Business Law from Osgoode Hall Law School in 2005 and taught as an instructor at the Ontario Bar Admission Course. Before joining LAWPRO in 2001, Mr. Freedman previously practiced in real estate and litigation. LAWPRO provides malpractice insurance and risk management programs to more than 23,600 Ontario lawyers, and title insurance in all Canadian jurisdictions. LAWPRO’s TitlePLUS title insurance program is the only all-Canadian title insurance product on the market today.

June 2013 Canadian Underwriter

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The 13th annual Ontario Pond Blue Goose Scotch Nosing took place on Apr. 25 at the Shangri-La Hotel (Toronto) in its beautiful Queenâ&#x20AC;&#x2122;s Park Ballroom. More than 200 Ganders and guests attended raising funds in support of Camp Oochigeas â&#x20AC;&#x201C; A Camp for Children With Cancer. Once again, Ed Patrick, president and founder of the International Order of the Companions of the Quaich Whisky Appreciation Society, presided over the nosing and led the tastings.

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Kernaghan Adjusters held its 60th Anniversary Celebration on May 1, at the University Club of Toronto. In honour of this milestone, President and CEO Patti Kernaghan thanked all who attended and shared in the celebration, as well as all those within the industry for their support over the years.

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Winmar Toronto/Brampton hosted their annual “Spring Fling” on May 2, at the Watermark Irish Pub in Toronto. The event was created as a way to raise awareness of brain injury research and also served as a fundraiser for St. Michael’s Hospital. 100s of industry friends were entertained by guest singer “Roxanna” and everyone enjoyed an evening of good food and beverages.

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CSN Collision & Glass hosted is 4th Annual Date Night on May 7, with food, cocktails and a private screening of the new release, The Big Wedding. The CSN Team and its shops invited insurance adjusters and industry partners with their dates to join them for a night out. The festivities began in Jack Astorâ&#x20AC;&#x2122;s at Square One in Mississauga, Ontario, where everyone enjoyed great food and refreshments. The evening then continued at the Mississauga Coliseum, where the movie was on the big screen for the private audience of 140.

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The life of insurance industry veteran John Raney (who passed away on Mar. 19, 2013) was honoured at a special event ‘A Celebration of Life for John Raney’ on May 9, in Toronto. The event was held at the offices of McCague Borlack and saw dozens of family, friends and co-workers gather together to share memories and listen to a number of guests speak of Raney’s love of the outdoors, his hospitality, and loyal devotion to his profession, industry and clients. Raney began his working life with Allstate, having worked primarily in the claims field and enjoyed an exceptional career with the

company for over 19 years until 1986 when he moved to the broker side of the business – joining Aon – initially as VP Claims and Toronto Branch Claims Manager. In 1989, he took on a national role for Aon and was promoted to SVP with their Claims Advocacy Group and in 1991 became Aon’s National Advocacy Group Leader. According to one speaker – sentiment that was echoed in other speakers’ comments, “John was a great friend, a caring mentor and a loyal caring colleague who left a lasting impression on everyone he met. He was one of the true gentlemen in our business.”

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June 2013 Canadian Underwriter

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In May, the Lloyd’s of London Under 30’s Study Tour of Canada and North America, passed through Canada and the USA on May 5 to May 20, due to the importance of the North American market to Lloyd's. The trip was comprised of 30 Lloyd’s Representatives from a wide section of the market, being Underwriters and Brokers of varying classes of Non-Marine insurance and reinsurance business, and Lloyd’s. The participants selected on the trip travelled not only as representatives of their individual companies, but also of the Lloyd’s market. The Lloyd’s Non-Marine Under 30s Group was es-

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tablished some 30+ years ago, with the aims and objectives of the group to provide a forum for topical comment and to encourage members to be aware of the many rapidly changing facets of the insurance industry as a whole. As part of their study tour agenda, they attended meetings with clients, conducted site visits and risk inspections as well as attended various lectures. On May 6, the Lloyd’s Under 30 Tour gathered at the Westin Harbour Castle Hotel in Toronto for a presentation by Lloyd’s Canada and several of Lloyd’s service companies, followed by a reception.

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