Canadian Underwriter May 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

M AY 2 0 1 3 A Business Information Group Publication #40069240

Cat Scan BY CRAIG HARRIS

On Trend BY GREGOR ROBINSON

Shaky Prospects BY ANDREW TABLOTNEY

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VOL. 80, NO. 5, MAY 2013 CANADAâ&#x20AC;&#x2122;S INSURANCE AND RISK MAGAZINE. PUBLISHED BY BUSINESS INFORMATION GROUP

www.canadianunderwriter.ca

COVER STORY

Cat Scan

The definition of catastrophic impairment for those injured in vehicle accidents has proved to be a contested subject over the past three years. Some argue that the definition is outmoded and no longer reflects current medical science; others contend court decisions have provided ample clarity. Can regulators in Ontario get the definition right? BY CRAIG HARRIS

FEATURES

Ontario Auto

Electronic Proof

Insurance industry optimism that soared following the 2010 auto reforms in Ontario has sprung a leak. Concern is emerging over minor injuries guidelines, accident benefits, bodily injury and waits for arbitration.

Despite the availability of mobile devices and technology that could put electronic proof of insurance a click away, insurance companies have not yet tried to make that move.

BY JIM CAMERON

BY WILLIE HANDLER

50 Hail Damage

Canadaâ&#x20AC;&#x2122;s p&c industry has had to navigate rough waters. Solid insurer performance in risk management and underwriting has helped buoy economic stability, with a return to normal long-run average growth in sight.

Insurers writing business in high-risk hail zones are well-advised to consider using impact-resistant roofing materials and incentivizing their use.

The times are changing. But amidst all this change, are there constants that the insurance industry can seize, leverage and capitalize on?

By quickly determining if a vehicle is a total loss, an insurer will realize savings in terms of cycle time and rental days, and customers will get settlement cheques into their hands more quickly.

BY ALISTER CAMPBELL

BY MARK FAIRHURST

BY GLENN MCGILLIVRAY

BY GREGOR ROBINSON

28 Telematics and UBI Telematics and usage-based insurance products in vehicle insurance is not new. But the technology is seeing a big boost in its use in insurance markets around the globe. BY JOCHEN FRIEDRICHS

54 Certificates of Qualification The Ontario College of Trades is set to start enforcing rules requiring certificates of qualification for dozens of skilled occupations. Critics say the extra layer of enforcement will lead to higher claims cost. BY GREG MECKBACH

32 Earthquake Risk First Notice of Loss

Drivers of Change

16 Economic Outlook

62 Auto Insurance Satisfaction Survey

Earthquakes around the world serve as a wake-up call that British Columbia, too, must be prepared. With its high density of strata structures, low take-up for coverage in certain areas and rising costs, collaboration is sorely needed to address a potentially shaky future.

While use of self-service and emerging channels is on the rise, brokers, agents and customer call centre reps are still primary points of contact for many customer questions and tasks.

BY ANDREW TABLOTNEY

BY JEREMY BOWLER

May 2013 Canadian Underwriter

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VOL. 80, NO. 5, MAY 2013

PROFILE

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

10 House Call Scott Tannas, head of Western Financial Group Inc., has a whole new set of priorities these days. He was recently named to the Senate and as he steps into his new role, he will begin to slowly ease back from the business he founded almost two decades ago. BY GREG MECKBACH

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66 Moves & Views 68 Gallery

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EDITORIAL

Beyond Distraction

The NHTSA guidelines include recommendations to limit the time a driver must take his or her eyes off the road to perform any task to two seconds at a time, and 12 seconds in total. Angela Stelmakowich, Editor astelmakowich@ canadianunderwriter.ca

Canadian Underwriter May 2013

The future is full of possibilities — and, apparently, so is the personal automobile. Regarded as futuristic not so very long ago, new technology and devices bring with them the same old debate: could versus should. As the mind-boggling array of tools/toys exits the domain of luxury and approaches standard fare, mind-boggling, too, is the potential for some gadgetry to serve as a vehicle for distraction. Of course, technology can also be used for good. It can provide a modern kick in the pants to stop people from doing what they already know they should not be doing, or can serve as a gentler reminder. Consider scalable video cameras that, when integrated with vehicle chassis systems, offer driver assist functions to avoid accidents caused by lane drift. Figures from the National Highway Traffic Safety Administration (NHTSA) in the United States show that roadway departure is the cause of 53% of road fatalities. Beyond lane departure warnings, the cameras are said to offer forward collision warning, headlight control, traffic sign recognition and pedestrian detection. Or consider the technology customers of a U.S. provider can use to block mobile phone calls, texts, e-mails, Internet and other smartphone applications until the car is at a full stop, a clear attempt to fight distraction head-on. A free app — using non-pairing Blue-

tooth technology that works with several types of devices — can be downloaded and a device plugged into the car’s on-board diagnostics port. Washington, D.C.-based Auto Alliance reports that six in 10 consumers taking part in an opinion poll said they would be interested in getting driver assist technologies such as lane departure, blind spot monitoring and pedestrian detection when buying a vehicle. Some assists are geared at producing safer driving; others seem fuelled by distraction. Of the more than 65,000 people killed in car crashes in the U.S. over the past two years, one in 10 were in crashes where at least one of the drivers was distracted, notes police data in the Fatality Analysis Reporting System. Information from the Ontario Provincial Police notes motorists are 23 times more likely to become involved in a collision while texting. Although texting is among the most dangerous activities while driving, distracted driving refers to all forms of distracted or inattentive driving, the OPP points out. Officers laid almost 16,000 distracted driving charges across the province in 2012 and continue to see careless drivers texting and talking on their phones and engaging in other forms of distraction every day, the OPP reports. Last year, 83 people were killed in motor vehicle collisions within OPP jurisdiction in which distracted driving was a causal factor. In British

Columbia, RCMP Traffic Services reported recently preliminary statistics for 2012 show 37% of all motor vehicle-related injuries and 30% of fatalities at least partially involved distracted driving. And in Manitoba, Manitoba Public Insurance notes more than 160 road deaths have been linked to distracted driving since 2005. It may not be a matter as simple as hand-held versus hands-free. “The crash risk associated with hands-free texting while driving is not as well-understood because in-car voice-to-text technology is relatively new,” states a report released in May by the Traffic Injury Research Foundation. But recent studies “support the contention that hands-free texting while driving poses significant distraction, and, consequently, unacceptable crash risk.” In April, the NHTSA issued voluntary guidelines that encourage automakers to limit the distraction risk connected to electronic devices built into vehicles. The guidelines include recommendations to limit the time a driver must take his or her eyes off the road to perform any task to two seconds at a time, and 12 seconds in total. It is unlikely that new technology and assists will stop being included in personal vehicles — that genie is out of the bottle — but a bit of common sense and reserve will greatly help to avoid wreckage that straddles property and life alike.

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Regulation ONTARIO PLAN TO REACH 15% AUTO RATE REDUCTION Ontario’s minority Liberal government outlined in its 2013 budget document on May 2 how it could employ changes to the rate-filing process and the return-onequity (ROE) benchmark for insurers, as well as measures to address fraud, as part of its target to cut auto insurance premiums an average of 15%. The budget document does not provide a timeframe for the reduction. Finance minister Charles Sousa has said it will depend on how quickly budget measures are passed, but changes would begin within a year. If passed, among other things, the government’s plan could see the Superintendent of Financial Institutions with the authority to call on insurers when to file their rates; have the Financial Services Commission of Ontario (FSCO) reduce the ROE benchmark used for rate filings; have outside experts examine the impact that previous reforms have had on costs and premiums; and have FSCO provide an interim report this year on the progress of the Minor Injury Treatment Protocol project. The budget document also includes measures to reduce auto insurance fraud. Insurance industry response to the budget document was mainly positive. The Insurance Bureau of Canada (IBC) welcomed the potential fraud-tackling measures and

8 Canadian Underwriter May 2013

other reforms. IBC president Don Forgeron suggests, however, that government’s plan around rate filing and ROE may not be necessary. “If costs are removed from the system, there’s no need to force insurers to lower their rates.” As well, he adds, further consultations on the catastrophic impairment definition are not needed since it has been studied extensively. Although pleased with some measures, Randy Carroll, CEO of the Insurance Brokers Association of Ontario (IBAO), notes, “We are very concerned that consumer expectations for a 15% reduction will be very high.”

Canadian Market REGULATOR GREEN LIGHTS DESJARDINS UBI PROGRAM Desjardins General Insurance Group has launched a new usage-based auto insurance offering, the first program of its kind to be approved by Ontario’s regulator and made widely available to drivers across the province. Also available in Quebec, the Ajusto program is free and voluntary for current and new policyholders. Desjardins reports users could save as much as 25% on their premiums. The program will use a wireless device from iMetrik Solutions. The device, which plugs into a vehicle’s diagnostic port, will measure distance travelled, extent

and frequency of hard braking and extent and frequency of acceleration. Each of the three measures potentially contribute to a 10% decrease in premium. The tool also measures when the vehicle is driven, contributing to a potential 5% rate decrease. Drivers can view their driving behaviour and probable rate savings online. Potential savings are available on annual renewal of their policies. The next step will be to launch the program in Alberta, and then in the Atlantic provinces.

DECLINE OF BROKER SHARE EXPECTED TO SLOW An executive with RSA Insurance predicts that despite brokers losing market share to direct writers and customers demanding more web and mobile services, the decline in broker share will slow. “We’re quite bullish on the broker channel,” Shawn DeSantis, executive vice president of RSA Insurance, said during a presentation at the CIP Society Symposium 2013, held in April by the Insurance Institute. Brokers have 91% of the Canadian commercial market, he said. DeSantis and Alex Manning, manager of corporate partnerships at DAS Canada, said broker share of the market has been dropping by one percentage point per year in Canada. “We believe it will reach a point where it will decline at a much slower rate,” DeSantis said. “We see brokers changing quickly to adapt.”

PRIVATE PASSENGER AUTO INSURERS SEE MODEST ROE Private passenger auto insurers witnessed marginal net returns in 2012 and 2011 after recovering from a severe loss situation before Ontario’s 2010 auto reforms took effect, the IBC reports. IBC commissioned J.S. Cheng & Partners Inc. (JSCP) and KPMG to analyze Ontario Private Passenger Automobile Insurance from 2008 to 2012 using publicly available financial data. KPMG determined private passenger auto saw a return on equity of 0.2% in 2011 and 3.3% in 2012; JSCP found a 2.6% ROE in 2011 and 4.9% in 2012. KPMG reports that private passenger auto insurers had a net income of $294 million in 2012 and $17 million in 2011. JSCP, for its part, cites a net income of almost $492 million in 2012 and $132 million in 2011.

Technology MOST INSURERS USING SOCIAL MEDIA, BUT LACK A STRATEGY The majority of insurers are now using social media in some way, although more than a third do not have an established social media strategy, Celent reports. An online survey done in January, which had 114 North American responses, showed 80% of insurers reported using social media in their business. Of the

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MARKETPLACE

companies not now using social media tools, 45% said they plan to do so in the next year, adds the survey, which was done in partnership with law firm Locke Lord, LLP. “We see insurers of all sizes and in most lines of business on social media for marketing, customer service, sales and catastrophe response functions,” says Mike Fitzgerald, a senior analyst with Celent’s insurance group and author of the report. However, more than a third of those using the tools said they have not established a social media strategy, which Celent notes could create a risk management issue in terms of employment law, regulatory compliance and intellectual property rights.

Claims HIGHER CAP FOR MINOR AUTO INJURIES IN N.B. New Brunswick is raising the cap on damages for those who suffer minor personal injuries from auto collisions. The new cap of $7,500, up from $2,500, takes effect July 1. Starting on January 1, 2015, the maximum amount will also increase in accordance with the Consumer Price Index for New Brunswick. The definition of “minor personal injury” has also been updated in the province’s Insurance Act. “A sustainable and stable auto insurance system must strike a balance between providing adequate benefits for the few people who make

claims and affordable premiums for everyone who drives,” says Steve Olmstead, IBC’s manager of government relations.

Risk Management SWISS RE: DISASTER MITIGATION SHOULD GUIDE DECISION-MAKING Canada needs to harness the collective power of government and the private sector now — before the next big storm, fire, quake or flood, Sharon Ludlow, president and CEO of Swiss Re Canada, said at the global reinsurer’s 28th annual Canadian Industry Outlook Breakfast on April 3. Citing the National Disaster Mitigation Strategy (NDMS), Ludlow suggested the NDMS offers “an opportunity to put Canada on a path to increased resiliency, where disaster mitigation helps guide private and public decision-making.” Flood now has an impact on more people globally than any other peril. Developing a flood insurance product in Canada requires having the right infrastructure in place and making flood maps that “are available at the right level of granularity and with the right technical specifications that we can use them as an industry to make those determinations jointly with government on where you build, where you don’t, what’s the code,” Ludlow said.

69% OF POLLED CANADIAN BUSINESSES EXPERIENCED A CYBER ATTACK Preparedness against cyber crime among Canadian businesses is lacking despite seven in 10 polled organizations being the victim of a cyber attack, notes a survey from the International Cyber Security Protection Alliance. “Across business communities, there is a general lack of strategy, procedures and trained personnel to combat cyber crime,” the survey report states. It suggests that two factors could be responsible for the lack of preparedness: the damages (financial or reputational) caused by cyber attacks have not been significant enough to merit shifts in attitudes and behaviour; and/or organizations do not have enough awareness and knowledge of what strategies they should be implementing to minimize vulnerability against such attacks. The quantitative study involved 520 small, medium and large Canadian businesses. “Cyber crime is fairly prevalent among Canadian businesses, with 69% reporting some kind of attack within a 12-month period.” In all, 5,866 attacks were reported by respondents. Malware and virus attacks (occurring among 51% of surveyed businesses) are the most prevalent, with phishing and social engineering (reported by 18% ) the second most common.

Reinsurance INSURERS NOT PREPARED FOR NAT-CAT EVENT WITH $30 BILLION INSURED LOSSES Canadian property and casualty insurance carriers are well-prepared to respond to a natural catastrophe giving rise to claims of as much as $15 billion, but a disaster with insured losses of $30 billion or more will overwhelm the industry, notes a report from the Property and Casualty Insurance Compensation Corp. (PACICC). Why Insurers Fail: Natural Disasters and Catastrophes, released in April, discusses the possibility of catastrophes such as an earthquake in British Columbia or Quebec, an asteroid strike on a major urban area or a solar storm that damages electrical components. The report notes that should a major catastrophe exceeding $15 billion occur, it is possible a carrier could pay its claims and remain solvent, but subsequently become insolvent as a result of its responsibility to pay part of the cost of claims made against failed insurers. PACICC’s model suggests multiple large insurers become insolvent at $30 billion. With a $30-billion event, it is estimated PACICC assessments on surviving member insurers could approach $25 billion. “This assessment is so large, every PACICC member across Canada would fail the regulatory solvency tests.”

May 2013 Canadian Underwriter

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PROFILE

House Call Greg Meckbach Associate Editor

Scott Tannas, former part-time disc jockey turned full-time head of Western Financial Group Inc., has a new set of priorities as he steps into his role as senator and eases back from the business he founded almost two decades ago. Scott Tannas never seems to be satisfied when he only has one job. That being the case, the last few months have likely suited the 51-year-old president and CEO of Western Financial Group just fine. Tannas, now Senator Tannas, was appointed to the upper house in March, but plans to continue to run the High River, Alberta firm he founded in 1996 until the end of the year. In the 10 years before starting his insurance career in 1993, he worked in travel and tourism. “I always had part-time jobs and little business schemes and that sort of thing,” Tannas says. “That included being a radio disc jockey, I was hired at dances

10 Canadian Underwriter May 2013

and I was a lifeguard. I always liked to have two jobs,” he says. “I’m a college dropout and barely got through high school,” Tannas says, but adds he always loved to work. Just three scant years after insurance became his focus, Tannas founded his firm, then known as Hi-Alta Capital Inc. in 1996. Today, Western Financial’s holdings include more than 100 property and casualty insurance brokerage offices between British Columbia and Manitoba. In the past year alone, the company has made six acquisitions — as of press time, the most recent of these was Melfort Agencies in Saskatchewan. “We have a very, very busy acquisitions pipeline at the moment and a few months from now, we will have a number of additional names to add to that list,” Tannas reports. “The acquisition side of things is where I’m most active today and will continue to be in the future.” When Western Financial officials approach independent brokerages to discuss potential acquisitions, Tannas says the owners not only want to ensure that selling is their best move, but they also want to have pivotal conversations only with the most senior individual. “It has to involve the top guy… and that’s me at the moment. And that’s what I would do if I was in their position,” Tannas says, adding that some acquisi-

tion talks have gone on for decades. “In many cases, it’s not just their business; it was their parents’ business, too. And so if the time comes to sell, you really want to know it’s the right fit.”

PIONEER SPIRIT Western Financial is not a typical independent Canadian brokerage. Its holdings include a chartered bank (Bank West), a pet insurance carrier, Western Life (originally the Canadian arm of Federated Mutual) and Marlin Travel. Owned by Desjardins Financial Group, which itself owns Levis, Quebec-based direct writer Desjardins General Insurance Inc., Western Financial, too, owns a direct writer, Western Direct Insurance. The target markets for Western Direct are in Edmonton, Calgary and Fort McMurray, while Western Financial’s retail brokerages focus on smaller communities, Tannas says. “At various times over the last 17 years, we have raised the eyebrows and the uncomfortableness of our business partners and folks in the industry, regulators and so on,” he says. “That’s part of our pioneering nature going back to when we started. Overall, regulators and our business partners have accepted that that’s what we do, and we have always had good, frank strong relations

with insurers” that compete with Desjardins General, he continues. Managing Western Financial’s growth has certainly kept Tannas busy, but he points out that politics was always in the back of his mind. Little wonder, since his father, Don Tannas, served as a Conservative member of the Alberta

Another priority is to address the risk of an earthquake in B.C. or Quebec. “Some of the studies and extrapolations I’ve seen where a colossal event could essentially wipe out the entire industry is something that’s hard to get your head wrapped around.” legislative assembly from 1989 until 1994. “I watched my father go through the process and he enjoyed public service and I thought, some day, if everything lines up... maybe I’ll give it a shot.” Tannas was also inspired by another High River native, Joe Clark, who as Prime Minister led a minority federal Progressive Conservative government from the summer of 1979 until February 1980.

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“If you were a little bit politically aware and living in High River, you couldn’t help being interested just because we knew the family and felt a connection, so that stoked my interest,” Tannas says. Tannas opted to finally “give it a shot” in October 2012, when he ran in Alberta’s Senate nominee elections, held at the same time as the provincial election. Although Senate nominee elections are not binding on the federal government, provincial law requires that the three Senate nominee candidates with the greatest number of votes are submitted to the Privy Council as persons who may be appointed to the Senate. Of 13 candidates, Tannas had the second highest number of votes. With Tannas now in the Senate, officials at Western Financial Group are working to find his successor as president and CEO no later than Labour Day. After that, Tannas plans to continue as CEO until the end of 2013 and remain as part-time vice-chairman for another 10 years. “We’ve got a succession project under way right now,” he says. “In the last few years, as I’ve come to enjoy Western’s success... and have come to see the fabulous people that we’ve got and the size and breadth of the organization, I started thinking, ‘It’s soon going to be time for somebody

Photo: Courtesy of the Senate

PROFILE

with different skills and a different perspective to lead Western,” Tannas says.

UNFINISHED BUSINESS Now in the upper house, Senate reform is among Tannas’s priorities. By law, senators are allowed to stay on until the age of 75. But Tannas supports the Senate Reform Act, which has yet to be passed into law, and proposes, among other things, limiting

Senate terms to nine years. “The idea of an elected Senate was intriguing,” Tannas says. “From an outsider’s perspective, (the Senate) really needs to be... reformed and become more useful both in reality and in the perception of Canadians,” he suggests. Another priority, one that straddles his new life in politics and his old one in insurance, is to address the risk of an earthquake in B.C.

or Quebec, something that Tannas suggests could threaten the entire insurance industry. “Some of the studies and extrapolations I’ve seen where a colossal event could essentially wipe out the entire industry is something that’s hard to get your head wrapped around,” he says. “It’s something we need to be moving on,” Tannas adds. Attracting the most notice from constituents, though, seems to be Bill C-279, which, if passed into law, would, among other things, amend the Canadian Human Rights Act to include gender identity as a prohibited ground of discrimination. After passing third reading in the House of Commons in March, the bill reached second reading in the Senate in mid-April and debate in the upper chamber has since been adjourned. “My office is being swamped with people phoning and e-mailing, urging me to vote against this bill,” Tannas says, but adds that he has not yet made his decision. Tannas is “used to doing all the talking,” he quips, and putting ideas into action. In his new role as senator, though, Tannas will keep listening, putting what he characterizes as his “underdeveloped listening muscles” to the test in the Senate and working towards meeting his new priorities.

May 2013 Canadian Underwriter

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Jim Cameron

President, Cameron & Associates Insurance Consultants

Insurance industry optimism floated to new heights following the adoption of Ontario’s auto reform package in 2010. But the bubble seems to have burst, leaking concern over MIG, AB, BI and waits for arbitration that can stretch into years. The euphoric state of the industry on the passing into law of the 2010 auto reforms is now metamorphosing into concern to be quickly followed by panic. Most of the positive factors of the reforms influencing pricing are not only evaporating as quickly as the winter snow, they are indicating disturbing trends in the other direction. The pendulum that had reputedly swung too far over to the insurer’s side is now on the backswing and gaining momentum. The Minor Injury Guideline (MIG) is absolutely critical to the success of reforms to the Statutory Accident Benefits Schedule (SABS) implemented by the Ontario government in September 2010.The MIG provides a cap of $3,500

12 Canadian Underwriter May 2013

in treatment costs (without prior approval of the insurer) for injured persons sustaining minor injuries. These are defined to include sprains, strains, whiplash injuries and whiplash-associated disorders, including associated sequelae. In Scarlett v. Belair, John Wilson, an arbitrator with the Financial Services Commission of Ontario (FSCO), recently ruled the MIG was merely a guideline, not the law, and not appropriate, in this case, for an injury that arguably predominantly fell within the definition. One of the most significant conclusions was that “the burden of proving that the claimants’ injuries fall within the parameters of the MIG falls on the insurer.” Some evidence of a psychological impairment, which the claimant himself denied, a chronic pain diagnosis and temporomandibular joint disorder (TMJ) were sufficient to remove the claimant from the MIG. The guideline is a “non-binding interpretive aid in deciding specifically whether Mr. Scarlett comes within the MIG,”Wilson held. “What it is not is a cookie-cutter application of an expense limit in every case where there is a soft-tissue injury present,” the ruling adds. If the MIG decisions stay on this course, “for insurers, the MIG is not an effective tool for

Illustration by Sandy Nichols/threeinabox.com

Frankly Scarlett…

controlling costs,” defence counsel Daniel Strigberger, a partner in the Kitchener-Waterloo office of Miller Thomson, noted during the Canadian Defence Lawyers’ (CDL) 4th Annual Accident Benefits Joint Plaintiff and Defence Seminar in April. Strigberger did comment, however, that the case was not groundbreaking from a jurisprudence point of view. The basis for the decision “doesn’t pay attention to the wording in the SABS,” he noted. Interestingly, the Ontario government’s recent budget bill included a proposed amendment to section 268.3 of the Insurance Act that a guideline incorporated by reference in the SABS is binding. While Scarlett is under appeal, it has set a road map for plaintiff counsel.

victims are actually compensated, but any insurer claims manager will say that BI claims are more prevalent, and becoming more difficult to settle. The Insurance Bureau of Canada (IBC) noted before Ontario’s Standing Committee on General Government that, despite a decrease in the number of accidents, there were 3,753 more tort (third-party BI) claims made in 2011 than in 2008, a 32% increase. An increase in BI tort costs was predicted by

actuaries when SABS was modified, but with decisions like Scarlett, the corresponding reduction in AB loss costs may be gone with the wind.

Effect on premiums The IBC refers to the Scarlett case in its submission, claiming “this makes all injuries non-minor until proven otherwise.” FSCO’s 61-page submission to the standing committee notes that rates had “stabilized” as insurer costs have come

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THE STATS Loss costs: AB and BI One of the key elements of any automobile injury restitution system is a balance between the costs of the no-fault

Because your clients have more important issues to occupy their time with. benefits paid to injured victims by their own insurance company (AB) and the costs of tort claims made against the insurers of drivers who are at fault for accidents (BI). Prior to the most recent reforms in 2010, industry stats for 2009 revealed that loss ratios for AB claims were 148% and 91% for bodily injury (BI) claims. The most recent numbers reveal that for 2012, BI claims had risen to 100.3%. Bodily injury (tort) costs have risen from 26% of the net incurred losses in 2010 to 32% in 2011. FSCO has undertaken a study to determine how accident

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down due to changes brought about by the 2010 auto reforms, along with reductions in fraud and abuse of the system. The industry is almost embarrassed to point out to outspoken critics that average premiums have actually fallen during 2012 by 0.26%, and in the first quarter 2013 by 0.03%. Hardly anything to get excited about! The effect of the loss of the MIG on loss costs would be enormous on its own. Add to that IBC estimates that a mandatory premium reduction of 15% across the board would turn the 2012 results, which recorded a modest profit, into a loss of $2 billion spread amongst the 90 insurance companies selling auto insurance in Ontario.

tion services at FSCO, has released stats showing the marked increase of mediations filed over the past four years. FSCO has undertaken several initiatives to address the horrendous backlog problem of 35,000 cases awaiting mediation, 80% of which originate in the Greater Toronto Area, and are making a dent.

A POLITICAL SOLUTION?

THE INSURER’S APPROACH? At an industry event in 2011, defence counsel and arbitrator Lee Samis reminded the industry that “we need to be careful as an industry always trying to figure out compartments to put claimants in rather than assess what treatment is best.” Speaking at the recent CDL seminar, Mark Cekuta, alternative dispute resolution supervisor, accident benefits at RSA/Johnson, cautioned insurers to use the SABS “effectively and with common sense. An independent examination should not be required in every case to try and place the case within the MIG. If there is objective evidence of TMJ or other injuries not listed in the MIG, we should pull it out of the MIG.” The MIG only creates another layer of complexity.

FSCO MEDIATION AND ARBITRATION No discussion of the uncertainty of results in Ontario auto is complete without reference to the delays in the mandatory system of resolving disputes between claimants and insurers. Under Ontario’s Insurance Act, before a claimant can proceed with his or her dispute with the insurer in courts or in arbitration, the claimant must file for and participate in mediation. The mediations and arbitrations are conducted by FSCO. John Lobo, manager of dispute resolu-

14 Canadian Underwriter May 2013

more as claimants pursue their claims to the next level. After waiting for sometimes as long as two years for the dispute to be mediated, the claimant must now wait another year or more to pursue the claim in arbitration. Needless to say, arbitration is a much more expensive process for insurers and claimants alike. Leading defence counsel Philippa Samworth and Phil Howell, FSCO’s CEO and Superintendent of Financial Services, have both publicly said about the dispute resolution service, “It is not working.”

IBC reports that despite a decrease in the number of accidents, there were 3,753 more tort claims made in 2011 than in 2008. An increase in BI tort costs was predicted by actuaries when SABS was modified, but with decisions like Scarlett, the corresponding reduction in AB loss costs may be gone with the wind. The good news is that for the first time since 2009, the number of new mediations filed has actually declined in the 12-month period ending March 31, down 35% to 23,325 from a record 36,425 the previous year. On the other hand, FSCO arbitrations have increased by 100% in the same period. As the backlog of mediations is addressed, this is expected to rise even

The Ontario government, in the midst of tumultuous times for the minority Liberals, is conducting a review of the Ontario auto insurance product. The Ontario Auto Insurance Anti-Fraud Task Force is actively seeking further legislative changes to assist insurers in fighting fraud. The committee to determine catastrophic injury guidelines has made its recommendations and is seeking changes. Several other committees are very active. The NDP has once again raised the issue of auto insurance premiums in Ontario, the highest in the land.The New Democrats proposed an across-the-board cut of 15% in rates to which the government acquiesced to “start implementing.” On April 30, finance minister Charles Sousa was quoted in a Toronto Star article, aptly titled “Brace for roller coaster ride on auto insurance”, as saying, “Let’s go 15% and let’s go as fast as we can.” In the provincial budget, released on May 2, Sousa reiterated the government’s commitment to introduce changes aimed at meeting the 15% reduction target, although a specific timeframe was not given. The budget document notes the change will be made “within a period of time to be prescribed by regulation.” As arbitrators and judges expand the definitions and erode limitations on coverage, and with auto insurance very much back in the political spotlight, interesting challenges lie ahead. Let’s hope the roller coaster arrives safely at the end of the ride and does not derail first.

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Coming Through

Ro ugh Waters

The last couple of years have seen Canadaâ&#x20AC;&#x2122;s property and casualty industry navigate some rough waters. Solid performance by insurers in risk management and underwriting has helped buoy economic stability, with the medium term expected to see a return to normal long-run average growth.

Gregor Robinson Senior Vice President and Chief Economist, Insurance Bureau of Canada

2012 was a year of relative success for Canadaâ&#x20AC;&#x2122;s property and casualty industry, reflecting the continuing hard work of insurers in risk management and underwriting discipline. That success is important. A strong p&c industry is important for economic stability, enabling Canadian families and businesses to plan for and take on risk. It also enables the sector as a whole to be better prepared for whatever challenges the future might bring.

IN HINDSIGHT Last year, the Insurance Bureau of Canada (IBC) cited three major forces that would continue to shape our industry: the economy, the environment and regulation.

The economy IBC noted that gross domestic product (GDP) growth has been trending downward for several years and would likely continue to do so, tempering the pace of growth in premium demand.

16 Canadian Underwriter May 2013

In fact, GDP growth was even lower than expected, coming in at 1.8%. Growth in direct written premiums slowed to 3.0% from 4.4% in 2011. IBC also suggested the prolonged period of low interest rates and uncertain financial markets would continue. And, by and large, they did.

The environment Climate change continued to have an impact. Last year was the fourth year in a row with natural Cat losses of near or above $1 billion. Billiondollar Cats are now the new normal. Apart from the size of the losses, extreme weather brings uncertainty to the business. Good results in the first half of the year can be completely undone by a few large events later on, as happened with the storms in Alberta last summer. Regulation The third trend mentioned last year was increased attention from regulators.The industry is probably more regulated than any other in

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Canada, with some 24 bodies that make rules and collect assessments from p&c insurers. On the positive side, the industry has been able to engage with regulators in all jurisdictions. At the federal level, IBC has been working closely with the Office of the Superintendent of Financial Institutions (OSFI) to help ensure a better understanding of the impacts of revisions to capital requirements. As a result of consultations on Guideline B-9, OSFI’s proposed revision of the earthquake Probable Maximum Loss measure has been deferred and OSFI is now working jointly with IBC on a revised approach.

triple-A assets. Increased stock holdings reflect lower volatility, renewed risk appetite and a search for better yields.

FINANCIAL RESULTS Year-end financial results showed a decline in the industry loss ratio from 68.4% to 64.9%, and operating results below the break-even point with a drop in the combined ratio from 98.6% to 95.4%. Net claims incurred for all lines fell by 2.8% from a year ago — the first reduction since 2006. The drivers of these results were twofold. First, while nat Cat losses remained historically high, they were lower than in 2011. Second, the industry continues to see the impacts of the 2010 Ontario auto reforms. As usual, overall results hide a great deal of variability. While most companies had a combined ratio between 85% and 105%, a quarter had combined ratios above 105%. Loss ratios fell for all major p&c product lines. For property and commercial liability, the improvement was largely driven by a marked reduction in direct incurred claims. The insurance industry also noticed a change in asset allocation strategies. In 2012, insurers held a higher share of assets in short-term deposits and stocks. The move to short-term assets reflects heightened market uncertainty and regulatory constraints that skew portfolios towards short-term, domestic and

Following the 2010 auto reforms in Ontario, results improved from the abysmal losses of preceding years. But the several thousands of cases now in the dispute resolution system suggest a lot of people are betting against the ultimate success of the reforms.

18 Canadian Underwriter May 2013

THE ROAD AHEAD Economic outlook What does IBC see ahead? In the short term, continued sluggish growth and low interest rates; in the medium term, a return to normal long-run average growth. Until recently, Canadian GDP has been driven by domestic consumer and government spending. With these now faltering, a continued reluctance by business to invest suggests moderate growth for the near future.

But looking out 24 to 36 months, a turnaround is expected. First, the U.S. economy is starting to turn the corner. Second, reductions in household and government debt should start materializing, with consequent impacts on final demand. Third, as the economy picks up, interest rates are expected to rise, bolstering the investment environment. With brighter medium-term prospects, stronger demand for p&c products is also expected.

Regulatory concerns The pace and magnitude of regulatory activity remain a concern. While other jurisdictions are slowing implementation of solvency revisions, OSFI continues to press ahead.

There are other developments on the international horizon that may ultimately affect us, including ComFrame, the designation of Globally Significant Insurers, rules for Cross-Border Operations and so on — which, suggests KPMG, “will likely provide a sense of direction of future regulatory requirements for all insurers.” At the provincial level, Alberta is carrying out a comprehensive review of the regulatory framework for auto, and Ontario is reviewing the profit provision for rate applications.

Ontario auto Ontario automobile insurance has historically performed poorly. From 1994 to 2012, the average financial loss ratio was 82%. In several years, it was a lot higher than that. Following the 2010 reforms to no-fault injury coverage, results improved from the abysmal losses of preceding years. But whether or not savings are sustainable will depend on arbitration and court decisions.The several thousands of cases now in the dispute resolution system suggest a lot of people are betting against the ultimate success of the reforms. And while the reforms may have addressed the cost pressures facing accident benefits, they did nothing to deal with pressures in the tort system. Bodily injury costs have continued to climb. Over the past year, the loss ratio for third-party liability claims worsened every quarter. At year-end, it stood at 99.6%. What has plagued Ontario auto for the past 25 years has been politics. However, complex problems deserve real solutions. For premiums to be reduced, the government must seriously address costs on a proactive, committed and ongoing basis. Climate change impact The evidence is overwhelming: 2012 was the 16th “warm year” in a row and the fourth warmest for Canada. July through September was the warmest of

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any three-month period in 65 years. Global temperatures in the 21st century are higher than they were in the 1900s, bringing with them more extreme weather. For insurers, that means higher claims costs and pressure for more diligent underwriting. IBC must continue advocating for investments in adaptation by all levels of government.

Canadian Insured CAT Losses $1.8

Catastrophic Insured Losses ($, Billions)

Second Half First Half Slave Lake

$1.2

$0.6

$0.0

2006 *

2007

2008

2009

2010

2011 2012*

2 *Estimated catastrophic insured losses Source: IBC, with data from Facts Book, PCS

N National Direct Loss Ratios 6

76% 74%

69%

69% 58%

Personal Property

62%

63%

68%

Commercial Private Commercial Property Passenger Auto Liability

2011

63%

57%

Total

2012

*2011 and 2012 calculated on a consolidated basis Source: IBC with data from MSA, as of March 27, 2013

Ontario Auto Bodily Injury Ontario Auto Liability Loss Ratio

100%

99.6%

91.0% 79.5%

75%

70.4%

68.2%

2008

2009

50% 25% 0%

2010

2011

2012

*2011 and 2012 calculated on a consolidated basis Source: IBC with data from MSA, as of March 27, 2013, excludes Lloyd’s

20 Canadian Underwriter May 2013

Earthquake Natural Resources Canada reports that there is a 30% chance of a significant quake in British Columbia in the next 50 years, and a 5% to 15% chance of a major quake in the Ottawa-MontrealQuebec City region. Is our industry ready for these events? OSFI’s 2012 Earthquake Stress Test estimated that a magnitude 9 Cascadia

OSFI’s 2012 Earthquake Stress Test estimated that a magnitude 9 Cascadia quake could lead to about $30 billion in insured losses. Many insurers would fail their Minimum Capital Test requirements; many more would be at risk. The effects would then spread through the economy. quake could lead to about $30 billion in insured losses. Many insurers would fail their Minimum Capital Test requirements; many more would be at risk. The effects would spread through the economy via mortgage and real estate exposures in the banking system, failures in basic soft and hard infrastructure and interruptions in business operations. A major earthquake would pose two big risks: one has to do with our industry’s reputation; the other is about Canada’s social and economic resilience. It is about the 55% plus of B.C. residents who do not have insurance, but are going to expect compensation. The good news is, now we know. And as an industry, we can respond, educate and prepare.

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Opinion/Analysis

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Plus ça change…

In a world of rapid change, it can be tough to keep pace. All industries are learning this — and insurance is no exception. But amidst all this change, are there constants that the Alister Campbell insurance industry can seize, Chief Executive Officer, leverage and capitalize on?

The Guarantee Company Part One of this article (CU April 2013) outlined of North America 10 drivers of change, each with the potential to materially affect the insurance industry. But with change so obviously happening all around us, it might be worthwhile to review some things that are not changing at all. Like human nature. It is possible to make the argument that in the midst of all this change, some key elements of traditional business models might actually have more power than ever before. Those who want to leverage change to their benefit need to do so keeping in mind how stable some elements of consumer behaviour continue to be.

22 Canadian Underwriter May 2013

Value

Charlie Munger, vice-chairman of Berkshire Hathaway Corporation, chaired by Warren Buffet, is quoted as having said, “Price is what you pay; value is what you get.” It remains fundamentally true that many humans are still willing to pay for “value.” The fastestgrowing retail sectors are in the luxury space. Part of this is being driven by the 1% and the buying habits enabled by accumulating wealth. But a bigger component is being driven by effective marketing — demonstrating that in a web world where commoditization is the overarching trend, value can still be both created and extracted. Whether it is the selection of the branded peanut butter over the no-frills version, when we decide what to buy at the grocery store or the price we will pay for the silk tie worn during that big client pitch, we are all living proof that value is still alive and that commodity trafficking is not the only future business model. To illustrate, consider “premium” bottled water. There is perhaps no better example of a

Illustration by Sandy Nichols/threeinabox.com

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commodity than water freely available at roughly the price from the tap. And yet consumers are buying bottled water at prices progressively greater than zero. This reality is why it is so frustrating when people call insurance a commodity. It is not. In fact, insurance is a product set with a rich range of value-added propositions embedding multiple costs of capital, as well as a very broad range of service and value-added functionality. To be sold as a commodity weakens the value proposition and exposes us to change threats. Value can still be sold — because consumers are still willing to pay for it — but to convince them of that, certain things need to be overcome.

Cynicism

No matter where today’s Canadians come from, it appears in one sense that we were all, in fact, born in Missouri. Cynicism about our industry remains high. It is why we are always at risk of demagogic political attacks in lines like Ontario auto. Insurance practitioners have always known that we start in a trust deficit and have to work our way back to better than balance. Today’s consumer is no different in this regard than those a decade or two ago. Or if they are, it is only because they are more cynical than ever. Perhaps it is worse these days because the property and casualty industry is, by definition, grouped with other financial services pillars that have had recent significant and negative impacts on global financial health and well-being. As a CEO of a Canadian-owned company with a subsidiary in the United States (just a wonderful thing to be able to say), I have experienced this deficit firsthand. As all U.S. state regulators require fingerprints from corporate officers, one of my first acts in my new CEO role was to get inked and fingerprinted at the Southfield, Michigan police station! This consumer cynicism is, in fact, a source of great opportunity — particularly for those seeking to create value

24 Canadian Underwriter May 2013

through advisory services. Those best able to overcome this cynicism and win the trust and loyalty of modern Canadian consumers will be particularly well-positioned to take advantage of a role that has remained constant in many other fields of endeavour.

The Trusted Advisor...................

One of the most fascinating conundrums in a web world where information is more readily accessible than ever, is that the quantum of that information is generating new value creation opportunities for information “brokers.” The challenge of “big data” is not just an overwhelming one for corporations; consumers are also potentially overwhelmed. Everyone is busier, forced to move faster simply to keep up, and threatened by the trends making middle class life tougher than ever.

The position of trust needs to be constantly re-earned. Too often these days, brokers seeking to increase operating margins have been working to reduce costly customer touchpoints and, as a result, have minimized their opportunities to deepen trust and actually offer advice. Today’s Canadian consumer will continue to demonstrate one key element that has certainly characterized insurance consumers for decades — the readiness to outsource complexity to trusted advisors. Independent brokers have been beneficiaries of this trait for generations, and if we get this right, it has every prospect of continuing for generations more. But the position of trust needs to be constantly re-earned. Too often these days, brokers seeking to increase operating margins have been working to reduce costly customer touchpoints (e.g., price-only quoting, automated

renewals, direct bill and 1-800 claims service) and, as a result, have minimized their opportunities to deepen trust and actually offer advice. Competitors will be ready to offer price-only alternatives, with operators standing by 7/24. To compete, intermediaries will have to re-think recent trends in their business models, and leverage new and older technologies to provide valueadded service through a human interface. In some ways, they will have to go “back to the future” to continue to earn their place as “trusted advisors” in a mutually beneficial relationship.

Relationships

It is the “relationship” among independent brokers, their customers and their shared communities that has enabled brokers to defend market position for so long. The largest single driver of human behaviour has been said to be the fear of loneliness.This certainly explains why we seek to establish relationships both in our private lives and our business transactions. Making personal financial decisions alone is frightening — especially when the risk of error is magnified by the size of exposure, as is the case in the selection of car, home or business insurance. A relationship with a trusted advisor is an obvious solution to reduce the fear of error. A truly interesting weakness of the web is that while it has the capacity to link people together, it has not proven to be a great platform for building deeper relationships. Of course, it tries. But locally based, human relationships are proving hardy, and consumers are proving to be increasingly cynical about web-initiated efforts to build relationships. That provides the independent broker with much room to prosper in insurance advisory services — and not just in commercial lines. But today’s independent broker, especially in larger urban centres, is going to have to work harder than ever to ensure the human relationships built over time continue to

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be sustained in a world where human interactions become scarcer and touchpoints are automated or dis-intermediated. In this context, a key test will be how we respond when customers who trust us and feel they have a relationship with us seek help.

Help

When uncertainty becomes fact and risk becomes tangible, customers do not start by seeking to make a claim… they start by needing and asking for help.This might be the hardest thing to automate, and may be the least desirable function for our industry to try to automate. The faster an empathetic human can be introduced, backed by competency and authority to make things right, the better. The process of delivering help through a claim clearly represents the most significant opportunity we have to prove value, demonstrate that trust was not misplaced, and make the promise of our relationship real. The special challenge is how to demonstrate all of this in advance? In an environment where no client really expects to claim — and the majority never will — it may come down to brand.

26 Canadian Underwriter May 2013

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Brand

Marketers call it the “brand promise” and spend a lot of time talking about “brand values.” But in the end, the companies that invest in brand often win. Brand is what can convince you to pay for value — like the label on that peanut butter or the tag on the back of that silk tie. The world of the web has not diminished the power of these brands. To the contrary. Precisely because the web is so impersonal, brands that have developed personality have become more important than ever. The insurance industry has many great brands. Significantly, though, there is no famous intermediated underwriter in North America. This is because intermediated underwriters invest their acquisition expense in broker commissions rather than in electronic and print media. The relative weakness of intermediated carrier brands should be of great concern to the intermediated side and of particular concern to the disaggregated distribution channel made up of so many independent brokers fighting the ground war when the direct writers control the sky. In this context, there is an urgently necessary increased collaboration between intermediated

carriers and their broker partners to mutually build upon each other’s brands.

LEVERAGING CHANGE The insurance industry will continue to be roiled by political pressures, new telematics-driven pricing models and ever-increasing consumer expectations around service. There will be those who chase change and never catch up; others will give up the chase and manage their (hopefully) slow decline. Winners, though, will most likely be those who work out how to grab a hold of the things that are changing — be it in technology or customer sophistication — and leverage those trends in a way that exploits the constant elements in human nature: those elements that leave personal and commercial consumers still open to business relationships, still ready to seek advice from people they trust, still eager for empathetic customer service and still willing to pay for value. Innovation in business models will undoubtedly be required, but the best innovators will be those who know what is changing, … and understand what is not. These winners will create lasting shareholder value by delivering real customer value.

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Driving Forward

Jochen Friedrichs

Senior Consultant, Motor Consulting Unit, Munich Re

Employing telematics and usage-based insurance (UBI) products in vehicle insurance is not new: the concept of UBI has been around for at least 15 years. More recently, the technology looks to be coming of age with the huge boost in its use in insurance markets around the globe. Technological progress is unstoppable. One need look no further than vehicle telematics to see how technology is unfolding in a rapidly developing field. Modern vehicles are packed with an increasingly long list of sophisticated technical assistants: GPS, automatic distance sensors, emergency braking systems, lane assist to alert a driver when the vehicle breaches a lane boundary, and infrared sensors that project an image directly onto the windscreen to warn the driver of pedestrians at the roadside, to name but a few.

28 Canadian Underwriter May 2013

Driverless vehicles that safely reach their destination, communicate with traffic lights or even communicate with one another â&#x20AC;&#x201D; these are just a few of the visions presented by vehicle telematics. But what impact will telematics have on insurersâ&#x20AC;&#x2122; businesses?

EXPANDING REACH The continued growth of telematics in the motor market affords insurers access to a wide range of new and additional rating criteria. Once that telematics data is in hand, insurers can explore and enter into new approaches to rating design and pricing models that can replace the prevailing practice. Telematics awareness is definitely trending in Canada. In a survey from early 2012, conducted by Canadian practitioners, more than half of the respondents had a low level of understanding of the technology. However, awareness rose by the time a second poll was completed in August 2012, when more than 60% of respondents reported having a high degree of awareness. Beyond awareness, an additional 10% of respondents noted being involved in a telematics project. Last December, Boston-based Strategy Meets

Action (SMA) reported three-quarters of the approximately 200 North American insurers surveyed said they believe that UBI will fundamentally alter the auto insurance industry between now and 2020. “Telematics is rapidly gaining momentum, and every auto insurer should be thinking about their plans for telematics and usage-based insurance,” Mark Breading, co-author of Usage-Based Insurance/Telematics: a Catalyst for Change, and SMA Partner noted in a statement. Survey results indicated 70% of North American property and casualty insurers are engaged in some stage of UBI, whether that be operating active programs, conducting pilots or building strategies. Almost 20 auto insurers are running UBI programs in the United States and Canadian markets, and eight of the top 10 U.S. companies have UBI programs or pilots under way, SMA reported at the time. It is anticipated telematics’ potential to add value to insurance products and

reduce claims-handling costs will pave the way for the technology to rapidly develop over the coming years. “Telematics is going to have a profound effect on the auto insurance business,” said Richard Welch of REW Consulting and co-author of the SMA report. “Even if consumer adoption is in the low end of the consensus range, usage-based insurance will grow rapidly, and as it grows, the traditional market will shrink, making it very difficult for companies not playing in the usage-based segment to maintain market share.” Munich Re sees some feasible propositions and uses for insurers, including the following: • perform better risk selection — risks deviating positively from the norm can be incentivized with services or the offer of lower premiums; and • base premium on driving behaviour — having actual driving influence the rate provides high motivation for the insured to avoid undesirable behaviour.

TARGET MARKET In Europe, the introduction of unisex pricing has lent new impetus to telematics-based insurance. Since the start of 2013, European insurers have no longer been able to use gender as a rating factor in motor insurance. But rating factors used in telematics-based insurance allow the driving behaviour of every policyholder to be observed and evaluated precisely. This gives rise to new business models, such as that of the British telematics insurer, insurethebox. The start-up company aims to show, in particular, that insurance premiums remain affordable even for inexperienced young drivers, provided that this target group’s individual driving behaviour is better than the norm. The cars are fitted with a telematics box and the drivers collect bonus miles for defensive driving behaviour, which then count toward the agreed annual driving performance for the policy.The

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It has yet to be demonstrated that telematics-based rates can, indeed, significantly and permanently change users’ driving habits and reduce loss potential. The data provided by current pilot projects are often not sufficiently comprehensive to yield significant findings that can be applied to a complete portfolio.

internet-savvy “Facebook generation” is the primary target group of insurethebox. Perhaps the same can be said for the Mobiliz auto insurance policy, launched in April 2012 in Quebec by Industrial Alliance, Insurance and Financial Services Inc. The policy encourages young people to adopt more responsible driving behaviour through the use of rewards, notes a company statement. Based on the pay-as-you-drive (PAYD) model, Mobiliz uses telematics technology to monitor distance travelled, speeding, forced acceleration and hard braking.When the program was introduced, the company reported that it would provide free installation of a GPS-type module to Quebec drivers between the ages of 16 to 24 who join. And in Germany, certain insurers are testing another strategy in telematicsbased insurance. A customer of ÖSA (Öffentliche Versicherungen Sachsen Anhalt), for example, can have a “crash sensor” installed in his or her vehicle by the insurer. The ÖSA Copilot is sold in addition to normal motor insurance and a monthly usage fee charged for the three-year term of the policy. Copilot is essentially based on the introduction of eCall, a legislative initiative that by 2015 will require every new car in the European Union to have a small sensor that automatically triggers an emergency call in the event of a road accident. The insurethebox and ÖSA products illustrate the distinction between a

30 Canadian Underwriter May 2013

telematics-based tariff and a telematicsbased insurance product: the former takes account of technical possibilities when structuring and calculating the tariff, while the latter affects the extent of loss incurred by the insurance customer.

QUESTIONS REMAIN The possible applications for telematicsbased insurance are numerous and the potential enormous, but its success for the insurance industry is difficult to assess. There are a number of crucial questions:Who collects which data and how? Who has access to that data? What advantages can policyholders gain from the telematics boxes? Are customers prepared to voluntarily hand over personal data about their driving behaviour? What can insurers offer in return? How low must telematics-based rates be to attract policyholders? Telematics applications in the U.S. and the United Kingdom, in particular, have spurred insurers around the world to introduce such telematics-based rates as PAYD. However, it has yet to be demonstrated that telematics-based rates can, indeed, significantly and permanently change users’ driving habits and reduce loss potential. The data provided by current pilot projects are often not sufficiently comprehensive to yield significant findings that can be applied to a complete portfolio. It may also be assumed that new telematics-based rates will primarily attract defensive drivers with lower

mileage and related findings cannot simply be applied to all drivers in a portfolio by way of extrapolation. In North America, telematics products generally involve a customer plugging a low-cost memory stick directly into the diagnostic interface of the vehicle. Driving data is collected on the memory stick, which is then available to calculate the renewal premium. For example, Progressive provides a discount of as much as 30% with its Snapshot product if the stored data proves that the driver brakes defensively, drives fewer kilometres than the average driver in the state in question, and the car is rarely used either during peak commuter traffic times or between midnight and 4 am. Other U.S. insurers, such as State Farm Insurance, rely on the use of smartphones. The insurer offers an app with which policyholders can directly investigate their own driving behaviour, making telematics products more intelligible for the customer and making it easier to keep tabs on any developments when these are done via a smartphone. For the insurer, that means a growing target group. The use of telematics enables the insurer to generate cost savings in the claims-settling process and at the same time, effectively work against insurance fraud by policyholders or third parties. With regular feedback and incentives, it is anticipated that customer loyalty to the insurer will also increase.

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Opinion/Analysis

Andrew Tablotney

President, Insurance Brokers Association of British Columbia

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Fault Lines Recent earthquakes around the world have provided a stark reminder that British Columbia must get prepared. With its high density of strata structures — coupled with low take-up levels for coverage in some areas and rising costs — everyone must come together to develop a plan to address a potentially shaky future. It may be beautiful British Columbia, but it also serves as the Canadian face of the Ring of Fire. The 40,000 kilometres of shoreline that encircles the Pacific Ocean contains 75% of the world’s active volcanoes and 90% of its earthquakes. A number of recent events have helped sharpen the focus on just what these events may mean for both B.C. and Canada’s insurance industry.

32 Canadian Underwriter May 2013

The shocking images of the devastation produced by earthquakes in Japan, Chile and New Zealand provided a stark reminder of the destruction that could happen here, too. Add to that reminder that predictive modelling — the technology used by insurers to quantify risk levels — has become more sophisticated and has brought forward new data. Not only is there a 30% probability of a significant quake in B.C. within the next 50 years, recent updates to modelling put the potential epicentres in the Cascadia subduction zone, as much as 55 kilometres farther east than previously predicted, and closer to Victoria and Vancouver. In a one-year period from April 21, 2012 to April 22, 2013, Natural Resources Canada recorded 4,292 earthquake events in and around B.C., 43 of which were strong enough to be felt by residents in the affected areas. Of the total, 56 quakes occurred near Victoria, three of those felt by residents; four quakes off Haida Gwaii ranged from magnitude 6.1 to 7.7 on the Richter scale, but fortunately caused no damage. In response to new modelling and other factors, Canada’s Office of the Superintendent of

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Financial Institutions has updated its B-9 Earthquake Guidelines for insurers. At street level, brokers and their customers have seen some insurers pulling back on their concentrations in certain neighbourhoods in southwest B.C., areas where just a few years earlier they had been keen to take on more business. In response, insurers have had to increase reinsurance and pass along those costs to consumers. So just when brokers are telling customers about the importance of having earthquake coverage, they are also having to explain the increase in its cost.

RISK PROFILE Stricter building code The B.C. Building Code has been toughened up. Residential home construction in 40 locations in southwest B.C. now requires that walls include lateral bracing for greater resistance to loads resulting from earthquakes.The mandatory bracing system mainly consists of full-height walls sheathed or finished with panels that are well-fastened to the frame. The braced panels must align vertically for each storey, creating a band that extends from the foundation to the roof. It is anticipated the change will add to the reconstruction costs of dwellings that suffer major losses, although there are no concrete estimates at this point and these would depend on factors such as dwelling size and type.

Population density Another trend adding to the risk profile is the increasing population density in the province. In 45 years, condominium living has gone from concept to major asset for about half of the people in southwest B.C. Real Estate Vancouver reported in early 2012 that the city has more condos per capita than any other city in Canada; in 2011, the city witnessed four strata properties being sold for every house. An academic paper by Douglas Harris, a professor in the Faculty of Law at the University of British Columbia, notes that in 2009, with a population of ap34 Canadian Underwriter May 2013

proximately 600,000, there were about 95,000 condominium units spread between almost 4,100 buildings in the Greater Vancouver Regional District, which includes the municipalities east of Vancouver to the Abbotsford border. The number of condo owners has pretty much doubled each decade. The concentration of infrastructure — mainly concrete high-rises and wood frame low-rise structures — and the complexity of having a commercial policy for the building and personal policies for unit contents, combine to make this a particularly problematic risk when the potential for shake damage is also added to the mix.

At street level, brokers and their customers have seen some insurers pulling back on their concentrations in certain neighbourhoods in southwest B.C., areas where just a few years earlier they had been keen to take on more business. Insurers have had to increase reinsurance and pass along those costs to consumers. Take-up levels Across the broad base of habitational insureds, meaning single-family detached and stratas province-wide, it has been demonstrated that interest in purchasing earthquake insurance is low. Anecdotally, brokers report a range of take-up levels for habitational earthquake coverage, depending on where they are located. Some Insurance Brokers Association of British Columbia (IBABC) members with a substantial strata business in the Lower Mainland report that 100% of the buildings they insure have earthquake coverage. But members have also expressed concern that in the major losses they have handled to date, fewer than half of the affected unit owners had any unit coverage at all.

RECONSTRUCTION CHALLENGES The day after an earthquake, there will be challenges getting even well-insured buildings rebuilt. A strata corporation that owns a $20-million building with a 10% earthquake deductible will have to come up with $2 million to start repairs or reconstruction, even for a partial loss. Strata owners can purchase deductible coverage as part of their unit policies, but if as many as half of the owners of a building do not have that coverage and need to raise their share of the assessment, reconstruction will be delayed. It is not yet known to what degree financing will be available to owners for their portion of the deductible; banks were not exactly enthusiastic about financing assessments for leaky condo repairs. Consider that in Christchurch, New Zealand, reconstruction has not yet begun on some of the worst-hit buildings two years after the quake. It is estimated that it will take 10 years to rebuild many residents’ homes and neighbourhoods. IBABC representatives have been discussing and raising concerns about earthquake with stakeholders for some time. Solutions will require that industry and government work together. Education from brokers, insurance companies and government is needed to help the public understand its potential exposures to earthquake. IBABC’s recommendation is that companies include within their policies the actual dollar deductible (as opposed to a percentage) to ensure the figure is more visible and understandable to the client. Companies should also make clear on the declaration page that “earthquake is not covered” when a client chooses not to purchase the coverage to help reduce errors and omissions (E&O) issues down the road for brokers. These two changes should help improve public awareness and help jumpstart a dialogue.

RELATIVE EXPENSE It is interesting the perception exists that earthquake coverage is expensive. As far as the affordability aspect is con-

cerned, one need look no further than south of the border to see rates and limit restrictions that make the earthquake product in B.C. a godsend in comparison. As prices and deductibles likely continue to climb, the solution is not for clients to remove coverage. This will only create even more expectations that government will need to step in and help should an event occur. There is also talk of that “golden goose” of coverage known as guaranteed replacement cost (GRC), and whether or not it should be removed from earthquake coverage so as to provide more certainty around the cost of reconstruction. As has been seen with other catastrophic events — Superstorm Sandy being a recent example — the

peril. As a follow-up this year, the conference in June will include a Strata Symposium. It is already known that every major quake has shown that modelling for the area underestimated the risk, and that resulting damage was significantly higher than predicted. Similar results can be expected in British Columbia. Areas elsewhere thought to be prepared found efforts to be woefully inadequate

— and British Columbia is not even at their levels of preparedness. So this, too, is a discussion that needs to take place among our partners and all levels of government. The time to act is now. After the fact is not the time to ask and answer these important questions. Let’s hope that everyone can come to the table so that a concerted plan can be developed for what may be a potentially shaky future.

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aftermath brings new thinking on how to prevent future losses on such a scale, and potential changes to building codes could add to reconstruction costs to a degree that cannot be foreseen. On the homeowners’ side, some insurance companies are starting to cap GRC by placing a 120% limit; on the commercial side, some policies that had offered GRC are removing the coverage. For stratas, however, section 149(4) of British Columbia’s Strata Property Act provides that the building policy must be on the basis of full replacement value. It is clearly time for all stakeholders to have a frank discussion about the whole earthquake issue and make sure that industry is not setting itself up for a huge failure — of both reputation and financial stability. At its 2012 annual conference, IBABC hosted a symposium on earthquake

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Cat Scan The definition of catastrophic impairment for people injured in vehicle accidents has proved to be a complex and contested subject over the past three years. Insurance Bureau of Canada contends an urgent need exists to update an outmoded definition that no longer reflects current medical science. Injured victimsâ&#x20AC;&#x2122; rights groups, trial lawyers and some medical professionals argue that court decisions have provided ample clarity on the matter. Can regulators in Ontario get the definition right? CRAIG HARRIS

36 Canadian Underwriter May 2013

hat has taken so long? It is a fair question of the seemingly unending process to redefine catastrophic impairment and impart greater certainty to the question of who is and who is not catastrophically injured for insurance purposes. While the category of “catastrophic impairment” was first introduced in Ontario in 1996, the provincial government pledged in November 2009 to examine the wording as part of its auto insurance reform package. An expert panel was appointed in December 2010 to do so. The panel presented its conclusions to the Financial Services Commission of Ontario (FSCO) in two reports in April and June of 2011, and the regulator also received 33 stakeholder submissions in response to the panel’s recommendations. In June 2012, Ontario’s Superintendent of Financial Services issued its report to the provincial finance minister on the definition of catastrophic impairment, which largely accepted the expert panel’s recommendations (with some modifications). FSCO also held a roundtable discussion in March 2013 to garner yet more “stakeholder feedback,” notes a spokesperson for the regulator. Three and a half years later after the process first began, insurers are still waiting for a firm policy decision to change the definition of catastrophic impairment in the Statutory Accident Benefits Schedule (SABS). “The government has not indicated a timeline, but it is important that it act soon,” says Ralph Palumbo, vice president, Ontario for Insurance Bureau of Canada (IBC). “Because of the porousness of the definition, insurers have reported that the number of applications for catastrophic designation has been climbing.”

May 2013 Canadian Underwriter 37

COVER STORY

Cat Scan

OPEN TO DEBATE Clearly, reconfiguring the definition of catastrophic impairment is a complicated process fraught with issues of evidence-based medicine, legal interpretations and an array of interest groups with, in some cases, diametrically opposed viewpoints. Regulators are walking a fine line between providing appropriate funding for catastrophically injured claimants and ensuring affordability in auto insurance — a hot topic of late. In fact, exactly how much catastrophic injuries contribute to the costs of auto insurance is a subject open to some debate. Several commentators suggest that these injuries represent only a small portion of overall accident benefits claims and, thus, do not require a major revamping of the current definition. “I question fundamentally whether any change in the present (definition) is even necessary as the definition only affects about 1% of all claimants,” says Dr. Harold Becker, an assistant professor in the faculty of medicine at the University of Toronto, and a vocal critic of the expert panel. “Given that there are 60,000 claimants in the system each year, that means only 600 or so individuals are affected by the definition and… about half of them will clearly meet any reasonable definition due to such things as severe brain injury, quadriplegia and amputations,” Dr. Becker says. “That leaves only a few hundred claimants over whom this whole fight is evolving.” Others share these sentiments. “Do we really need to devote the time and resources to tinkering with the Cat definition when there is no evidence it is too costly or causing problems in its current shape?” asks Andrew Murray, president of the Ontario Trial Lawyers Association (OTLA). “(We) believe that these proposed changes are an economic policy issue with the intent of saving dollars for insurers,” says Rhona DesRoches, board chair of the group, FAIR Association of Victims For Accident Insurance Reform. “Catastrophic impairment affects such 38 Canadian Underwriter May 2013

a small percentage of accident victims; those who need the most assistance,” DesRoches adds. Even some in the insurance industry are unsure of why catastrophic impairment has consumed so much attention in recent years.

“The panel is of the opinion that the current system leads to inconsistent catastrophic impairment determinations and frequently gets the diagnosis wrong,” the report notes. “The proposed changes would make the process more accurate, consistent and objective, and would also speed up determinations and reduce transaction costs and disputes.” “This has taken up a lot of resources and time for a definition that affects only a small percentage of claimants,” notes Tammie Norn, CEO of Proformance Group Inc., an adjusting firm. “I think there are so many other areas to look at and try to fix in the auto insurance system,” Norn says.

In the Superintendent’s Report on the Definition of Catastrophic Impairment in the Statutory Accident Benefits Schedule, an effort was made to measure statistics of catastrophic injury claims among insurance companies from 2002 to 2006 (the latest period for reliable data). The report found that Cat injuries had increased from a rate of 5.45 per 1,000 bodily injury claims in 2002 to a rate of 9.7 in 2006. This trend “may be related to the evolving definition arising from decisions by arbitrators and the courts,” notes the report. For Palumbo, the cost issue has little to do with road safety or more severe injuries from car accidents. The primary driver instead is found in the loosened and increasingly inclusive definition of catastrophic impairment. “Arbitration and court decisions in recent years have produced a variety of interpretations, blurring the line between catastrophic and non-catastrophic injuries,” says Palumbo, who adds that coverage for medical and rehab expenses, as well as for attendant care, rises to $2 million in catastrophic impairment cases. “This had led to excessive legal action, delayed resolution of claims for many people and growing costs from inappropriate catastrophic designations,” he argues. The “blurred” legal interpretation of catastrophic impairment prompted the call for an expert panel to review the definition and a sharper emphasis on updated diagnostic measurements, science and evidence-based medicine. “The current definition is nearly two decades old and is no longer based on the leading available science,” Palumbo says. “The expert panel has outlined what that leading science is and how it can be used to bring certainty to the determination of whether an injury is catastrophic.” The superintendent’s report similarly supported the expert panel’s focus on evidence-based medicine. “The panel is of the opinion that the current system leads to inconsistent catastrophic impairment determinations and frequently gets the diagnosis wrong,” the report states. “The proposed changes would

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COVER STORY

Cat Scan

make the process more accurate, consistent and objective, and would also speed up determinations and reduce transaction costs and disputes,” it adds. “The panel’s approach of incorporating current evidence-based medicine is consistent with the approach the government has directed for another project, namely the development of a medical evidence-based treatment protocol, the Minor Injury Guideline (MIG),” the report notes. While the expert panel report contained multiple recommendations — including automatic designation of catastrophic impairment for children suffering serious brain injuries — it called for changes to the definition of catastrophic impairment in four key areas: the combination of physical and mental/psychiatric impairments; the introduction of new clinical tools; a revisiting of pain as a category of impairment; and an interim benefits period for people who are seriously injured and awaiting determination of catastrophic impairment status.

COMBINED OR NOT? The first, and arguably most controversial, recommendation of the expert panel is to not combine physical and psychological impairments in determining a whole person impairment (WPI) rating. This was supported by the superintendent in his report. “The impairment rating systems for physical and mental/behavioural impairment are not compatible and cannot be combined. In addition, there is no scientific evidence to suggest that combining impairments is a simple additive process,” the superintendent notes. “The (expert) panel had trouble understanding how combinations of physical and psychiatric conditions that independently do not meet the criteria for catastrophic impairment could be equated to a severe injury to the brain or spinal cord or to blindness,” the report adds. However, others note that Ontario’s highest appeal court has upheld the combination of mental and physical impairments in catastrophic injury cases. 40 Canadian Underwriter May 2013

In a unanimous December 2011 ruling, Kusnierz v. Economical Mutual Insurance Company, the Court of Appeal for Ontario found that assessors could combine physical and psychological impairments to determine catastrophic impairments. That decision restored the rules for determining catastrophic impairment established in Desbiens v. Mordini in 2004.

“(We) emphasize the need to continue with the combining of mental and physical impairments in light of the Kusnierz decision and notions of equality and fairness in addressing claimants who suffer from both physical and mental or psychological impairments,” suggests the OTLA. “It is unwise to discard more than 15 years of jurisprudence, unless there is some compelling reason to do so.” “(We) emphasize the need to continue with the combining of mental and physical impairments in light of the Kusnierz decision and notions of equal-

ity and fairness in addressing claimants who suffer from both physical and mental or psychological impairments,” says the OTLA’s Andrew Murray. “It is unwise to discard more than 15 years of jurisprudence, unless there is some compelling reason to do so,” he cautions. In fact, Dr. Becker argues the singular focus of the superintendent’s report and the expert panel on medical science has obscured the fact that catastrophic impairment is a legal interpretation. “It is important to remember that catastrophic impairment is a legal definition, not a medical one,” he says. “Therefore, what does or does not represent catastrophic impairment cannot be based on ‘science,’ nor can it be based on medical opinion. That is the essence of the discussion at hand.” While the recommendation to not combine physical and psychiatric impairments could impart “clarity” for adjusters, Norn comments she is uncertain if the definition change would stand up to any court test. “I think it depends whether the courts look at this as a statutory definition or merely a guideline,” she says, noting that a recent decision by a FSCO arbitrator on the MIG ruled it was a guideline only and subject to interpretation. “If you asked me before (the MIG arbitration decision), I would have said a new catastrophic definition would hold up,” Norn observes. “Now, I am not so sure.”

REFINED CLINICAL TOOLS A second crucial part of the expert panel’s recommendations involves new clinical tools to determine catastrophic impairment in brain injuries, spinal cord injuries and psychiatric disorders. These refine or replace older measurements. For example, the Extended Glasgow Coma Scale is widely recognized as a superior tool for determining traumatic brain injury in adults over the previous Glasgow Coma Scale. In addition, the American Spinal Injury Association’s (ASIA) classification for spinal cord injury is recommended as the latest evidence-based clinical tool.

COVER STORY

Cat Scan

For other types of injuries, the expert panel recommends the definition of catastrophic impairment include a physical impairment or combination of physical impairments that, in accordance with the American Medical Association’s (AMA) Guides to the Evaluation of Permanent Impairment, 4th Edition, 1993, results in 55% or more impairment of the whole person. In terms of psychiatric disorders, the expert panel suggested a combination of requirements to meet the test for psychiatric catastrophic impairment. It indicated three psychiatric diagnoses should be used as criteria — major depressive disorder, post-traumatic stress disorder or psychiatric disorder. Another requirement involves a tool called Global Assessment of Function (GAF), which is a numerical scale-scoring system used by mental health clinicians and physicians to rate subjectively the social, occupational and psychological functioning of adults. The expert panel set the GAF score at 40, which was accepted by the superintendent. Dr. Becker has argued the diagnostic restrictions for mental and behavioural impairment are too restrictive and may actually be discriminatory against Ontarians receiving accident benefits on the basis of a mental disability, potentially violating the Canadian Charter of Rights and Freedoms. He also asserts that the GAF score of 40 or less is “draconian.” “To me, the introduction of this new draconian definition is an unfortunate agenda-driven attempt to exclude mental illness in all but the most profoundly severe forms,” Dr. Becker contends. “If that is what the government wants to do, it should be straightforward and it should explain its intention honestly as a matter of policy to… Ontarians who may be at risk. So far, this has not been done.” Another contentious area of the expert panel findings is the decision to not allow pain to be quantified as a separate impairment, which was also accepted in the superintendent’s report. The superintendent explains the justification for excluding pain as a separate impairment. “In terms of pain conditions, such as chronic pain syndrome 42 Canadian Underwriter May 2013

and fibromyalgia, the (expert) panel reports that they cannot be quantified as impairments on their own,” his report states. “The (expert) panel indicates there is no way to measure pain and no method of confirming that a claimant does or does not meet a pain threshold.” Groups such as FAIR strongly disagree with this assessment. “Insurers would likely be delighted to ignore pain and its associated costs,” DesRoches charges.

FAIR takes the view that “pain is a major part of an injured person’s ability to function in society — take the pain out of the equation and there will be fewer claims. We find the concept absurd and feel that the intent is to save money for insurers. We note that the recommended changes are basically roadblocks to access the promised benefits.” “Pain is a major part of an injured person’s ability to function in society — take the pain out of the equation and there will be fewer claims. We find the concept absurd and feel that the in-

tent is to save money for insurers. We note that the recommended changes are basically roadblocks to access the promised benefits,” she contends.

IN THE MIDDLE The final major recommendation from the expert panel is for an interim period of access to accident benefits for people seriously injured, but not determined to be catastrophically impaired at that specific time. The superintendent agreed with this recommendation, and indicated that additional benefits of $50,000 over and above the standard coverage should be available for these claimants. They would then be assessed at a later date, suggested at six months, to determine catastrophic impairment. “The (expert) panel believes that fairness would be improved for these claimants if they receive benefits without undue delay,” the superintendent’s report notes. “(Most) claimants eligible for interim benefits would ultimately receive a catastrophic impairment designation. In most cases, the interim benefits would, therefore, turn out to be an advance on the catastrophic impairment benefits. In a very few cases, the claimant would recover and would no longer qualify for catastrophic impairment designation,” the superintendent adds. Norn suggests that the interim benefits period could serve as a source of confusion for adjusters, insurers and claimants alike. “This is definitely going to be a challenge,” she observes. “There are lots of questions about how we are going to handle that, from a claims perspective. That is a very short period of time and we will have to determine whether or not the insurance is adequate.” DesRoches and FAIR hold that the interim benefits are a stopgap measure that will provide little meaningful treatment for seriously injured accident victims. “This initial $50,000, which sounds like a lot of money, does not really go very far if you are seriously injured,” she argues.

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“After nearly 20 years with the current definition of catastrophic impairment, it is time to update it to ensure timely access to Cat benefits for the people who need it, while also protecting the driving public from the significant cost effects of inappropriate designations,” Palumbo says. “The proposal is that you can apply for more benefits at the six-month mark and that you may get approval for further benefits after an assessment. And this conveniently ignores that there is nothing quick about our insurance system except the denial rate. There could easily be a gap in treatment while claimants are working their way through the mediation system. How does that fit in with the expectation of timely and appropriate treatment?” she asks. In fact, groups such as FAIR, OTLA and several medical professionals with expertise in catastrophic impairment have jointly argued the expert panel on catastrophic impairment — and the resulting superintendent’s report, represent a “deeply flawed” process. They have been critical of the composition of the expert panel, its consensus model involving six out of eight votes (which they argue marginalized some members’ input) and its generally more restrictive nature of catastrophic impairment definition. They also contend that the entire review process of a new definition should be overhauled — or scrapped entirely. This vocal dissent may have prompted the recent roundtable talks at FSCO in March 2013, which many opponents of the expert panel hope will spark a new approach to catastrophic impairment. “These roundtable discussions represent a fresh start to allow all stakeholders to discuss their views about the Cat impairment definition,” Murray suggests. “We anticipate many conversations and 44 Canadian Underwriter May 2013

much further study. We doubt anyone would be recommending change without first heeding our cautions as change for the sake of change alone does everyone a disservice,” he adds. “The feeling that FAIR came away with (from the roundtable) was that the Minister of Finance is fully aware through prior discussions, and the submissions from various stakeholders, that much of the content of this (superintendent) report were unacceptable,” reports DesRoches. “We hope that our government will acknowledge that the flaws in the panel makeup, the size of the panel and the subsequent lack of real agreement between the members (are) good reasons to reconsider how they have approached this issue,” she says. On the other side, insurer groups like IBC defend the work of the expert panel as reasonable, scientific and measured in coming up with a new definition of catastrophic impairment. “The proposed definition relies on a science-based evaluation process that uses scientifically proven tests to determine the type and severity of an injury,” says IBC’s Ralph Palumbo. “Generally, it should produce more consistent and timely injury determinations and fewer costly legal disputes.” In the review process, the government and other parties involved have spent a great deal of time and resources on getting the definition of catastrophic impairment right, particularly in terms

of applying the latest medical science. One likely reason why the definition has taken so long is the need for consistency and clarity in the terminology — regulators know that the courts will carefully scrutinize any new definition. After so much time, the worst-case scenario would be a hasty return to the drawing board if the courts strike down any new definition of catastrophic impairment. Given that there is a great deal at stake for both consumers, who pay auto insurance premiums, and accident victims, particularly those who are seriously injured and may fall into “grey areas,” this would be a serious setback, IBC argues. “After nearly 20 years with the current definition of catastrophic impairment, it is time to update it to ensure timely access to Cat benefits for the people who need it, while also protecting the driving public from the significant cost effects of inappropriate designations,” Palumbo concludes. Others say the ongoing search for a new definition of catastrophic impairment may end up creating even more uncertainty down the road. “It has taken 18 years to accumulate the existing jurisprudence that is finally providing clarity to the interpretation of the definition as it stands,” says Dr. Becker. “If the purpose of the definition change (as stated by FSCO) is to ‘clarify’ how to apply the SABS, expect another 18 years before we get to the point we are at now in achieving that clarity.”

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Willie Handler Consultant, Willie Handler and Associates

Providing proof of auto insurance coverage in Canada today is somewhat like a trip back in time. Despite the availability of mobile devices and technology that could put electronic proof of insurance a click away, insurance companies at home seem reticent to be the insurer to make the first move. One would think that the standard auto insurance card seems like a throwback in this increasingly paperless age, but that it is not the case in Canada. Despite smartphones, tablets and other technological gadgets now being part of everyday life, providing proof of auto insurance cover-

46 Canadian Underwriter May 2013

age is like a nostalgic trip back to the days of our parents or grandparents. In Canada, insurance companies and brokerages mail, fax and e-mail copies of the standard pink insurance slips to policyholders upon renewal or policy changes. In March 2013, Industrial Alliance Insurance and Financial Services provided its group health customers in Quebec with the option of an electronic version of its plastic insurance card. However, there is currently no movement to do the same for auto insurance policyholders. In Ontario, the Compulsory Automobile Insurance Act states that drivers must â&#x20AC;&#x153;have in the motor vehicle at all times, (a) an insurance card for the motor vehicle; or (b) an insurance card evidencing that the operator is insured under a contract of automobile insurance, and the operator shall surrender the insurance card for reasonable inspection upon the demand of a police officer.â&#x20AC;? Despite confirming existence of a card, fake or invalid insurance cards can be easily acquired. Obviously, an invalid card is going to look legit-

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Something to Prove

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imate if an unscrupulous driver cancels the policy immediately after getting the card. The Uninsured Vehicle Project, an initiative led by Ontario’s Ministry of Transportation, provides an electronic means of determining whether or not a vehicle carries mandatory insurance coverage when licence plates are being renewed by checking with the insurance industry’s online database. The wrinkle is that police officers do not have access to the database and accept as valid any insurance card that appears to not have expired.

CHANGING TIMES In Ontario, the five-year review report of the Superintendent of Financial Services at the Financial Services Commission of Ontario (FSCO) raised the issue of electronic commerce back in 2009.The superintendent noted he had received feedback from insurers that they would like to see legislation and regulations updated so that transactions regarding applications, policies, endorsements and renewals could be conducted electronically.

The submission of the Canadian Association of Direct Response Insurers stated, “Of concern also is the requirement to provide a paper copy of the liability card. Companies should be able to provide the liability card along with all the other documentation in electronic form if the customer approves.” The regulator indicated its primary concern regarding electronic commerce

is the production of fraudulent liability cards. However, FSCO also acknowledged that fraudulent paper insurance cards currently exist and there may be technological solutions to address these concerns. Based on the submissions received, FSCO noted it appeared that not all industry stakeholders were aware that Ontario’s Electronic Commerce Act, 2000 already enables auto insurers and others doing business in the province to implement electronic document delivery and electronic counterparts to traditional written documents and written signatures, provided certain functional equivalency rules are followed. The five-year review report signalled to the insurance industry that electronic documents, including the insurance

In Ontario, the Superintendent of Financial Services has received feedback from insurers who said that they would like to see legislation to allow transactions regarding applications, policies, endorsements and renewals to be done electronically. card, was acceptable under existing Ontario law, yet no insurer has introduced electronic proof of insurance over the past four years. Steve Whitelaw, senior vice president of business solutions at The Dominion, says that guidance is required from regulators in all jurisdictions with respect to security and auditability requirements. In addition, there are other logistical issues that must be addressed by The Dominion that are relevant to its distribution of insurance through brokers, Whitelaw reports. The capability to issue electronic policy documentation, including liability slips, is on The Dominion’s road map. “There are competing priorities,” he says, pointing out “this topic does

not appear to be a priority for consumers, and from our perspective, The Dominion’s focus remains on the replacement of our legacy systems.” Ontario law is silent about whether or

not an electronic version of the insurance slip counts as valid proof of insurance, but it is uncertain if police officers would accept an electronic version. Consider such an incident: a driver in a recent minor accident could not locate his pink insurance slip. He contacted his broker from the scene of the accident who e-mailed him his pink slip as a PDF file. The police officer responding to the accident informed the driver that he bought himself one hour to produce a paper copy. Bob Percy, deputy chief of the Halton Regional Police Service, says he sees an electronic insurance card being accepted by police “as long as there was comprehensive awareness of the process, and assurances that the material could in no way, shape or form be manipulated to create false, but legitimate-looking, insurance slips.” But how many people would be comfortable handing their personal devices to officers who require the information to complete accident reports? Percy suggests that the ideal approach would be to have an insurance database that officers could access, similar to the Canadian Police Information Centre database. This concept would be an up-to-date information repository that

May 2013 Canadian Underwriter

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confirms insurance particulars with no reliance on the driver.

SERVICE ADJUSTMENT Last year, J.D. Power & Associates issued results of a survey of the insurance industry in the United States, which was entitled 2012 U.S.Auto Insurance Study Management Discussion. “As customer preferences and interaction behaviours continue to evolve, insurers must be prepared to adjust their service strategies to keep pace with those changing preferences,” the report points out. “All insurers face the reality that customer expectations are being reshaped by market forces beyond their control — whether through the emergence of new technologies and devices such as the iPhone, iPad,Twitter or Facebook, or through changing servicing dynamics being introduced in other verticals. Ultimately, every insurer must recognize that such a decision of necessity will need to be made in the not-too-distant future,” the report notes. “Ultimately, it all comes down to customer choice — today that choice is rapidly expanding to include a variety of new self-service tools and interfaces,” it adds.

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The Property Casualty Insurers Association of America (PCIAA) reports that 11 U.S. states — Alabama, Arizona, Arkansas, California, Idaho, Kentucky, Louisiana, Minnesota, Mississippi, Virginia and Wyoming — now have laws or regulations on the books that allow

But how many people would be comfortable handing their personal devices to officers who require the information for accident reports? One deputy police chief suggested the ideal approach would be to have an insurance database that officers could access. for electronic insurance cards to be used for both vehicle registration and when being pulled over by the police. In Colorado, drivers can use e-cards for registration, but not for police traffic stops. However, the state is considering legislation that would extend electronic proof to traffic stops as well. PCIAA reports the governors of Kansas and Indiana are expected to sign legislation in their states, while several

other states — Florida, Georgia, Hawaii, Indiana, Iowa, Maine, Michigan, Missouri, Ohio, Oregon, Rhode Island, South Carolina,Texas, Utah,Washington and Wisconsin — have pending legislation on the matter. For drivers in states that allow for the use of electronic insurance cards, it would be wise to still have a paper copy handy when driving outside of home jurisdiction.

PRIVACY MATTERS There are some valid concerns about e-cards. For example, what privacy rights, if any, are being handed over when someone — let alone a police officer — is allowed to look at a driver’s phone to view his or her insurance card? While some states have put limits on what can be viewed — Arizona, for example, specifies that showing an e-card does not imply consent to view other items on a wireless device — many have no such language. It appears inevitable that electronic proof of insurance will come to Canada. The technology exists and both government regulators and police forces appear open to the change. It just seems that no insurer particularly wants to be the first to make the move.

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• The View from OSFI Julie Dickson, Superintendent of Financial Institutions, OSFI • Preparing for “The Big One”; Perspectives on Earthquake in Canada Moderator: Mary-Lou O’Reilly (IBC); Speakers: Petra Nemcova (Happy Hearts Fund); Gregor Robinson (IBC); Professor Peter Gordon (University of Southern California); Ross Stein (USGS/Global Earthquake Model) Gold Sponsors • Keynote Luncheon Speaker: Preparing for an Earthquake - Leading Through Partnership Don Forgeron, President & CEO, IBC • Global Reinsurance Panel Moderator: Bill Eyre (Towers Watson); Panelists: Ulrich Wallin (Hannover Re); Jacques Bonneau (ACE Tempest Re Group); Dominic J. Addesso (Everest Reinsurance Company); Toby Stubbs (Pembroke) • Policy/Reinsurance Wordings - Pitfalls and Opportunities Mark Lichty (Blaney McMurtry); John F. Cairns (Chubb Canada); Stuart S. Carruthers (Stikeman Elliott) • Prairie Storms: Thunderstorms, Tornadoes, and Blizzards. What the Hail is Going On? Moderator: Paul Kovacs (Insurance Institute for Catastrophic Loss Reduction); Panelists: Patrick McCarthy (Meteorological Service of Canada); Maxime Lafleur-Forcier (Aviva Canada); Tanya Brown (US Insurance Institute for Business & Home Safety) • Global Economic Outlook Dr. Kurt Karl, Chief Economist, Head of Swiss Re Economic Research & Consulting, Swiss Re Silver Sponsors • The Future of Auto Insurance Amid Tech Advancements Moderator: Jamie Rodgers (CGI); Panelists: Robyn Robertson (Traffic Injury Research Foundation - TIRF); Dr. Peter Burns (Transport Canada); Donald Light (Celent); Michel Laurin (Industrial Alliance Auto and Home Insurance Inc.) • Getting a Handle on Supply Chain Risks Moderator: Kelly Marchese (Deloitte); Panelists: Matthew Yeshin (Marsh Canada); Linda Conrad (Zurich Financial Services) • Is Time for Flood Insurance in Canada Nigh? - A Debate Moderator: Alain Thibault; On the ‘No’ side: Guy Vézina (TD Insurance); On the ‘Yes’ side: Kathy Bardswick (The Co-operators Group Limited) • Where’s the Action in Class Actions? A ‘No Holds Barred’ Debate Moderator: Amanda Lang; Media Sponsors Won Kim (Kim Orr Barristers) vs Robert W. Staley (Bennett Jones) • Closing Keynote Luncheon Speaker: The New Economic Challenges Facing Quebec and Canada The Honourable Jean Charest, 29th Premier of Quebec & Former Deputy Prime Minister of Canada For more information visit www.niccanada.com or contact Laura Viau at laura.viau@msaresearch.com. NICC 2013 sessions are accredited by RIBO: 5 Hours Management, 4 Hours Technical

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All Hail Opinion/Analysis

Glenn McGillivray

Managing Director, Institute for Catastrophic Loss Reduction

Insurers writing business in high-risk hail zones need to consider employing impact-resistant (IR) roofing materials and incentivizing their use. Overall efforts will be advanced by having IR requirements in building codes for homes being constructed in these zones. The need to address the problem of mounting hail-related claims in Canada could not be more acute. That said, the anticipated increase in hail damage going forward is not necessarily driven by any projected increase in frequency, but rather the increased concentration of values and growing costs of replacing damaged property. Large gaps currently exist in the testing of such elements as siding, vents, soffits, fascia and fenestration, as well as with the implementation of impact-resistant (IR) standards.There are also clear gaps that need to be filled regarding research to better protect vehicles from large and damaging hail. It is likely best for the Canadian insurance industry to concentrate first on those measures where it has the most knowledge and where insurers will get the best return: roofing. Knowing that IR roofing products perform markedly better than non-IR products, insurers writing business in high-risk hail zones need to consider leveraging their buying power, and incentivizing their use. These overall efforts will be advanced by having IR requirements in building codes for homes being constructed in high-risk hail zones. If not, Canadian insurers writing personal lines

50 Canadian Underwriter May 2013

business in hail hazard areas should get used to writing big cheques more often.

PRAIRIE FOCUS Consider that after getting hit with a major hailstorm in Alberta during the summer of 2012 — the second in just three years — and two smaller events, Canadian property and casualty insurers, through ICLR’s Insurance Advisory Committee, asked the ICLR to look into the peril and suggest actions that insurers can take to mitigate future hail losses in the country. As a first step, a senior ICLR staffer was among more than 300 attendees to the War on Hail symposium sponsored by the Texas Department of Insurance (TDI). Hailstorms are the leading cause of homeowners’ insured losses in the state. Research findings — all meant to help build more storm-resilient structures — as well as mitigation measures and insurance business practices discussed at the symposium can be applied here in Canada. Information from Emergency Preparedness Canada notes that hailstones have a minimum diameter of half a centimetre, but can grow larger than 10 cm in diameter and can hit the ground at 130 kilometres per hour.

Though hail can, and has, struck every province and territory in Canada, the majority of hail days are in Alberta, the southern Prairies and southern Ontario. From an insurance perspective, essentially all of the large-loss hail events recorded in Canada have occurred in Alberta. Emergency Preparedness Canada’s website lists the September 7, 1991 event in Calgary as the most expensive hailstorm in Canadian history, resulting in $237 million in personal property damage spread over 62,000 claims, with a further $105 million in vehicular damage over 54,000 claims. That event was eclipsed by a July 12, 2010 storm that pelted Calgary with hailstones of almost 4 cm in diameter, prompting more than $400 million in claims. That storm, in turn, was overshadowed by the August 12, 2012 hailer that saw parts of Calgary hammered by golf ball-sized stones. PCS Canada has pegged the insured damage from the storm at more than $500 million, representing roughly half

of all insured damage from severe weather tallied in Canada last year. Insurance Bureau of Canada reported last December that the August 12 storm in Calgary, the July 11-12 event in Edmonton and the July 26 event in southern Alberta combined to produce more than $732 million in claims. When added to hail claims racked up in 2010, Canadian (re)insurers have paid out well over $1 billion in just three years, not including damage for crops.

INSURED ASSETS Hail claims for homes and cars are often to repair damage that is only cosmetic in nature. However, large hail events often result in claims for replacement of badly damaged roofs that no longer function properly; shredded and missing siding, broken windows and skylights — all of which can allow water into a home; and replacement of auto glass needed to restore driveability of a vehicle. Some of the measures that can be taken to protect homes against hail have

become clearer and better understood in recent years. Better understanding, however, does not necessarily translate into increased ease of implementation of mitigation measures as a result of a host of issues, not least of which is openness and acceptance by homeowners and insurance companies.

Housing As discussed at the TDI event, hailstones generally become destructive when they are 2.5 cm (one inch) wide or larger. They then have the capability to cause extensive damage to industrial and commercial assets, public infrastructure, trees, vegetation, crops and livestock, vehicles and homes. A quick look at the data available on recent hailstorms in Alberta indicates that while the number of damaged vehicles is substantial when large hail falls, damage to houses is equally as frequent. The data also indicates the average hail claim is roughly twice as much for a home as for a vehicle.

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Roofing As is true in the United States, the majority of homes in Canada use asphalt shingles for roof covering. Information on www.roofery.com notes that asphalt shingles can be categorized by design type — single-piece shingle, strip shingles, laminated shingles and interlocking shingles — and by constitutive elements, which include fibreglass or organic elements. The fibreglass variety is preferred for its fire-resistant property and for its comparative light weight, but not for overall performance. Organic composition asphalt shingles, on the other hand, are popular for their durability and value for the money, and are considered to be more flexible and favoured in colder regions. The Canadian Asphalt Shingle Manufacturers’ Association, or CASMA, notes that hail can have two main effects on asphalt roofing: aesthetic and functional: “By far, the most common type of damage caused by hail [is aesthetic]; small localized areas with minor loss of granules.This type of damage generally has little impact on the expected life of the roof,” CASMA reports. “Functional damage is where there is sufficient damage to the shingles to either cause a short-term leak or to reduce the life of the roof… Generally shingle replacement is only required in severe cases of damage.” For an IR roofing standard used by both U.S. and Canadian shingle manu-

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facturers, one must look to Underwriters Laboratories standard, UL 2218 Impact resistance of roofing systems.The Tampabased Insurance Institute for Business & Home Safety (IBHS) notes that the UL 2218 test “involves dropping steel balls of varying sizes from heights designed to simulate the energy of falling hailstones. Class 4 indicates that the product was still functional after being struck twice in the same spot by twoinch (5-cm) steel balls.”

PCS Canada has pegged insured damage from the August 2012 hailstorm in Alberta at more than $500 million, accounting for roughly half of all insured damage from severe weather tallied in Canada last year. It was noted at the TDI symposium that asphalt shingles designated as Class 4 under the UL standard hold up very well against 95% of all hailstorms experienced. A recommendation made several times at the symposium was that insurers replacing a hail-damaged roof, particularly in areas that regularly experience significant hail events, should make it a policy to only provide reimbursement for Class 4 IR roofing that meets UL 2218.The moderately higher cost over installation of a Class 1 shingle would be small given the potential

How Does Hail Form?

Direction of Movement

32F

Warm Updrafts Cold Downdrafts

Inside of a thunderstorm are strong updrafts of warm air and downdrafts of cold air. If a water droplet is picked up by the updrafts, it can be carried well above the freezing level. With temperatures below 32F, the water droplet freezes. As the frozen droplet begins to fall, carried by cold downdrafts, it may thaw as it moves into warmer air toward the bottom of the thunderstorm. But the little half-frozen droplet may also get picked up again by another updraft, which carries it back into very cold air and re-freezes it. With each trip above and below the freezing level, the frozen droplet adds another layer of ice. Finally, the frozen water droplet — now with many layers of ice, much like the rings in a tree — falls to the ground as hail.

Source: National Oceanic and Atmospheric Administration (NOAA)

52 Canadian Underwriter May 2013

claims savings, and could be reduced by an insurer’s buying power. Also worthy of consideration is the idea that new home builders use a Class 4 shingle whenever a home is being built in a high-risk hail zone, such as in both southern Alberta and southern Saskatchewan. On February 20, the IBHS conducted what was billed as the world’s first indoor hailstorm at its research centre in Richburg, South Carolina, again attended by a senior ICLR staffer. The test was the first to subject a fullscale home (key construction features of which included roofing, exterior walls, skylights and gutters) and a car to a four- to five-minute barrage of hail, delivered by multi-barrelled hail cannons. The cannons produced 8,000 to 10,000 hailstones with diameters measuring one (2.5 cm), 1.5 (4 cm) and two (5 cm) inches at as much as 76 miles per hour (122 km/h). Among the preliminary test findings are that the majority of impacts from the hailstones were on the roofing system; and post-test damage surveys revealed roof damage patterns consistent with what IBHS researchers have documented in the field following recent hailstorms in Colorado and Texas.

Siding, vents, soffits, fascia, skylights and fenestration In moderate hailstorms, it is often just the roof of a home that is damaged. However, in larger, very destructive storms, the Texas experience has been that the other half of damage relates to elements such as siding, vents, soffits, fascia, skylights and fenestration (i.e. windows and doors). To date, very little research has been done on these items, which can prove to be significant sources of damage. Discussions in Texas noted that there is a huge void in the science and testing, and virtually no IR standards exist for siding, vents, soffits, fascia and fenestration. Clearly, much more work needs to be done in the testing of these elements, and in the development of related IR standards.

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

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Skill Set The Ontario College of Trades will soon start enforcing provincial rules requiring certificates of qualification for dozens of skilled occupations, including auto body professionals. One auto carrier suggests the move will help raise the standard of technicians’ skills, but critics contend existing licensing, professional standards and inspection regimes are sufficient and the new enforcement layer will spur higher claims cost. Greg Meckbach Associate Editor

In April, the Ontario College of Trades began registering new members, including those in trades requiring certification. Proponents say that mandatory certification in certain auto repair trades, for example, could help raise the standard of the work and improve public safety. But critics characterize having the college enforce mandatory certification requirements as a redundant layer of regulation that could lead to higher cost of auto and property restoration claims, and convince some property restoration specialists to go underground. The college — intended to be similar to other self-regulatory, professional bodies in Ontario, such as those for engineers, architects and health professions — will govern 157 different occupations. As of April 8, anyone wanting to perform one of the 22 trades for which certification is mandatory (these include auto body and collision damage repairer and automotive service technician, although the college’s review panels have the power to make trades compulsory) had to pay an annual fee of at least $60 per appren-

54 Canadian Underwriter May 2013

tice and $120 per journeyperson. The move has automotive technicians such as Christine Aarlaht concerned.The Hamilton, Ontario firm that Aarlaht owns, CT&G Automotive Specialists, now pays $120 every three years in licensing costs for two technicians. But with two journeyperson technicians and an apprentice, she estimates the new requirements will drive her licensing costs to about $1,200 every three years. Aarlaht has provided her response to several calls from the college for stakeholder input. “I have asked quite a few times what the money is going towards,” she said in an interview.

SUPPORTING EDUCATION Among the things the college plans to do is work with high school guidance counsellors to promote careers in skilled trades and employ inspectors who will travel to work sites to verify that those performing work have the certificates of qualification required by provincial law, says Ron Johnson, chair of the College of Trades. Aarlaht suggests for repair shops like hers, a

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certification process already exists, alluding to the Interprovincial Standards Red Seal Program. There are also certification processes in place for trades people in property restoration, adds John White, owner of Winmar in London, Ontario. As an example, White cites the Institute of Inspection Cleaning and Restoration Certification, which has standards for, among others, rug-cleaning technicians, senior carpet inspectors and water damage restoration technicians. White says he initially had concerns certain trades would need certification. “If it’s true that painters, drywallers, etc. will have to be certified, it will drive some of these people underground,” he cautions. From what he has heard from other construction contractors, the new requirement will create an unnecessary bureaucracy and “will make our jobs more expensive to the consumer and to the insurance industry, no question.” Aarlaht argues the new fees will also drive up the cost of auto claims because collision repair centres will pass on their costs to those paying for repairs. Todd Bourgon, executive director of Trillium Automobile Dealers Association in Markham, Ontario, agrees. “When costs go up, everyone pays,” says Bourgon, whose association represents new vehicle dealers. But one major auto insurer suggests the type of oversight provided by the college will help improve quality of work and encourage more people to enter the auto repair trades. “A self-regulatory body overseeing the auto body and collision repair trade will help raise the standard of technicians’ knowledge, competence and skills,” a spokesperson for CAA Insurance Company (Ontario) notes in an e-mail to Canadian Underwriter, pointing out that vehicles are becoming more complex as a result of new materials and computer systems.The hope is the college would “increase the general profile and awareness of auto body repair as a career choice and help bring more apprentices into the field.” Beyond its mandate of attracting young people into the trades, the college will maintain a public register of members on its website and is required to investi-

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gate complaints against those members. For example, insurance carriers or claimants unsatisfied with the quality of work could lodge a complaint about the performance of a repair shop, says Johnson. “The college would do an investigation and could determine who was responsible for that work and if, in fact, there is an issue of incompetence,” he says. If so, the issue “would be addressed accordingly.” The response could include revoking or suspending a member’s certificate of qualification or statement of membership, imposing a fine of as much as $2,000 or ordering a member to pay the costs of the proceedings against him or her. At press time, the college said its officers would be “prepared to enforce” provisions under Ontario’s College of Trades and Apprenticeship Act by June 6.

Concerns have been expressed that property restoration will be more expensive and the new fees will also drive up the cost of auto claims since collision repair centres will pass on their costs. Johnson says most people he has spoken with in auto repair support establishing the new oversight body because their business prospects are being eroded by those non-qualified people working under the table in home garages. But critics such as Bourgon and Garfield Dunlop, Ontario’s Progressive Conservative Party critic for apprenticeship programs, point out that auto repair facilities are already subject to inspections from the provincial labour, transportation and environment ministries. On April 10, Dunlop tabled a motion in the Ontario legislature to abolish the College of Trades. Johnson argues there is no redundancy since the college and ministries are focusing on different obligations. While college enforcement officers will check, for example, that a person doing brakes in a garage is certified to do so, labour ministry inspectors will be enforcing things such as

the Occupational Health and Safety Act. He emphasizes that ensuring someone is qualified contributes “to the overall safety of both the safety of the consumer and the worker.”

PROFESSIONAL INDEMNITY Some critics warn there is no professional indemnity clause in the College of Trades and Apprenticeship Act governing the College of Trades, even though its processes are similar to those of provincial colleges governing doctors, engineers and architects. Building designers registered with Ontario’s Ministry of Municipal Affairs and Housing are required by the Building Code to carry either a liability or an errors and omissions policy. That policy must indemnify the firm against liability arising out of performance of — or failure to perform — services during the time they are registered. “If the same rationale is applied (to regulated trades), it should capture the trades who apply the same if not more ‘knowledgeable’ field skill to a construction project in Ontario,” architect Derek Smith, director of project development for London-based MCI Design-Build Corp. and former executive director of the London and District Construction Association, writes in an e-mail. “I do not know if (general liability) insurance from a sub-contracting company or a union for which the tradesman is seconded and is a member works or will suffice if put to the test,” Smith notes. The decision for trades people to obtain liability insurance or increase the limit of an existing policy “is a matter for them to decide on the basis of independent legal and financial advice,” a college spokesperson notes in an e-mail. At least one carrier suggests liability is a concern for auto trades. Leonard Sharman, senior advisor for media relations at The Co-operators Group Ltd., says that in auto accidents causing serious personal injury, engineers look for evidence of prior repairs to the body. “If there is a connection between faulty work and the injuries sustained, it is likely that the tradesperson who did the work can be brought into the legal action as a defendant,” Sharman adds.

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

e|djuster Launches New Brand Identity by e|djuster – May 10 First General Thunder Bay Proudly Announces Joe Sgambelluri is HAAG Certified! by First General Services Canada – May 8 Granite Global Solutions Continues Efforts to Help Crack Down on Insurance Fraud by Granite Global Solutions – May 7 Cira Medical Services Sparks Discussion on Canada’s $51 Billion Price Tag During Mental Health Awareness Week by SCM Insurance Services – May 6 Team STRONE-Itech Ready to Ride for Heart on June 2nd by by STRONE-Itech – May 6 FIC Welcomes Iain Murray as Business Development Manager in New Westminster by SCM Insurance Services – May 3 DKI Canada Welcomes Geoff Stewart to the Team at Head Office by Disaster Kleenup Canada Ltd. (DKC) – May 2 First General Niagara Welcomes their New Owner by First General Services Canada – May 2 Winmar Signs Contract with Symbility Solutions Inc. by WINMAR – May 1

First General Vancouver Welcomes their New General Manager! by First General Services Canada – Apr. 24 Burns & Wilcox Canada Supports National Growth Strategy with Key Sales and Marketing Hire by Burns & Wilcox Canada – Apr. 23 Granite Claims Solutions is on the ground in Northern Ontario by Granite Claims Solutions – Apr. 23 Cira Medical Services Hosts Seminars on Workplace Health Strategies and IME Industry Trends by SCM Insurance Services – Apr. 19 STRONE acquiert Les Entreprises Rénovaneuf | STRONE Acquires Les Entreprises Rénovaneuf by STRONE-Itech – Apr. 17 First General Hamilton Expands by First General Services Canada – Apr. 17 Community Care Family Set to Take First-Ever Family Road Trip Thanks to CARSTAR St. Catharines Donation by CARSTAR Automotive Canada – Apr. 15 Granite Global Solutions welcomes Doug Tremblay as Managing Partner of Rochon Engineering by Granite Global Solutions – Apr. 15

Grain Insurance Launches New ‘Brand’ For a Renewed Business Era by Wynward Insurance Group – May 1

Young people’s experiences in the co-op housing program - study by Aviva highlights YouthLink’s outstanding work with at-risk youth by Aviva Canada Inc. – Apr. 12

CNA Canada announces promotion of Michael O’Connor to position of Vice President, Underwriting by CNA Canada – Apr. 30

FIC Welcomes Frank Cutruzzola as Manager, Investigations in Hamilton by SCM Insurance Services – Apr. 11

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Mark Fairhurst

Director of Marketing, Audatex Canada

Getting an auto repair estimate right the first time is critically important. Being able to access information to determine if a vehicle is a total loss will save the insurer money in terms of cycle time and rental days, and help get a settlement cheque into the hands of the customer more quickly. What matters most to customers when settling a total loss claim for a vehicle? A customer demands that the process be quick, provides fair market value for the vehicle, offers transparency and keeps him or her informed. For the driver, watching his or her vehicle be towed away from an accident scene is upsetting. Not knowing how the insurer will treat the

58 Canadian Underwriter May 2013

driver after submitting a physical damage claim will likely add to an already unsettling experience. Insurance companies that implement total loss settlement best practices can have a positive impact on the customer experience by ensuring that policyholders — at least, more policyholders — are content with settlement outcomes. Settlement transactions should be not only fast and efficient but, ideally, also leave customers with a positive emotional connection to the insurance provider. As noted in Top Insurance Industry Issues in 2013, released by PwC this past February, most insurers are not meeting the changing needs of their customers and, as such, are “missing out on a vital competitive differentiator.” The refrain by now should be familiar to all: consumer expectations are changing as a result of widespread combined effects of an e-commerce economy driven increasingly by mobile technology. These advances have created new distribution and communication channels that are

Illustration by Sandy Nichols/threeinabox.com

Collision Course

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changing how insurers conduct business and manage relationships. Generation Y, for example, seems completely at ease with using digital platforms to become more informed consumers.

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workflow estimates takes the guesswork out of the equation by immediately alerting adjusters to the likelihood that the vehicle will be a total loss. The adjuster can then decide whether or not to submit the total loss vehicle for market valuation.

MAKING THE BEST OF OPPORTUNITY Insurance companies that “get it,” understand that the first opportunity to make a positive connection with customers is at the first notice of loss (FNOL). Adjusters need to ask some pointed questions about vehicle damage to arrive at an assessment. These questions include the following: • Were more than two vehicles involved? • Is the car driveable? • Which parts of the vehicle appear to be damaged? • Did the airbags deploy? • Are any internal parts of the car that are normally not visible now visible? • Are any of the doors opening improperly or cannot be opened? • How fast was the car travelling at the time of the accident? FNOL triage tools can help by quickly calculating the repair costs. However, not all tools are the same. Given the complexity of vehicles today — including computerized suspensions, alternative materials and hybrid drive systems — adjusters need access to accurate and intelligent valuation information that covers all the unique and vehicle-specific options available from manufacturers. Getting vehicle options right the first time ensures a fair and accurate market price is returned to the adjusters. Insurers are able to use vehicle identification number (VIN) decoders to accurately retrieve the individual vehicle content — everything from the model name to standard equipment, factory-fitted options and engine and transmission data.This vehicle-specific information is critical to calculate accurate damage repair costs and total loss valuation. An options-driven database linked to

In Canada, approximately half of auto policyholders reported that they had an intention to shop around at next renewal. Intention to shop was found to be highest among direct customers, at 58%, and those younger than 45, at 46%, the survey results note. Automating FNOL using integrated tools that provide accurate and complete vehicle data can shave days off the total loss process. Reducing how long the customer is without his or her vehicle can save the insurer money in terms of cycle time and rental days. A fast and effective triage regimen at FNOL can also improve the overall customer experience and, in the process, help set the insurer apart from its competition.

POLICY SHOPPING ON THE RISE The PwC report notes policy shopping and switching behaviour is growing. Between 2009 and 2011, for example, the number of policy shoppers in the United States increased from 27% to 33% of total property and casualty insurance customers. Of those who shopped their policies, the number of policy switchers increased from 37% to 39% (representing 10% to 13% of all customers). In Canada, for the same period, about half of auto policyholders reported an intention to shop around at next renewal. Intention to shop is highest among direct customers, at 58%, and those younger than 45, at 46%. The net result of the findings for p&c insurers is that their “at risk” market is growing and it is becoming increasingly difficult to retain policyholders. What can account for this trend? In February, the World Insurance Report 2013 was released by Capgemini, which provides consulting, technology and outsourcing services, and the not-forprofit organization, Efma. Based on 16,500 customer surveys, research data from 41 markets and interviews with 114 insurance executives, the report says only 30% of customers surveyed in 30 countries reported a positive experience with their respective insurance company. In Canada, 70% of respondents said they were satisfied, but only 45% reported feeling positive about their experience. Of note, report authors observed a strong link between the ability of insurers to provide relevant products and services and their customer experience performance. This correlation suggests relevant products and services represent an important component of customer experience. That said, this is certainly not the only consideration. “Insurers need to look beyond simple satisfaction with products and services if they are going to deliver more favourable experience to customers, and create a differentiating proposition,” the report states. The report further concludes that significant opportunity exists for insurers

May 2013 Canadian Underwriter

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

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

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

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

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

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

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

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

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

ENGINEERING SERVICES

Granite Claims Solutions Global Adjusters and Marine Surveyors www.graniteclaims.com

Canadian Underwriter May 2013

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

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

INSURANCE COMPANIES CONSULTING FIRMS

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

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

complex engineering incidents. www.waltersforensic.com

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

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

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

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

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

RISK MANAGEMENT

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

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

INSURANCE LAW

SPECIALTY INSURANCE

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

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

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experience tool — found that what almost a quarter of respondents most value in their insurance providers is “prompt and fair claims” processing. Insurers can also go that “extra mile” and help remove the stress from the car-buying process by helping customers find a new vehicle quickly and easily through a vehicle replacement service linked to the valuation process.

PERCEPTION IMPORTANT

able to “pinpoint the key elements of customer experience” in the areas considered most important by customers. Nowhere is this more evident than when policyholders are dealing with a total loss claim. Once a vehicle is determined to be a total loss, it is imperative that insurers get the vehicle market valuation correct. Access to a comprehensive and locally sensitive database of comparable vehicles is key to determining accurate total loss values. When providing a valuation, it is not sufficient to cite only dealer values. Insurers need to use research tools that leverage multiple data points, including privately advertised vehicle information that reflects local market values. Being able to show the customer that

It is imperative that insurers get vehicle market valuation correct. Having access to a comprehensive and locally sensitive database of comparable vehicles will be important to determining accurate total loss values. the valuation is fair and accurate in an easy-to-read and understand report also goes a long way toward building trust. An analysis last year of more than 600 reviews of home, auto and life insurance companies — conducted using InsurEye’s online insurance consumer

Keeping claimants better informed of the progress of their claims has been shown to improve customer perceptions of the settlement experience. Recent survey findings in the U.S. seem to bear this out. J.D. Power & Associates’ 2012 U.S.Auto Claims Satisfaction Study looked at claimant experience related to FNOL, service interaction, appraisal, repair process, rental experience and settlement. The data reveals that there is a correlation between higher overall claimant satisfaction with the claims experience and those insurers who offered more options — either with web-based or mobile communication tools — to keep claimants informed of the progress of their claim. By enabling customers to remain abreast of the status of their settlements and providing them with easily understandable market valuation reports, insurers can positively influence customer experience in a cost-effective way. No driver expects to have an accident, let alone one that results in a total loss. Drivers want to get back on the road as quickly as possible — and expect they will be able to do so in a vehicle of the same or better condition than before the collision. Claims managers, too, want to get drivers back in their vehicles quickly. They are concerned about replacement values, storage costs, rental costs and delays in vehicle replacement. By using a fully integrated total loss claims management solution, insurers will see productivity gains and reduced cycle times that result in a better overall customer experience, as well as help manage loss adjustment expenses.

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Channel Surfing What is the impact of channel selection on customer experience? Although customer use of self-service and emerging channels is on the rise, brokers, agents and customer call centre representatives continue to be primary points of contact for many questions and tasks.

Jeremy Bowler

Senior Director, Global Insurance Practice, J.D. Power & Associates

The continued advancement of consumer technology has altered many aspects of everyday life, including the way people interact with their insurers. While the growth in digital channel usage in the insurance industry may be slower than in other industries — J.D. Power & Associates’ 2012 Canadian Retail Banking Customer Satisfaction Survey shows that Canadian banking customers now interact with their branch office more frequently online than in person — the company’s 2013 Canadian Auto Insurance Satisfaction Study finds that increasing numbers of customers are using self-service and emerging channels. The survey results reflect online responses from 11,257 auto insurance policyholders, fielded from February 20, 2013 to March 25, 2013. Overall satisfaction is based on five factors, each weighted as per the following: interaction, 25%; price, 24%; policy offerings, 20%; billing and payment, 16%; and claims, 15%. The 2013 survey shows the percentage of Canadian customers using non-traditional channels, such as a provider’s website, has increased by as much as 7 percentage points from 2012,

62 Canadian Underwriter May 2013

depending on the particular region, while interaction via customer call centre representatives has declined by 1 to 4 percentage points. Although local brokers/agents and customer call centre representatives continue to be primary points of contact for many questions and tasks, the decline in the percentage of customers using a call centre year over year — particularly among direct consumers — is further evidence of increasing customer acceptance of new technology and the willingness to use self-service for many tasks. Looking just at 2013, among customers interacting with their insurers, more than a quarter of direct insurance customers has done so via their insurer’s website, and almost one in six has contacted via e-mail, either on their insurer’s website or with a broker/agent or call centre representative. While fewer customers are interacting via call centre representatives, it is important to note that these more personal interactions — especially for more complex tasks, such as filing a claim — continue to be a major driver of both customer satisfaction and loyalty.

SURVEY FINDINGS Insurer model and channel usage While customers of insurers that use a local broker/agent model for sales and service are much more likely to interact exclusively through their local broker/agent, customers of direct insurers more frequently interact through multiple channels. Nearly 60% of direct customers who have ever interacted with their respective insurer utilized more than one channel. Direct customers use insurer websites more often than broker/agent-served customers, and are also more likely to have interacted through e-mail, text or a smartphone app. The web channel is the most frequently used method outside of the traditional channels (agent/broker and call centre customer service representatives, or CSRs) among both direct- and broker/agent-served customers. Among customers who use multiple channels to interact with their insurers, the web remains the most frequently utilized method outside of the traditional channels; however, it should be noted e-mail interactions are almost as prevalent.

Reason for contact The way in which customers interact with their insurers is often driven by the reason for the contact. The most frequently cited contact reasons among direct-served customers are as follows: policy renewal; questions regarding policy coverage; to add or change drivers; to gather information; or questions related to billing. The service channel that customers most prefer to use when contacting their insurers varies significantly depending on the reason for the contact and the insurer’s service model. Service channel preference among direct-served customers Direct customers typically have no access to a local broker/agent. Many of these customers prefer to use the insurer’s website for routine activities, with more than one in four indicating a preference

for ordering proof of insurance cards, making a payment, updating contact information, and gathering information via the web. For more complex tasks — such as obtaining a rate quote, changing drivers or vehicles, and discussing policy coverage or price — direct customers still prefer to contact a customer call centre representative.

WEB VALUE Insurer sites an important resource for direct-served customers Expectedly, customers most often cite gathering information as the reason for visiting their insurer’s website. However, policy coverage and renewal are also reasons for a high incidence of web interactions — tasks direct-served

Insurance and Risk News and Information In Real-Time: Property & Casualty Insurance Newswire

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May 2013 Canadian Underwriter

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Putting the pieces together.

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

CIP Society Seminars & Events: Victoria – PROedge Seminar: Handling an Environmental Claim . . . . . . . . . . . . . . . . . . . May 23 Vancouver – 11th Annual Golf Tournament . . . . . . . . . . . . . . . . . . . . May 24 Vancouver – PROedge Seminar: Top Cases & Developments 2012-2013 . . . . . . . . . . . . . June 6 Toronto – Annual Fellows’ Golf Tournament . . . . . . . . . . . . . . . . . . . . June 10 Victoria – 7th Annual Golf Tournament . . . . . . . . . . . . . . . . . . . . . . . June 21 Halifax – Annual Golf Tournament . . . . . . . . . . . . . . . . . . . . . . . . . . . . . July 9

Edmonton – 25th Annual Golf Tournament . . . . . . . . . . . . . . . . . . August 19 Kitchener – PROedge Seminar: Environmental Losses . . . . . . . . . . . . . . . . . . . . . . September 10 London – Annual Golf Tournament . . . . . . . . . . . . . . . . . . . . . . September 20 Kelowna – Annual Golf Tournament . . . . . . . . . . . . . . . . . . . . . September 20 Edmonton – PROedge Seminar: Advanced Business Interruption . . . . . . . . . . . . . . . . October 3

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

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Among customers who use multiple channels to interact with their insurers, the web remains the most frequently utilized method outside of the traditional channels; however, it should be noted that email interactions are almost as prevalent.

customers say that they prefer to discuss in person or via the phone. Additionally, the variety of activities that can be conducted online may have a significant impact on both customer satisfaction and retention, which further highlights the need for insurers to make certain their websites are able to facilitate a variety of activities.

Return on investment through a highly satisfying website experience Insurers should continue investing in their websites, as website satisfaction is the lowest among all of the interaction channels. Ensuring that the technology offerings are competitive within the marketplace may lift both customer satisfaction scores and retention metrics. Insurers that are able to meet the current level of customer expectations related to website functionality may also realize a return on investment. By providing and promoting functionality that allows customers to conduct routine or simple tasks via the website, insurers may considerably decrease the necessity for calling a customer service

representative. The decrease in call centre traffic, in turn, may provide an opportunity to trim related costs. The benefit of providing efficient services via the web is evident when examining channel usage trends among highly satisfied customers (channel satisfaction scores of 800+ on a 1,000point scale). The percentage of these customers who have not called a call centre in the prior 12 months has increased during the past two years to 56% in 2013 from 46% in 2011. Website satisfaction among customers who are unable to resolve their issues online is considerably lower than among those who are able to do so (703 versus 792, respectively). Further, when customers who are unable to resolve their issues via the online channel must contact their insurer through a secondary channel — typically the broker/agent or a customer call centre representative — satisfaction with that secondary channel also declines.The inability to resolve an issue online may decrease overall customer satisfaction with their insurer by 52 points.

INVEST TO KEEP PACE Customers’ preferences for interacting throughout all facets of their personal and business relationships are shifting, and insurers must determine where to invest resources to keep pace with industry trends and customer demands. Investments made in digital channels, such as an insurer’s website, should be a high priority given the rapid adoption of technology among consumers; moreover, the high functionality within this channel may also help reduce the number of in-bound service calls. Despite a slight decline in usage, the call centre still serves an important role in customer satisfaction. Customers tend to use the call centre and broker/agent channels more frequently for complex interactions, such as obtaining quotes or discussing pricing options. Ensuring that the call centre CSRs and brokers/agents are knowledgeable of insurer policies regarding coverage and that they are well-versed in behaviours of common courtesy may help ensure the delivery of a satisfying personal interaction experience to customers.

Service Channel Preference Among Insurer Direct-Served Customers Phone (Call Centre Representative)

69%

14%

20%

Renewal

26%

19% 10%

Gather Information

15% 18%

24%

Verify Payment Receipt

Email, Text Message, or Digital Chat 30% 21%

21% 11%

Obtain a Rate Quote

17%

11%

Update Your Contact Information

Website 34%

30%

15% 14%

Price Changes

33% 15% 10% Make a Payment

19% 8%

Add/Change Drivers and/or Cars

Source: J.D. Power & Associates 2013 Canadian Auto Insurance Satisfactory Study Note: Not all activities shown

May 2013 Canadian Underwriter

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MOVES & VIEWS UPCOMING EVENTS: FOR A COMPLETE LIST VISIT

www.canadianunderwriter.ca

AND CLICK ‘MY EVENTS CALENDAR” ON THE HOME PAGE

Travelers Insurance Company of Canada recently named Lucy Hathaway [1] as its new vice president, middle market, business insurance. Hathaway joins Travelers Canada from RSA, bringing with her 18 years in underwriting and management roles in commercial insurance. Her experience includes managing small, middle and large accounts, with much of her time spent in western Canada. St. Paul Fire & Marine Insurance Company and Travelers Guarantee Company of Canada are the Canadian licensed insurers known as Travelers Canada.

First General Services Canada Ltd. has made several new senior appointments. Frank Mirabelli [2] is now chief operations officer for Canadian operations while Adrian Mirabelli has taken on duties as vice president, property management division liaison of Canadian operations at the property and damage restoration firm. Toronto-based First General Services has also named Randy Millar as vice president, quality assurance and client liaison for Canadian operations. Chris Johannesen, a former district manager for FirstOnSite Restoration LP, has accepted the position of general manager for the company’s Vancouver office. First General has more than

66 Canadian Underwriter May 2013

80 affiliates in Canada and the United States.

Toronto-based Iter8 Inc., which offers software-as-a-service for property and casualty brokers and agents, has been acquired by Quindell Portfolio Plc in Fareham, England. The teams of both firms “have worked closely over the past year to develop a pipeline of opportunities, including those relating to the roll out of telematics-based insurance models for the Canadian market with existing customers,” Rob Terry [3a], chairman of technology provider Quindell, notes in a press release. “With our two technology sets now integrated and first client implementations contracted, we are very confident that we can use our knowledge and standing within the North American market... to accelerate Quindell’s technology and outsourcing growth in North America,” says Iter8 co-founder and executive vice president, Tim Scurry [3b].

Burns & Wilcox Canada has welcomed two new senior staff. Brian Neale, a former senior marketing specialist at Chubb Insurance Company of Canada, has been named the company’s new national sales and marketing manager, notes a statement

from the commercial broker. Past treasurer of the Toronto Insurance Marketing Representatives Association and a former vice president of the Brampton Brokers Association, Neale was a senior marketing specialist at Chubb. Before that, he spent 12 years at Gore Mutual Insurance Company, where he managed 60 brokerage accounts. Also joining the Burns & Wilcox team as a property and liability underwriter is Deanne Taylor, who will be based in St. John’s, Newfoundland. Before coming to Burns & Wilcox, Taylor had 14 years of industry experience as an underwriter, claims adjuster and customer service representative. Previously manager of the homeowners department at Atlantic Insurance Company, she has also

worked at Cal Legrow Insurance and Crosbie Job Insurance.

Property restoration firm Winmar Franchise Corp. has announced that it will use software from Symbility Solutions Inc. to let staff generate estimates using their smartphones and tablets. Winmar has signed a multi-year agreement to integrate the Symbility software, including Mobile Claims, which is available on Apple Inc.’s iPad and iPhones, as well as smartphones running on Google Inc.’s Android operating system, says a statement from Winmar in London, Ontario. “Mobile Claims will enable Winmar staff to quickly and easily generate accurate estimates, improve

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MOVES & VIEWS

Rain and Hail will continue to provide crop insurance under its existing name.

efficiencies and shorten the claims-estimating process,” the statement notes. As well, the company will implement Symbility’s Claims Connect property and casualty claims workflow management software, which “will streamline the claims-estimating process by reducing cycle time and increasing accuracy in all aspects of the claims-handling process.”

will now have 225 employees and $175 million in annual premium volume. “Believer Plus is a good strategic fit for CG&B, and we look forward to continuing to grow this book of business,” H. Larry Later [6], president and CEO of The CG&B Group Inc., says in the press release.

Toronto-area brokerage firm CG&B Group Inc. has acquired the majority of assets of Believer Plus Insurance Brokers Ltd. Launched in 1997 by The Mitchell-Abbott Group Insurance Brokers, Believer Plus represents CG&B Group’s 16th acquisition in 14 years, the firm reports. CG&B Group

ACE Group has formed an agriculture property and casualty business, dubbed ACE Agribusiness. The business is comprised of Penn Millers Insurance Company and the Farm and Ranch division of Rain and Hail Insurance Service, both of which were previously acquired by ACE. The business will offer farm and ranch and specialty p&c commercial insurance products and services, while

Brokerage firm Hunters International Insurance of Toronto recently announced it has accepted an invitation to join UNiBA Partners, a Brussels-based provider of risk management, brokerage and employee benefits services. UNiBA has broker partners in 130 countries, while other partners in Canada include Axis Insurance Managers Inc. in Vancouver and GPL assurance inc. in Montreal, notes a company statement. Founded by Brooke Hunter in 2005, Hunters International provides brokerage services for risks such as property, business interruption, liability, employment practices, boiler and machinery and kidnap and ransom.

Plant Hope Adjusters has announced the opening of its ninth office in Atlantic Canada. Located in Bedford, Nova Scotia, within the Halifax Regional Municipality, senior adjuster Mike Connolly [9] will serve as the principal adjuster in the new office. The company’s network of nine offices and its team of 29 adjusters provides services across Nova Scotia, New Brunswick and Prince Edward Island. Plant Hope Adjusters offers loss investigation, marine survey-

ing and claims management to both carriers and to self-insured clients.

Frank Cutruzzola [10] has been named Forensic Investigations Canada’s (FIC) manager of investigations in the company’s Hamilton, Ontario branch. Offering services such as investigations and surveillance for disability and injury claims, FIC is a division of Edmonton-based SCM Insurance Services, which also owns ClaimsPro and CIRA Medical Services.

Doug Tremblay [11], chief operating officer of Rochon Engineering, recently became a managing partner for the firm, its parent company reports. Bolton, Ontario-based Rochon Engineering, whose services include fire investigation, motor vehicle accident reconstruction and failure analysis of mechanical and electrical systems, is part of Granite Global Solutions, out of Toronto. Tremblay, a mechanical engineer specializing is accident reconstruction and failure analysis, has been with the company since 2007. He has worked in forensic engineering and the automotive and aerospace industries. Follow @CdnUnderwriter on

http://twitter.com/CdnUnderwriter

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The WICC Ottawa 3rd Sugar Bush Breakfast took place at the National Arts Centre on Apr. 5. Surgical oncologist and Ottawa scientist Dr. Rebecca Auer, updated a record crowd of 280 on her research work which focuses on finding a way to boost a patient’s immune system following cancer surgery. Dr. Auer is the recipient of a $200,000 innovation grant awarded by the Canadian Cancer Society and named after WICC Ottawa, Ontario Chapter. A $30,000 cheque representing the proceeds from the WICC Ottawa Wine and Cheese event was

presented to Mary Hobbs and Heather Gray of the Canadian Cancer Society. Samantha Iturregui of Kelly Santini LLP and Gerry Denomme of First General Services were both presented with a Gold Flame plaque from WICC Ottawa, in recognition of their continued generous support over the past three years. The breakfast event was enjoyed by all and preliminary results would indicate that over $13,000 was raised toward cancer research. The WICC Ottawa Breakfast committee wishes to thank all the sponsors, donators and participants for their generous support.

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National Insurance Conference of Canada (NICC)

Peace Hills Insurance

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7 17, 25 31, 45, 55

WINMAR

Wawanesa Insurance

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Douglas Tremblay Murray Wallace, CEO of Granite Global Solutions, is pleased to announce the appointment of Doug Tremblay as Managing Partner of Rochon Engineering effective April 1, 2013. Doug is a Licensed Professional Engineer who has been with the firm since 2007 and Chief Operating Officer since June 2012. He completed his Baccalaureate of Technology in Mechanical Engineering at Ryerson University and his accreditation program through the University of Toronto. He is currently completing his MBA at the Queen’s School of Business. With 25 years of engineering experience, 15 of that in a managerial role, Doug has worked in the forensic engineering, automotive, and aerospace industries. He has also spent over a decade providing forensic engineering services to the insurance industry. An accident reconstruction and failure analysis specialist, Doug trained in Advanced Accident Reconstruction Methods at the renowned Institute of Police Technology and Management, University of North Florida. He is an active member of various societies such as the American Society of Mechanical Engineers and the Society of Automotive Engineers. “Doug’s years of experience with Rochon are invaluable to his new role. Over the years, he has provided steady leadership to the other professionals and will be a strong force in growing the talent pool at Rochon,” said Wallace. “More importantly, Doug knows the company and the clients and the clients know him. He has been providing top notch service to the insurance industry for many years, and he knows what they are looking for in a professional engineer.” About Rochon Engineering Rochon Engineering, an engineering and environmental services firm, has been serving clients across Canada since 1996. The team of experienced professionals specialize in fire investigation, structural and civil engineering, motor vehicle accident reconstruction, failure analysis of mechanical and electrical systems, environmental remediation, and material laboratory services.

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WICC Ontario held its 17th Gala Dinner, ‘Star Struck – An intimate evening with Chantal Kreviazuk’ on Apr. 11 at The Westin Harbour Castle Hotel in Toronto. WICC dinner co-chairs and evening emcees Marian Adamson and Michael Butler introduced WICC cochairs Ellen Moore and Jean Faulkner to present a $250,000 cheque from WICC to Martin Kabat, CEO of the Ontario division of the Canadian Cancer Society. Board member Marilyn Horrick acknowledged WICC’s Tribute Recognition initiative – the seven WICC Tributes currently established having raised over $110,000, including Tributes for: Leona Charbonneau; Cristina DeVargas; Linda Hajekerou;

70 Canadian Underwriter May 2013

Mary Goodbrand; Jamie Knowles; Jim McRae; and Micki Traikos. Gold flame Awards, recognizing significant contributions to WICC, went to Chubb Insurance Company of Canada; Ross Totten and Team Totten; National Insurance Conference of Canada (NICC) and Joel Baker; First General Services (Ottawa) and Kelly Santini LLP (Ottawa). The Lew Dunn Memorial Award was presented to Elisa Gutierrez, executive assistant, Enterprise Rent-A-Car. WICC Relay for Life chair Paul Martin spoke about the industry's commitment to the event and 2013 Relay for Life plans and goals. Since WICC's inception in 1996, the Canadian P&C insurance industry has raised more than $6 million for cancer research.

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WICC Ontario 17th Gala Dinner, Apr. 11

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ProFormance Group Inc. hosted its 3rd Annual Wine Tasting & Charity Event on Apr. 18 at the Drake Hotel in Toronto. The evening included two grand prizes, a silent auction, a 50/50 draw and door prizes. $10,000 was raised and went to the Jennifer Ashleigh Children's Charity – funds which will go to help approximately 10 families with children that have serious illnesses “when love is not enough”. Wine tasting and hors d'oeuvres were available throughout the evening. Jennifer Valentyne of Breakfast Television emceed the event.

74 Canadian Underwriter May 2013

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