C A N A D A’ S I N S U R A N C E A N D R I S K M A G A Z I N E . C A N A D I A N U N D E R W R I T E R . C A
JUN E 2 0 1 4 A Business Information Group Publication #40069240
Cyber 2.0 BY CRAIG HARRIS
e-Commerce Emerging BY KULLI TAMM
Getting Personal BY KEVIN DEVEAU
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2014-06-13 1:17 PM
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CANADIAN UNDERWRITER
VOL. 81, NO. 6 , June 2014 Canada’s Insurance and Risk Magazine. Published by Business Information Group
www.canadianunderwriter.ca
Cover Story
Cyber 2.0
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Cyber insurance coverage is entering the next phase in its evolution from optional add-on product to increasingly important component of a thorough risk management program. But while more organizations are having the “cyber talk” with their brokers and insurance partners, the pace of product adoption is slow grind rather than big bang. By Craig Harris
features
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54 Cyber 2.0
JUNE 2014 A Business Information Group Publication #40069240
BY CRAIG HARRIS
22 Mobile Apps Some insurance companies in Canada are starting to offer mobile apps. But some argue these apps must be integrated into insurer computer systems to realize their full potential.
e-Commerce Emerging
Usage-Based Insurance Canadian auto insurers have been slow to embrace UBI, but gearing up now is advised to seize an advantage 26-14 CUW June_Cover_V2.indd 1 and remain competitive. By James Colaço
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BY KULLI TAMM
Fraud Detection
By Greg Meckbach
Getting Personal New technological advances 30 Predictive Analytics BY KEVIN DEVEAU have made it possible to Predictive analytics can analyze untapped data and help leverage business shift the fight against fraud intelligence tools to create 2014-06-13 from the claim to claimant. predictive models to make By Kevin Deveau more effective and accurate business decisions.
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Digital Distribution
Predictive Modelling
Technology is playing an important part in framing consumer demands about how they want to browse, shop and be served by insurers.
Insurers must develop a more comprehensive, strategized and aggressive approach to predictive modelling implementation.
By Kulli Tamm
By Nathalie Bégin
50 RIMS Annual Conference & Exhibition The risk landscape is changing, demanding a wider view be taken of what constitutes risk and how different risks work together. By Angela Stelmakowich
58 Flood Restoration Restoration efforts at a 128-unit town house complex 1:17in PM Southern Alberta after last year’s flooding illustrates the importance of mitigation and prevention.
By Nicolas Michellod
By Jim Mandeville
34 Insurance Telematics Canada 2014
67 Paperless Workflow
The conference offered sessions on issues from the regulatory landscape to privacy, commoditization of usage-based insurance, consumer demands and the business case for telematics.
Going paperless offers the promise of some significant efficiencies and costs savings, but combining solutions can provide brokers with a bigger bang for their buck. By Catherine Smola
By Angela Stelmakowich & Harmeet Singh
June 2014 Canadian Underwriter
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VOL. VOL.81, 81,NO. NO.2,6,FEBRUARY June 20142014
Editor Angela Stelmakowich astelmakowich@canadianunderwriter.ca (416) 510-6793
PROFILE profile
14 Leading by Example James Cameron, president of Cameron & Associates 16 Broker Advocate Insurance Consultants Limited, Ted Harman has plenty of was recognized by the CIP goals — including to make Society when he received its it easier for brokers to send Established Leader Award. information from their BY ANGELA STELMAKOWICH computer systems to those of insurers — and looks forward to focusing on those goals as part of his work with provincial and national organizations. SPECIAL FOCUS By Greg Meckbach
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Editorial
8special Marketplace focus 56 Moves & Views 12 Editorial 58 Gallery 14 Marketplace
Online Editor Harmeet Singh hsingh@canadianunderwriter.ca Twitter: @CU_Harmeet (416) 442-5600 ext. 3652 Photo: Patrick Thompson
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Safe and Certified
Recent attacks and hacks “show how far cyber criminals will go to steal people’s financial details, and we absolutely cannot afford to be complacent.” Angela Stelmakowich, Editor astelmakowich@ canadianunderwriter.ca
12 Canadian Underwriter June 2014
The United Kingdom may have a jolly good idea turned scheme turned potential competitive advantage when it comes to cyber security. The U.K. government’s Cyber Essentials (CE) scheme — which was introduced in April and went live June 5 — is meant to help businesses defend against cyber threats. Should businesses that become CE-certified opt for a little crowing thereafter, perhaps securing some competitive advantage, so be it. U.K.’s Department for Business, Innovation & Skills reports there had previously been no single recognized cyber security assurance certification suitable for all businesses to adopt. It seems that those days are over. So, too, are the days when suppliers bidding for contracts involving handling of personal and sensitive information get the job. Come October 1, the U.K. government will require all such suppliers — likely IT-managed or outsourced services, commercial services, financial services, legal services, HR services and business services — to be certified. Any company that obtains a CE badge will be able to advertise that it takes cyber security seriously — boosting reputations and providing a competitive selling point, the government statement argues. With the world (individuals and businesses) relying so thoroughly on the cyber scene these days — and with hackers, fraudsters and
others with ill intent forever at the ready to take advantage of weak links — it seems a safe move. A recent study released by the Center for Strategic and International Studies, and sponsored by McAfee Inc., estimates the cost of cyber crime at US$445 billion. The report found that global losses connected to “personal information” breaches could reach US$160 billion. Here at home, PwC recently reported that 36% of polled Canadian respondents said their businesses were subject to economic crime, up from 32% in 2011. Cyber crime was listed as one of the top five economic crimes, with 22% of respondents noting their firms had been victims. Recent attacks and hacks “show how far cyber criminals will go to steal people’s financial details, and we absolutely cannot afford to be complacent,” says U.K. universities and science minister David Willetts. “We know from recent research that a significant proportion of businesses, of all sizes, are not deploying a number of basic security controls, leaving them exposed to this increasing threat,” Mark Brown, director of information security at EY (Ernst & Young), says, commenting on the new scheme. But “businesses should not view this scheme as a complete solution, as it only addresses the basic controls,” Brown cautions. “Businesses need to make sure they are going above
and beyond this to ensure they are fully protected,” he adds. Some insurers certainly see value in the scheme, which is being backed by AIG, Marsh, Swiss Re, the British Insurance Brokers’ Association and the International Underwriting Association. Some insurers, in fact, are offering incentives to businesses to become certified, the statement notes. “As part of our commitment to the program, we will incorporate Cyber Essentials into our risk assessment process for new cyber insurance policies, offering preferential rates to those prospective AIG clients who have obtained a Cyber Essentials Certificate as part of our commitment to superior cyber hygiene and overall cyber risk management,” Jamie Bouloux, cyber liability underwriting manager for AIG, says in the government statement. The scheme is food for thought in Canada, especially for a country that does not have mandatory breach notification for organizations to disclose information to affected individuals. Alberta requires notifications of breaches to the provincial privacy commissioner, which can issue fines for businesses, and Manitoba is looking to introduce legislation to make it mandatory for organizations to notify affected individuals. Baby steps, but these are always the first in charting a new, wider path.
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marketplace
Canadian Market ARTHUR J. GALLAGHER TO ACQUIRE BROKER NORAXIS Arthur J. Gallagher & Co. has signed a $422-million agreement to acquire Noraxis Capital Corporation — a subsidiary of Roins Financial Services Limited, which owns the RSA Canada group of companies — that, if approved, will leave the Illinois-based company holding majority equity interests. Upon completion of the transaction, which is subject to regulatory approval and is expected to close in July, Arthur J. Gallagher will hold 87.1% of the equity interests in Noraxis. The remaining 13% will continue to be owned by various management employees of Noraxis, notes Arthur J. Gallagher, an international insurance brokerage and risk management services firm. “Gallagher expects to finance the transaction using mostly additional long-term borrowings and its line of credit. This transaction is expected to result in earnings accretion of $0.07 per share in 2015, and should also generate another $0.03 per share of earnings from our ability to use additional tax credits.” Noraxis generated almost $125 million in revenue in 2013, has more than 650 employees and operates out of 23 offices across Alberta, Manitoba, New Brunswick, 14 Canadian Underwriter June 2014
Nova Scotia and Ontario. “In Noraxis, we have found our ideal Canadian partner and together we now have a solid platform for organic growth and a leadership team that will continue to attract new merger partners,” says David Ross, CEO of Arthur J. Gallagher International. Rowan Saunders, CEO of RSA Canada, says the sale “enables us to invest in advancing our strategy and build stronger capabilities and propositions to our brokers and customers.”
CANADIAN P&C NET INCOME FALLS 30% AFTER RECORD CAT LOSSES: SWISS RE Record catastrophe losses caused the Canadian property and casualty insurance industry to see 2013’s underwriting profit decline to $284 million compared to $1.9 billion in 2012, notes a briefing from Swiss Re. Net income (after tax) fell by almost 30%, and return on equity deteriorated to 7.7%, a decline of 3.5 points. Elevated catastrophe losses increased the combined ratio by almost five points year over year to 99.8%. “Alberta floods caused the biggest loss on sigma records in Canada, with an estimated $5 billion in economic losses and an estimated $2 billion in insured losses,” notes the briefing. Combined with damage from thunderstorms and flash floods in Toronto and an Ontario ice storm, insured losses from natural catastrophes “reached a new record for the country.”
Technology POLLED UBI CUSTOMERS REPORT BECOMING BETTER DRIVERS: DESJARDINS Half of the respondents to a poll marking the one-year anniversary of Desjardins General Insurance Group’s (DGIG) launch of its usage-based insurance (UBI) programs said they are safer drivers and almost seven in 10 now pay more attention to acceleration and braking. The survey — based on input from 257 Ajusto and Intelauto (for group insurance customers) clients — indicates more than two-thirds of respondents agreed with the statement that they pay more attention to acceleration and braking since signing up. As well, 50% of respondents agreed they have become safer drivers since they installed the telematics device in their vehicles and began monitoring their driving habits online. DGIG reports that clients of the programs are earning, on average, a 12% discount in their insurance premiums.
NEW CANADIAN FIRE INSURANCE GRADING INDEX VERSION ISSUED Fire Underwriters Survey (FUS), operated by Opta Information Intelligence, was scheduled to release a new online system for its Canadian Fire Insurance Grading Index in late May. Version 2.0 was to be available through the iClarify property valuation tool from Opta, at no additional cost to
subscribing insurance firms and the brokers they sponsor. The system is also available at the FUS website. Some features of the new version of the index, a web-based service, include that 80% of all hydrants in Canada have been geo-coded and included in search results; and that road network data with improved mapping accuracy has been updated. “The insurance industry is evolving quickly and there are significant gains ahead as companies realize they can improve accuracy, efficiency and profitability with the implementation of digital and GIS-based tools,” suggests Michael Currie, FUS director at Opta Information Intelligence.
Claims HOMEOwners filing MORE CLAIMS FOR STORM DAMAGE: J.D. POWER Year over year, the number of weather-related insurance claims in Canada has increased by 32%, notes the latest edition of the annual J.D. Power 2014 Canadian Home Insurance Study. The study, which examines customer satisfaction with their homeowner insurers, is based on responses from 7,092 customers, collected March through April 2014. Overall, 41% of the home insurance claims were for weather-related damage. Despite the rise in weatherrelated claims, though, customer satisfaction with
marketplace
their insurance providers — even among those who filed a claim — is improving. Among those who filed a weather-related claim, satisfaction with the claims process averages 790 (on a 1,000-point scale), up from 764 in 2013 when 31% of claims were for storm damage. “Insurance is a product customers hope they never have to use, but when they do have to, that’s the opportunity for the insurance provider to make good on their promise,” says Jeremy Bowler, senior director of the insurance practice at J.D. Power.
a catastrophic impairment. The maximum is $6,000/ month if the insured person did sustain a catastrophic impairment. Attendant care benefits are for “services provided by an aide or attendant, or by a long-term care facility, including a long-term care home under the Long-Term Care Homes Act, 2007 or a chronic care hospital.”
Regulation
The Institute for Catastrophic Loss Reduction (ICLR) is scheduled to demonstrate loss mitigation methods on two homes this year in Western Canada, a move that is hoped to help with ICLR’s effort to influence the construction of new homes. In May 2013, ICLR showed the public a home in Quebec City, which had been retrofitted to make it more resilient to earthquake risk and winter storms, as part of its Showcase Homes program. At its recent annual general meeting, institute founder and executive director Paul Kovacs said ICLR expected to announce two homes — one in Calgary; one in Kelowna. The Calgary home will be designed to prevent water damage while the one in Kelowna (to be showcased this fall) will be designed to prevent wildfire damage, noted Kovacs, who is also president and chief
ONTARIO UPDATES ATTENDANT CARE RATES The Financial Services Commission of Ontario (FSCO) is revising the hourly rate guideline for attendant care benefits in the province’s standard auto insurance policy, raising the amount payable for “basic supervisory functions” from $10.25/hour to $11/hour for accidents that occur on or after June 1, 2014. FSCO’s Attendant Care Hourly Rate Guideline “establishes the maximum expense that automobile insurers are liable to pay” for attendant care services under the Statutory Accident Benefits Schedule. Under Ontario’s standard auto policy, the maximum attendant care benefit that can be paid is $3,000/month if the victim did not sustain
Risk HOMES TO DEMONSTRATe WILDFIRE, FLOOD RISK REDUCTION METHODS: iclr
executive officer of Property and Casualty Insurance Compensation Corporation. Kovacs said it is more expensive to retrofit an existing home, to make it more resilient to natural catastrophes, than to build a resilient home in the first place.
THIRD OF SMALL firmS HAVE NO severe weather CONTINGENCY PLANS: CIBC More than a third of surveyed Canadian small business owners do not have contingency plans for work stoppages from severe weather or other interruptions, notes a new poll from CIBC. Based on a web survey of 500 small businesses (under 500 employees) and carried out by Leger Marketing in February, 35% of respondents lack contingency plans. In Atlantic Canada, 43% lacked business interruption plans; in Quebec, it was 41%; 31% in Ontario; 32% in Manitoba and Saskatchewan; 35% in Alberta; and 36% in British Columbia. But following 2013’s major flooding events and ice storm, some small businesses are reevaluating business interruption plans because of natural disasters and severe weather. In all, 38% of respondents in Alberta and 23% in Ontario were rethinking their plans, compared to just 5% in Quebec and 9% in Atlantic Canada. This despite one in 10 owners having had a business interruption in the past year, with most citing weather as the cause, followed by illness or an owner’s personal reasons.
OSFI WARNS ABOUT USE OF DATA IN PRODUCT DECISIONS The use of “vast amounts” of data to make underwriting and product decisions carries some risk for property and casualty insurance companies, suggest presentation notes from Andrew Kriegler, deputy superintendent of the Office of the Superintendent of Financial Institutions (OSFI). “The increasing use of big data to support product design, underwriting and pricing decisions — especially if they are based on models that derive from a small number of theoretical foundations — has the prospect of taking the longstanding competitive underwriting cycles and making them both more frequent and more severe,” state the notes for Kriegler, who spoke at the 2014 Property and Casualty Insurance Industry Forum. The risk “is exacerbated when the dataset supporting these models is lean and the reality that underlies the data is subject to potential change, as in the case of new or expanding products.” The riskiest insurance products derived from such data, Kriegler said, are those that cover infrequent, highloss events, such as catastrophes, including earthquake and overland flood. Kriegler recommended p&c professionals ask themselves if the models they use are “well-designed and properly maintained,” and if other carriers are getting the same answers at the same time. June 2014 Canadian Underwriter
15
Profile
Broker Advocate Greg Meckbach Associate Editor
One goal for Ted Harman — who keeps himself busy running a brokerage in Montreal while also serving local, provincial and national organizations — is to make it easier for brokers to send data from their computer systems to those of insurers. When Ted Harman was 18, he was a franchisee running a restaurant in Montreal, with no ambitions to enter the insurance industry. Today, he runs Accent Insurance Solutions while also serving as a member of Insurance Brokers Association of Canada’s (IBAC) technology committee, as secretarytreasurer of the Quebec brokers’ association, Regroupement des cabinets de courtage d’assurance du Quebec (RCCAQ), as vice-chair of the Centre for Study of Insurance Operations (CSIO) and as president of the Concordia Brokers Association. “I have a full-time job and a challenging part-time job,” 16 Canadian Underwriter June 2014
Harman says. “You need people to step up and take a position, and advocate for different things and help move the industry forward,” he suggests. “I think that’s something we’ve been working very, very hard at, on different levels, for all of the organizations that I have been involved with.” One initiative intended to move the industry forward is the ongoing effort to develop computer systems that allow brokers to send transactions from their own systems to those of carriers without having to re-enter the same data into insurers’ portals. What brokers want, argues Harman, is to be able to work from their work management platform, input information and data into their broker management systems, and transmit the information they need to do new business entry, policy changes and process renewals to insurers. By day, Harman is the president of Montreal-based Accent Insurance Solutions, which he acquired almost 12 years ago when it was known as Assurances Senecal Inc. Beyond property and casualty, the company offers other financial services, including life insurance, annuities and banking through Manulife Bank. About 65% of its insurance business is personal lines, while 35% is commercial. One risk for Harman’s homeowner clients in Quebec is earthquake. “In the next
60 days, we expect to be writing to every one of our homeowner policyholders to sensitize them specifically about the earthquake issue, and to strongly suggest to them that they add earthquake shock to their policy,” he reports. “My personal lines clients and a number of guys that I play hockey with will make a joke that, ‘Ted’s always talking about earthquakes.’ But the day after an earthquake in Quebec, I don’t want people calling me saying, ‘Why didn’t you suggest this coverage to me?’” Natural Resources Canada has estimated that within the next 50 years, there is a 5% to 15% chance of a major quake in the Ottawa/ Montreal/Quebec City region. Harman questions if one should bet the total equity on one’s home “to save somewhere between $15 and $30 a month on your insurance premium.”
WORK AHEAD The importance of helping others become informed is likely to continue being part of Harman’s ongoing association and organization work. Having been secretarytreasurer of RCCAQ since November 2007, currently into his fourth two-year term, he will step down in November 2015 in line the group’s four-term limit. Knowing the significant time commitment that working to become RCCAQ
president-elect would have entailed, he has opted to focus on his work with CSIO and IBAC. “I find the work that I do with the CSIO and with IBAC sufficiently rewarding that I didn’t want to step away from the other responsibilities that I have.” For example, IBAC’s technology committee is facilitating work on computer technology that will essen-
“In the next 60 days, we expect to be writing to every one of our homeowner policyholders to sensitize them specifically about the earthquake issue.” tially allow broker management systems (BMSs) to communicate with insurance carriers’ systems. “Different insurers have been paired with different BMS vendors to try and speed up the process so that the work that’s accomplished between the BMS and the insurers can be templated over to other insurance companies,” Harman explains. “It can speed up the process of implementing an interface between a particular BMS and the different insurers that are participating in the process.”
As for CSIO, the organization is certifying IT vendors and carriers for eDocs, a standard designed to let brokers download policy documents directly from a carrier’s system to their respective BMS, and to store those documents without manual intervention. CSIO has a calculator that lets brokers figure out how much money they can save by using eDocs, Harman says. “In my brokerage, the expectation is that it will save us $20,000 per year,” he reports. “When you extrapolate $20,000... across the country, the amount of benefit that is generated across the broker network is substantial. It’s millions of dollars in cost savings. I think that it is very, very, very beneficial for the broker cause,” he adds. It is a cause Harman continues to support, although he did not start out as a broker. In fact, insurance was never on his “radar screen” as a career choice. From Montreal originally, Harman’s wife moved to Toronto in 1984 to start a new job as a teacher. He joined her after graduating from Concordia University with a commerce degree in 1985. (He has since also earned a Master of Business Administration.) Harman started looking for work and got a job in claims with Progressive Casualty Insurance Company, which sent him to Ohio for six
Photo: Patrick Thompson
Profile
weeks of training. He then spent two years as a road adjuster in Toronto. “To my mind, there is a shortcoming in our industry about communicating to high school, college and university students about the level of opportunity that exists in the insurance business. It’s something we need to work on in a more co-ordinated and concerted fashion.” Harman and his wife later moved to Ottawa, where he took up new duties as Progressive’s senior marketing representative, responsible for Eastern Ontario. He remained there until
1989, when he joined Baxter Structures for a two-year stint, and then moved on to Zurich Canada in 1991 as manager of services. Still with Zurich Canada, he and his wife moved back to Montreal in 1994. In 1997, he joined ING Canada (now Intact), the last carrier he worked for, as vice president for the Montreal region. Harman then decided to make the switch, which also represented a return to the past. “I decided to launch myself into the insurance brokerage side,” he says. “In the past I had been an entrepreneur.”
Harman had worked for a small Montreal restaurant chain for two years when he was 18. “They had been having problems with a franchisee at a particular place and they asked me to take over the restaurant for them, which I did,” he says. “When I first became a broker in Montreal, I was approached to sit on the board of the Concordia Brokers Association, which is the association that represents English brokers in Montreal,” he says. Through one of his contacts, he became active with RCCAQ. “The entire idea for me was to be able to give back to the brokerage community,” Harman says. “It’s something I feel very, very strongly about.” One way to give back is to advocate for technology standards to help brokers be more efficient. “I don’t think that any insurer would allow their staff to work the way that brokers have to work today, where you have multiple company platforms, where you are working in four, five, six or seven different company portals and having to manage passwords for all those portals, and having to learn and navigate through seven different systems,” he says. “The ultimate goal is to be able to work from a single work platform that will make us more efficient. It’s more than a laudable goal. I think it’s a necessary goal for our industry,” Harman says. June 2014 Canadian Underwriter 17
Seizing Advantage
Senior Manager, Monitor Deloitte
Canadian auto insurers have been slow to embrace usage-based insurance (UBI), but the time for taking a “wait-and-see” approach is coming to an end. Telematics and UBI are here to stay, and they support a future where, broadly, data plays a key role in driving the strategic agenda of carri-
18 Canadian Underwriter June 2014
ers. Insurers should take steps now to develop telematics offerings to seize an advantage and remain competitive in the years to come.
TELEMATICS IN BRIEF In the context of auto insurance, telematics refers to a range of technologies — from GPS location services and wireless connectivity — that are used to collect and analyze the driving behaviour of individual policyholders. Telematics provides insights into policyholders’ actual driving behaviour, which can then be used to price risks more accurately. In turn, customers pay premiums that reflect their personal driving behaviours rather than the behaviours of their demographic. Good driving habits are rewarded with discounted premiums, while poor habits — in theory, at least — result in higher premiums. CANADIANS TAKING THE SLOW ROAD While telematics offerings have been available for some time in the United States, Europe, Australia and South Africa, they remain relatively uncommon in Canada. A handful of insurers
Illustration by Dave Whamond/threeinabox.com
James Colaço
Canadian auto insurers have been slow to embrace usage-based insurance (UBI), but telematics is only the beginning of a data-driven revolution that is poised to transform insurance. Insurers would be well-advised to develop UBI offerings now to seize an advantage and remain competitive in future.
have introduced telematics products in recent months, yet other carriers appear to remain hesitant to take the plunge themselves. Several factors are behind the Canadian market’s slow adoption of telematics. Insurers struggle to choose from an array of telematics technologies and business models: Automakers, tech firms and third-party telematics service providers (TSPs) are actively promoting alternatives ranging from plug-in OBD2 (onboard diagnostics) units to smartphonebased apps to manufacturer-installed “black boxes” in vehicles. Some insurers are deferring making a decision for fear that they will make the wrong one. At the same time, Canadians have a lukewarm attitude towards telematics. In part, this is a matter of understanding — many Canadians simply do not know enough about telematics yet. However, the chief concern is privacy. In a recent Deloitte study, almost 40% of the 768 Ontario and Quebec home and car insurance policyholders polled reported they would not be willing to install a device in their vehicles due to privacy concerns. Canadians are not keen on having “big brother” track their driving, and they worry about how that data will be used. These concerns make it difficult to gauge the potential size of the telematics market opportunity. Further complicating the picture is the fact that provincial regulators themselves harbour different perspectives on how telematics should be implemented. One province allows insurers to adjust rates up or down based on telematics data. In another jurisdiction, drivers must explicitly opt-in for telematics offerings, and insurers are permitted to use data to discount rates, but not raise them. Other provincial regulators are watching these jurisdictional “experiments” with interest before making their own decisions. INSURERS RISK FALLING BEHIND The uncertainties around how telematics will play out in Canada may lead some insurers to conclude that it is better to wait until the dust settles before making 20 Canadian Underwriter June 2014
a move. By doing so, however, insurers run the risk of ceding ground to their competitors — ground that they may not be able to make up in the future. Deloitte takes the view that adopting telematics sets the stage for significant competitive advantage over the long term. The reason lies in the enormous amount of customer data that telematics devices provide to insurers. This data al-
lows insurers to better understand individual driver behaviour, and can inform pricing decisions, product development and marketing strategies. It also means that early-adopters can better identify and shed high-risk, lowprofitability customers — and, conversely, find, attract and retain highly profitable policyholders. Yet early-adopters stand to benefit beyond the obvious and intended advantages delivered by telematics. The introduction of telematics is driving the need for more sophisticated data analytics tools and capabilities that can help insurers to not only understand their customers’ driving habits, but also to gain insights that assist in creating
value-added services that engage and delight those customers. For example, telematics data can offer “gamification” opportunities for customers using leaderboards, contests and rewards to better engage and retain customers. Telematics data — especially as the technology grows more refined — will enable insurers to deliver services and advice once unthinkable. These could range from alerting drivers to delays along their chosen route to providing tips for safer driving and even offering discounts at retailer partners along drivers’ usual commutes. These added features can help insurers to deliver the kind of personalized attention and service that today’s customers increasingly demand. Moreover, the experience and capability that insurers gain today from adding telematics to their offerings will enable them to better seize the opportunities taking shape as the “Internet of Things” becomes a reality. Within the decade, billions of devices and sensors — from water meters to thermostats to household appliances — will be delivering a steady flow of data to homeowners, institutions and service providers. This will bring today’s telematics revolution to home insurance and to life and health insurance as well. The carriers that have learned how to turn policyholder data into actionable insights will be able to capitalize on the potential of this new technology. STEPS TO TAKE NOW It is still early days for telematics, especially in the Canadian market. There are many issues to be resolved. Which technology platform or platforms will come to dominate? How large is the market for telematics offerings? It is difficult to predict technology winners. It is anticipated that automakers will introduce equipment on new cars that can be leveraged for telematics purposes, perhaps capitalizing on moves by technology companies to get their operating systems into vehicles. It is also expected telematics-driven
UBI will comprise a sizeable proportion of the auto insurance market, but it will not replace traditional methods of underwriting and pricing. Despite this uncertainty, insurers would be well-advised to take steps towards developing a telematics capability. Telematics is only the beginning of a data-driven revolution that is poised to transform insurance. To remain relevant and competitive in the “Internet of Things” world to come, insurers must start to build the capacity to collect, analyze and act on their customer data. • Get in the game. Insurers should invest resources into understanding how they can incorporate telematics and UBI into their offerings. Insurers that fail to step into the telematics arena today will lose competitive ground to those that do, and catching up will be nearly impossible. • Start small. Take time to pilot a telematics offering with a small group of willing customers. The insights and feedback gained from the pilot project can be used to refine your approach prior to a wider rollout.
Canadians are not keen on having “big brother” track their driving, and they worry about how that data will be used. These concerns make it difficult to gauge the potential size of the telematics market opportunity. • Do not focus solely on “front-end” telematics technology. It is all too easy to get lost in trying to decide which technology a carrier should use for its telematics solution. Use pilots to explore various technologies to find one that best fits the needs of the company and its customers. • Invest in back-office infrastructure. The technologies used to gather and transmit telematics data are certain to change and evolve in the years to come. What will not change is the need for a robust, flexible and scalable infrastructure that can support telematics and UBI. Insurers should invest in developing their data analytics capability to gain actionable insights from customer data — as well as their capability to turn those insights into programs that engage those customers. Canada’s telematics and UBI revolution is just beginning. While it remains to be seen how widely telematics is adopted in the Canadian market, it is here to stay, because it will provide insurers with a new basis on which to more accurately assess and price risks. Yet more importantly, it will deliver the means for insurers to better understand and engage their customers — and that will be the real competitive advantage in the years to come.
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App for That Greg Meckbach
Associate Editor
Canadian property and casualty insurers have started dipping their toes in the app pool, providing customers with a few options related to home and auto insurance. But current offerings skim the surface, with the potential of mobile apps running far deeper. Home and auto insurance carriers in Canada are starting to offer mobile apps for smartphones that allow clients to submit claims information or obtain quotes; some also give policyholders the option of submitting photos of damaged vehicles and homes. One expert likens the app progress to date as the insurance industry “dipping its toes in the water” of the mobile app pool. Some critics contend that to make a bigger splash, however, it is critical that insurers integrate these apps with their own computer systems.
22 Canadian Underwriter June 2014
Quebec City-based La Capitale General Insurance entered the app arena last March when it began offering an app for both Apple Inc.’s iPhone and smartphones running Google Inc.’s Android operating system. With the app, policyholders can submit photos with their home, auto and health claims. Though customers cannot actually open a claim using the app, they can use it to submit photos of damage on an existing claim, says Eric Champagne, vice president of marketing and e-commerce for La Capitale General Insurance. When submitting photos either by the app or by e-mail, policyholders must enter the number of an existing claim. “The application at this point in time is very, very simple,” Champagne points out, characterizing it as the company’s “first step” in developing apps with additional capabilities. Although customers were able to send photos of vehicle damage over the Internet prior to launching the app, the process required them to upload the photos to their computers and then send as e-mail attachments. As of late May, 248 clients had downloaded the Android app and another 828 had downloaded the iPhone app, with more than 800 health and
“The GPS on your phone knows where you are. Rather than writing down what’s on the other fellow’s pink slip, you can just snap a photo of it, it’s all attached to your claim and it’s uploaded with a map of where you are and photos of the damage.”
p&c claims processed using the apps, Champagne reports. “We can assume that given the high cellphone penetration for younger people, I expect this would come mostly from the younger population,” he says. Among the other Canadian p&c insurance companies offering mobile apps are Co-operators General Insurance Company, Alberta Motor Association (AMA) Insurance and State Farm. At press time, State Farm’s Pocket Agent was available in Canada on phones and tablets running Apple Inc.’s iOS operating system and Android, says a company spokesperson. The app allows a user to submit accident claims, search for tow trucks, check claim status and find a State Farm Select Service repair facility, the spokesperson notes. For its part,The Co-operators launched Mobile Assist, for the iPhone, in 2010. Currently, more than 50 clients monthly use the app to submit claims, reports Leonard Sharman, senior advisor of media relations for The Co-operators. Clients can also use their iPhone app to file a first notice of loss, Sharman says. “At the time that we launched, one of the things that we wanted to do was to have something that focused particularly on young people,” he says. “The use has been increasing pretty steadily. It’s not a huge chunk of our business, but going into it, we wanted to provide a new way to service clients and see how it 24 Canadian Underwriter June 2014
goes, and see what we can learn from it.” In 2013, Deloitte Canada conducted a phone survey of Ontario and Quebec residents who had purchased home and auto insurance, and asked them whether or not they had downloaded an app. “Less than 2% of those surveyed had,” says Mark Patterson, senior manager at Deloitte Canada. “When we asked the follow-up question, How many times have you used that app?, most of them said it was once. They downloaded it, they looked at it and never used it again,” Patterson says.
POISED FOR GROWTH The Canadian insurance industry is “really just dipping its toes in the water because the apps are really just a forerunner for the whole digital thing,” suggests Paul Cleveland, KPMG’s vice president of insurance advisory services in Canada. “I think telematics is going to be the forerunner for a broader explosion in terms of the use of apps,” Cleaveland predicts. With telematics, he says, an insurance carrier can use the GPS on a vehicle’s on-board device to determine a policyholder’s location. This feature will allow insurance companies to interact with the customer for activities other than insurance, he suggests. One example, Cleaveland says, would be that carriers could offer discount flyers to customers who drive nearby certain businesses.
“A restaurant has a deal with your insurance company,” he explains. “So when you drive by, your insurance company knows where you are because you have GPS, so it sends you a message that says, ‘In the next 12 hours, if you drop into this restaurant, you get 10% off.’” For an insurance app to be successful, “it has to be something you are going to fairly often,” says Troy Bourassa, vice president of operations at AMA Insurance Company. Available for Apple, Android and BlackBerry devices, AMA Insurance’s app lets users get quotes on the company’s auto and home insurance policies. But the mobile app also provides advantages for the company, which has other lines of business, including roadside assistance. It is useful to tie the app to other functionality, Bourassa suggests, because maybe the customer wants to buy cheap movie tickets or check out a travel deal. “It’s something you are going to more often than if we were just insurance.” READYING FOR LAUNCH A mobile app is “relatively easy to get off the ground,” for an insurance company, Bourassa suggests, pointing out that web development is a “much more universally available skill” than the ability to write computer programs for various systems, with different computer programming languages, that carriers tend to have. “As an insurer, you need to be a bit
careful, though, because you can build a web presence pretty easily, but you may not have the connectivity in the background,” Bourassa cautions. “What was really important to us was to make sure that it was perfectly integrated with our systems. There’s no real advantage to having a mobile presence if you have somebody in the background that is re-keying in information and having to manage it in a very manual way,” he argues. For some insurance companies, the integration with back-end computer systems could pose a challenge, says Doug McPhie, partner and Canadian insurance leader at EY (Ernst & Young). “A lot of the insurers have these old legacy systems and a lot of these insurers have grown through acquisition,” McPhie says. “Just the integration challenge, I think, will be significant — not that it cannot be overcome.” Some carriers currently offering mo-
“The use has been increasing pretty steadily. It’s not a huge chunk of our business, but going into it, we wanted to provide a new way to service clients and see how it goes, and see what we can learn from it.” bile apps plan to add more features. For example, Champagne notes that La Capitale expects to add functions to its app, though exactly what those functions will be has not yet been determined. The company has opted to conduct a market survey to get feedback on what other mobile features it will offer. At AMA Insurance, changes to the claims support apps are expected. “The beauty of having claims functionality embedded into an application is that it can use the other functionality of your phone,” Bourassa says. “The GPS on your phone knows where you are. Rather than writing down what’s on the other fellow’s pink slip, you can
just snap a photo of it, it’s all attached to your claim and it’s uploaded with a map of where you are and photos of the damage, all at once,” he says. State Farm planned to offer Pocket Agent on Amazon’s Kindle Fire Tablet as of June 13, when the device was to become available in Canada. And at The Co-operators, Sharman says that it is anticipated new services will be introduced “down the road.”
Cleveland argues that the insurance industry is lagging behind the banking industry when it comes to mobile apps, perhaps because consumers do not interact with insurers as often as they do with banks. “Maybe the insurance companies, from purely an app perspective, will look at this and say, ‘What’s the business case?’” he notes. “Maybe the ones who have developed claims apps will say, ‘We will have an app. We can learn.’”
Shopping Around
Senior Economist, Swiss Re
Swiss Re’s latest sigma study, Digital distribution in insurance: a quiet revolution, looks at how technology is revolutionizing insurance distribution globally. Where does Canada stand? Globally, the Internet and mobile telecommunications are fundamentally changing how consumers and firms interact with insurers. The study found that new technology will eventually enable customers to arrange most of their insurance through remote digital channels. Though the share of e-commerce premiums generally remains small today, advances in technology in most markets are already playing an important part in framing consumers’ expectations
26 Canadian Underwriter June 2014
of how they want to browse, shop and be served by insurers, as well as the quality of interaction they expect. Canada, however, is a relative laggard in this space. A PUSH FROM PRICE COMPARISON SITES The motor market in the United Kingdom is the clear leader in terms of e-commerce sales. Direct channels — including telephone, Internet and price comparison websites — now account for almost two-thirds of personal motor distribution in the country. Success can be attributed to cultural factors and a big push by price comparison websites backed by advertising dollars and, thus, leverage with insurers. In Canada, despite the existence of online comparison sites such as Kanetix — which has been around for more than a decade — a 2012 survey, commissioned by Allstate and conducted by Pollara, found that only 2% of customers had bought their current auto policy online. Moreover, 2013 Canada property-casualty insurance outlook, an EY (Ernst & Young) global consumer survey released the same year, found that only a third of Canadians had even researched propertycasualty insurance on the Internet. This is likely due to the strong presence of direct agent networks of most major Canadian insur-
Illustration by Dave Whamond/threeinabox.com
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The share of e-commerce premiums is small today in most markets, but things are changing. Advances in technology are already playing an important part in framing consumers’ expectations of how they want to browse, shop and be served by insurers.
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ers, as well as brokers, and the limited push by the companies to promote sales through their websites. However, the experience of the U.K.’s motor market shows how quickly consumers’ buying patterns can change. With consumer surveys indicating greater interest in online research and purchasing, the future in Canada may look quite different from today. Aware of the growing consumer interest, particularly among Generation Y, most large Canadian insurers have launched online auto quote generators on their websites over the past few years. Still, the latest sigma survey shows, they continue to lag behind other markets in providing website capabilities to allow research, advice and sales online, in the auto insurance sector and beyond. TAPPING THE MOBILE SPACE Like the Internet, mobile devices are still largely used to gather information, but insurance executives expect that to change as online purchasing proliferates. To accommodate how consumers interact with their mobile devices, however, successful insurance distribution via smartphones requires mobile-tailored design, not just providing mobile access to websites. For example, in the Netherlands, Aegon launched a new company, Kroodle, in 2013. This is paperless insurance offered via Facebook only, using Facebook profile information to partially pre-fill the insurance application. Similarly, innovative homeowners’ insurer Homesite in the United States has a sales applica28 Canadian Underwriter June 2014
tion designed specifically for convenient mobile use. In the U.S., many insurers’ mobile apps can also be used for post-purchase services, including reviewing policy documents, making changes to policy coverage or personal information, or even starting a claim by uploading accident photos via smartphone. Canadian insurers, on the other hand, do not appear among the first-movers
The experience of the U.K.’s motor market shows how quickly consumers’ buying patterns can change. With consumer surveys indicating greater interest in online research and purchasing, the future in Canada may look quite different from today. with mobile technology. An increasing number of companies have started to offer mobile apps and mobile-friendly websites, although a large majority of Canadians nevertheless still go through their broker or agent to change policy information and file claims. Telematics are fundamentally changing insurance distribution by mobilizing the data collection process. So far, most applications have been in auto insurance, with global adoption accelerating in the
past few years. In Canada, Quebec was the first province where a telematics product was rolled out in 2012, for young drivers of Industrial Alliance Insurance and Financial Services Inc. The relatively slow spread to other provinces has been partly attributed to regulatory hurdles. However, over the past year, Ontario has seen a few insurers introduce telematics, including some of the largest p&c providers in the country, and a number of commentators have suggested the slow start will give way to a fairly quick ramp-up in the near future. Over time, the use of telematics-based insurance is likely to grow beyond motor. In property insurance, this could, for instance, include sensors in homes or buildings to detect changing risk conditions. In the life and health space, the use of wearable devices to track information related to individuals’ exercise, diet or health behaviours is influencing design, pricing and claims management. In South Africa, for instance, Discovery’s Vitality program already allows users to record activities with web-enabled mobile devices, receiving premium discounts in exchange for providing information to underwriters. BIG QUESTIONS Consumers’ digital interactions have resulted in the capture, storage and management of large quantities of information — both from direct engagement with customers, through, for example, insurers’ own websites, and via data gath-
ered by third-party vendors such as Google and Facebook. Combined with enhanced analytics (often collectively referred to as Big Data) this is facilitating a deeper understanding of customer wants, needs and behaviours. The key is to harness the insights from data and analytics to not only improve risk selection and pricing, but also to use the technology to make insurers’ products and services more customer-centric. Insurers are not leading investors in Big Data, but they are gearing up. Canadian insurers are somewhat behind the U.S. in implementing predictive modelling in underwriting, risk selection and pricing, although they actually may be ahead of the game in some commercial pricing applications, as suggested by separate reports from Towers Watson and Swiss Re. Claims management and fraud detection are also potential beneficiaries of Big Data analytics and predictive modelling. For example, the Insurance Bureau of Canada has worked with IBM on a fraud identification project that is projected to lead to solutions that could save Ontario auto insurers about $200 million per year, notes information on IBM’s The Big Data & Analytics Hub.
Canadian insurers, on the other hand, do not appear among the first-movers with mobile technology. An increasing number of companies have started to offer mobile apps and mobile-friendly websites, although a large majority of Canadians nevertheless still go through their broker or agent to change policy information and file claims. Globally, the sigma study concludes, technology-led shifts in distribution increase transparency, empower customers and lower barriers to entry in some markets, which can lead to further commoditization of insurance products. In this more price-competitive world, the most successful insurers will be those that can build trusted brands and reputations for good service. Mastering the latest devices to be able to provide more personalized cover and accurate risk-based pricing to differentiate from the competition will matter. As everywhere, Canadian insurers will have to innovate to develop a client-centric and digital mindset capable of responding to changes in the market environment and delivering insurance solutions closely tailored to customer needs. June 2014 Canadian Underwriter 29
D Leveragingata
Predictive analytics to address issues such as claims fraud, underwriting and customer segmentation can help leverage business intelligence tools to create predictive models to more effectively and accurately make business decisions.
Nicolas Michellod
Senior Analyst, Insurance, Celent
Predictive analytics can leverage various business intelligence tools to create predictive models that allow them to more effectively and more accurately make business decisions. Predictive analytics solutions try to address various business issues, including claims fraud, underwriting and customer segmentation. For instance, claims fraud detection is an area where insurers are increasingly investing in new technologies. These technologies typically run in real time upon data entry, using predictive analytics to identify the likelihood of fraud. Another business area is price optimization. Price optimization is a method that helps insurers focus on key business questions to refine their pricing decisions using specific technologies. It brings other dimensions into the pricing calculation, balancing profit and sales volume while applying customer behaviour and competitive analysis to maximize profit. It leverages analytical tools and large amounts of data about consumer behaviour to help insurers refine the price component that is a critical driver of consumer behaviour. To better understand customers, insurers also use text and sentiment analysis. This technique consists of analyzing customer sentiment through voice pattern analysis and natural language used in mail, web-chat and short message service
30 Canadian Underwriter June 2014
(SMS), to determine when a customer is either content or frustrated with the service being delivered. This technology is often delivered as part of a contact centre solution where high volumes of calls, e-mails and web-chats are being transacted. Typically, both the call centre agent and supervisor are able to analyze contact records to either intervene or redirect a difficult conversation. THE IMPORTANCE OF DATA A crucial element to make the most from modern and advanced predictive analytics systems is the ability of insurers to leverage not only their internal data sources, but also external data. Celent has surveyed the insurance industry in 2013 to better understand its attitude to data (detailed in the report, Perceptions and Misconceptions of Big Data in Insurance, released in April 2013). Two interesting observations can be drawn from survey results: • A minority of insurers are currently using external data: Approximately 30% of surveyed insurers are already using data from data markets and data aggregators, and from public sources. Less than one insurer for five use data from open government schemes, and this proportion drops to one for 10 for other types of data sources, such as private customer data
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that are willingly shared, data from customer-owned devices and information from social networks. Therefore, it appears that insurers have not really captured the importance of mixing data from different sources to the benefit of their activities. • Insurers understand the importance of external customer data sources: About half of the respondents felt that private customer data willingly shared and data from customer-owned devices will be a key differentiator in the next two to three years. This proportion is much lower (approximately 20%) for data supplied by public institutions and government. It is also interesting that only 20% of respondents believe that data from social networks is going to be a key differentiator in the future. Celent takes the view that there is a “fear” factor here — insurers are not sure about what is allowed and not allowed by the regulator when it comes to exploiting private data from open sources on the Internet. The distinction between data willingly (implying knowingly) shared by customers is often the same data as that shared on social networks, but the permission to use that is explicit. The “data source” issue — the types of data used and where data sources sit — is a question insurers have been faced with only recently. Indeed, the growing amount of data sources that are now openly available to insurers via Internet sites, social networks and media offer both an opportunity and a threat. Insurers understand there is potential value to leveraging external data sources in different domains of their business. One of the major problems, though, is finding an efficient approach to include these data sources in their daily analysis. USING PREDICTIVE ANALYTICS TO IMPROVE BUSINESS FUNDAMENTALS In mature markets such as North America and Western Europe, including the United Kingdom, it is difficult for insurers to improve their core business profitability only through new customer acquisition. Therefore, insurers have to implement 32 Canadian Underwriter June 2014
actions to improve their combined ratios. To do so, they increasingly invest in advanced predictive analytics systems in areas that have a direct impact on their technical results. • Optimizing policy pricing: With modern pricing optimization techniques, insurers want to leverage data around customer behaviour, their competitive landscape and elasticity of demand to complement their traditional pricing approach, which is mainly based on
Indeed, the growing amount of data sources that are now openly available to insurers via Internet sites, social networks and media offer both an opportunity and a threat. Insurers understand there is potential value to leveraging external data sources in different domains of their business. expected claims and cost to generate and administer a policy. To include these new parameters in their pricing strategies, insurance companies need to be able to run complex algorithms frequently and, therefore, they need enhanced calculation performance. The value is driven by combining modern pricing techniques with Big Data (or perhaps Fast Data) infrastructure to improve their reactiveness to specific customers’ needs and market conditions. • Improve understanding of customers: With the soft insurance market, insurance companies need to have a better understanding of their existing and potential customers. Internal data helps them identify single-product customers and potential upsell opportunities. Big Data, modern customer relationship management (CRM) tools and predictive analytics allow insurers to find pock-
ets of growth in a tough market. • Enhance risk analysis: Underwriting remains one of the most important core processes performed by insurance companies. Many insurers have neglected this process and marketed products that were insufficient and inadequate to cover certain types of risks. Either these products were deemed to bring new market shares or the risks involved were just poorly evaluated. Nowadays, insurers want to improve and enhance underwriting and they understand they need to dedicate resources and effort to better leverage data in this domain. • Mitigate fraud: In many mature insurance markets, especially in general insurance, loss ratios have experienced deteriorations as fraud becomes more organized and structured. There is a growing investment in modern claims fraud detection systems, for instance witnessing the willingness of insurers to get appropriate weapons to fight claims fraud. It is Celent’s view that fraud mitigation tools can offer strong value to insurers when they are coupled with Big Data infrastructure, with a number of out-of-the-box solutions already implemented on Big Data techniques and technology. PREDICTIVE ANALYTICS VENDORS It is important that insurance companies consider investment in predictive analytics. In a recently published report, Predictive Analytics in Insurance: 2014 IT Vendor Spectrum, Celent reviewed IT vendors and their offerings in predictive analytics for the insurance area. This report profiles 12 IT vendors and 16 predictive analytics systems and is not restricted to a specific geography. For each vendor, its solution offering options, customer base, data sources supported, functionality, predictive analytics and modelling capabilities and technology, and implementation and costs are described. Although the list of vendors profiled is not exhaustive, it provides experience of implementations in the insurance industry.
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Insurance Telematics Canada 2014 Toronto
Angela Stelmakowich Editor
Harmeet Singh
Online Editor
Talking
Telematics
Canada has entered the telematics arena, with several stakeholders offering usage-based insurance (UBI) programs. Commoditization, privacy and consumer demands are sure to become even more frequent topics than they already are. Speakers at Insurance Telematics Canada 2014, held May 28 to 29 in Toronto, offered views on related issues ranging from privacy to commoditization of usage-based insurance, consumer demands and driver behaviour. COMMODITIZATION OF UBI The current regulatory environment is fuelling commoditization of usage-based insurance (UBI) offerings, something that could be at odds with how open consumers are to exploring different
34 Canadian Underwriter June 2014
options, Colin Wright, principal of Corner 2 Consulting, told attendees during Insurance Telematics Canada 2014. “Because of the constraints from the regulator and so on, I think we’re starting to see somewhat of a commoditization of UBI offerings,” Wright suggested. By way of example, he noted that in Ontario, the offerings are all very similar and all are targeting the same market niche. “UBI will be used to price most or all of the auto insurance market — and, hopefully, sooner rather than later — because it is a more accurate, fairer and more equitable way to price auto insurance risk,” he predicted. That said, “regulation and market realities pose limitations on the strategic prospects that are available,” Wright noted, emphasizing that innovation in delivery and products “is the way forward.” But that demands taking advantage of the technological innovations that are currently available and moving forward in step with what consumers say they want. Citing a Towers Watson survey released in the spring, he noted that 94% of respondents reported they would be receptive to
purchasing UBI auto insurance policies if they were guaranteed their premiums would not rise. That seems to dovetail with survey results from Aviva’s Autograph program, which he managed starting in 2008. “I think as important as the magnitude of the positive response was the fact that we learned the marketing was important.” The appeal of the product crossed age, gender, socioeconomic status and geography boundaries, “which was a real eye-opener for us,” he said. “We discovered it had broad appeal and anybody would be interested.” There are lessons to be learned from both the Towers Watson and Aviva survey findings, Wright suggested. “What this tells me is I think the public is well out in front of the industry, policymakers and regulators in terms of their willingness in terms of different products, and UBI in particular,” he told attendees. Wright argued that Canadians have already accepted they are willing to make a
trade-off with regard to privacy, by providing some personal information, “in exchange for material benefit” and regulators “need to catch up with the public.” Although not an opinion shared by all, Wright argued that “auto is a commodity product and commodities sell on price. So your strategic option is pretty obvious; it’s cost leadership. You’ve got to drive costs down in order to eke out an advantage over your competitor.” One downside with current efforts around UBI, though, is that Canadians seem quite comfortable with regulation, he said. “It’s a bit unfortunate because I think we should be really pushing our regulators to move forward on this a little more quickly.” ALBERTA DECISION ON UBI COMING SOON Privacy must be top of mind for insurers wanting to launch UBI programs in Alberta, a decision regarding which will likely be made by year’s end, an official with the
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Office of the Superintendent of Insurance said during Insurance Telematics Canada. Alberta’s Personal Information Protection Act will apply to insurers and the third-party providers they work with for their telematics programs, Laurie Balfour, acting deputy superintendent of insurance in Alberta, emphasized. Insurers will also be expected to work with the Office of the Information and Privacy Commissioner to ensure privacy legislation is respected, Balfour said. This will include submitting a privacy impact statement, as well as addressing any questions and concerns prior to implementing the UBI program. Insurers also may be expected to have informed consent documentation reviewed and approved by the privacy commissioner before launching their telematics programs, she added. Overall, the office is also continuing to look at UBI in Ontario, Quebec, the United States and Europe for best practices, Balfour said, noting that it expects
to make a decision by the end of 2014. The provincial regulator has received several applications for UBI programs and is in talks with insurers and other telematics stakeholders, Balfour said. Officials are deciding which rating factors — such as speed, acceleration, braking, turning, time of day, location (GPS), distance driven and mileage — will be approved and which will be prohibited for UBI. “We don’t think of UBI as a rating factor. We think of it as a bundle of separate rating factors that will be pulled together to form the UBI program,” she told attendees. The superintendent’s office will use Alberta’s auto insurance rating factors framework, published last year, when it carries out its analysis. MARKETING TELEMATICS PROGRAMS TO PARENTS Generally facing high auto insurance premiums, young drivers may be more open to UBI, but connecting with mom and dad will likely be key when marketing telematics programs, attendees heard during Insurance Telematics Canada. “The parents do need the premium relief, too — they’re usually paying the bills,” Paul Mlodzik, vice president of marketing and communications for The Co-operators Group Limited, said during a panel discussion. The Co-operators is looking at ways for parents to have a type of “unofficial contract” with their teens to view their driving habits and make improvements. Nathan George, vice president of technology with the telematics services firm, Modus, said that when his firm launched a national UBI program with an insurer in the United States, most of the interest was coming from parents of teens. The strategy became about how the insurer could help parents help their children be safer drivers, George said. More granular information could also prove useful for new drivers, he suggested. A teen driver might not listen when being told to slow down, George said, but might improve if given specific in-
36 Canadian Underwriter June 2014
formation about how to handle certain road scenarios. And there is plenty of information available through online portals that gather their information from telematics devices, Mlodzik said. For example, The Co-operators’ portal can allow users to see the health of their vehicle and environmental impact, along with their driving behaviour information. Young drivers also seem to like the immediacy of the information that telematics devices can offer, Mlodzik added.
“What this tells me is I think the public is well out in front of the industry, policymakers and regulators in terms of their willingness in terms of different products, and UBI in particular.” CHANGING DRIVING BEHAVIOUR Saskatchewan Government Insurance (SGI) has plans to continue its motorcycle telematics pilot, the ultimate goal of which is to change driving behaviour and reduce related loss. “We’re going to continue this pilot for one more year. We want to get a little more data,” Don Thompson, SGI’s vice president of product management, said during Insurance Telematics Canada. Data is needed to determine and build thresholds — thresholds that could, in turn, be used for variables for rating, Thompson explained. Some see variables that are predictive of loss as including speeding, harsh acceleration and braking. “I don’t think we have enough data yet to say for sure what those (variables) are,” Thompson said, but added that as SGI obtains more data, “we will figure that out” and will “get more sophisticated at that over time.” When SGI submitted its proposal to the Saskatchewan Rate Review Panel in
February 2013, it included a cap on rate increases for all vehicles except motorcycles. With rates substantially lower than what is required to cover claims costs, the proposed increase for motorcycles was 73% (later a 15% cap was applied, effective August 31, 2013). Though the motorcycle telematics pilot had several goals, Thompson said the “ultimate goal was to reduce the number of injuries and fatalities with motorcycles by whatever means we could. Motorcyclists didn’t want to pay out 73% more rate. If they don’t want to pay more premium, we have to bring the losses down.” Thompson noted that if someone is in an accident with a motorcycle, there is generally very severe injuries, pointing out 72% of the premium breakdown for motorcycle is for injury compared to 23% for private passenger vehicle. There are also a large percentage of accidents involving new riders, he said. “Forty-five percent of our accidents with motorcycles happen with less than three years of experience,” he told attendees, citing cornering as a concern. “We knew that that was something that caused accidents and was predictive of loss.” SGI’s view is that telematics devices can be used to demonstrate driving behaviour and, in turn, illustrate the need for coaching or training to improve those behaviours. “Every study that we have seen says the reduction in claims is anywhere from 20% to 40%,” Thompson said. “Is that 40% reduction because of self-selection or are people changing their driving behaviour?” he asked. Even small reductions in the number of injuries involving motorcycles can prove impactful, Thompson suggested. If the 20% to 40% reduction in claims being cited in studies and reported by insurers is correct, “even if half of that is from modified driving, then, yes, the economics makes sense,” he said in response to a question from the audience. “We’re hopeful that this (pilot) is successful and then we would ultimately launch into a usage-based insurance program for motorcyclists,” he said.
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Cyber 2.0 Cyber insurance coverage is entering the next phase in its evolution from optional add-on product to increasingly important component of a thorough risk management program. As high-profile data security breaches grab top headlines, more organizations are having the “cyber talk� with their brokers and insurance partners. The pace of product adoption, however, is slow grind rather than big bang. CRAIG HARRIS
38 Canadian Underwriter June 2014
C
ould 2014 be the breakthrough year for cyber insurance? Clearly, the number and severity of data breaches have rebooted the interest level in cyber liability products. There is compelling evidence that several factors have come together for a turning point in the take-up rate of coverage. High-profile individual cases — such as the Heartbleed Bug that shut down Canada Revenue Agency’s (CRA) website for four days in April or retailer Target’s hacking woes last December involving personal financial information of 70 million customers — garner mainstream media attention. Target’s experience, in particular, spawned shareholder litigation that alleged the company’s directors and officers neglected their duty of care in managing privacy risks. “The Target breach stirred a lot of attention here,” says Brian Rosenbaum, national director, legal and research practice for Aon Risk Solutions in Canada. “Because this was such a high-profile case, a lot of directors and officers and risk managers were asking about how the D&O liability (insurance) would cover. This one really hit home,” Rosenbaum comments. Class action litigation may be a far more effective means of jumpstarting cyber interest than broker or insurer presentations on the subject. These lawsuits have increasingly captured the attention of the “C-suite,” where decisions about serious company and organizational investments in risk protection get made.
June 2014 Canadian Underwriter 39
COVER STORY
Cyber 2.0
“Whether we are talking about large U.S. retailers or the CRA in Canada, it raises the question of whether organizations should explore cyber insurance protection,” notes Michael Petersen, managing director and national leader, communications, media & technology practice for Marsh Canada. “Some of the cases in the U.S. have shown that IT security procedures were not adequate. So now, many of the directors, officers and boards of companies are very much engaged and wanting to understand,” Petersen says.
cyber risk practice for ACE Group. “This creates much higher awareness and leads to the placement of more cyber policies,” Merrill says.
SALE OF RISK The ramping up of cyber risks to the executive level is a positive sign for insurance companies keen to match coverage with exposures. “The more high-profile data breaches out there, the more we get requests for proposals for coverage,” says Greg Irvine, national director, management solutions group for Zurich Insurance. “As insurance companies, (we) are helping risk managers to understand those risks and help develop a product to respond. Definitely, we (have had) a lot of dialogue with our clients about their cyber-related liabilities over the last 12 to 24 months,” Irvine says. “New privacy breaches on a worldwide basis appear in the media on a monthly, if not daily, basis, and contribute significantly to increased awareness among board members and business owners — they realize that if it can happen to their peers or competitors, then it can happen to them,” says Karen Gauthier, Toronto practice leader, cyber, media and professional liability for Chubb Insurance Company of Canada. “Cyber security has grown to become an enterprise-wide issue and is being discussed at the executive, board or ownership levels of many businesses,” Gauthier reports. “All companies face this increase in cyber and data privacy exposures, and the awareness is no longer sitting at the risk management level — it is coming from the C-suite,” observes Toby Merrill, division senior vice president, global 40 Canadian Underwriter June 2014
“More organizations realize this is not just a large company issue, particularly with respect to personally identifiable information,” comments Kevin Kalinich of Aon Risk Solutions. “It could affect supply chains, it could affect business interruption, it could affect revenues.” TAKE-UP RATE: TENTATIVE? How much momentum cyber policies have made in terms of market penetration, however, is an open question. While early cyber insurance coverage studies pointed to 30% to 40% take-up in select industries, sources note that the overall level of policy purchasing is much lower than that. “I’d suggest it is a lot less,” notes Geoff White, underwriting manager, cyber, technology and media at Lloyd’s syndicate, Barbican Insurance Group. “The
U.S. market is estimated to hit $2 billion of an estimated $85 billion opportunity this year, so we maybe have 3% to 4% penetration at most. Outside of the U.S., penetration is much lower, though we are seeing an upturn in enquiries from countries such as Canada,” White says. “Uneven” would be a good characterization of the actual take-up level of cyber coverage, particularly in Canada’s federal privacy environment that does not require mandatory notification of data breaches. Instead, brokers report that the process has involved sending a steady stream of proposals for coverage and seeing if clients are willing to take the next step to bind. “If you talk to a lot of underwriters, they say we are doing a lot of quoting, but not a lot of binding,” says Michael Loeters, vice president and associate with BFL Canada Risk and Insurance Services, who likens the current state of cyber liability insurance to D&O liability a decade ago. “They want to write more, but I don’t think we are there yet,” Loeters suggests. Sources note the key economic sectors purchasing cyber liability coverage include retail (particularly those that must be Payment Card Industry, or PCI, compliant), health care, education, utilities, financial institutions, technology companies and, increasingly, professional services firms such as accountants or lawyers. Among these groups, the takeup rate is significantly higher, as much as 40% to 60%. “When Chubb Canada first launched its CyberSecurity product in 2009, market interest focused primarily around large corporations, particularly those with a great deal of private customer information like retail, large hospitality and financial institutions,” says Gauthier. “We now see a diverse range of industries, including mid-market and small private companies, showing interest in, and embracing the addition of, cyber security coverage to their insurance portfolio,” she notes. “The insurance market for cyber has expanded greatly over the last five years,” Merrill agrees. “While most of that growth
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COVER STORY
Cyber 2.0
has been in the United States, we are now seeing a considerable uptick in Canada and internationally.” Some sources say cyber insurance is moving into the mid-sized and smaller markets, where arguably the risk management expertise of brokers is most needed. One reason is that government agencies and larger companies are requiring proof of cyber coverage as part of contractual arrangements. “More organizations realize this is not just a large company issue, particularly with respect to personally identifiable information,” comments Kevin Kalinich, global practice leader, network risk/cyber insurance for Aon Risk Solutions. “It could affect supply chains, it could affect business interruption, it could affect revenues. I think the awareness is translating into action for more prudent companies to take a look at their existing policies, and some are taking the step of a standalone cyber product,” Kalinich reports. Whatever the need or awareness, some argue cyber insurance is still a hard sell in the small- to mid-market. “I find a lot of people haven’t contemplated coverage for cyber losses, period,” Loeters reports. “Many organizations still don’t seem to have the appreciation for all the ways security network breaches happen. And a lot of organizations don’t think they maintain a lot of data of value. We are still at the very early stages and there is still a lot of education needed on cyber risk,” he contends.
SOMETHING BORROWED One potential limitation of increased take-up is the existing cyber insurance product itself, which has largely been mapped from foreign markets such as the U.S., London, Europe or Bermuda over to Canada with some minor modifications. “When you really look at the guts of the policy in Canada, the modifications are not that significant,” Loeters suggests. “That could be one of the problems. There is not a huge depth of cyber underwriting expertise in Canada. Any of the larger risks that are quite complex, a lot of the underwriting authority still resides in the U.S. or overseas,” he says. 42 Canadian Underwriter June 2014
Peter Zaffino, president and CEO of Marsh, pointed out some of the limitations of standard cyber coverage products at an industry luncheon this past April in Toronto.
“When you really look at the guts of the policy in Canada, the modifications are not that significant,” suggests Michael Loeters of BFL Canada Risk and Insurance Services. “Any of the larger risks that are quite complex, a lot of the underwriting authority still resides in the U.S. or overseas.” “We have to come up with a cyber product that responds to all the different types of losses in one form,” Zaffino said. “Traditional insurance is not as responsive as it needs to be. Is it an extension of property? Is it third party? Is it professional? What else is it?”
PRODUCT EVOLUTION One thing most brokers and insurers agree on is that traditional commercial general liability (CGL) and umbrella liability policies offer very limited, if any, coverage for cyber risk. Recently, the U.S.-based Insurance Services Office (ISO) introduced a series of endorsements designed for CGL and umbrella policies to specifically exclude cyber-related losses, effective May 1. And in February, a justice of the New York Supreme Court ruled that the personal and advertising provisions of Sony’s CGL policy do not cover the theft by hackers of confidential information belonging to users of the company’s PlayStation Network. While the court judgments are not uniform, what is emerging is acknowledgement of a significant gap between traditional commercial insurance policies and cyber exposures. For cyber coverage, however, there is no standard solution to fill this gap. “There is no real commonality between products, which is, from a broker’s perspective, very challenging, especially for those brokers who don’t deal with this on a day-to-day basis,” Loeters suggests. “When you get terms from three different insurance companies, you really have to spend the time comparing each and every one of those forms,” he says. Loeters cites the example of Canada’s anti-spam legislation, which is set to take effect July 1. “Let’s say your client is conducting a social media or e-mail marketing campaign, you better make sure your cyber policy has spam coverage built into it — a lot of them don’t,” he cautions. “You have to know the questions to ask to really assess what coverage the client needs,” Loeters advises. “There is still a lack of consistency in product offerings and premiums,” Petersen observes. “That can be a good thing for clients in that we are seeing an evolution of insurance products, better wordings, more coverage options,” he says. “The term ‘cyber coverage’ is quite broader than most people think,” Bobbie Goldie, vice president, professional risk
COVER STORY
Cyber 2.0
for ACE Canada, adds. “There are eight different insuring agreements available within ‘cyber coverage.’ The coverage has evolved over the years to address online media, cyber extortion and, most notably, data privacy, regardless of whether the data is in digital form.” Petersen notes some innovation has already taken place in cyber coverage, including contingent business interruption coverage for downtime from cloud service providers, enhanced coverage for regulatory fines and penalties, and the addition of “cyber supplements” to E&O policies at limited cost. Others, however, hold that there is room for further growth in cyber product development. “What if your company is not just reliant on personally identifiable information? What if it’s your supply chain, your distribution chain?” Kalinich asks. “What if you had to shut down a manufacturing plant from malware or a virus? It is in the area of intangible perils where there is a tangible property damage or bodily injury that we need to make bigger steps in coverage,” he argues.
midst of updating its cyber forms with respect to privacy breach costs and health care ID restoration and investigation. “For example, a property policy might be refreshed once every five to 10 years. However, with cyber risk, it is every 12 months that you are looking at new and evolving exposures,” he says.
EMERGING CONCERNS Aon Risk Solutions’ Brian Rosenbaum says the protection of corporate information has become a key discussion point for clients. “While a lot of the discussion about privacy centers around the personal information of individuals, some of these insurance policies now provide a module that protects organizations against theft of intellectual property,” he points out. “For business-to-business operations that have a lot of employees, this can be an important cover,” he suggests. Zurich Insurance’s Greg Irvine agrees “business interruption and intellectual property rights are major concerns for many companies. Intellectual property… is becoming a topic that clients want to discuss to transfer that risk.” The more difficult challenge for insurers is keeping pace with the constantly changing cyber world. “What is different today is how quickly the exposures are evolving,” suggests Irvine, who reports Zurich is now in the 44 Canadian Underwriter June 2014
“A property policy might be refreshed once every five to 10 years. However, with cyber risk, it is every 12 months that you are looking at new and evolving exposures,” says Zurich Insurance’s Greg Levine. PRICING AND CYBER CLAIMS The speed of cyber changes and exposures can catch underwriters and claims managers off guard when it comes to frequency and severity of cyber losses. Several sources say that there has been enough litigation and claims experience
to accurately rate cyber exposures, even if it may seem more art than science at this stage of product development. “We are drawing from the claims experience in Canada. So we feel we have a comprehensive rating model in Canada. There is certainly some frequency (of claims) in Canada that will drive prices,” Irvine says. “The (industry) has now aggregated the information over a five-10 year period with respect to privacy and security breaches, so the actuarial data is better,” Kalinich suggests. “They don’t pretend it is an exact science, with a mathematical actuarial formula like they can with property. However, the underwriters are getting smarter — instead of asking a company about their revenues, they are asking how many personally identifiable records and what types of information they store,” he says. Petersen says that much of the claims data is U.S.-based. NetDiligence, a cyber risk assessment firm, releases reports on actual cyber claims. In a 2013 study, the company examined 145 data breach insurance claims. In those claims, heath care was the sector most frequently breached (29.3%), followed by financial services (15%). The most frequent cause of loss was a lost or stolen laptop/personal device (20.7%), followed by hacking (18.6%). Typical claims amounts ranged from $2,500 to $40,000, with a highpoint of $20 million. Other international studies of cyber privacy, such as those by the Ponemon Institute, show the cost of data breaches is increasing. In a study released in May, the research group found the average cost of a data breach to a company was US$3.5 million, or 15% more than what it cost last year. “Relative to other lines of insurance coverage, underwriters are still learning about what their losses are in cyber risk,” Petersen observes. “When we obtain insurance proposals on behalf of our clients, pricing is pretty scattered. The fact that the premiums are all over the place shows there is still some uncertainty in how to rate the exposure.”
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COVER STORY
Cyber 2.0
BREACH RESPONSE SERVICES One of the key features emerging from insurance company cyber coverage is the provision of breach response services. “Policyholders today now have access to loss prevention portals and services to help them mitigate their cyber and data privacy exposures,” says ACE Canada’s Bobbie Goldie. “They also have access to data breach response teams in case their organization sustains a data breach event. There is significant value to the cyber coverage that is available today,” Goldie suggests. “This is, of course, beneficial to our clients and the insurers, because we are trying to control the reputational risks to our clients. It also can minimize the costs of a security breach,” Petersen says. But breach response planning is also a two-way street, notes Rosenbaum. Given the cost of services and the potential amount of the claim, insurers want to know what level of preparation prospective clients have in place. “We have had situations where our client was not co-ordinated in their breach response plan, and the terms we have got back from the underwriter were not favourable,” Rosenbaum says. “That is where a lot of the money is spent on these policies — in first response. The better the companies are at dealing with that, the better risks they will be.” Sources say that the ensuing focus for companies has to be on enterprise-wide risk management. “Companies should create an incident response plan to provide a road map of how an organization will manage and co-ordinate with risk management, legal, financial, the board, and any other vendors that may be retained,” Gauthier suggests. “As cyber security is no longer just an IT-related issue, co-ordination between multiple departments as well as senior management and the board, is increasingly important.”
CANADA’S E-PRIVACY REGULATORY RECORD Under federal privacy legislation — the Personal Information Protection and Electronic Documents Act (PIPEDA) — there is no 46 Canadian Underwriter June 2014
mandatory breach notification requiring organizations to disclose information to affected individuals. In Canada, Alberta is the only private sector jurisdiction that requires notification of breaches to the privacy commissioner, who can prescribe fines of as much as $100,000 for businesses.
“When we obtain insurance proposals on behalf of our clients, pricing is pretty scattered. The fact that the premiums are all over the place shows there is still some uncertainty in how to rate the exposure,” observes Marsh Canada’s Michael Petersen. Manitoba is set to introduce privacy legislation this year that will have mandatory breach provisions requiring organizations to notify affected individuals.
Bill S-4, the Digital Privacy Act, currently before the Senate, would mark the first federal law for mandatory data breach reporting if passed into legislation. Several previous attempts to update or amend PIPEDA have failed. Canada lags other jurisdictions, such as the U.S., where 47 states have enacted legislation requiring private or government entities to notify individuals of security breaches of information involving personally identifiable information. In August 2013, the European Union introduced breach notification regulations for electronic communication service providers. It is expected that a broader proposed General Data Protection Regulation will come into force soon for all companies operating in the EU. “One of the reasons we speculated that organizations have not purchased cyber insurance is because there is no mandatory reporting provision in Canada,” says Petersen. “(Bill S-4) will change that, but there are also several clauses in the act that will allow the privacy commissioner to fine or penalize organizations. This is a big step for awareness in the Canadian environment.” Another growing compliance issue is the prevalence of regulatory tests or audits for cyber exposures. “We are also seeing regulators like OSFI (Office of the Superintendent of Financial Institutions) come out with guidelines for banks and federally regulated financial institutions with respect to cyber risk,” Rosenbaum says. “That is absolutely going to force awareness. It will also lead to changes in protocols and procedures with respect to the publicity around data breaches,” he adds.
WORLD OF SYSTEMIC RISK Beyond regulatory compliance, the emerging term for global cyber liability exposures is “systemic risk.” This points to both the near-total reliance of various industries and sectors of the economy on the Internet and related technology, as well as the interdependency and interconnectivity of networks and devices among companies, vendors, supply chains and customers.
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COVER STORY
Cyber 2.0
“There are a lot of companies that are doing a great job managing their cyber risks, but there are also a lot that are lagging behind,” concurs Bobbie Goldie of ACE Canada. “The hackers can find those lagging behind and access those systems quite easily. You don’t want to be the last one in line.” In April, Zurich Insurance Group released the Zurich Cyber Risk Report in collaboration with the Atlantic Council. In the study, the Swiss insurance group identified seven interconnected risks, including internal IT enterprise, counterparties and partners, outsourced and contract, supply chain, disruptive technologies, upstream infrastructure, and external shocks. “While our society’s reliance on the Internet grows exponentially, our control of it only grows linearly, limited by outdated government procedures and ineffective governance,” the report notes. “Yet modern cyber risk management does not give much thought to ‘distant digital perfection,’ the aggregations of cyber risk, which lie sometimes far outside an organization’s own server and firewalls,” it adds. Other sources concur on the notion of systemic risks facing organizations in today’s cyber world. “I think people are getting a better understanding of their exposures and how (these) are changing,” Irvine says. “There is a shift there in clients’ understanding that their exposures are much broader than network breach and financial loss,” he adds. 48 Canadian Underwriter June 2014
“There’s still a gap in knowledge around systemic loss, as many companies feel they have passed their liability onto their data hoster or cloud provider, which is not the case,” notes Geoff White of Barbican Insurance Group. “You, as the data controller, are responsible for the data, and most contracts still limit the data hoster’s liability to the annual fees paid by the customer.” White adds that the education level of clients is just as uneven as the take-up rate of cyber coverage. “Some companies are treating the risk seriously; many are still putting their heads in the sand on this issue,” he maintains. “There are a lot of companies that are doing a great job managing their cyber risks, but there are also a lot that are lagging behind,” Goldie concurs. “The hackers can find those lagging behind and access those systems quite easily. You don’t want to be the last one in line,” she cautions. The laggards may become more exposed in the bigger picture of systemic risk, sources suggest. “What has happened over the last few years is a very strong awareness that technology is
now core for virtually all industries. It is increasingly difficult to stay on top of the technology risks,” Petersen suggests. “People are talking about the Internet of things, where you can turn your washing machine on or check your house lights with your smartphone,” says Kalinich. “These are great developments, but it is unknown what new exposures this will be creating in the next few years. You can imagine what kind of havoc cyber criminals could cause if they get access to that type of information,” he adds. Class action litigation, systemic risk, regulatory compliance, reputational exposure — these are threats that brokers and insurers argue require a thorough discussion at organizations about cyber risk management solutions. The risks are real, as is the potential for insurance risk transfer. How many organizations make the next step to incorporate cyber insurance into their risk programs will represent the evolving next phase of online risk protection. Will it be a cyber big bang breakthrough or the continuing grind to raise client awareness?
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Risks Ahead The risk landscape is changing, demanding that stakeholders adopt a wider view of what constitutes risk and how different risks can work together. The RIMS 2014 Annual Conference & Exhibition, held in Denver on April 27 to 30, provided an opportunity for attendees to learn what steps they can take to protect their organizations against both established and emerging risks. Topics discussed ranged from cyber security to supply chain risks, terrorism and the role of the risk professional. INTERCONNECTED CYBER RISKS It is not news that cyber risks are increasing, but the issue has the potential for much further implications than previously seen, Dan Riordan, CEO of Zurich Global Corporate North America, said during a press conference at the RIMS 2014 Annual Conference & Exhibition in Denver. “What is different is just how quickly the cyber risk landscape is changing,” Riordan said in releasing reports detailing risk management insights for seven key industry sectors and business areas. These reports expand on Risk Nexus: Beyond Data Breaches: Global Interconnections of Cyber Risk, the prod-
50 Canadian Underwriter June 2014
uct of a year-long study by Zurich Insurance Group and international think-tank, the Atlantic Council. The sector reports are for automotive, construction, health care, information technology, larger corporations, small and mid-sized entities (SMEs), and governments. Jason Healey, report author and director of the Atlantic Council’s Cyber Statecraft Initiative, recommended looking beyond the usual suspects — data breaches, fraud and identify theft — and exploring what the next big cyber risks could be in two, three or five years time. “As risk managers and cyber security professionals, we tend to look at risk as if it’s self-contained within our own organization,” Healey said. But as the recent Heartbleed incident illustrated, it is clear “that we are critically vulnerable to something that none of us had ever really heard about, because it was laid outside of the four walls of the company, outside of corporate control.” The sector-specific reports delve into the global interconnections of risk. “It struck us that the way we look at cyber risk today is extremely similar to how we looked at financial risk prior to 2008,” he said, namely one risk at a time, that things are not correlated and a cascade of effects is not possible. Recommendations for managing risk include some combination of the following actions: • shifting from protection to resilience;
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• improving basic cyber security; • embracing new technology, but carefully managing the risks; • implementing incident response and business continuity planning; • focusing on interconnection risks; • pushing out the risk horizon and looking beyond its four walls; and • practising board-level risk management. These changes may appear daunting to SMEs that unlikely have the resources that larger companies do. Healey argues, however, that SMEs should consider their advantages. “They’ve got more agility; they’ve got more personal relationships that they can draw on than a big company,” he told Canadian Underwriter. SMEs will need to use the cloud and leverage IT wherever they can. “So, absolutely do cloud, do the rest of it, but at least be thinking about the security aspects of it. Ask the questions,” he said. “It is going to be more secure and resilient over the longer term to go to the cloud,” Healey noted. That said, should something go awry, it is essential to “have some kind of back-up, have some kind of manual workaround.” SMEs face the same issues as larger firms, Riordan noted in an interview. It is “the same issues of resiliency, encouraging that resiliency, improving that resiliency over time on a smaller scale,” he pointed out. There is “the same need to prepare, to have business continuity planning, to identify it as a holistic issue for the entire company, not just for the IT guy,” Riordan emphasized. Healey added that cyber security issues need to be considered right down the line. “Everybody is outsourcing further and further,” he said, in some sectors to much smaller players. “We know the classic service providers and the rest, but who do they outsource to?” SUPPLY CHAIN FEARS ON THE RISE Supply chain failures, data breaches and political instability are among the issues weighing on the minds of executives for businesses in the United States and Canada with plans to expand operations overseas this year, note survey results released
52 Canadian Underwriter June 2014
at RIMS 2014 by the Chubb Group of Insurance Companies. Representing the top overseas business threat, supply chain failure was cited by 19% of respondents to the 2014 Chubb Multinational Risk Survey. Findings are based on a survey of 300 senior executives, done by JLA Strategic Research. Rounding out the top four issues for respondents was a data breach/cyber event, cited by 15%; government/regulatory investigation and political instability, each cited by 13%; and natural catastrophe, cited by 12%. Survey findings also show that 52% of polled businesses plan to increase overseas activity in 2014, 27% of respondents expect to increase overseas travel, 27% expect to introduce new products in foreign markets, and 26% expect to increase employee headcount abroad. As companies large and small “expand their international business operations, companies need to take a more holistic or global approach to managing risk,” says Kathleen Ellis, senior vice president and worldwide manager for Chubb Multinational Solutions. “They increasingly are being confronted by political and economic turmoil, natural and manmade disasters, and regulatory hurdles.” Of concern is that just 56% of polled companies have a business continuity plan that addresses overseas risks, and 22% of companies with a plan have never tested it. “Companies are left exposed to significant supply chain failures and associated business interruption costs that can undermine their financial results and stability,” Ellis cautions. TERRORISM/SABOTAGE UNDERRATED The majority of surveyed executive and non-executive directors of captive insurance companies that Aon manages agree that as the Terrorism Risk Insurance Act (TRIA) expiration approaches, terrorism should be ranked higher. The survey, results of which were released by Aon Risk Solutions at RIMS 2014, are detailed in the 2014 Underrated Threats report. The report highlights concerns over the top 50 key risk ranking
in Aon’s 2013 Global Risk Management Survey (GRMS), which gathered input from 1,415 respondents in 70 countries. More than half of respondents to the web-based underrated risks research reported a ranking of 46 in the GRMS was too low for terrorism risk, given the pending expiration of TRIA. “It is barely conceivable that a little over a decade after one of the most impactful risk events in recent world history, the ranking for terrorism is so low,” the report states. In June, the Senate Banking Committee in the United States approved a bill to extend the TRIA program for another seven years, although questions remain. Aon research indicates that if TRIA was not renewed, many industries would be at a high risk: health care, transportation, real estate and financial institutions. “Preparing ahead of the expiration deadline becomes crucial for companies that may be facing several challenges at this renewal, such as the impact on embedded TRIA coverage, standalone terrorism pricing and TRIA captive placements.” RISK MANAGEMENT UNDER-UTILIZED The vast majority of C-suite respondents taking part in the 11th annual Excellence in Risk Management Survey say that risk management is playing a more strategic role within organizations, but its full potential is not being realized. The survey, released jointly by Marsh and RIMS during RIMS 2014, was compiled from online responses received in February from almost 600 risk professionals, C-suite executives and others involved in risk-related functions. In all, 93% of C-suite respondents indicated risk management carries either some or significant impact on setting their organization’s business strategy. But only 20% of C-suite respondents reported their organizations use the risk management function to its fullest abilities. Brian Elowe, a managing director at Marsh, noted that “if used properly, data and analytics can help organizations make better business decisions while at the same time, increase the profile of risk management within the organization.”
Recent Insurance Press Releases featured on insPRESS.ca Darren Cherban Appointed Branch Manager, Calgary with On Side Restoration by On Side Restoration Services Ltd. – June 5
Opta Information Intelligence Announces the Launch of an Integrated Commercial Replacement Cost Valuator by SCM Insurance Services – May 27
John Browning Appointed Branch Manager, Vancouver with On Side Restoration by On Side Restoration Services Ltd. – June 4
Braemar Adjusting hires Apar Purohit as Senior Loss Adjuster by Braemar Adjusting – May 27
CRU Posts 2014 Alberta Flood Update by CRU - Catastrophe Response Unit – June 2 ENCON’s Environmental program notes steady growth as it reaches the five-year mark by Encon Group Inc. – June 2 FirstService Unifies the Paul Davis Restoration Brand Across North America by Paul Davis Systems – June 2 Cira Medical Services Launches iAssess™ by SCM Insurance Services – May 30 Opta Information Intelligence and iLOOKABOUT™ are pleased to announce superior geo-coding olutions for iClarify in Quebec by SCM Insurance Services May 29 SPECS Limited – Kelowna BC Office Move by SPECS (Specialized Property Evaluation Control Services) – May 29, 2014 AssessMed Announces National Coverage – Industry Leading Evidence-based IME Provider goes National by AssessMed Inc. – May 29
South Western Group Offers Architects & Engineers E&O/CGL Product by South Western Group – May 23 Opta’s Fire Underwriters Survey® (FUS) releases Canadian Fire Insurance Grading Index-Version 2.0 by SCM Insurance Services – May 22 Team STRONE-Itech Returns to Ride for Heart on June 1st by STRONE-Itech – May 15 Academy of Insurance Adjusting begins Calgary classes by CRU - Catastrophe Response Unit – May 15 PuroClean Canada Hiring Business Development/Customer Service Associate by PuroClean Disaster Response Services – May 15 PuroClean Canada Hiring Project Manager by PuroClean Disaster Response Services – May 14 Win in Windsor-Essex with STRONE by STRONE-Itech – May 14
Alliance of Clinical Evaluators Inc. Receives three-year CARF Accreditations by Alliance of Clinical Evaluators Inc. (ACE) – May 28
Winners announced for the 2014 DKI Canada Hockey Pool by Disaster Kleenup Canada Ltd. (DKC) – May 12
Rochon Engineering / Rochon Environmental makes senior appointments by Granite Global Solutions – May 28
Neil Pike Appointed Senior Director of Business Development for AssessMed Inc. by AssessMed Inc. – May 12
To Read the Full Story for Each Press Release visit insPRESS.ca
INSPRESS COLUMN AD JUNE 2014.indd 1
14-06-20 1:52 PM
Fraud Rings Beware
Managing Director, FICO Canada
Fraud has been, and remains, a daunting and costly problem for Canadian property and casualty insurers. This is especially the case when the perpetrators are a moving target, with fraudulent individuals and rings continuously evolving and modifying schemes to execute false claims. For the most part, insurers have focused their efforts on reducing insurance fraud through analysis of data on the claims themselves. However, a rich source of data has been largely untapped by
54 Canadian Underwriter June 2014
the industry: personal attributable data on claimants and on other individuals related to the claim or to the claimant. By incorporating analytic technologies to perform real-time searches across an enterprise’s disparate data, insurers can find, match and link similar entities and uncover hidden relationships between people, places and things. This is the future of fraud detection: focusing on finding patterns that cross multiple claims and claimants to uncover abuse or expose fraud rings. A GROWING CONCERN It is undeniable that there is a growing trend of organized fraud, collusion and opportunistic fraud. The insurance industry has been particularly exposed because detection has traditionally been difficult and prosecution can be expensive and challenging. Often these losses have been perceived as a “cost of doing business.” Yet given the magnitude of losses and industry-wide interest in cost containment, this view is changing — attitudes in the insurance industry are evolving from acceptance that fraud is a “cost of doing business” to a more aggressive stance on proactive prevention and engagement.
Illustration by Dave Whamond/threeinabox.com
Kevin Deveau
The insurance industry needs to take additional actions to stop the significant problem of losses caused by individual fraudsters and organized crime rings. New technological advances have made it possible to analyze untapped data and shift the fight against fraud from the claim to the claimant.
Insurance companies across the globe routinely release figures demonstrating how prevalent the issue is. For example, in April 2014, United Kingdom-based provider Aviva reported a 19% rise in fraudulent claims in 2013 compared to the previous year. The company noted it is currently investigating 5,500 suspicious injury claims linked to known fraud rings in the U.K., which represents a 20% increase in the number investigated last year.
hind fictitious — and shared — personal information, such as addresses, phone numbers and licence numbers. The bad news is that every major insurance carrier experiences numerous types of organized fraud on a daily basis; the good news is that data on many of the participating fraudsters can be captured.
BEYOND DETECTION To leverage the value of data on fraud ring culprits, as well as fraudulent individuals, it is essential for insurers to quickly access as many internal and external data sources as possible, and match the data attributes that serve as the “golden nuggets” of financial crime prevention and investigation.
REAL OR NOT? What makes a fraudulent claim successful is that it is often sophisticatedly disguised as a real claim. Among the common problem areas found to be trending across many insurance lines of business are identity fraud, collusion between victims and service providers, and collusion among parties
Attitudes in the insurance industry are evolving from acceptance that fraud is a “cost of doing business” to a more aggressive stance on proactive prevention and engagement. in accidents across multiple policies and companies for the purposes of driving benefits claims. While there is proven worth in technology that helps evaluate the likelihood of a claim being fraudulent, identifying suspicious information on individuals related to claims can lead directly to a strong reduction of losses from organized fraud rings as well. With multiple individuals across multiple entities involved in ongoing fraudulent claims, the “fingerprints” of organized fraud rings can be found across disparate databases in the form of personal attribute information. For example, as members of a ring attempt to defraud various carriers, they use and leave be-
June 2014 Canadian Underwriter 55
In terms of fundamental technological power, the key to realizing a meaningful reduction of losses from fraudsters comes from two very distinct abilities: • the ability to quickly and efficiently access a breadth of data — and the capabilities to conduct thousands of queries per day on hundreds of millions of records across dozens of disparate databases; and • the ability to understand the identity matches and non-obvious relationships between individuals across dozens of data sources — despite input errors or deliberate attempts to deceive. As technologies have enhanced and developed the ability to focus on the claimant as well as the claim, insurers can now strengthen their current analysis of claims with an added perspective on risk associated with individuals. Applied reactively in regular claims processing — or proactively in off-line reviews — the technology uniquely gives insurers a seamless, deeper view into fraud risk. However, improving detection is just the first step. Insurance companies should consider preparing themselves organizationally as well, such as defining priorities and objectives, providing tools to ensure their investigation teams can handle increased volumes, and developing new policies and procedures. REMOVING SILOS AND BARRIERS For the most part, regulators are concerned about privacy, particularly around personalized consumer data. In addition, companies are often concerned about sharing customer data with competitors. This has traditionally worked in favour of fraudsters who benefit from siloed data to hide their activities across the industry. In order to work with the regulators, many fraud-detection models are developed using depersonalized data. These can be implemented such that a full cross-review of data can be achieved without the need for replicating or moving data to centralized locations, which
56 Canadian Underwriter June 2014
can be sensitive both from privacy and from competitive perspectives. While working closely alongside their technology partners, insurers have developed methodologies and math-
As technologies have enhanced and developed the ability to focus on the claimant as well as the claim, insurers can now strengthen their current analysis of claims with an added perspective on risk associated with individuals. ematical solutions to analyze the data available to them. Two such methods are cross database identity resolution and link analysis, details of which follow. Cross data identify identity resolution One of the first steps when investigating the claimant is to resolve the identity of the claimant. Is this claimant someone who appears, perhaps with slight variations to personal attribute information,
on other claims, either as a claimant or as another third-party related to a claim? If yes, how strong are the matches? Can they be relied on to deem the claimant suspicious, and to stop payment to the claimant? The hope is to determine “who’s really who” by finding, matching and linking similar people across disparate data sources. Technological advances have led to the creation of algorithms that can overcome data barriers, created by clerical errors, linguistic differences and purposeful misrepresentations that otherwise would make it difficult for typical investigative tools to find similar, but not exact, matches across databases. The algorithms accurately find matches on people, places and things, even whether or not they are only partially similar. Link analysis If an insurer has found reason to suspect a claimant of possible fraud, the next step would be to investigate the claimant’s relationships with individuals listed on the claim. Through the use of link analysis, information can be gathered by investigating complex webs of evidence and drawing conclusions that are not apparent from any single piece of information. These methods are equally useful for creating variables that can be combined with structured data sources to improve automated decision-making processes. EXPLORING UNEXPLORED DATA Data is information that, when accurately examined, can provide insight that drives beneficial action. The insurance industry needs to take additional actions to stop the significant problem of losses caused by individual fraudsters and organized crime rings. One way that insurers can do so is by taking advantage of a vast amount of data that, to date, has gone largely unexplored. Personal attribute data on claimants and other individuals can be found across a variety of data sources — much of it within insurers’ own databases, as well as accessible external sources.
Recent Blog Posts Featured on
insBlogs.com
Insurance Blogs hosted by Canadian Underwriter Western’s Storm Damage Assessment team on the ground in tornado struck Ontario town by Glenn McGillivray – June 18 On the road to insurance 2020 by Christian Bieck – June 16 What the Liberal Majority Government Means For Ontario Auto Insurance by Willie Handler – June 14 The writing is on the wall for future wildfire risk in Canada by Glenn McGillivray – June 10 Telematics changes the dynamics of the automobile insurance industry by Peter Morris – June 5 Sent Today, Spam Tomorrow? by Catherine Smola – June 4 Innovation ecosystem, open innovation a powerful combination for the insurance industry by Denise Garth – June 3 Can an insurer be added as a defendant by the plaintiff to determine a coverage issue? by Chris Dunn – June 3 FSCO’s Licensing Process for Service Providers Has Begun by Willie Handler – June 2 Are potato chips the new cigarette? by Carol Kreiling – June 2 Laches Returns to Loss Transfer by Daniel Strigberger – May 30 Backwater valves and backflow preventers are not at all the same thing by Glenn McGillivray – May 27
Robots and the nature of risk by Christian Bieck – May 23 What the Ontario Party Platforms Say About Auto Insurance by Willie Handler – May 23 Connected Cars – The Future Standard? by Catherine Smola – May 23 Actuarial Research on the Effectiveness of Collision Avoidance Systems by Willie Handler – May 21 The evolution of apps – use case for insurance? by Christian Bieck – May 19
Insurance
ON Court of Appeal Divided in Accident Benefits Nexus Case by Daniel Strigberger – May 16
Looking at water through a catastrophic loss and hazard risk reduction lens by Glenn McGillivray – May 14 On Innovation in the Workplace by Roger Bickmore – May 12 How leading insurers communicate by Christian Bieck – May 5
Restorative rocess P
Jim Mandeville Senior Project Manager, Large Loss North America, FirstOnSite Restoration
A look back on the worst flood in the history of Alberta shows that even now, some homeowners, businesses and schools are still in the process of rebuilding. Restoration efforts at a town house complex in High River shows that restoration efforts can be complicated, making mitigation and prevention all the more important in the wake of increasingly common extreme weather. June marks the one-year anniversary of last summer’s Alberta floods, which the provincial government declared the worst disaster in the history of the province. Damage caused by the floods has been extremely expensive, amounting to $5 billion in total damages, and $1.7 billion
58 Canadian Underwriter June 2014
in insurable damages. This makes it the costliest natural disaster in Canadian history. Most will remember June 19 to 21, 2013, when more than 100 millimetres of rain fell on Southern Alberta, causing rivers to rise to in excess of five times their normal flow rates. The news coverage showed sections of Highway 1 being washed away, 10 rows of the Scotiabank Saddledome becoming submerged, and entire towns cut off by flood waters and mudslides. One year later, some homeowners, businesses and schools are still in the process of rebuilding, or have just begun to finish. This is not entirely surprising as the amount of devastation caused by the floods was unprecedented. The strain that this event placed on response and restoration personnel was extreme — repairs, costs and headaches are ongoing. The basic stages of restoration are mitigating the damage, stabilizing the property (for residences, this can include making it liveable; for businesses, it means getting back to business), and final reconstruction. There were not enough contractors in the area to keep up with the demand for restoration services. Add to this the complication of having to get older buildings restored and up to presentday code.
Those fortunate enough to be back on their feet did not necessarily have less flooding or better luck. The Prairie Sound town house complex in High River, Alberta, for example, shows how organization, access to specialized resources and a restoration partner can be employed to produce a positive result. During the floods, the Highwood River overflowed to the point where vehicles were swallowed in the town’s streets, and more than 150 people needed to be rescued from the rooftops of their homes. On June 20, all 13,000 residents of High River were ordered to evacuate. The town saw some of the worst flooding of the summer.
A comprehensive, tested emergency response plan is what will put properties in a good position to weather a serious storm, and help to mitigate damages. The Prairie Sound town house complex, made up of 128 units, is located a five-minute walk from the river. The complex — set up as a figure-eight, with inner courtyards where residents regularly interact with one another — is very much like a small community within a community. During the flood, units in the complex suffered significant damage caused by backed-up sewage that mixed with water flowing in from surrounding ranches, carrying toxic, category 3 black water. All 128 units were evacuated. Time is of the essence in restoration projects, not only to mitigate damage to the property, but to ensure a smooth transition back into the home. Living away while work is completed can cost in excess of $10,000 per month for a family. When extrapolated across a large group of people, such as in the case of Prairie Sound, this amounts to thousands of dollars a day in additional expenses. The same can be said for business-
es that lose thousands of dollars daily when they are forced to close by a disaster. Prairie Sound had never experienced a disaster on this scale and did not have an updated emergency response plan or a restoration partner in place. In the wake of the flood, the condo association attempted to mitigate and remediate the damage by hiring inde-
pendent local contractors to tackle the job. But for crews untested with events of this magnitude, progress was sporadic and slow. The property manager opted to commission FirstOnSite about one month after the flood. DIFFERING NEEDS The Prairie Sound case was extremely complicated as each unit had different
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levels of damage and all had to be restored to pre-flood conditions. Given the toxic nature of the water from overland flooding, there was a great deal of material replacement involved. All interior finishes on the ground level — including walls, ceilings, floors, doors, furnaces and hot water heaters — had to be removed. The majority of the framing was saved (excluding sill plates) and was heavily sanitized and dried to safety standard. The concrete walls and floors were also sanitized and dried using desiccant dehumidification to accelerate the process. As an additional safety measure, the floors (carpets and solid surfaces) were cleaned and sanitized in all units. And, finally, the ductwork and new furnaces were cleaned to remove any dust, contaminants or construction debris. An additional challenge for the project was managing the variety of finishes in each unit. For example, each resident had 60 different flooring materials to choose from, and 60 to 70 paint colours. Because managing the materials sourcing and workflow was a complex job, project managers developed a comprehensive spreadsheet-based system to help track unique owners, residents, units, materials needed and restoration progress. Operations were quarterbacked from a command-centre-type office built on site for the duration of the job. Operational resources were mobilized from as far away as Nova Scotia — this included equipment for drying and restoration, as well as skilled labour, although most temporary workers were hired locally. In this type of situation, where many arms and legs are needed to get the job done in a timely manner, tapping into local resources as much as possible, and supplementing from outside when necessary, is recommended. As many as 500 temporary workers were employed to scale up to the jobs on hand. The same goes for building materials. Imagine the state of the local Home De-
60 Canadian Underwriter June 2014
pot or Rona after the floods. There were line-ups out the door for basic building materials such as two-by-fours, drywall sheets and trim. Orders were backed up for weeks, and there was even a black market for essential materials. Being able to tap into resources outside of Alberta was a huge asset as the project progressed. Doors, trim and siding were brought in from other provinces and from the United States to keep things on pace.
While residences were being disinfected, safety-tested and rebuilt, many residents were living out of hotels in Calgary, which could cost up to $10,000 per month, adding incentive to get people back into their homes quickly. While residences were being disinfected, safety-tested and rebuilt, many residents were living out of hotels in Calgary, which could cost up to $10,000 per month, adding incentive to get people back into their homes quickly. Crews were able to get hot water tanks up and running in five to eight weeks, and a full-time health and safety manager ensured that the site was safe for residents as it was, in essence, a construction zone. Over the course of the project, more than 300,000 square feet of drywall was installed, and 128 water tanks and furnaces were installed in one month. There were no lost-time injuries and reconstruction was mostly completed by the holiday season. KEEPING RESIDENTS UPDATED Communication is always key when restoring someone’s property. In the case of Prairie Sound, residents were consis-
tently updated on the state of the project, and responses were provided for specific concerns and requests. The community’s Facebook page was used to post updates, a weekly newsletter was produced, and news was posted on a physical billboard on the premises to keep residents informed of progress. While this communication was directed at residents, it went a long way to helping property management and insurers manage the situation, and understand exactly where things stood at any given point. The flooding was an eye-opening experience for insurers and property managers, who had never before had to respond to a disaster of this magnitude. The fact is that this type of extreme weather event is becoming increasingly common. It is essential that property owners and insurers be aware of the threats and have a plan in place before the storm hits. A proper emergency response plan includes a full risk assessment specific to the property and a written plan that addresses those risks and the stakeholders involved, and having a restoration partner on board for when disaster strikes. No two plans will be exactly alike, as special considerations need to be taken into account. What are the main operational and business priorities in order of importance? For example, is the business dependent on its physical location, or can it use technology to continue its operations remotely? How can a building’s construction and floor plans help or hinder restoration efforts? This unique plan should be tested on a regular basis. A comprehensive, tested emergency response plan is what will put properties in a good position to weather a serious storm, and help to mitigate damages The anniversary of the Alberta floods is a reminder that disasters come quickly, but their effects are long-lasting. It is our responsibility to be prepared for the next one.
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Role Model
Nathalie Bégin Senior Actuarial Consultant, Towers Watson
The use of predictive modelling continues to increase in nearly every business line — a positive trend that varies in degree by line of business, notes Towers Watson’s fifth annual Predictive Modeling Benchmarking Survey. The survey of North American property and casualty insurance executives, conducted from last September 5 through October 21, examined where and how insurers are embracing predictive modelling — a means to enhance performance improvement efforts in underwriting, pricing, claim management and other core functions. (Respondents can provide their input on the sixth annual edition of the survey, which will be launched this September.) The latest survey of 67 company groups (59 U.S. and eight Canadian) also found that, given marketplace realities, overall usage fluctuates significantly by line of business and company size, and in most cases, data-driven analytics are not applied uniformly throughout the enterprise. This fluctuation in usage is evident when the personal and commercial lines markets are compared. Personal lines insurers operate in a highly competitive, mature market, so it is not surprising that a very high percentage of these insurers have adopted many aspects of predictive modelling. Commercial lines, while still competitive, face
62 Canadian Underwriter June 2014
less intense pricing pressure in some segments, in part due to the heterogeneity of risk and the heightened reliance on individual risk underwriting expertise, particularly in large risk/specialty lines. Specialty lines are considered by some in the industry to hold the potential for more profitable growth, and specialty lines insurers are showing increasing interest in applying predictive modelling to their businesses. Nonetheless, some smaller insurers have chosen to focus on other competitive differentiators, including customer service and claims, rather than predictive modelling. Key findings of the survey are as follows: • large insurers are more active in applying predictive modelling analytics to claim applications, and few small insurers have plans for claim-related applications; • small insurers seek to differentiate themselves in areas such as service and claims, rather than by modelling; • large insurers see more favourable top- and bottom-line predictive modelling benefits, while some smaller insurers have concerns about adverse top-line ramifications related to defending market share and retention of existing business; • personal lines insurers, particularly smaller personal insurers, find value in all forms of com-
Illustration by Dave Whamond/threeinabox.com
Use of predictive modelling is on the rise, an encouraging development in light of its promise to improve underwriting, pricing, claim management and other core functions. That said, overall use of predictive modelling fluctuates significantly by line of business and company size.
petitive analysis; and • most insurers seek to increase the predictive power of their models, first by exploring new internal and external data, with personal lines insurers more likely to emphasize variable interactions and commercial insurers looking to leverage external, risk-specific variables. Nearly half of personal lines automobile insurers have formal usage-based insurance (UBI) plans — up from a third last year — and insurers have progressed in executing those plans. SOLID BASE FOR IMPLEMENTATION A growing number of p&c insurers have the basic tools and capabilities to enable them to pursue integrating data-driven analytics throughout their organizations.
Driven by different market segment concerns and needs, survey respondents reported that they are tailoring their predictive modelling programs to focus on specific market realities, and most have yet to achieve a more comprehensive, integrated, company-wide approach penetrating all core functions. This readiness is suggested by the consistent enthusiasm for predictive modelling, the measurable actions already taken and the proven success of earlyadopting insurers. • Enthusiasm: The enthusiasm for predictive modelling seen in Towers Watson’s two most recent surveys was evident again in the current survey. In Canada and the United States, over 75% of personal lines and small to midmarket commercial lines respondents view predictive modelling as essential or very important. All personal lines
respondents attached some degree of importance to sophisticated underwriting and risk selection techniques for rating and pricing, with an overwhelming majority (81%) of personal lines respondents identifying predictive modelling as essential. • Measurable action: The perceived value of predictive analytics was backed by action. Modelling increased for virtu-
ally all lines of business. • Proven success: Many personal auto insurers that have successfully implemented predictive modelling have expanded to implementing UBI programs (which incorporate a predictive modelling component) as a logical next step in building on their predictive modelling initiatives and integrating them more fully throughout their organizations.
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DIVERSE USES AND APPROACHES Driven by different market segment concerns and needs, survey respondents reported that they are tailoring their predictive modelling programs to focus on specific market realities, and most have yet to achieve a more comprehensive, integrated, company-wide approach penetrating all core functions. In personal lines, the competitive nature of the market, characterized by the availability of similar products from a number of insurers, is evident from survey responses. In particular, personal lines insurers are concerned that they are competitively aligned with their industry peers because the market makes it imperative to match competitors with comparable products and attractive prices. In commercial lines, insurers have been slower to adopt predictive modelling, and as a result, respondents said there is less competitive pressure to use predictive modelling applications for risk selection and pricing in their main lines of business. Survey responses indicate Canadian insurers have been somewhat less active than U.S. insurers in commercial lines. TOP- AND BOTTOM-LINE RESULTS Canadian insurers have experienced greater top-line impacts than their U.S. counterparts, with U.S. insurers reporting greater profitability improvements. The survey findings offer a general sense of where Canadian and U.S. insurers are benefiting most. Insurers on both sides of the border agree that rate accuracy and loss ratios are improved. With regard to claim applications, the survey found that applying predictive modelling to claims continues to lag risk selection and pricing, but activity continues to grow in the area, particularly among larger insurers. In addition, U.S. insurers have been more aggressive than Canadian insurers across all claim-related applications. The survey findings suggest there are significant opportunities for Canadian insurers, small U.S. insurers (and all other insurers, for that matter) to implement operational changes focused on improvements to the bottom line by applying predictive modelling and data-driven 64 Canadian Underwriter June 2014
Some companies do not fully understand the benefits associated with price integration and price optimization, including how they are, ultimately, a means to measure and enhance customer value, and how those findings can be factored into everything from pricing to targeted new business marketing and portfolio defence. analytics to advance claim performance, given that the claim function is where most of the premium dollars exit the organization. PRICE INTEGRATION AND OPTIMIZATION While many insurers are not currently using price integration (i.e., bringing together customer behaviour, competitor and loss cost models to derive key business metrics, such as profit and volume, to test the impact of different rate scenarios) or price optimization (i.e., the application of a mathematical search algorithm to a price integration framework, aiming to identify the rates that maximize business metrics), they increasingly plan to do so. Survey findings suggest that some lines may not be ripe for these techniques.
This is either because the data are lacking (price information is hard to collect or risk level modelling is not a viable option) or because companies have not prioritized price integration and, ultimately, price optimization to enhance performance while reflecting specific business goals. Survey findings further suggest that some polled companies do not fully understand the benefits associated with price integration and price optimization, including how they are, ultimately, a means to measure and enhance customer value, and how those findings can be factored into everything from pricing to targeted new business marketing and portfolio defence. THE ROLE OF DATA As the sophistication and power of applying predictive models and datadriven analytics have increased, insurers continue to jockey for position, looking for the next predictor variable or interaction that will give them an edge over competitors. A majority of insurers continue to explore new internal and external data in an effort to improve the predictive power of their models. In addition, commercial lines insurers stress external risk-specific or sociodemographic data, while personal lines insurers tend to look for more variable interactions to strengthen their models. Personal lines insurers are much more likely to apply predictive modelling in the form of rating plan adjustments by creating or revising rating/tier variables and relativities, while standard commercial lines insurers balance pricing and risk selection responses. In particular, while a majority of commercial lines insurers also use predictive modelling to create or revise rating/tier variables and relativities, a much larger number also use predictive modelling to revise underwriting rules, including acceptance/rejection criteria and company placement. These efforts need to continue — and insurers need to take it a step further and develop a more comprehensive, strategized and aggressive approach to predictive modelling implementation.
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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 Dedicated to fellowship and charity. 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
Crawford & Company (Canada) Inc. Enhancing the customer experience, every day. www.crawfordandcompany.com Cunningham Lindsey International independent claims services. www.cunninghamlindsey.com DSB Claims Solutions High Performance Speciality Adjusting Satisfaction Guaranteed! www.dsbclaims.com
Granite Claims Solutions Global Adjusters and Marine Surveyors www.graniteclaims.com PCA Adjusters Limited Adjusting to Meet your needs™ www.pca-adj.com Quelmec Loss Adjusters Identifying, Investigating, Resolving... for over a quarter century! www.quelmec.ca
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
ENGINEERING SERVICES
Giffin Koerth Forensic Engineering and Science Investigate Understand Communicate www.giffinkoerth.com
GRAPHIC COMMUNICATIONS Informco Inc. Integrated Graphic Communications Specialists. www.informco.com
INSURANCE COMPANIES
Aviva Canada Inc. Home Auto and Business Assurance. www.avivacanada.com Catlin Canada Underwriting Ambition. www.catlincanada.com FM Global The leader in property loss prevention. www.fmglobal.com National Bank Insurance Auto | Home Home and Auto Insurance in Quebec. www.nbc-insurance.ca 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
Wawanesa Insurance Earning your trust since 1896. www.wawanesa.com
INSURANCE LAW
The ARC Group Canada Inc. Your Partner in Insurance Law & Risk Management. www.thearcgroup.ca
REINSURANCE
Guy Carpenter & Company The world’s leading reinsurance intermediary. www.guycarp.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
The ARC Group Canada Inc. Your Partner in Insurance Law and Risk Management. www.thearcgroup.ca
Your Breaking Insurance News Source... Sign-up to receive Canadian Underwriter’s FREE DAILY Insurance Headline e-News: http://bit.ly/cuenews 66 Canadian Underwriter June 2014 72 Canadian Underwriter March 2014
.ca
Paperless
Savings Catherine Smola President and Chief Executive Officer, Centre for Study of Insurance Operations
The iconic image of a broker’s desk cluttered with stacks of insurance applications, policy wordings and billing statements is quickly becoming a thing of the past. Less paper exchanged among brokers, carriers and their clients means more efficient workflows that allow for real-time, instantaneous transactions. While the most obvious benefits of adopting paperless workflows are less printing, faxing, scanning and mailing, there are several other important benefits brokers can enjoy by moving to a paperless environment. With the proliferation of personal computers, mobile devices and the Internet, clients now expect to receive information right away, and having a paperless office is a key element in meeting those client expectations. Through paperless activities, brokers are able to accelerate their business processes and provide an improved client experience by delivering substantial time savings, thereby helping to meet the growing demands of clients for rapid service. Enhanced security is another key benefit a paperless office provides. Locked cabinets can be broken into, but with the right computer security software
Going paperless offers the promise of some significant efficiencies and costs savings. Combining different solutions, however, can provide brokers the biggest bang for the buck.
and procedures in place, a paperless office can add several layers of security to keep unauthorized individuals from gaining access to sensitive material. Role-based security and permissions can also be added — companies can provide certain employees with the capability to read, write, modify and delete specific files, something that is much more difficult to do with a paper-based system. With well-managed electronic storage, there is also better disaster recovery and back-up of files. When a paper file is destroyed in a fire, for example, there is no chance of recovering that piece of paper. But if a digital file is accidentally deleted, it can usually be recovered with the correct information management procedures in place. The labour savings of a paperless office are also considerable. Paper requires a great deal of time and labour to organize, file and retrieve. Working with digital files is much quicker for employees. Retrieval of information is almost immediate in a well-managed paperless office. Electronic data can also be accessible from remote sites to many individuals at the same time, making remote collaboration and working with off-site colleagues much faster.
June 2014 Canadian Underwriter 67
Putting the pieces together.
Events and Seminars Calendar You work hard to protect your clients’ property. Now, it’s time to ensure that you apply the same kind of energy and commitment to your own success. CIP Society Events and Seminars give you the opportunity to learn, to network, to catch up on industry developments and to think about your career.
CIP Society Events:
Professional Development Courses:
Halifax – Golf Tournament . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . July 9
Vancouver – Essential Management Skills . . . . . . . . . . . . . . . . . . . . . June 24-26
Edmonton – Golf Tournament . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . July 14
Vancouver – Think on Your Feet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . October 7-8
Hamilton – Volleyball Tournament . . . . . . . . . . . . . . . . . . . . . . . . . . . . August 27
Edmonton – Think on Your Feet . . . . . . . . . . . . . . . . . . . . . . . . . . . October 21-22
Brooklin, ON – Beach Volleyball Tournament . . . . . . . . . . . . . . . . . September 4
Edmonton – Building Better Relationships at Work . . . . . . . . . . . . . . October 23
Toronto – Indoor Beach Volleyball Tournament . . . . . . . . . . . . . . . September 30
Calgary – Think on Your Feet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . October 28-29
Edmonton – Battle of the Bands . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . October 7
Winnipeg – Essential Management Skills . . . . . . . . . . . . . . . . . . . November 4-6
North Bay – Curling Bonspiel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . October 30
Ottawa – Essential Management Skills . . . . . . . . . . . . . . . . . . November 11-13
Keeping you at the forefront of the P&C industry. The CIP Society. MEMBERS BENEFIT. www.insuranceinstitute.ca/cipsociety
One could argue that a paperless environment can even improve employee morale. With employees no longer spending time on tasks such as sorting and filing paper, they are able to spend their time more productively. A paperless office may also be beneficial in attracting promising new hires who are drawn to workplaces that are innovative and efficient, leveraging technology and tools to support a paperless workflow. POSITIVE GROWTH Paperless benefits have been demonstrated. Thanks to emerging technologies, paperless offices are growing in popularity and companies are experiencing substantial time and cost savings, while at the same time decreasing their environmental footprint. Technology solutions developed by the Centre for the Study of Insurance Operations (CSIO) — combining eDocs, eSignatures, CSIOnet and CSIO industry forms — seek to work individually (but preferably combined) to help brokers reach the goal of a paperless environment. Serving as a cornerstone of a brokerage’s paperless workflow, the eDocs standard allows policy documents (usually PDFs) to be downloaded directly from an insurer’s system to a broker management system (BMS) via CSIOnet and automatically attaches transmitted documents to the client file in the BMS. Beyond eDocs, though, further efficiencies can be gained by implementing eSignatures, the process of obtaining an electronic signature from a client. eSignatures produce digital signatures that are authentic, verifiable, tamper-proof and legally compliant. The notion that physical insurance documents need to be signed for most types of contracts is actually a misconception, not a legal requirement. Published in November 2013, the CSIO eSignatures Advisory Report explains that businesses can use eSignatures for most internal and external documentation, eliminating the need to print, scan, fax and shred documents. Electronic signatures are more about
creating a seamless paperless insurance transaction than simply obtaining a digital signature, which contributes significantly to a paperless workflow. HARD SAVINGS A broker can measure the dollar savings that have been gained through adopting a paperless workflow. For example, a broker on average may do the following: • receive 100 policies a day from insurers; • pay an administrative support employee $16/hour to gather, organize and archive policy documents (spending four hours a day on this task); • spend $100/month on document shredding and disposal; and • spend $100/month on external document storage. Using eDocs to establish a paperless workflow, this sample broker can realize more than $18,000 in annual cost savings and 125 workdays in time savings. These savings are in addition to the cost of postage and mailing. Consider that the cost of mailing a standard letter in Canada soared 35% in 2014, from 63 cents to 85 cents. Using the CSIO eDocs Savings Calculator allows brokers to calculate the potential time and cost savings of eDocs for their own brokerage. In addition to the aforementioned costs, it is important to consider the cost associated with obtaining signatures on paper documents. “A study in the (United States) estimated that there are 30 billion paper documents copied or printed annually, and when you factor in the cost of copying, scanning, archiving, routing and retrieving lost documents, the estimate was that each paper signature costs around $6.50,” says Daniel Fabiano, a partner at Fasken Martineau DuMoulin LLP and author of the CSIO eSignatures Advisory Report. “There’s no reason to think that the cost per signature would be any different in Canada; in fact, it could be higher.” SOFT SAVINGS But there are also soft savings that cannot be so easily translated to specific dollars, such as response time and increased client satisfaction.
“I’ve been using eDocs together with eSignatures since early 2014, and they tie in quite well together,” says Gord Thompson, an account executive at Christie-Phoenix Insurance, based in British Columbia. “Instead of chasing clients around for statements of values or letters of brokerage, and sometimes waiting weeks, I’ll now get them back in 10 minutes. It’s a night-and-day difference,” Thompson says of eSignatures. Clients also increasingly prefer the convenience of receiving a digital file and are not demanding paper as frequently. “From a client perspective, eDocs are becoming more common because I’ve noticed clients don’t want the hard copies anymore,” he says. “It’s easier for them to record it on their phone, pull it up on their tablet, refer to it electronically... that’s what their comfort level is.” NET & FORMS Efforts to create a paperless environment can be further enhanced with CSIOnet, which transmits data between insurance industry trading partners, namely brokers and insurers. And although it might seem counterintuitive because of their long-time association with paper, CSIO forms actually contribute to the paperless workflow as well. Although for many the word “form” conjures up images of paper, more and more forms are being integrated into BMSs, using the vendor’s own user interface. Their appearance may be different on screen, but the forms can help brokers achieve a paperless workflow by using data standards, which CSIO develops and maintains for the industry in collaboration with its members in working groups. This standardized forms data is then efficiently transmitted between the broker and insurer over CSIOnet. CSIO will continue its work on other initiatives to support the paperless workflow. A strong foundation for eDocs has been built for personal lines, and as more insurers adopt the solution for commercial lines, the paperless workflow can be achieved for commercial business as well. June 2014 Canadian Underwriter 69
MOVES & VIEWS upcoming events: for a complete list visit
www.canadianunderwriter.ca
and click ‘my events calendar’ on the home page
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Aviva Insurance Company of Canada has announced that Sharon Ludlow [1] is the company’s new president, effective June 17. Ludlow’s last position was as president and chief executive officer of Swiss Re in Canada. In the newly created role at Aviva Canada, Ludlow will be responsible for its broker distribution operations and customer, marketing and digital strategy, reporting directly to president and CEO, Greg Somerville. Prior to Swiss Re, Ludlow served as chief financial officer (CFO) of Liberty International Underwriters’ commercial property and casualty operations. As CFO, she played a role in launching the quote comparison service, Kanetix. Ludlow is a director for the Insurance Bureau of Canada, the Canadian Life & Health Insurance Association and the Institute for Catastrophic Loss Reduction. She is also chair of the Reinsurance Research Council.
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Economical Insurance has named Hans Reidl [2] as the company’s new vice president of finance. Reidl previously served as vice president of finance at ATS Automation Tooling Systems Inc. and is a former senior manager with Ernst & Young’s assurance and advisory services practice. In his new role, Reidl will lead the
70 Canadian Underwriter June 2014
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corporate financial accounting and reporting teams, the financial planning and analysis team and the finance operations function. He will also provide oversight and support to the reinsurance and procurement functions.
Steve Robinson [3b] will continue to lead the day-to-day operations of the Canadian business, as CEO and chief operating officer, respectively. Tim Robinson [3c] is the current president and CEO of Paul Davis Restoration.
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Toronto-based property services firm FirstService Brands, a subsidiary of FirstService Corporation, announced in June that it has acquired restoration firm Paul Davis Systems Canada for an undisclosed amount. The acquisition adds 63 franchises to the North American business services platform of Paul Davis Restoration, based in the United States, bringing total franchises to 370. Ken Robinson [3a] and
Beyond Insurance Brokers Inc.’s business development director, Debbie Thompson [4], is now a partner with the Whitby, Ontario firm. Thompson, chair of the board of Insurance Brokers Association of Ontario (IBAO), will continue to be responsible for business development at Beyond Brokers. She began her insurance career at Citadel Assurance and has also worked at Gellatley Insurance and Sinclair Cockburn.
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EGI Financial Holdings reports that shareholders have elected Ani Hotoyan-Joly, Serge Lavoie and Carol Poulsen to the firm’s Board of Directors. Hotoyan-Joly, chief financial officer (CFO) and corporate secretary of Coventree Inc., is a former CFO of Swiss Re Canada and a former vice president of finance at Zurich Canada; Lavoie, former president and CEO of Jevco Insurance Company (now part of Intact), is Quebec president at GDI Integrated Facility Services; and Poulsen is executive vice president and chief information officer of The Co-operators Group Limited. The three are replacing Mark Curry, Patrick Hodgson and Paul Little on the board.
MOVES&&VIEWS VIEWS MOVES
of Calgary; Gordon Adams; Robert Cartwright, Jr.; has hired Amanda Ketelaars Al program Gorski; Leslie Lamb; as manager for John its Phelps; office. Michael Phillipus; Toronto Ketelaars has Frederick Savage; and Lori held various roles at Keal Seidenberg. whose products Technology,
3 3b
99 positions have included general adjuster, branch manager, vice president operations In May, of Rochon and Lloyd’s Divisionofleader. Engineering
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Concord, Ontario announced that Mark Samis Chisholm [6a] isMacdonald now a senior environInsurance (MCT) mentalTrask consultant for the announced in early company and J.M. Michel January that it will prop(Mike) Laberge [6b]join is now erty and casualty brokerage its director of business BrokerLink. The termsisof the development. Samis “extransaction wereenvironmental not disperienced with closed, notesand a statement regulations guidelines from BrokerLink. for drinking water,BrokerLink surface companies, subsidiaries water, groundwater, site of Intact Financial Corp., remediation, peer review and include 84 offices serving subrogation support, brownclients in Atlantic Canada, field site redevelopment and Alberta and Ontario. Dating waste management,” notes back more than 60Rochon years, a statement from MCT has moreLaberge, than 110 Engineering. forinhis surance inyears 18 part, hasprofessionals more than 29 offices. Michael Brien, who of leadership experience in has led MCT over the last 12 claims, management, quality years, joins BrokerLink as assurance, operations and head of itsdevelopment. Atlantic operations. business
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Carolyn Snow [7] will lead RIMS as president FirstOnSite Restoration for the 2014 term,app has a new mobile which that took allows effect customers January 1. Snow, who with has been on the to connect its 24-hour RIMS Board of Directors response centre without for seven years, is The currently having to dial. app isdirector of risk management for available for Android, iPhone Humana Inc. She previously and BlackBerry. Two lines served as RIMS’s treasurer, have been set up — one secretary and director ofone for existing customers; external affairs.public. The RIMS for the general “We board for 2014 includes understand that also stress is vice high president Richard very during a disaster Roberts, Jr.; Julie situation, so treasurer we developed Pemberton; corporate secrean application that will allow tary Nowell director people to getSeaman, a live person of global risk management for on the line as quickly as posPotash says Corporation sible,” Nathan of Belcher, Saskatchewan Gloria the company’s Inc.; director of Brosius; Steve Pottle, director information technology. of risk management services at York University; Jennifer Santiago; Stein, TheJanet Centre for director of risk management and Study of Insurance insurance at the University Operations (CSIO)
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include the sigXP broker management system. She beof January 8, gan herAscareer as a customer insurance broserviceToronto broker for McFarlan ker Insurance Jones DesLauriers Rowlands Brokers Insurance Management Inc. She “will lead CSIOInc. (JDIMI) group had acquired Whitley working activities that Insurance and Financial enable the identification Serand vices. Whitley Insurance has implementation of leadingoffices in Belleville, Ontario edge technology standards and solutions the nearbyforcommunities and the broker of Trenton, Deseronto distribution channel,” and notes “Thefrom acquisition aStirling. statement CSIO. is expected to build a solid presence for JDIMI in Eastern OntarioWawanesa and position the firm Mutual to better service their clients, Insurance Company with strengthened commerrecently announced cial and insurance that Jeff personal Goy [9] has been offerings inpresident the region and a appointed and new financial chief executiveservices officer. diviGoy sion,” notes a statement from joined Winnipeg-based JDIMI. President andHis CEO Wawanesa in 1990. Shawn DeSantis will lead the previous roles at Wawanesa teams from both companies. include vice president of Loris Clarkeunderwriting, [8] has been automobile named successor to Paul vice president of insurance Whitley, and president of Whitley product vice president Insurance, will remain of corporatewho development. during transition period. as Goy hasa also been elected
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a director of The Wawanesa Mutual Insurance Company, Ken Rayner has The Wawanesa Life[9] Insurance joined Anderson Company and Wawanesa & Associates GeneralMcTague Insurance Company. Ltd. as its director of business development, Central Region. “Ken brings ageneral wealth Managing of experience to our comagent Burns & pany, having held various Wilcox Canada senior management positions has promoted Brett Graham with insurers and other MGAs,” [10] to associate managing
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says Chuck McTague, president of Anderson director responsible forMcthe Tague & Associates, a familyAtlantic region. Graham had owned MGA basedasinNova New previously served Brunswick. In January, Scotia representative forAnderson McTague & Associates Burns & Wilcox Canada, and announced wasbeen expanding, before that, ithad RSA adding an office in Insurance’s regionalToronto directorto service the brokers of Ontario for Montreal and Quebec and Manitoba. City. He holds aRayner’s Bachelor of appointment the Commerce in confirms Management company’s “commitment from Dalhousie University.to the Ontario/Manitoba marketplace, and to the building of a local support teamand to assist Property brokers withcasualty their surplus insurlines and difficult to place ance brokerage business,” McTague adds. it BrokerLink has announced
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has acquired the ownership position in Anthony Clark The Guarantee Insurance Brokers Ltd. (ACI), Company of previously held by Anthony North America Clark International Insurance has announced thatinTara Brokers Ltd. Based Wishart [10] became Calgary, Anthony Clarkvice president of claimsoperates for the Insurance Brokers insurer’s Toronto branch on six locations in Alberta December 2, 2013. Having through Anthony Clark 21 years ofDyck experience in The Insurance, Insurance Guarantee’s claims and Heritage Hills Insurance. department, Wishart will be “Not only does this transacresponsible for the operations tion support our strategy of the Toronto Claims. for growth, butBranch ACI’s sales She first joined The focus combined withGuarantee in 1995 as an adjuster BrokerLink’s scale and and has heldwill roles of increasefficiencies benefit both ing seniority with comoperations,” Christhe Miller, pany, of including, most head the Alberta region recently, claims manager at BrokerLink, says in a for specialty lines. is a statement. TonyWishart Consalvo, member ofand both theofSurety president CEO ACI, Association of Canada will join BrokerLink as and a the Canadian Association regional branch manager. of Women in Construction.
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June 2014 Canadian Underwriter 71 57 February 2014 Canadian Underwriter
GALLERY See all photos from this event at www.canadianunderwriter.ca/gallery
More than 200 senior insurance industry executives gathered in Toronto for the Swiss Re 2014 Canadian Outlook Breakfast on March 27. Attendees got their first look at the Canadian P&C industry’s 2013 results and learned about market trends, economic factors and 2014 outlook. Speakers included Sharon Ludlow, president and CEO of Swiss Re Canada; Michel Liès, group chief executive office, member of the executive committee, Swiss Re; and Gregor Robinson, senior vice president policy and chief economist of the Insurance Bureau of Canada.
72 Canadian Underwriter June 2014
GALLERY See all photos from this event at www.canadianunderwriter.ca/gallery
The 14th annual Ontario Pond Blue Goose Scotch Nosing took place on April 3 in the beautiful Carlton Ballroom at the RitzCarlton Hotel Toronto. More than 200 Ganders and guests attended, raising funds in support of Camp Oochigeas – A Camp for Children With Cancer. Jeff Goy, B.Comm. (Hons.), ACAS, CIP
Jeff Goy,
The Boards of Directors are pleased to announce that Jeff Goy has been appointed President and Chief Executive Officer, as well as elected as a Director of The Wawanesa Mutual Insurance Company, The Wawanesa Life Insurance Company and Wawanesa General Insurance Company.
The Boar to annou appointed Officer, as of The W Company, Company Insurance
Mr. Goy joined Wawanesa in 1990 in the Actuarial Department and over the years assumed roles of increasing responsibility. In 2002, he was appointed Vice President, Automobile Underwriting, in 2007 Vice President, Insurance Products and in 2013 Vice President, Corporate Development.
Mr. Goy the Actu the years responsibi appointed Underwrit Insurance President,
Mr. Goy is a member of the Board of Insurance Bureau of Canada having served on a number of its committees including Chair of the National Automobile Underwriting Working Group. He has been a member of the Boards of General Insurance Statistical Agency and Centre for Study of Insurance Operations. Mr. Goy also currently sits on the United Way of Winnipeg Campaign Cabinet as the Co-Chair of the Major Corporations Division.
Mr. Goy i Insurance served on including Automobi Group. He Boards of Agency an Operation the United Cabinet a Corporatio
Wawanesa Mutual, established in 1896, is a major Canadian policyholder owned multi-line insurer. The Wawanesa group of companies offers property and casualty as well as life insurance products, employs over 2600 people and is represented by over 1700 brokers throughout Canada. With head office in Wawanesa, MB and executive offices in Winnipeg, MB, the Wawanesa group serves almost 2 million customers through regional and service offices across Canada, as well as in California and Oregon. In 2013, Wawanesa reported written premiums of $2.5 billion with total assets of $8.0 billion.
Wawanesa is a major multi-line of compan as well as over 2600 over 1700 With hea and execu the Waw million cu service of as in Cal Wawanesa $2.5 billion
June 2014 Canadian Underwriter 73
GALLERY See all photos from this event at www.canadianunderwriter.ca/gallery
With a record attendance of more than 100 members, the Property Casualty Underwriters Club (PCUC) held its annual Spring Thaw social on April 8 at Turf Lounge in downtown Toronto. This annual event marks an evening to break free from winter hibernation and enjoy time with friends and colleagues. Attendees were treated to a full oyster bar, selections from the chef’s custom aperitif menu of seafood, spring veggies and antipasto, along with seasonal wine, all while enjoying lively off-track wagers on favourite contending horses, compliments of the PCUC.
74 Canadian Underwriter June 2014
GALLERY See all photos from this event at www.canadianunderwriter.ca/gallery
On April 15, Quebec risk managers (QRIMA) and their industry partners gathered at the Irish Embassy Pub in Montreal for an evening of fun and games at the 4th annual Pub Quiz night. All proceeds from the event were remitted to the Canadian Red Cross, together with a matching donation by QRIMA, amounting to a total of $3,000. It was a great evening for a great cause!
June 2014 Canadian Underwriter 75
GALLERY See all photos from this event at www.canadianunderwriter.ca/gallery
CCR’s 13th Annual Blues Night was held at Fionn MacCool’s in downtown Toronto on April 23. Guests were treated to an evening of great food and a musical performance by the great Suzie Vinnick, a Saskatoon native blues musician.
76 Canadian Underwriter June 2014
Gallery See all photos from this event at www.canadianunderwriter.ca/gallery
HUB HKMB International held its annual Hockey Challenge for Charity Tournament on Thursday on April 17 at William P. Wilder Arena at Upper Canada College. HUB HKMB hosted industry partners and friends for a fun-filled day of great food and action on the ice, with all proceeds donated in support of United Way Toronto. Each team’s endurance was put to the test with a minimum three-game schedule before the knock-out round commenced with team RSA repeating as champs. The tournament was followed by a reception, trophy presentation and raffle draw.
Appointment Dave Picot HSB BI&I appoints Dave Picot as Chief Operating Officer and Corporate Secretary. In his new role, Dave will oversee the company‘s commercial brokerage channel through its national network of branch and regional offices, its Reinsurance Assumed business, and new strategic products. Dave has been an Officer of HSB BI&I since 2004 and has held various executive roles, including responsibility for Underwriting, Claims, Engineering and Inspection. He assumed the role of Corporate Secretary in 2007, was promoted to Senior Vice President in 2012, and recently held the position of Chief Financial Officer. Dave holds a Bachelor of Arts from the University of Western Ontario and is a Fellow Chartered Insurance Professional (Hons). The Boiler Inspection and Insurance Company of Canada, a member of HSB Group and part of Munich Re’s Risk Solutions family, provides the industry-leading range of specialty equipment breakdown insurance coverages for business and home. Visit biico.com.
June 2014 Canadian Underwriter 77
GALLERY
The Insurance Institute of Ontario held its 10th CIP Society Symposium, entitled The Future’ at the Toronto Board of Trade on April 10. The CIP Society symposium committee welcomed more than 170 current and future leaders. The full-day program provided a platform for learning about a variety of issues, including session topics: Telematics: Big brother or good fortune; Can we handle the risk? The future of weather; and Off the grid. Are you prepared? Breakfast keynote speaker was Peter Zaffino, president and CEO, Marsh Inc. and luncheon keynote speaker was Jim Harris, leading innovation, leadership and change expert. An ‘Up Close and Personal’ session had senior industry executives share their insights and outlook with groups of attendees in an efficient ‘speed dating’ format.
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GALLERY See all photos from this event at www.canadianunderwriter.ca/gallery
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WICC Ontario held its 17th Gala Dinner, ‘A night in the French Quarter with celebrity chef Chuck Hughes’ on April 24 at the Liberty Grand in Toronto. WICC dinner co-chairs and evening emcees Marian Adamson and Michael Butler presented a $200,000 cheque from WICC to Martin Kabat, CEO of the Ontario division of the Canadian Cancer Society. Co-Chair Marilyn Horrick acknowledged WICC’s Tribute Recognition initiative – the seven WICC Tributes currently established having raised over $115,000, including Tributes for: Leona Charbonneau; Cristina De Vargas; Linda Hajekerou; Mary Goodbrand; Jamie Knowles; Jim McRae; and Micki Traikos. Gold flame Awards, recognizing significant contributions to WICC, went to Enterprise RentA-Car; Hub International
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(Ontario); ORIMS; and STRONE. The Hall of Flame Award went to Intact Insurance. The Lew Dunn Memorial Award was presented to Robert Landry. WICC Relay for Life chairs Paul Martin and Mariellen Glover spoke about the industry’s commitment to the event and 2014 Relay for Life plans and goals. Accepted by Co-Chairs Ellen Moore and Marilyn Horrick, WICC received a special honour from the Canadian Cancer Society – the National Corporate Achievement Award – recognizing WICC as a donor that has made a significant contribution to the Society on a nationwide basis and having an unparalleled passion for the fight against cancer. Since WICC’s inception in 1996, the Canadian P&C insurance industry has raised more than $6 million for cancer research.
GALLERY See all photos from this event at www.canadianunderwriter.ca/gallery
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GALLERY See all photos from this event at www.canadianunderwriter.ca/gallery
Crawford & Company (Canada) offered their invited guests at the 2014 RIMS Conference and Exhibition in Denver, Colorado with a sampling of local fine cuisine on April 26 at 1515 Restaurant. Located in beautiful downtown Denver, 1515 provided guests the perfect atmosphere to mingle, enjoy some great wine and cocktails before sitting down to a private dining experience.
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GALLERY See all photos from this event at www.canadianunderwriter.ca/gallery
Crawford & Company, Broadspire and RSG hosted the “Think BIG” reception at the 2014 RIMS Conference in Denver. Attendees were treated to amazing views of Denver atop the Grand Hyatt’s 38th floor Capital Peak Ballroom. Guests also had the opportunity to mingle and enjoy great food, classic cocktails and live music.
Appointment Mark Moore HSB BI&I appoints Mark Moore as Chief Financial Officer and Vice President. With 20 years of Accounting and Finance experience, Mark has held various senior management roles within the Insurance industry, including the positions of Vice President Reinsurance and Corporate Controller. Mark holds a Bachelor of Arts degree in Economics from the University of Western Ontario and is a Chartered Professional Accountant. The Boiler Inspection and Insurance Company of Canada, a member of HSB Group and part of Munich Re’s Risk Solutions family, provides the industry-leading range of specialty equipment breakdown insurance coverages for business and home. Visit biico.com.
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Over 400 exhibitors filled the Exhibit Hall at the RIMS 2014 Annual Conference & Exhibition Apr. 27-30 in Denver. Held at the Colorado Convention Centre, the show floor bustled with thousands of delegates from throughout North America and around the globe. The booths offered unlimited opportunities for learning, networking and sharing.
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GALLERY See all photos from this event at www.canadianunderwriter.ca/gallery
Appointment David Pivato HSB BI&I appoints David Pivato as Vice President. In his new role, David will continue to be responsible for HSB BI&I’s Underwriting functions and Reinsurance Risk Management program. His appointment reflects expanded responsibility for supporting the underwriting of new products and Renewable Energy. David is a Professional Engineer, holds a Canadian Risk Management designation and is a Fellow Chartered Insurance Professional. He is a member of the Executive Committee of the Canadian Boiler and Machinery Underwriters Association, and sits on the Underwriting Wordings Committee of the Insurance Bureau of Canada. The Boiler Inspection and Insurance Company of Canada, a member of HSB Group and part of Munich Re’s Risk Solutions family, provides the industry-leading range of specialty equipment breakdown insurance coverages for business and home. Visit biico.com.
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Canadian delegates of the 2014 RIMS Conference and Exhibition in Denver gathered with their U.S. and international friends at Canada Night on April 29, sponsored by SCM Insurance Services and the Canadian Litigation Counsel. The event provided the opportunity to network whiling enjoying the guest “Mountie�, great food and music. RIMS Canada Council (RCC) Chair Roman Parzei made two important presentations that evening: a donation of $10,000 to Joe Restoule (President and Director) in support of the William H. McGannon Foundation and a special thank you to Steve Pottle for his decade long service on the RCC Communications & External Affairs Committee.
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GALLERY See all photos from this event at www.canadianunderwriter.ca/gallery
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GALLERY See all photos from this event at www.canadianunderwriter.ca/gallery
On April 30th, WICC BC welcomed guests to its annual gala, held at the Vancouver Art Gallery. The event, hosted by Lynn Colliar of Global BC News, was well attended by industry supporters who enjoyed the cocktails and appetizers as well as a silent auction, roving magician, and caricaturist on a gorgeous spring evening. The chairs presented a cheque for $75,000 to Barbara Kaminsky of the Canadian Cancer Society, representing funds recently raised. The event itself raised an additional $26,000, which means that 17 children can attend a weeklong Camp Goodtimes program for free.
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APPOINTMENT
GALLERY See all photos from this event at www.canadianunderwriter.ca/gallery
Winmar Toronto/Brampton held its annual Boat Cruise Fundraiser on May 5. Guests boarded the Captain Matthew Finders, Toronto’s largest and grandest ship, and enjoyed a fun filled afternoon of great food, beverages and live entertainment while raising awareness and support for the St. Michael Brainian Injury Research Foundation. Funds will be directed to the ‘Rick & Mindy Gelman Fund’.
Nahla Hanna President and Attorney in Fact Peter Honeyborne, Chairman of the Board of Directors for the Ontario Municipal Insurance Exchange (OMEX) is pleased to announce the appointment of Nahla Hanna as President and Attorney in Fact. Nahla has more than 20 years of senior leadership experience in Canada’s insurance industry, most recently as Chief Operating Officer of a specialty insurer. Prior to that, Nahla was Managing Director, Plans and Programs, at Marsh Canada. Responsible for the growth and profitability of the department, she led a large team responsible for programs in various segments including public and private sector, professional groups, and not for profit clients. She later managed the healthcare practice responsible for hospitals, healthcare clinics, pharmaceutical and bio-tech companies. Throughout her career Nahla has developed a solid track record of driving growth, building strong client relationships, and managing efficient operations. OMEX is a not-for-profit reciprocal insurance exchange created and owned by Ontario municipalities and devoted exclusively to serving their unique insurance needs in the most costeffective manner.
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GALLERY See all photos from this event at www.canadianunderwriter.ca/gallery
The Risk Management Counsel of Canada (RMC), a national network of law firms that works with the insurance industry, recently held a “Culinary Trip Around the World” event at Airship 37 on May 1 in the historic Distillery District in Toronto. The event greeted and ushered guests via a red carpet into the “VIP departure lounge” where attendees were then taken on the ultimate culinary voyage to Bangkok, Tokyo, Delhi and Mexico. Also worth noting, the Risk Management Counsel of Canada is a proud supporter the Women in Insurance Cancer Crusade (WICC) and has signed-on to become a National Sponsor.
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40TH ANNUAL CROSSROADS 2014: Changing Landscapes Winnipeg, Manitoba September 14–17, 2014
JOIN FELLOW RISK MANAGEMENT PROFESSIONALS AT CANADA’S PREMIER RISK MANAGEMENT EVENT. The CROSSROADS 2014 team is looking forward to hosting you at our worldclass conference! Our comprehensive program, including informative educational sessions and distinguished speakers, will focus on the challenges and opportunities faced by organizations operating in a constantly evolving business landscape. The CROSSROADS 2014 team, with the support of all our industry partners, is committed to making your conference experience first-rate and to sharing Manitoba’s renowned prairie hospitality. Visit our website today for additional details!
www.rimscanadaconference.ca
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