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
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JUNE 2009 A Business Information Group Publication #40069240
Launching Commercial Tech by CRAIG HARRIS
Perils of Paperless By Vanessa Mariga
Flood of Information By Glenn McGillivray
pg2 IIntact
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The two sweetest words you can say to a customer? “You’re back.” )S THERE ANYTHING MORE GRATIFYING THAN HAVING A SATISFIED CUSTOMER 9OU KNOW THE ANSWER TO THAT ONE 3O DO WE )T S ONE OF THE GREAT THINGS WE HAVE IN COMMON !ND WHY WE RE SO EXCITED ABOUT THE TWO SIMPLE WORDS THAT FORM OUR CUSTOMER PROMISE )T S A DIFFERENT KIND OF PROMISE BUT THAT SHOULDN T BE SURPRISING BECAUSE WE RE A DIFFERENT KIND OF INSURANCE COMPANY )NSTEAD OF TALKING ABOUT US OUR SIZE STABILITY AND YEARS OF HISTORY THE WORDS h9OU RE BACKv EXPRESS SOMETHING MORE IMPORTANT THE BENEFIT YOUR CUSTOMERS EXPECT FROM THE INSURANCE THEY CHOOSE .OW LET S TALK ABOUT YOU !ND THE BENEFITS YOU CAN EXPECT FROM US &IRST YOU NEED TO KNOW WE RE GOING TO BE THERE FOR YOU 2EALLY BE THERE HEART AND SOUL /UR DECADES OF WORKING WITH BROKERS LIKE YOURSELF HAVE ONLY DEEPENED OUR CONVICTION THAT WHEN IT COMES TO PROTECTING A CUSTOMER WITH THE RIGHT INSURANCE
EVERYTHING STARTS WITH YOU )T S WHY WE RE MAKING YOU AND THE CRITICAL ROLE YOU PLAY A VITAL PART OF ALL OUR NEW ADVERTISING MESSAGING )T S WHY YOU HAVE OUR WORD WE LL NEVER STOP THINKING OF NEW PRODUCTS AND SOLUTIONS TOOLS AND SERVICES TO HELP YOU GROW YOUR BUSINESS IN REAL TANGIBLE WAYS )N SHORT WE RE EXCITED ABOUT BUILDING AN EVEN STRONGER FUTURE TOGETHER "ECAUSE WHEN YOU SUCCEED WE SUCCEED
HOME CAR BUSINESS
The BIP logo is a registered trademark of the Insurance Brokers Association of Canada (IBAC). All other trade-marks are property of Intact Financial Corporation used under license. © 2009, Intact Insurance Company.
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VOL. 76, NO.6, JUNE 2009 CANADA’S INSURANCE AND RISK MAGAZINE. PUBLISHED BY BUSINESS INFORMATION GROUP
www.canadianunderwriter.ca
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Commercial Tech Comes of Age Commercial lines policies are supposed to be the most complicated to automate, and so why is commercial lines technology seemingly in the vanguard when it comes to data exchange between brokers and insurance carriers? BY CRAIG HARRIS
FEATURES
18
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Perils of Paperless
Why Insurers Fail
Insurers are going “paperless,” sending out electronic versions of policy documents. But the well-intended process isn’t without glitches and can sometimes negatively affect the broker’s workflow.
Inadequate pricing, aggressive growth and insufficient reserving are all part of why insurers fail. But another, largely unexplored part of the story is the influence of strict regulation.
BY VANESSA MARIGA
46
BY DARRELL LEADBETTER, PAUL KOVACS AND JIM HARRIES
14 Buying Commercial Systems Brokers interested in purchasing a new commercial management system (CMS) should perform due diligence to ensure the technology is appropriate for their needs. BY STEVE PIEROWAY
22 2009 Market Outlook The same factors that plagued the CanadIAn property and casualty industry’s results during the latter half of 2008 will also likely affect the results in 2009. BY JOEL BAKER
34 Flood of Information
For the first time ever, Canadian airlines are being led by a Canadian-based insurer.
Water has displaced fire as the Number 1 cause of damage to home properties. The Institute for Catastrophic Loss Reduction has responded by creating a handbook of information to help mitigate flood risk.
BY DAVID WATTS
BY GLENN McGILLIVRAY
Flying Friendly Skies
42 Credit Concerns Several insurance company CEOs at the 2009 convention of Alberta brokers suggested credit scoring for the purpose of assessing a consumer’s risk is acceptable so long as it’s done properly, with complete transparency and the public knows why it is being done. BY DAVID GAMBRILL
48 Correct Courthouse The Supreme Court of Canada’s decision in Tech Cominco may cause parties to rush to Canadian and U.S. courthouses to obtain a ruling in their preferred legal forum. BY DAVID CAMERON
50 Property Limits Market value is an intuitive answer to the question of how to measure property coverage limits, but the correct answer is reconstruction cost. BY KLAAS WESTERA
June 2009 Canadian Underwriter
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VOL. 76, NO.6, JUNE 2009
PROFILE
12 Bright Light,
Big Achievements Marjatta Light took home the CSIO’s Lifetime Achievement Award in 2009, which recognized her tenacious quest for a single-entry, multiple carrier interface (SEMCI), the Holy Grail of data exchange between brokers and carriers. BY VANESSA MARIGA
Senior Publisher Steve Wilson steve@canadianunderwriter.ca (416) 510-6800
Associate Publisher Paul Aquino paul@canadianunderwriter.ca (416) 510-6788
Editor David Gambrill david@canadianunderwriter.ca (416) 510-6796
Art Director Gerald Heydens
Associate Editor Vanessa Mariga vanessa@canadianunderwriter.ca (416) 510-6793 Account Manager Michael Wells michael@canadianunderwriter.ca (416) 510-5122 Advertising Sales Christine Giovis christine@canadianunderwriter.ca (416) 510-5114
Art Consultation Pylon.ca Production Manager Gary White (416) 510-6760 Print Production Manager Phyllis Wright President Bruce Creighton Vice President Alex Papanou
SPECIAL FOCUS
6
Editorial
8
Marketplace
52 Moves & Views 54 Gallery
Canadian Underwriter is published thirteen times yearly (monthly + the Annual Statistical Issue) by Business Information Group, a division of BIG Magazines LP, a leading Canadian information company with interests in daily and community newspapers and business-to-business information services. Business Information Group is located at 12 Concorde Place Suite 800, North York, ON, M3C 4J2. Phone: (416) 442-5600. Canadian Underwriter, USPS 022-494. US office publication: 2424 Niagara Falls Blvd., Niagara Falls, NY 14304-0357. Periodicals Postage Paid at Niagara Falls, NY, USA. US postmaster: Send address corrections to Canadian Underwriter, Po Box 1118, Niagara Falls, NY 14304. All rights reserved. Printed in Canada. The contents of this publication may not be reproduced or transmitted in any form, either in part or in full, including photocopying and recording, without the written consent of the copyright owner. Nor may any part of this publication be stored in a retrieval system of any nature without prior written consent. Š Published monthly as a source of news, technical information and comment, and as a link between all segments of the insurance industry including brokers, agents, insurance and reinsurance companies, adjusters, risk managers and consultants. Privacy Notice From time to time we make our subscription list available to select companies and organizations whose product or service may interest you. If you do not wish your contact information to be made available, please contact us via one of the following methods: Phone: 1-800-668-2374 Fax: 416-442-2191 E-mail: jhunter@businessinformationgroup.ca Mail to: Privacy Officer, 12 Concorde Place., Suite 800, North York, ON, M3C 4J2
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Canadian Underwriter June 2009
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EDITORIAL
Pandemic Un-preparedness
Opportunistic underwriters may want to start looking at whether language in standard business interruption policies is tailored to cover off the exact nature of the economic damage wrought by a pandemic.
David Gambrill, Editor david@canadianunderwriter.ca
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Canadian Underwriter June 2009
For all of the talk about pandemic preparedness within North America’s insurance and risk management communities over the past few years, it is surprising to see recent research in the United States that indicates only 55% of U.S. companies now have a plan in place for dealing with the H1N1 virus. Of further interest is the fact that even if part of the plan includes purchasing standard business interruption coverage, that may not account specifically for the kind of damage wrought by people sick with the flu. As Marsh notes in its recent report, Influenza A (H1N1) — Business Interruption and Time Element Coverage Considerations, standard forms of business interruption coverage are generally written to cover business losses related to physical damage. In other words, if a plant explodes, the insurance will cover the business losses associated with reconstruction of the plant and the lost income arising from the closure of the plant. But if the assembly line workers stay at home with the flu and the plant is forced to shut down or operate at half-speed, is that the same kind of “physical” loss? Does the workers’ lack of labour count as “physical” damage to the plant? What about the economic losses arising from the illness of workers? Where does that fit into standard business interruption coverage? When people talk about incorporating a pandemic plan into the risk management efforts of a company, that means mitigating the economic losses potentially
arising out of workers conscientiously choosing to stay home while sick (out of respect for their colleagues) or being ordered to stay home as part of a state-ordered quarantine. As it happens, outside of Mexico, there hasn’t been much reason to order such a broad quarantine. In Canada, as of May 25, 2009, Canada’s public health agency reported 921 confirmed cases of H1N1 flu virus. Most reported cases have been surprisingly mild. Only one person in Canada has died of H1N1-related complications, and Canada has now officially lifted any travel restrictions to Mexico, where the current strain of the virus was first discovered and has caused the confirmed deaths of 42 people. Basically, Canada got lucky. Fortunately the country’s pandemic preparedness hasn’t been truly tested after the SARS outbreak in 2003, when 44 people died after contracting the respiratory illness. Now is the time for Canadian businesses to ask themselves what they plan to do if the H1N1 virus mutates into a more severe strain by the end of the year, as predicted by Marsh. Alas, no concrete numbers are available to indicate Canadian businesses’ state of preparedness for a global pandemic. Anecdotally, the Toronto Insurance Conference (TIC), a national association of commercial insurers, has been working with the insurance trade association, the Insurance Bureau of Canada (IBC), to hammer out a pandemic endorsement. This would cover off the kind of nightmare sce-
nario in which a pandemic shuts down industries at a time when commercial policies are up for renewal. The endorsement would basically cover off policy renewals until they can be appropriately dealt with later. Back in 2007, OSFI said it would be running financial stress tests on insurers to make sure they had an appropriate level of capital to account for the more cataclysmic kind of pandemics. In the meantime, opportunistic underwriters may want to start looking at whether language in existing policies is tailored to cover off the exact nature of the economic damage wrought by pandemics. One Canadian insurer providing “outbreak” coverage said in 2007 that there is a difference between insuring a pandemic and a contagion outbreak. Whereas a pandemic is deemed to be an inevitable occurrence affecting an entire economy (which is difficult to insure), a contagion outbreak is a random, localized event for which it is easier to price and write specific coverage. Globalization merely increases a specific “contagion risk,” says Barrett Hubbard, who was with MINT Canadian Specialty at the time. It seems clear that a lot more work needs to be done when it comes to exploring how to write policies for businesses that respond directly to the type of damage caused by contagious outbreaks and/ or pandemics. Hopefully that work will be completed and put into action before the next occurrence of an H1N1 type of outbreak.
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Canadian Market GOOD BYE M&A, HELLO IPO The “big players” in Canada’s insurance market will likely take the IPO (initial public offering) route to expansion rather than the merger and acquisition route, says Jack Lee, vice president of BFL Canada. Lee was a speaker at the Property Casualty Underwriters Club luncheon in Toronto on May 20. He was asked if he anticipated a flurry of mergers and acquisitions activity in Canada. “I can only expect that there will be some mergers and acquisitions,” he said. “We have too much capacity and not everybody is going to rebound as well as others.” But, he added, “an acquiring company isn’t going to overpay to help someone else out. What you may see for some of the larger companies having problems [is that] when they’re not going to sell at a distress price, they may go the IPO route.”
NDP MAKES AUTO INSURANCE CAPS AN ISSUE IN NOVA SCOTIA ELECTION The NDP in Nova Scotia has dragged auto insurance into the province’s current political campaign, promising to scrap the existing Cdn$2,500 cap on insurance payments for minor auto injuries and replacing it with some form of deduction instead.
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Canadian Underwriter June 2009
Nova Scotia NDP leader Darrell Dexter told metronews.ca (Halifax) the cap on minor injuries is too broad and suggested some injury claimants haven’t been fairly compensated after life-altering collisions. “People who suffer very serious injuries are not able to get the compensation they deserve,” Dexter is quoted as saying in metronews.ca. “It’s just not fair to these people.” Dexter is reported to favour a deductible set high enough that only those with major injuries would proceed with a claim. The Canadian Press paraphrased Dexter as suggesting the deductible amount might be within the range of between Cdn$10,000 and Cdn$15,000. The province’s incumbent governing party, the Progressive Conservative Party of Nova Scotia, cited PC candidate George Jordan, a former Consumer Advocate for Insurance, as saying the NDP plan would ultimately increase consumers’ auto rates. “Scrapping the cap is a tremendously risky proposition,” Jordan says in a press release posted on the Nova Scotia Tories’ Web site. “Insurance rates have fallen almost 27% since the cap came into place in 2003. “Removing it opens the door to large cash settlements for minor injuries and that can lead to higher premiums for everyone.” Jordan says the average cost of insurance for Nova Scotia drivers was Cdn$1,069 in 2003,
whereas it was down to Cdn$782 in 2008.
Reinsurance
ING’S HOME INSURANCE LOSSES DRIVE 2009 Q1 LOSS
2009 HURRICANE SEASON IS A 50-50 CHANCE OF BEING NORMAL: NOAA
ING Canada Inc. (Now Intact Financial Corporation) reported a net loss of Cdn$36.3 million in 2009 Q1, compared to a net gain of Cdn$23 million in 2008 Q1. The company cited home insurance results as a major contributor to the loss. “Our operating performance continued to be healthy during the quarter driven by good underwriting results,” said Charles Brindamour, president and CEO of ING Canada Inc. “All our business lines performed well in the current environment except our home insurance business. “We are focused on improving our home insurance results through a robust action plan.” ING Canada said its home insurance business sustained a quarterly loss of Cdn$26.9 million and finished the quarter with a combined ratio of 112% “due to higher claims frequency related to the rapid snow melt.” In contrast, the company’s results in personal auto lines increased by Cdn$24.2 million and the combined ratio fell 4.8% (down to 96.1%). On the commercial side, the company reported an underwriting profit of Cdn$15.4 million and a combined ratio of 94.1%. Overall, the company reported a 99.2% combined ratio for 2009 Q1 and an ROE of 2.4% (ROE was 13% in 2008 Q1).
The National Oceanic and Atmospheric Administration (NOAA) Climate Prediction Center (CPC) has called for a 50% chance of a near-normal hurricane season, according to the 2009 Atlantic Hurricane Season Outlook. The outlook indicates as well a 25% chance of an above -normal season and a 25% chance of a below-normal season, according to the NOAA. There is an estimated 70% probability that the 2009 Atlantic hurricane season will include nine to 14 named storms, four to seven hurricanes and one to three major hurricanes.
Risk Management MUTATED VERSION OF H1N1 POSSIBLE BY END OF THE YEAR: MARSH Global insurance broker and risk advisor Marsh is warning businesses to be prepared for the possible outbreak of a second, more severe mutation of influenza A (H1N1) later this year. Toby L. Merlin, M.D., deputy director of the influenza coordination unit at the Centers for Disease Control, participated in a Marsh Web cast related to the recent H1N1 viral outbreak. He
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said there could be a second wave of disease in late summer or early fall of 2009 that may be different from the current outbreak. “It could possibly be more severe,” he cautioned. “This virus is quite capable of either mutating, or re-assorting with other circulating viruses to change the nature of the disease it causes. “People can watch the course of the disease in the southern hemisphere, which might be predictive of disease we’re going to see here.” In Canada, as of press time, there were 805 confirmed cases of H1N1 and one death associated with the flu. In the United States, there were 6,764 confirmed cases of H1N1, resulting in 10 deaths.
to such a file-and-use system would represent quite a change in Alberta’s private auto insurance market. “If approved by government, working on the implementation of a new regulatory model [would] move Alberta
away from an annual industry-wide rate adjustment process to a file and approve process, where the [AIRB would] review companies on an individual basis to determine if rate changes are appropriate and fair,” the AIRB says
in its 2008 Annual Report. If accepted, the AIRB goes on to note, “this model will change the way premiums are regulated from an annual, ‘onesize-fits-all,’ industry-wide adjustment to an individual company application process.”
Cunningham Lindsey offers expert claims handling for the most complex and specialized losses. To access our team of experts, write to us at corpservices@cl-na.com for a copy of our new Specialty Services Directory.
Regulation ALBERTA RATE BOARD SEEKS TO ADOPT FILEAND-USE REGULATION The Alberta Automobile Insurance Rate Board (AIRB), which regulates the province’s auto insurance rates, is seeking approval from the provincial government to introduce a new file-and-use system for determining auto insurance rates. In a “pure” file-and-use system, insurers can file for changes in their auto insurance rates with the government and then use the filed rates pending formal government approval. Aspects of this kind of filing system exist in jurisdictions across Canada, although the move
www.cunninghamlindsey.com
June 2009 Canadian Underwriter
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PROFILE
A Light Shines on Broker Workflow Vanessa Mariga Associate Editor
The CSIO has recognized Marjatta Light for her decades of dedication to improving broker workflows. When Marjatta Light began working in an insurance brokerage nearly 30 years ago, the big buzz was that one day in the not-so-distant future brokers’ work efficiencies would be vastly improved. Some day, it was said, brokers would be able to enter a client’s information into their broker management systems and that data could be exchanged with multiple carriers at once, in real time, without having to re-key data for each individual insurer’s system. While the dream of a singleentry, multiple-carrier interface (SEMCI) solution has yet to be realized — and not because of lack of efforts — Light, the recently retired national director of personal lines at Aon Reed Stenhouse, still holds hope. She says she will likely continue
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volunteering her time and insights to the various organizations striving towards improving broker workflow. Her determination and willingness to contribute ideas, feedback and volunteer time over the span of her career are among many reasons the Centre for Studies in Insurance Operations (CSIO) selected her to receive its 2009 Lifetime Achievement Award. Light was born in Finland and moved with her family at a young age to Thunder Bay, Ontario. Nearly 30 years ago, a friend suggested she take a job at a local brokerage as a file clerk. Light accepted the position and thus began her foray into the realm of insurance brokerages. It didn’t take long for her to rise through the ranks of brokers. In doing so, she came face-to-face with the realization that broker workflows included various systemic technological inefficiencies. Light joined Aon Reed Stenhouse in 1991; three years later, she was transferred to Toronto. When she retired last year, she held the title of national director of personal lines. “When I first came into the in-
surance industry and started work as a file clerk, one of the things I heard was that, ‘One of these days, you’ll be able to put things into the computer and it will go to all of the insurance companies so that they could respond,’ and that was really going to innovate our industry,”
People are taking components of SEMCI and working on it bit by bit. As long as people are working with CSIO standards, I think that these tentacles are going to come in and pull it all together. she says. “Really, I’m so surprised that I’m coming to the end of my career and it hasn’t happened.”
PIPING UP Light’s involvement with the CSIO dates back to her days working in Thunder Bay. “The CSIO would send out communications about feedback for
forms and changes that they were going to make,” she says. “I have worked with the Agency Manager computer since version 1.4.2, which used the ACORD — and subsequently the CSIO — forms,” she says. “I felt it was important, when [the CSIO was] making changes, that brokers be involved in making those changes and providing feedback so that we got what we wanted or what we needed.” Light’s work at Aon kept her busy and on the road quite a bit. Nevertheless, she still tried to attend CSIO meetings whenever possible and offer feedback. Over the past six or seven years, she made it a priority to become even more involved in the changes that affected the brokers’ technological landscape, she says. “I felt it was important that brokers were participating and providing feedback on what it is that brokers need when the vendors were putting systems together and the insurers were starting to develop their Internet sites,” she continues. “I could see that there was going to be an issue… sometimes I was the only broker there, which was somewhat disappointing be-
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cause [the decisions that are made by the vendors and insurers] really affect the brokers.”
COMMON GROUND Many of the existing technological processes for exchanging data between brokers and insurers just don’t work, Light maintains. “You can have a broker representing six companies and there could be six different systems that they have to input to. Nothing looks the same so training becomes difficult,” she continues. In fact, she observes that
some recent technologies, such as Internet portals established by individual insurers, have actually made the brokers’ data exchange with carriers “less efficient, and technology is taking us in the opposite direction of what it was intended to do.” For example, she says, “to access the [insurers’ systems], you have to go through different Internet sites, and that really doesn’t expedite the process. What we’re forgetting about in the process is the consumer.” Light remains hopeful that things will change. Although she
does not foresee an overhaul revolutionizing the entire system, she says she has noticed increased cooperation between the broker channel, insurers and vendors. And she holds high hopes for the application of CSIO standards to streamline broker workflows between multiple markets. “The exciting part is that the CSIO standards are in place, but instead of the CSIO being the one who directs this, they’re going to be an active participant,” Light said. “Some different groups right now are working on
different things, and I can see that what’s really going to pull it together is the CSIO standards.” Over the past 10 years, Light has noticed a momentum building for improving broker workflows. And so while previous efforts to develop a SEMCI solution have not been successful, she still feels stakeholders know something needs to be done. “Rather than trying to change the whole thing again, I think what’s happening now is that people are taking components of [SEMCI] and working on it bit by bit,” she says. “As long as people are working with CSIO standards, I think that these tentacles are going to come in and pull it all together.” Direct writers have existed for some time, she says, but a large number of consumers still want to buy insurance through a broker — including consumers who need something more sophisticated than a “cookie cuttertype” of policy. “So the way the industry stands right now is that brokers need to get these efficiencies,” she says. “It’s crucial. And I think that insurance companies are starting to realize this. I really feel positive that this is going to come together.”
June 2009 Canadian Underwriter
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Digital Diligence Commercial lines software is becoming a hot-ticket item. Due diligence is therefore a key feature of selecting the right technology for brokerages. Steve Pieroway Director, Marketing, Policy Works Inc.
Commercial-lines automation and technology is taking on heightened importance. Perhaps the biggest challenge facing commercial brokers today is whether or not they can grow their book of business with their current technology and software set-up.
MANUAL APPROACH Many brokerages across Canada manage their commercial lines by bridging a broker management system (BMS) with external applications, such as Microsoft Word or Excel. Some say this process works, and it does to a degree. But this approach hides inefficiencies and dangers that can negatively affect a broker’s commercial operation. For example, the manual approach of linking a BMS to Word or Excel: • creates manual, repetitive tasks (e.g. multiple re-entry of data, copying and pasting, file naming, etc.) that wastes valuable employee time; • opens up a potential lack of uniformity in procedures and can lead to sloppy document creation, file-saving and naming; • exposes the brokerage to potentially serious errors and omissions (E&O) liability, since files are incorrectly saved, or not properly updated and locked down; and
14 Canadian Underwriter June 2009
• creates a web of unlinked commercial data between the BMS and other applications.
AUTOMATION Competitive pressures in commercial lines, coupled with the inefficiencies mentioned above, are prompting brokers to look for automated solutions. A commercial management system (CMS), unlike a BMS, is specifically designed to manage the complexities of commercial insurance. The benefits of a CMS, depending on the specific system, include: • automated, standardized workflows resulting in an improved bottom-line; • increased protection against E&O exposure; • professional, complete submissions, proposals and binders; • centralized commercial expertise and knowledge recorded in one electronic file; • automated re-marketing, renewing and endorsing; and • ability to build custom specialty insurance programs and packages. These benefits are great, but how do you know which system to choose? Really, the decisionmaking process when looking to buy a CMS is influenced by a number of factors.
BUYING A CMS: FIVE CONSIDERATIONS The benefits of a CMS are appealing, but brokers need to be aware that functionality is often specific to a particular system or vendor. There are different vendors, and each vendor’s marketing effort will attempt to win you over.
pg15 RSAa
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CELEBRATING 80 YEARS TOGETHER This year Monarch Corporation celebrated 80 years of doing business with RSA and Aon. Not only are we celebrating Monarch’s significant success in the Residential Construction Industry, but also the longevity of our valued relationship. Monarch is a significant client and one of our longest standing – we’ve been business partners for 80 years, a great achievement for us all.
© 2009. RSA is a registered trade name of Royal & Sun Alliance Insurance Company of Canada. “RSA” and the RSA logo are trademarks used under licence from RSA Insurance Group plc. All other marks are owned by their respective trademark owners.
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Successful customers, those who get the most out of their CMS system, will go through a comprehensive due diligence process when selecting a system for their brokerage.The following five key factors form the basis for this due diligence process.
Clearly state your business goals for the next one, five and 10 years Brokerages come in all shapes and sizes in Canada, especially in commercial lines. They have different staffing requirements (CSRs, producers, etc.), play in unique niches and strive for their own growth and profit goals. One of the first steps for brokers should be to map out where exactly they want to be in commercial lines — not for the next quarter, but for the next five to 10 years. Questions to consider include: • What are your brokerage’s growth projections, both in terms of volume and dollar amounts? • What increase in volume of commercial business can your brokerage reasonably handle? • Where will this new business come from? • What are the challenges standing in the way of those targets? Be specific and honest when answering these questions. Use quantifiable numbers that are in keeping with your strategic plans. Map out your brokerage’s entire commercial-lines workflow Many brokers are acutely aware of whether or not they are making or losing money. But more progressive brokers drill down into the specifics of their firm’s dynamics and discover the relationships between productivity/efficiency and growth/profits. For example, how long it takes to complete a commercial policy from quote to submission to bind has an effect on a broker’s top line (growth) and bottom line (profitability). If a brokerage is encountering workflow bottlenecks in areas such as manual data re-entry or bridging a BMS with external applications, more growth is only going to make these problems worse. To understand how an automated solu16 Canadian Underwriter June 2009
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tion like a CMS can help improve workflows, brokers must understand where their inefficiencies exist. Answering the following questions can help identify gaps and inefficiencies: • What tools are currently used to manage commercial lines? • Are these tools completely integrated? If staff members are re-typing or rekeying data, then no, the systems are not integrated. • How much time is spent at each stage of the commercial policy workflow? • Do individual staff members use their own processes to manage files or prepare submissions? • Can you instantly create a snapshot of your brokerage’s key performance metrics?
Evaluate each CMS software application Perform a due diligence check on each of the CMS products offered by vendors in the industry.Ask for a live demonstration and include key staff in the presentation. Some questions to ask the vendor representative include: • Is the program easy to use and learn? • Does the program’s workflow follow a standard commercial policy lifecycle, including both the marketing and in-force policy lifecycles? • Can documentation, including submissions and proposals, be branded with your brokerage’s logo and identity? • Does the system handle specific business sectors, such as commercial automobile or policy issuance for Lloyd’s? • Does the CMS integrate with your BMS? What data actually flows through this integration? • Does the CMS upload and download commercial lines data to various insurers? • What is the vendor’s experience and understanding of commercial insurance? • What is the vendor’s track record in Canada? • Furthermore, ask each vendor representative for at least one customer with whom you can speak.Yes, the representatives are obviously going to refer you to a ‘friendly’ customer, but that’s okay. Ask the customer open-ended questions, and reassure them that candid responses will remain confidential.1
Implementation and support services: What after-sales services are offered? The purchase of a CMS is only the beginning of the process for you, the customer.The activities immediately following a sale will determine whether or not the CMS system you purchase is adopted into the daily workflow behaviour of your commercial staff. Management often overlook implementation, training and ongoing support, and yet these services are vital to ensuring the investment made in a system is realized as valuable. Some questions to ask a vendor regarding their implementation, training and support services include: • What is the implementation process used to transition brokerage staff from their current workflows to a CMS application? • What time frame is applied to the implementation process? • What kind of training resources does the vendor offer? • What is the vendor’s support offering? That is, how can customers contact support? • What is the vendors’ support request turn-around time? • What is the vendor’s support response policy? Price: you get what you pay for Price is a very important; it is a crucial part of the due diligence process. However, you have to look at the price of a system in the proper context.The price of a system should be balanced against three factors: • Improvements the CMS can make to your profits and expenses (i.e. your bottom-line). • The functionality you get from the system. • The support and implementation services provided by the vendor. Look at software as an investment, not an expense. Improving your commercial lines with software automation should yield increased profitability. Therefore, what you pay should really be a function of what you can expect to make, based on the system’s (and vendor’s) capabilities. 1. For a full CMS buyer’s evaluation kit, go to www.policyworks.com/kit to download the entire evaluation guideline.)
pg 45 Broker Builder
4/12/09
1:30 PM
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Unlocking Profits In Your Business
6.0 40%
Since the complete derailment of credit markets occurred in mid September, “the guiding principle for managers and business owners worldwide has been to gather up whatever cash they can find, and then do their damndest to keep as much of it as possible for as long as possible.” The Economist, 11/22, p17. This dismal economic environment has led to a marked increase in demand for premium finance loans. Small businesses, desperate to conserve current capital and existing credit facilities, are actively seeking out ways to help distribute the cost of their insurance over time. Even customers which were in cash rich, growing industries just months ago are highly motivated to use premium financing to ensure adequate insurance is obtained and expenses deferred. During the second half of 2008 we have seen substantial demand increases across industries and geographic regions of Canada. This is also the case in the US. Demand for premium financing is up as much as 30% to 40% from just the beginning of 2008. Complementing the dramatic demand increases is the rapid reduction in lending rates from Chartered banks. Accessing a line of credit to fund an in house premium finance (IHPF) program is a great way to generate additional revenue on existing business without tying up any brokerage capital. Most facilities used for IHPF are based on bank’s Prime Business rate. This rate has been reduced substantially throughout 2008 as a result of deteriorating economic conditions. The rate was as high as 5.75% in January 2008 and has moved down to 3.00% as of January 20, 2009.
10%
IHPF OPPORTUNITY
Business Rate
“Lenders are offering little new credit, and charging substantial premiums for it. Many companies have put expansion plans on hold. Banks are completely closed. Canadian Business, 11/24, p102.
20%
PF Demand Growth
30%
he economic malaise seems to be everywhere, .....contributing.to emotional exhaustion. The evening news and daily papers are full of doom and gloom. Over several months, credit has gone from a steady flowing river, to a dried up gulch.
Prime
When a Perfect Storm Creates Opportunity:
5.5
5.0
4.5
4.0
4.5
0% 3.5
2 0 0 8 01 02
03 04
05 06 07 08
P rime Business Rate
09 10 11
12
PF Demand
S o u r c e : B a n k o f C a n a d a ( w w w. b a n k o f c a n a d a . c a )
Expense obligations associated with running an in house premium finance program could not be more advantageous.
Business borrowing costs have lowered from Jan to Dec 2008 by 40%. This historic low interest rate environment is anticipated to last throughout 2009 and well into 2010. In uncertain times, sharpening your business focus around your existing customer base may be more prudent, and financially rewarding, than looking outside at risky acquisitions or other major expenditures. Establishing an in house premium finance program provides your brokerage with the opportunity to unlock profits existing in your business. Offer your best insureds exactly what they’re after in these difficult times. An in house premium finance program allows your brokerage to generate an additional 50% or more revenue on existing customers while making insurance purchases for your best clients even easier.
Contact Broker Builder today to learn more about converting receivables into revenues. Call 877-266-0691 or email bsillem@brokerbuilder.ca. Visit www.brokerbuilder.ca or www.premiumfinanceaccounts.com to learn more about this timely opportunity.
pg18,20Paperless_v1_DG_VM
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4:07 PM
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Paper Routes Associate Editor
Going paperless is intended to reduce an insurer's impact on the environment. But it can create potential difficulties for broker workflows. Going paperless by creating electronic policy documents is ostensibly about reducing an insurers’ environmental impact, but the route to paperless may instead be creating a new impact on insurers’ brokers.Whereas some consumers welcome the idea of having often-lengthy insurance policies and endorsements land in their inbox rather than on their doorstep, some brokers are voicing concerns that this new method of policy delivery may be creating more difficulty in their workflow. In a worst-case scenario, a broker may be left out of the insurer-consumer loop altogether, leaving the broker without a copy of their customer’s policy. Part of the problem, brokers say, is that currently no industry standard dictates a protocol on how the policy is ultimately delivered to the consumer — i.e. whether it’s sent directly from the insurer (and thus potentially bypassing the broker altogether), or if the broker is responsible
18 Canadian Underwriter June 2009
for plucking it from the insurers’ respective portals and then passing it along. The Centre for Studies in Insurance Operations (CSIO), which creates standards for the industry’s paper and electronic data, says such a protocol for policy delivery falls outside of its mandate. CSIO president Steve Kaukinen says the centre establishes standards for what the data should look like, but not how it is transferred from one party to another. That sort of process, he added, would be up to the carrier and the broker.
LOWERING IMPACT AND RAISING INEFFICIENCIES Efficiencies in broker workflows have always been a point of contention when it comes to developing and applying new technologies. What some see as a positive step forward in terms of leveraging new technologies can also create extra steps in the processing cycle in a broker’s office. “The lack of an industry standard mechanism for brokers obtaining electronic policies certainly comes up from time to time in broker circles,” says Richard Shallhorn, the chief information officer at HKMB Hub in Toronto. “Some companies send those electronic documents, the broker’s copy, to the broker via email. Some of the carriers have the broker go to their portal and have the broker download that document. Some of them
Illustration: Graham Roumieu
Vanessa Mariga
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pg18,20Paperless_v1_DG_VM
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have a combination of things: the broker is alerted by email that the policy is ready for pick-up on the portal. That’s just not in the interest of the broker.” Debbie Jodin, director of personal lines at Rhodes & Williams Insurance Brokers adds that while a benefit of electronic policies is having the exact same document that the client is looking at when answering questions, not all documents are provided in PDF format, making it difficult to print or extract specific pages of the policy. Also, she continues, no two insurers provide the same means of document retrieval. A standard mechanism, continued Shallhorn, would ideally see an insurer send the policy documents in a structured fashion. In situations in which the policy is sent directly to the consumer, Anna Baginski, vice president of Lyon & Butler Insurance Brokers Ltd., said the process might potentially create confusion and frustration for the consumer — the exact opposite of the intended effect of going paperless. “When we [brokers] get the actual documents, we review it for the accuracy of the information printed on it,” Baginski says. “And then, if there are any mistakes, we can correct that right away without going to the consumer and without upsetting them.” She added that sometimes policies are re-issued and re-sent when small clerical changes are made that don’t affect the coverage. “It would create even more confusion if those were all sent to the consumer,” she said. Baginski agrees with Shallhorn that situations in which copies of the policies need to be retrieved one-by-one from insurers’ respective Web portals is labourous and therefore costly to the broker. “In the beginning, that was okay,” she says. “But we’re gearing up towards the option where the insurer would be sending it straight to our vendor system and it will be attached to our client’s file.”
CLOSING THE LOOP Peter DiSilva, vice president of personal lines at Intact’s Central Atlantic region,
20 Canadian Underwriter June 2009
Page 13
explains that the newly-named insurer is in the process of developing its paperless policy. He says Intact’s vision would not take brokers out of the loop, but rather would have “the broker using emails and standard email protocols to get the information and to send the information.” Intact is still sorting out whether the broker in the near-term will retrieve the policy from Intact’s site or if Intact will send it out to the broker. But “our ultimate vision is that we would drop it into the broker’s management system,” says DiSilva. “There may be an interim step before we get there.” So-called “middleware” technology has yet to be developed that would allow the policies to be dropped from the carrier directly into a broker’s BMS. Gore Mutual ventured into the paperless realm in 2004. Now all policy and claims documents are currently stored
“Middleware” technology, it would seem, has yet to be developed. It would allow policies to be dropped from the carrier directly into a broker’s BMS. and used in an electronic document management system. In 2005, brokers gained real-time access to Gore’s policy documents, and brokers can now email policies to clients using GoBroker. It’s currently working to deliver a system that would allow “instant brokerbranded, electronic delivery of documents,” a Gore Mutual spokesperson says. The inclusion of the broker brand when delivering policy documents is key, says Cory Young, vice president of Rhodes & Williams. While Young supports electronic versions of policy copies, he also cautions that the value of a broker extends beyond just sending documents. “If [a policy document] was stored on the company site, accessible through the broker Web site — with our branding and our “face,” and not that of the insurance company — I believe this would be a win/win/win
(client/broker/company),” he says. “I have heard arguments from other brokers about delivering the policy being a key point of contact for the relationship with the client,” he says. “I feel we need to bring a lot more value to the relationship, rather than forwarding on documents from the company, to our clients, in a format that they no longer want or need.” Brokers can bring more value by being aware of a client’s life changes — such as retirement, purchasing a new home, etc. — and discussing with the client how such changes might affect their insurance coverage, he says. “Seeking other value-add points of contact is how we win,” he says. In November 2008, Aviva Canada also commenced a process to reduce its environmental burden, says Maurice Tulloch, executive vice president of Ontario broker and specialty distribution at Aviva Canada. One of the first steps is to eliminate the distribution of paper copies of policies to brokers. “But we want to build a system whereby the broker could receive a digital copy and even more importantly than that, we’re developing a system whereby a PDF version of the policy would be downloadable to the brokers’ BMS and can be attached to existing policyholder information,” he continues. Technology does exist today that would allow this, DiSilva says, but it does not integrate well with the insurer’s legacy systems. “Over the next two years, there is a priority to really get a handle on how we manage our documents with our brokers and really get this thing to come to fruition.” Baginski remains confident her insurer partners will make it happen. “When [the electronic policy] option came up, it was really enjoyable, but now it creates too many problems for brokers having to retrieve those,” she says. “When I speak with insurers, they all think [creating a process in which the policies would be downloaded into the BMS] is a great idea. I think it’s feasible and it will happen — just not in the next month. But I have big hopes that it’s going to happen soon.”
pg 19 IIC Golf
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pg22,23,24MSA v1_DG_VM
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k Ro c y Terrain All of the problems that contributed to poor financial results in 2008 are continuing to plague Canada’s property and casualty industry in 2009. Joel Baker
President, CEO MSA Research Inc.
Industry results1 for the full year of 2008 reflect a confluence of negative factors, many of which continue to plague the industry into 2009. The most obvious — and the most notable — of these factors are: • the severe deterioration in underwriting profitability affecting both personal lines insurers and commercial writers; • the market meltdown in 2008 Q4, which drove down industry capital and fair valued assets, and; • historically low interest rates that constrain insurer ability to provide respectable returns without achieving combined ratios below 90%. Underwriting results deteriorated across most major lines of business in 2008, most notably in property and auto. Personal property results deteriorated in most of eastern and central Canada, while commercial property results were worse across the entire country (save for Manitoba). As reported in our
22 Canadian Underwriter June 2009
Q3 report, personal property suffers from underpricing and inconsistent underwriting inputs, coupled with Guaranteed Replacement Cost (GRC) features. Commercial property results, although worse than in 2007, remain profitable overall. Ontario auto was (and is) particularly dreadful; the overall direct Ontario auto loss ratio hit 84.4% for the year.The mandatory components, especially accident benefits, are running at loss ratios well in excess of 100%. The Financial Services Commission of Ontario (FSCO) issued its report and recommendations on Mar. 31, 2009. The report acknowledges the underwriting challenges facing insurers. However, taken in their entirety, the recommendations appear to fall short of addressing insurer profitability issues in a meaningful way. The upshot is that insurers in that market need to continue going for rate to stave off ongoing losses. The 2008 combined ratio for the commercial writer population clocked in at 94.9%, climbing 11.2 points from the 83.7% COR of 2007. (See Figure 1 on Page 23.) If we strip out prior-period reserve releases, the result is grim: an AY-2008 COR of 102% for commercial writers. Results were worse across all major lines for commercial writers. The boiler and machinery (B&M) line was hit particularly hard: it saw its 2008 net loss ratio skyrocket to 84.4%. This is due largely to high losses in the B&M line for FM Global, the largest writer of this line in Canada. Still, we do not believe these results will usher in a robust hard commercial market. The reasons for this
pg22,23,24MSA v1_DG_VM
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Figure 1. Commercial Writers (excluding Lloyd’s and Genworth) Summerized Income Statement
Key Ratio
2008
2007
Premiums Written Direct Assumed Ceded
8,394,188 473,025 2,289,034
8,455,217 343,403 2,565,862
-07 37.7 -10.8
Net Net Premiums Earned Nets Claims & Adj Expenses Acquisition Expenses GeneralExpenses & Other Total U/W Expenses
6,578,179 6,217,446 4,002,920 1,421,008 470,033 5,897,138
6,232,759 6,233,383 3,412,644 1,334,047 477,560 5,219,104
5.5 -03 17.3 6.5 -1.6 13.0
U/W Income Net Inv. Income Other Income Net Inc. B. Tax & Ex. Items
320,310 787,877 52,272 1,160,458
1,014,279 1,054,742 -33.353 2,035,667
-68.04 -25.3
853,741
1,435,365
-40.5
275,830
(235,409)
1,129,570
1,199,957
NET INCOME OCI COMPREHENSIVE INCOME
% Change
2008
2007
64.38 30.47 94.85
54.75 28.98 83.73
Net UW Leverage Gross UW Leverage
66.6 89.8
63.4 89.4
Investment Yield ROE
3.78 8.63
Net Loss Ratio Expense ratio Combined Ratio
MCT or BAAT Ratio
313.33
329.42
-43.0
-5.9
Figure 2. Personal and Multi-Line Writers (excluding ICBC and SAF)
Apr 09 –
Mar 09 –
Mar 09 –
Mar 09 –
Feb 09 –
Feb 09 –
assessment are as follows: smaller provincial players that are exSummerized Income Statement Key Ratio commercial • unlike personal writers, books of business, posed to unprofitable Taken in their entirety, FSCO’s 2008 2007 % Change 2008 writers are reporting wide variations in adverse reserve development2007 patterns, Premiums Written recommendations for Ontario results across the spectrum; some comlimited pricing power and/or lack of Direct 27,227,386 28,234,403 3.8 Net Ratio Loss 73.34 67.18 least auto insurance panies continue to enjoy — or at 4,453,403 access to external sources of29.87 capital. appearExpense Assumed 4,314,048reform 3.2 ratio 30.12 are appearing to enjoy — strong underCeded 6,146,077 5,928,635 3.7 in- Combined Ratio 103.47 97.04 to fall short of addressing writing results.The lack of uniform 25,534,711 mis2009: EYES ON THE WHEEL Net 24,619,817 3.7 issues in a Net UW commercial means that al- surer profitability ery inNet WeLeverage see little reason146.5 to expect things to Premiums lines Earned 24,945,232 24,044,949 3.7 131.9 thoughNet some players desperately need to get much better on an industry-wide Claims & Adj. Expenses 18,295,694 16,152,681 13.3 Gross UW Leverage 181.8 163.6 meaningful way. Aquisition Expensesis keeping 5,844,409 5,604,825 4.3 raise rates, competition a lid basis in 2009 for the following reasons. General Expenses & Other 1,669,825 1,576,874 5.9 Investment Yield 3.47 posted a Cdn$800-million line insurers on hardening; Total U/W Expenses 25,809,936 23,334,229 10.6 ROE 3.69 • competition from multi-line insurers comprehensive loss at the end of 2008, Ontario auto U/W Income 710,720 MCT or Ratio 235.26 comprehenversus a Cdn$1.7-billion from Ontario auto etc; -864.704 seeking relief bleeding to continue expect writers220.95 WeBAAT Net Inv. Income 1,562,386 2,715,070 -42.5 • aggressive battles for turf by some sive gain in 2007. Hardening is taking here. As one CFO mentioned, if we were Other Income 100,253 297,585 -66.3 hold here,3,723,375 but it is far from sufficient. already living under IFRS, auto insurers players; and Net Inc. B. Tax & Ex. Items 797,935 -78.6 • recessionary pressures are limiting in Ontario would have to book losses the NET INCOME 671,577 2,673,715 -74.9 buyer ability to absorb significant rate SOLVENCY RATIOS STRONG, BUT… minute they wrote an additional auto OCI (1,469.343) increases. most insurers entered this policy in the province. FSCO’s recomThankfully,(986,409) COMPREHENSIVE INCOME (797,766) 1,687,306 The 2008 combined ratio for personal tough phase in the cycle with strong mendations have not come into force and multi-line insurers deteriorated less levels of capital.The battering companies yet; even when they do, they do not Source: Researcher P&C Software than that of MSA commercial writers, but have taken on both the underwriting promise relief. from a higher base, clocking in at and investment fronts have caused most Figure 3. Intact Share(See PricesMCT and BAAT levels to decline; how- Uncertainty regarding judicial decisions 103.5% (up from 97.1% in 2007). 85.0 – of companies, on the constitutionality of minor injury Figure 2.) Again, stripping out prior- ever, for the vast majority 39 – Direct Loss Ratios TSX-IIC 22-Apr. 09 year reserve releases reveals a 2008 acci- they remain at robust levels. 80.0 – Some com- caps in Alberta and Nova Scotia 37 – ––– Canada dent-year combined ratio of 106.4% for panies, however, are susceptible to cap- Both lower court decisions are in ap35 – 75.0 – ––– Quebec personal writers.This is an unsustainable ital deficiencies. Presumably the regula- peal and will likely find their way to the ––– Excl QC 33 – 70.0 guarantee – run-rate in such a low-interest rate en- tors and the industry’s fund, Supreme Court. If the Alberta decision is 31 – vironment. Further, on a comprehen- the Property and 65.0 Casualty Insurance ultimately overturned, a significant – 29 – sive income basis — after taking fair Compensation Corporation (PACICC), chunk of loss reserves will be released 27 – 60.0 values of ‘available for sale’ instruments are keeping a vigilant eye– on these com- into income. If, on the other hand, the 25 – into account — personal line and multi- panies. There are some 55.0 –concerns about decision is upheld, insurers will find 50.0 – 2000 2001 2002 2003 2004 2005 2006 2007 2008 June 2009 Canadian Underwriter
23
Inv. Income6/4/09 pg22,23,24MSANet v1_DG_VM
787,877 11:14 PM Page 14 1,054,742 U/W Income
Other Income Net Inc. B. Tax & Ex. Items NET INCOME
-25.3 320,310 787,877 -43.0 52,272 1,160,458 -40.5
52,272 -33.353 Net Inv. Income 1,160,458 2,035,667 Other Income Net Inc. B. Tax & Ex. Items 853,741 1,435,365 NET INCOME (235,409) 275,830 OCI 1,129,570 1,199,957
OCI COMPREHENSIVE INCOME
853,741
COMPREHENSIVE INCOME
Total U/W Expenses
5,897,138
1,014,279 -68.04 U/W Income 1,054,742 -25.3 Net Inv. Income -33.353 Other Income 2,035,667 -43.0
MCT or BAAT Ratio
Net Inc. B. Tax & Ex. Items
1,435,365 NET INCOME
-40.5
275,830 -5.9
(235,409) OCI
1,129,570
1,199,957 COMPREHENSIVE -5.9 INCOME
5,219,104
313.33
320,310 787,877 52,272 1,160,458
1,014,279 1,054,742 -33.353 2,035,667
853,741
1,435,365
275,830
(235,409)
1,129,570
1,199,957
329
Figure 2. Personal and Multi-Line Writers (excluding ICBC and SAF) Figure 2. Personal and Multi-Line Writers (excluding ICBC andand SAF) Figure 2. Personal Multi-Line Writers (excluding Summerized Income Statement
Key Ratio Summerized Income Statement
2008 Premiums Written Direct Assumed Ceded
2007
% Change 2008
Summerized Income Statement Key Ratio
2008
2007
Premiums Written 27,227,386 28,234,403 Direct 4,453,403 4,314,048 Assumed 6,146,077 5,928,635 Ceded
2007
% Change
Premiums Written 3.8 Net Ratio Loss Direct 73.34 27,227,386 28,234,403 3.8 3.2 Expense ratio Assumed 30.12 4,453,403 4,314,048 3.2 3.7 Combined RatioCeded 103.47
2008
67.18
Net27,227,386 Ratio Loss 29.87 4,453,403 Expense ratio 97.04 6,146,077 Combined Ratio
6,146,077 5,928,635 3.7 Net 25,534,711 Net 25,534,711 Net 24,619,817 3.7 25,534,711 24,619,817 3.7 Net Premiums Earned 24,945,232 Net Premiums Earned 24,945,232 24,044,949 3.7 Net UW Leverage 146.5 131.9 Net Premiums Earned 24,945,232 24,044,949 3.7 Net UW Leverage Net Claims & Adj.181.8 Expenses 163.6 18,295,694 Net Claims & Adj. Expenses 18,295,694 13.3 Gross16,152,681 UW Leverage Net Claims16,152,681 & Adj. Expenses 18,295,694 13.3 Gross UW Leverage Aquisition Expenses 5,844,409 Aquisition Expenses 5,844,409 5,604,825 4.3 Aquisition Expenses 5,844,409 5,604,825 General Expenses4.3 & Other 1,669,825 General Expenses & Other 1,669,825 1,576,874 5.9 Investment Yield 3.47 Investment General Expenses & Other 1,669,825 1,576,874 5.9 Yield Total U/W Expenses 25,809,936 Total U/W Expenses 25,809,936 10.6 ROE 23,334,229 3.69 ROE Total U/W 23,334,229 Expenses 25,809,936 10.6 U/W Income -864.704 U/W Income -864.704 U/W Income 710,720 -864.704 MCT or BAAT 710,720 MCT1,562,386 or BAAT Ratio Net Ratio Inv. Income220.95 235.26 Net Inv. Income 1,562,386 2,715,070 -42.5 Net Inv. Income 1,562,386 2,715,070 Other Income -42.5 100,253 Net Inc. B. Tax-66.3 & Ex. Items 797,935 Other Income 297,585 100,253 297,585 Other Income 100,253 -66.3 Net Inc. B. 3,723,375 Tax & Ex. Items 797,935 3,723,375 Net Inc. B. Tax & Ex. Items 797,935 -78.6 NET INCOME -78.6 671,577 NET INCOME 2,673,715 671,577 2,673,715 -74.9 OCI (1,469.343) NET INCOME 671,577 -74.9 OCI (1,469.343) (986,409) COMPREHENSIVE INCOME (797,766) OCI (1,469.343) (986,409) COMPREHENSIVE INCOME (797,766) 1,687,306
COMPREHENSIVE INCOME
(797,766)
FROM ORANGE TO RED Netherland’s troubled ING Groep’s exit from Canada’s insurance scene in February of this year — with the distressed
24 Canadian Underwriter June 2009
67 29 97
103.47
24,619,817 24,044,949 146.5 16,152,681 181.8 5,604,825 1,576,874 3.47 23,334,229
13 16
3.69
710,720 220.95 2,715,070 297,585 3,723,375
235
2,673,715 (986,409) 1,687,306
Figure 3. Intact Share Prices and have gained substantially. (See Fig85.0 – ure 3.) 39 The– institutional investors TSX-IIC 22-Apr. 09 that 80.0 – 3785.0 – – the Loss Ratios got in on the $25 per share price of Direct 35 – Loss 75.0 – Direct Ratios 80.0 – private placement on Feb. 3 have since ––– Canada 33 – seen their75.0 shares 37.6% by April 21. 70.0 – ––– gain Canada ––– Quebec 31 – – The common shareholders that bought ––– Quebec ––– Excl QC 65.0 – 2970.0 – – ––– Excl at a higher price (theQCbought deal was 31 – 70.0 – 27 – 60.0 – 65.0 – priced at $26.35) still have done very 29 – 25 – 65.0 – 55.0 – well since60.0 then.The upswing reflects the 27 – – distressed pricing on ING N.V.’s exit and 50.0 – 60.0 – 25 – 55.0 – 2 the March/April rally on the TSX. 55.0 – 50.0 – faces some headwinds in still The stock 2000 2001 2002 2003 2004 2005 2006 200 50.0 – the form of the overhang of private 2000 2001 2002 2003 2004 2005 2006 2007 2008 sale of its 70% share of ING Canada Inc. placement shares that will only be able to the public and via private placement to be traded in June, as well as the gento institutional investors — heralded the eral problems in the Canadian property birth of a domestic property and casu- and casualty industry from which Intact alty industry leader under the new name is not immune. Intact Financial Corporation. The man- 1 This survey is based on 204 reporting agement team remains under the stew- entities for which MSA Research Inc. had ardship of Charles Brindamour. data at time of writing. These companies Intact2 was the largest property and represent in excess of 95% of Canada’s casualty group in Canada in 2008, with primary insurers when measured on a net direct writings of Cdn$4.1 billion and premium written basis. Excluded are most net earnings of Cdn$96 million. Like reinsurers whose filing deadline is midother insurers, Intact’s underwriting in- April, ICBC and MPI. Some of the exhibits come and net income declined substan- in this study further exclude Lloyd’s Undertially as a result of underwriting condi- writers and Genworth Financial Mortgage tions, lower investment income and Company of Canada due to the distortions investment losses. they introduce. Intact’s debut seems to have gone well, 2 We refer to the company as ‘Intact’ even however. The IIC shares (soon to be though results for 2008 and prior were quoted under the IFC ticker) held up reported under the ING shingle. Apr 09 –
Mar 09 –
Mar 09 –
Mar 09 –
Feb 09 –
Feb 09 –
Apr 09 –
Mar 09 –
Mar 09 –
Mar 09 –
Feb 09 –
Feb 09 –
Apr 09 –
Mar 09 –
Mar 09 –
Mar 09 –
Feb 09 –
Feb 09 –
Global firming in reinsurance pricing is happening and it is affecting Canadian cedants We expect reinsurance will continue hardening for the foreseeable future as global players like Swiss Re, XL Capital and others seek to fortify their bruised balance sheets. We don’t believe reinsurance pricing is influential enough to make much difference in primary commercial casualty pricing at this time, but it may have some effect on catastropheexposed property writers.
28,234,403 73.34 4,314,048 30.12 5,928,635
Source: MSA Researcher P&C Software
their reserves and rating models wantFigurecourt 3. Intact Share Prices Figure 3. Intact Share Prices ing. The lower decision in Nova Scotia was in the industry’s favour. If – 39 – TSX-IIC85.0 22-Apr. 09 39 – is ultimately TSX-IIC overturned, 22-Apr. 09 that decision 37 – 80.0 – 37 – will bear a reserve and insurers there 35 – 35 – 75.0 – pricing hit. 33 – 33 –
% 2
1,687,306
Source: MSA Researcher P&C SoftwareSource: MSA Researcher P&C Software
31 –lines Commercial 29 – is not yet taking hold. Price firming 27 –is fierce. And with the imCompetition 25 – of Part XIII of the Insurance plementation Companies Act scheduled to take place in 2010 Q1, competition is expected to become intensified, especially for larger risks.
2007 2008
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Launching Commercial Tech Loading... 0%
Once thought to be too complex an area for technological automation, commercial lines have emerged in the forefront of an eternal quest to find the ultimate, real-time data transfer between brokers and their markets.
By craig harris
26 Canadian Underwriter June 2009
Long
viewed as too complex or labour-intensive, commercial insurance risks are increasingly enjoying the benefits of technology. After some experimentation, several leading insurers and brokers are working closely with vendors to automate workflow and integrate data, while still maintaining the role of hands-on underwriting. There may be no “killer commercial apps� to date, but there is a steady progression of technology bringing increased efficiency to the broker’s desktop.
June 2009 Canadian Underwriter
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COVER STORY
Launching Commercial Tech Commercial Lines in the Vanguard Do commercial lines insurer and broker operations have anything to learn from the personal lines quest for single-entry, multiple-company interface (SEMCI) technology? Many are putting that question on its head, arguing that commercial risks may actually be the most promising area of technology investment in the insurance industry today. With fewer technology vendors offering dedicated commercial management systems (CMS) to brokers (namely Policy Works and Keal’s comXP), and CSIO XML commercial data standards in place since 2005, an opportunity exists for insurers to work closely on data integration projects with defined timelines and deliverables. Many companies are taking advantage of that opportunity. “It seems every quarter there is another announcement,” says Byron Hindle, senior vice president of commercial lines for Intact Insurance. “There is a lot of excitement. Currently, it is downloading of renewals; soon it will be policy inquiry. Ultimately, there will be policy change. There is a lot of leap-frogging going on among the leading insurers such as Intact. No company maintains the lead for long.” The leading insurers in commercial lines technology development are familiar names: Aviva Canada, Gore Mutual, Intact Insurance, Lombard Canada, RSA Canada and The Economical Insurance Group. All are at varying stages of progress, but the emphasis generally for companies in the recent past has been on real-time comparative quoting in insurance company portals and uploading of quoting and policy information from CMS (or broker management system, BMS) to insurer. Real-time download of data, in any meaningful or functional sense, has proven elusive; some contend it is too difficult to manage. Download Gets Done However, in March 2009, Lombard Canada announced it was the first insurer to download commercial renewals directly into Keal’s comXP. Using its Commercial LINCQ solution and Business Choice com28 Canadian Underwriter June 2009
mercial program, Lombard can download renewal policies into Keal’s CMS without manual intervention — a process that includes not just data, but also a PDF of the entire policy output as an attachment tied to the policy. This PDF attachment feature occurs for all transactions. “A lot of people said commercial download was not possible, but through a lot of hard work we got it done,” says Peter Silk, senior vice president of commercial business process and delivery at Lombard Canada. “And we have done it in a way that is exportable to other systems down the road, such as Policy Works or a BMS.”
It seems every quarter there is another announcement. There is a lot of excitement. Currently, it is downloading of renewals; soon it will be policy inquiry. Ultimately, there will be policy change.
The payback is that the broker is up to date and current with all the information in the policy, says Brian Moses, vice president of business systems and development with Lombard Canada. “It allows any person with access to the BMS/CMS to service the account. It really widens serviceability within the BMS.” Silk adds that the true value to the broker in reducing duplicate entry is in tackling the high transaction areas of renewals and endorsements. Moses says Lombard Canada is in general release mode with commercial download of renewals after beta-testing it with three brokers, noting “quite a lot of interest from brokers across the
country.” Lombard is also working aggressively on bringing data download capabilities to all transactions in the policy life-cycle, such as new business, endorsements, cancellations and, eventually, multiple-location coverages and schedules — all slated for completion this year. Keal Technology president Pat Durepos echoes Lombard’s sentiment that sending information from the insurer to the broker is a tougher proposition than the other way around. “For Keal and likely other management system companies, a download is much more difficult than an upload,” he says. “We have to extract the data from the insurer system and bring all the information to populate the CMS in the broker office. There is a lot of room for potential error. That is why XML standards are so important. The issue really is one of data integrity.” Data Standard Pioneers Policy Works president Kevin Campbell says his company’s support of CSIO XML commercial standards through its Certified Data Exchange Program (CDEP) with five insurers is laying the foundation for future developments. “Each insurer partner we’ve worked with — Intact, Gore Mutual, Aviva, RSA and Economical — is taking an industry-leading role in terms of commercial lines data exchange,” he notes. “Really without their investment and desire to develop integration solutions, commercial lines data exchange would not be happening today.” Hindle says Intact Insurance has been an early adopter of and promoter of standards in CMS/BMS integration. In March 2007, it launched basic submission upload (name and address) through Policy Works. It also worked with Policy Works to add upload of coverage data in August 2007. Intact expanded these transactions to support other CMS applications, including Keal and Groupe Ultima. It was also the first insurer to launch quote upload and download capabilities directly into a CMS in May 2008. “We are committed to providing access to our systems in ways that suit the brokers’ workflow, whether click, call or
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COVER STORY
Launching Commercial Tech fax,” Hindle observes. “This can be direct transaction from a CMS, using our Savers CL submission tool, telephone access to our underwriting teams or through other communication vehicles such as fax and e-mail.” Intact’s Savers CL submission tool now sources approximately 20% of new commercial business from brokers. The advances in comparative real-time quoting of commercial risks have proven to be of great value to brokers, at least in the short-term, according to sources. “A lot of the emphasis these day is on real-time quoting, probably because the existing portals are designed around providing instant quotes for certain classes of business,” Campbell says. “Brokers find this useful when the prospect is sitting across the desk or on the telephone.” The Economical Insurance Group (TEIG)’s vice president of commercial lines, David Crozier, agrees that realtime comparative quoting “supports the key activity of attracting and booking the business for the broker.” But he notes TEIG has recognized that quoting functionality does little to help brokers service the policy during its lifecycle. “TEIG has recognized this gap in commercial (lines) and will be offering not only upload and download of quote information for new business, but also the ability to inquire about account or policy information and receive a response in real-time,” Crozier notes. “Furthermore, we provide the brokers with another option to submit to TEIG claims information — such as first notice of loss or report — using a process that is initiated directly from the BMS/CMS. This is the key component, allowing the broker to spend more time within the systems they use daily.” Portal Quandary One main obstacle standing in the way of brokers using their own systems has been the development of insurance company portals, a quandary similar to personal lines. Although portals are often beneficial for smaller brokerages, which can rely on getting a quick quote on a small commercial risk, they can actually be counter-productive for larger brokerages that already have a 30 Canadian Underwriter June 2009
CMS in place and need to constantly reenter data. Campbell says he has seen more insurance companies focusing on “bridging solutions,” which flow data between the broker’s system and the insurer’s portal. Citing features like single signon, upload of submission, download of quoting and inquiry, he notes brokers are beginning to see how they can tap into their CMS automation solution and adapt their workflows. These data bridges are one step on the path to true integration. “Bridging solutions are not true realtime, because they require brokers to
There is a lot of leapfrogging going on among the leading insurers. No company maintains the lead in commercial lines software applications for long.
work directly in the insurers’ portals, which means portal-specific training, managing user accounts and some additional data entry,” Campbell notes. “In the next year or two, we’ll begin to see true real-time integration between Policy Works and insurers’ back-end systems, where brokers will work only in Policy Works. And these integrations will expand beyond the marketing phase into the customer service operations, like policy enquiry and renewal download.” Hindle says Intact is looking beyond the insurance portal model to accommodate a broker’s preferred workflow pattern. “We have learned to think more of solutions that work within the BMS/ CMS for transactions, versus the fixation with portals,” he says. “We need to find solutions that match the workflow of
our brokers from the get-go. For business insurance, Intact’s customer-driven view is that the broker’s desktop is the centre of our universe. ” Durepos also believes the time is right for brokers to move away from portals and leverage their investments in CMS technology. “With the combination of CMS, Web services and data standards, you will see more of the use of XML streams to send data directly back and forth between an insurer’s policy management system and a broker’s CMS,” he says. “In fact, in some cases, this is already happening. You are seeing the early phases of actual implementation of real-time integration in commercial lines. We still have a lot of work to do to get to the full range of transactions in the policy, but we are making good progress.” “Most of the portals offer quoting services, but brokers cannot complete the transaction all the way through,” Moses observes. “Lombard is aiming for 100% single entry from the quote stage through to policy issuance, followed by full integration into the broker CMS/BMS. Ultimately with features like commercial download, the broker will be better able to service the policyholder.” Broker Anticipation For many commercial brokers, this wave of technology investment can’t come fast enough — or perhaps widely enough to include all the relevant commercial markets. “One of the frustrations for me is that more companies are not working or partnering with technology vendors on commercial lines,” says Brenda Robinson, vice president of commercial lines for Welland, Ontario-based Young Insurance Brokers. “As brokers, our job is to ensure we approach all markets and find the best coverage for a particular class of business, and we do that. But for those companies that are not investing in technology and efficiency, they will face a disadvantage. It will simply be harder to do business with them; they run the risk of being left behind.”
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Launching Commercial Tech David Scholes, vice president of commercial lines for Orangeville, Ontario-based Secure Insurance Solutions Group, says his brokerage participated in the best testing of data integration projects with Aviva, Intact and RSA. He is eagerly awaiting the arrival of TEIG’s system. “Data entry and support personnel within our brokerage are benefiting from the education received as a result of conversing with underwriters during the new business and renewal quotation process,” he says. The status of data integration projects with insurers aside, brokers are still benefiting from their investments in CMS. Estimates vary of how many brokerages with a significant commercial book of business actually have a CMS (it ranges from 10-40%), but anecdotal evidence exits that brokers are putting more emphasis on automating commercial lines business. “Brokers are looking at their commercial business and trying to find ways to either increase or maintain their book in difficult economic conditions,” notes Durepos. “To do this, many are examining their processes and procedures. Some are bringing in consultants to look at the entire way a brokerage does business in its commercial lines and its entire operations. That involves technology because many of the recommendations that come out of this review will be related to technology tools.” Durepos adds the marketing functions of a CMS are particularly beneficial to brokers, since a softer market may mean a ramp-up in increased sales activity. “One thing a commercial system can do really well is act as a client relationship management platform,” he says. “It can help brokers electronically manage referrals, leads, activities and follow-ups. This really helps broker mine their own database and provide a unified view of client data.” CMS in Challenging Conditions “From a vendor point of view, we’ve seen a number of BMS vendors creating and offering distinct commercial solutions within their BMS systems — a sign of the growing emphasis that is be32 Canadian Underwriter June 2009
ing placed on automating commercial lines,” says Campbell. (Canada’s largest BMS vendor, Applied Systems/TAM, does not have a dedicated commercial solution, although it is working with both Keal and Policy Works to share data with its BMS). Campbell also notes Policy Works has garnered a steadily growing customer base over the past five years, including the recent trend of smaller brokers showing interest in purchasing a CMS. “Five years ago, I could have counted the number of brokerages in our area with a CMS on one hand,” adds Robinson. “That has certainly changed over the last couple of years.”
A lot of the emphasis these days is on real-time quoting, probably because the existing portals are designed around providing instant quotes for certain classes of business. Brokers find this useful when the prospect is sitting across the desk or on the telephone.
Robinson says her brokerage has seen the advantages of CMS efficiency in areas such as marketing, renewal processing, comparative quoting and standardized processes across multiple branch offices and employees. “We don’t just use our CMS for the marketing tool, but for the full policy cycle — endorsements, renewals, inquiry and so on.” Scholes notes the CMS’s combination of improved documentation and electronic transmission provides an opportunity for greater efficiency in a brokerage. “Electronic transmission of the Policy Works submission allows the broker to increase significantly the number of customers serviced through improved documentation of new business and renewal quotation activities,” he says. “This documentation process is adequate, accurate and automatic, thereby reducing errors and omission exposure and improving the risk analysis process of the broker/producer.” For Campbell, the real benefit of a CMS is all about standardization. “A CMS solution really provides brokers with consistency of process, which leads to increased efficiency, reduced E&O and better customer service.” A CMS can handle virtually any size of risk, although likely commercial candidates for automation tend to be smallpackage business, single-locations risks with premiums up to Cdn$25,000 and individually-rated commercial auto. “I believe that we are moving more and more towards a paperless environment,” observes Robinson. “This is a big step in commercial lines because, in the past, the emphasis has been on forms and binders. Now, the companies are saying: ‘Here is a PDF of the declaration page. You only need to print it off if necessary.’ Obviously, the less you touch a small business policy, the less it will cost you to process it. If we are looking at a Cdn$1,000-2,000 policy, it has to be handled efficiently.” The smaller business policy also seems to be the starting point for many of the data integration projects between insurers and brokers. “I think the first step towards things like full download of transactions will happen here in small
business,” adds Robinson. “And this will come in steps; then we can move on to mid-market accounts.” Indeed, Scholes notes his brokerage’s beta testing of data integrations systems with insurers often precluded the more complicated risks. “We found the number of locations to be insured a red flag that would kick the risk to mid-market underwriters,” he says. “As the insurers experience the benefits of the electronic transfer, I feel the scope and variety of risks handled will increase.” For Crozier, this evolution will have to reflect the reality of increased complexity in certain commercial risks. “While there are some similarities between commercial and personal lines, the workflow, qualifying criteria, what will be written and at what rate tend to be more varied between carriers in commercial,” he says. “This in turn creates variability in the technology requirements.” Broker-Underwriter Collaboration In the bigger picture, Campbell says the level of risks taken on for automation will be a function of the collaboration between broker and underwriter. “Imagine a broker and underwriter working together on a proposal for a prospect, able to share and interact with whatever data they have in either’s systems and communicating however they are most comfortable — by phone, email, chat or whatever,” he predicts. “The data is only entered once, at the brokerage or the insurer, and then both parties are able to use it.” For Moses, this may mean a rethinking of how policy processing and underwriting have been approached in the past. “Lombard has separated policy processing from underwriting, which has resulted in a sharper underwriting focus and improved processing efficiencies,” he says. “Once a risk has been properly underwritten, all the data transactions should be able to flow through the system with considerable ease.” This is a far cry from the early days of commercial lines processing. The prevalence of manual transactions,
multiple touch points between brokers and underwriters and expensive paper trails typically resulted in higher expenses, reduced efficiencies and slower service time for end customers. It also ate into profit margins, making the advent of CMS and data-integration projects that promote streamlined workflow welcome signs for brokers and insurers alike. Still, challenges remain for the progress of commercial lines technology. Key obstacles include the evolution (and acceptance) of CSIO XML standards and potential download pitfalls among insurance companies for various types of transactions.
Although portals are often beneficial for smaller brokerages, which can rely on getting a quick quote on a small commercial risk, they can actually be counterproductive for larger brokerages that already have a CMS in place and need to constantly re-enter data.
“The continued evolution of CSIO standards for commercial is critical,” argues Crozier. “There has been work done on the commercial standards over the past few years, but this needs to continue to allow for multiple carrier and brokers systems to easily integrate and interface with each other without having to specialize code and translation for each.” Hindle says that as download becomes a reality for more and more insurers, companies must address how that information is accepted by the CMS/BMS. “As we extend the process to other transactions, such as download of renewals, policy inquiry (claims and billing) and policy change, we have to be careful not to overwrite the information that currently resides in the CMS/ BMS,” Hindle notes. “Our approach has been to download data into a separate record and then send it to the CMS/BMS to avoid that problem. The long-term challenge is to give the broker an image of the policy exactly as it appears at the insurance company, so they can make changes to that version. That is the ideal, but we are not there yet.” For all of the technological hurdles, one of the most prominent obstacles may simply come down to the human element — resistance to change, particularly among brokers. “It should not come as a surprise that the biggest problem is not technology, but people,” notes Campbell. “We’re finding that you need to change user habits one desktop at a time. That begins with simply capturing standardized data in your CMS so it is ready for data exchange. Some users are more comfortable with Word, Excel or their BMS systems, where the data is trapped and non-transferable. Insurers have invested heavily in the solutions that are available today and really need support from brokers.” “We need to work hard to ensure the technology is adopted by our brokers,” Hindle concludes. “Emphasis needs to be placed on training and supporting the brokers’ proper use of CMS/BMS integration functionalities. We need to show people how to use it.” June 2009 Canadian Underwriter
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From
FIRES to FLOODS Historically developed to respond primarily to fire damage, homeowners’ policies are now called upon to respond to water damage and flood perils.
Glenn McGillivray
As some industry veterans may well remember, homeowners insurance — in fact, all property inManaging Director, surance — was once known as ‘fire’ insurance, Institute for Catastrophic since this was the major peril against which polLoss Reduction icyholders were insured. Indeed, many of the earliest insurance companies to be formed in Canada had the word ‘fire’ in their names, with the Halifax Fire Insurance Association (1809) and the Quebec Fire Insurance Company (1819) being two of the earliest. But somewhere along the line, as more and more perils came to be covered under the standard policy, came the advent of the all-perils form, in which essentially all insured perils were folded into a single policy and riders were largely done away with. (The operative word here is “insured,” since the typical homeowners policy in Canada does not cover overland flood, shake from earthquake, or subsidence — i.e. landslide
34 Canadian Underwriter June 2009
and erosion. Perhaps the term ‘all-perils’ should be replaced with ‘most-perils.’) Today, roughly 80% of all homeowners’ policies sold in Canada use the all-perils form. Also somewhere along the line, fire dropped from being the primary cause of concern for property and casualty insurance companies. Although fires are still disconcerting (too many people perish in blazes each year and too much damage is caused by fire and smoke), water damage is now the main concern from a claims perspective.
BASEMENT FLOODING: A GROWING PROBLEM Basement flooding, caused by overland water flows, infiltration and sewer backup, is a major concern for many (if not most) urban municipalities in Canada. Increases in the frequency and intensity of heavy rainfall events exacerbated by rising urbanization, deteriorating infrastructure and climate change will increase basement flood risk in the future. Effective management of flood risks requires improving sewer infrastructure, and also the cooperation of more informed homeowners. Sewer backup is caused by ground and storm water infiltration and inflow into sanitary and storm systems, which can increase pressure and
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push sewage into lower levels of buildings through sanitary sewer connections and then enter basements through plumbing fixtures and floor drains. The existence of combined sewer systems, which convey both storm water and sanitary sewage, exacerbates sewage backup risk in older parts of cities. Damages from this hazard can be extensive. In August 2005, a severe rainfall event in the Greater Toronto Area (GTA) caused extensive overland flood and sewer backup damages, resulting in more than 13,000 sewer backup insurance claims at a value of Cdn$247 million.The City of Edmonton was hit with two severe rainfall events in 2004, resulting in 9,500 sewer backup insurance claims valued at Cdn$143 million. Many other communities across Canada have experienced similar loss events. The proliferation of finished basements has exacerbated the basement flood problem. In the January 2009 issue of Canadian Underwriter, Irene Bianchi, vice president of claims and corporate
First On Site.indd 2-3
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services at RSA, is quoted as saying that: “[In 2008] we had the majority of…[basement flooding] claims occur in the GTA, where lots of people have very nice, expensive finished basements in their homes. So instead of dealing with regular, unfinished basements that maybe only had laundry machines experiencing the water damage problem, we’re dealing with a beautiful basement that the family spends a lot of time in — basements that are very well-equipped with big-screen TVs, nice laminate flooring and beautiful furniture.” As a result, the average cost of sewer backup claims has went from just a few thousand dollars to the five-digit range. Sewer backup is generally perceived as strictly an infrastructure problem, but effective management of basement flooding requires actions at both the municipal and homeowner levels. Indeed, many homeowners’ eavestrough downspouts and foundation drains contribute a significant amount of unwanted and unnecessary water into sewer systems,
which exacerbates sewer backup problems. Still others have improper landscaping that conveys water toward the house, rather than direct it away. While municipalities should continue to upgrade existing sewer systems and adhere to improved standards when building new systems, upgrading infrastructure is an expensive and long-term proposition. In areas where upgrading of municipal infrastructure may take several years to complete, actions by homeowners can immediately reduce their risk of damage. Homeowners should also be informed of their role in contributing to sewer backup, and should be encouraged to reduce their contributions of unwanted water into sanitary and storm sewer systems.
NEW HANDBOOK ON FLOODING A few years ago, ICLR commissioned a survey to determine how much average homeowners understand about their insurance coverage. Two important findings of the professionally administered
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survey were: (1) homeowners expect to receive information about how to protect their families and property from the impacts of natural hazards; and (2) they expect to receive such information from their insurance company. In this spirit, ICLR’s Handbook for reducing basement flooding attempts to address the concerns of homeowners, local governments and homeowner insurers of the increasing instances of basement flooding. It provides comprehensive information on how to prevent such a loss from occurring or, at the very least, mitigating the impacts of such an event. The handbook is meant to represent ICLR’s advice on preventing basement flooding. It is a substantial 56 pages in length, although ICLR will in the nearfuture produce a smaller guide that highlights some of the immediate steps homeowners can take to prevent basement flooding. Additionally, municipal governments and insurance companies can use the handbook to produce their own material for homeowners.
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The handbook covers such topics as what basement flooding is and why it happens; simple and inexpensive things that can be done to prevent basements from flooding; and other measures that
Although fires are still disconcerting (too many people perish in blazes each year and too much damage is caused by fire and smoke), water damage is now the main concern from a claims perspective. can be taken that require more effort. In all, the handbook contains 20 measures that homeowners can take to prevent basement flooding from happening. Additionally, the publication contains several technical photographs and professionally rendered engineering drawings illustrating such things as the
dynamics of overland flooding and sewer backup, foundation cracks, cross connections (i.e. when storm water downspouts are connected to sanitary sewer lines), sump-pump and backwater valve installation and basement flood reduction. What’s more, the handbook contains a glossary of common terms related to basement flooding, sanitary sewer and stormwater management. The threat of fire to property has fallen from top position due to the concerted efforts of the insurance industry, municipal and provincial governments and homeowners to reduce the risk and impact of fire. The hope is that by providing information on basement flooding, ICLR — in partnership with local governments and insurance company members — can make the same happen with water-related claims. For more information on ICLR’s basement flooding reduction handbook or for a copy, contact handbook author Dan Sandink at dsandink@iclr.org.
When you’re not FirstOnSite, who is?
2/25/09 9:53:29 AM
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Why Insurers
Fail Solvency Matters
Insurers fail primarily due to rapid growth, insufficient loss reserves and price inadequacy. Insurance is a promise to pay claims in the future in exchange for premiums today. Confidence in the industry rests upon the foundation that these claims will be paid. Over the past 30 years, inadProperty and Casualty equate pricing and reserving has been the leadInsurance Compensation ing cause of failure for Canada’s insurers. Corporation (PACICC) Canada’s solvency regulators have involuntarily wound-up 32 insurers since 1979. Several (11 companies) were financially sound, yet were closed because their foreign parent became insolvent. But most became insolvent (21 companies).Two-thirds of the insolvent Canadian insurers over the past 30 years failed due to inadequate pricing, deficient loss reserves or rapid growth (14 of the 21 companies). Insolvency arises when insufficient assets and capital are in place to cover the claims liabilities incurred. A few insurance companies have failed over the last 30 years because of shocks to their capital or reinsurance arrangements (three companies). One company failed because it was overwhelmed by claims from a catastrophic event. A few companies failed due to alleged fraud (three
38 Canadian Underwriter June 2009
companies). But two-thirds (14) of the Canadian insurance failures over the past 30 years were due to some form of price or reserve inadequacy. PACICC recently completed a major research project on the causes of insurance price inadequacy as part of its Why insurers fail publication series. We examined in depth what could be learned from the experience of the 14 Canadian insurers that failed over the past 30 years due to price inadequacy and deficient loss reserves. Our review of these failures identified three primary reasons why some insurers get their pricing wrong to such an extent that it threatens their solvency.We also identified two factors related to the operating environment that can weaken the ability of an insurer to return to financial health. This article summarizes PACICC’s key findings on the relationship between inadequate pricing and insolvency risk.
Illustration: Graham Roumieu
Darrell Leadbetter, Paul Kovacs and Jim Harries
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INSURANCE PRICING Difficulties in pricing Claims, the largest cost for insurers, are unknown when the customer is accepted. Pricing is determined and agreed to before costs are known. Actuarial analysis is used to anticipate the expected frequency and severity of future claims, but actual costs are not known when prices are set. Some have described this as an “inverted production cycle,” noting that insurance is quite different from the other financial industries and most businesses where input costs are largely known when prices are set. For Canadian property and casualty insurance companies, fully 72.5% of the costs of the product are incurred in the form of claims costs after the insurance contract has been delivered. As comparative examples, manufacturers and deposit-taking financial institutions in Canada both incur, on average, a much lower proportion of “post-production” input costs — 21.9% and 6.6%, respectively. Data deficiency and poor information management Most Canadian insurers that have failed due to price and reserve inadequacy had poor information management systems. The specific deficiencies varied, yet consistently failed to provide meaningful and timely information about claims costs needed to properly manage solvency risks. The main problem appears to have been an inability to apply loss experience data properly to the pricing of risks, rather than to the lack of such data (although in a few cases, particularly for commercial lines, a lack of loss data contributed to the problem). It is also likely a lack of appropriate managerial experience contributed to the poor information-management practices exhibited by Canadian insurers that failed due to price inadequacy.
Page 13
ation, and 70% of failed insurers were less than 10 years old. Among failed new entrants that were in business less than 10 years, 57% were wound up as a result of inadequate pricing. Setting adequate prices is always a challenge, even for experienced insurers. But lessons from the Canadian experience suggest the risk of inadequate pricing of insurance is significantly higher for new entrants into a line of business, or for experienced in-
surers entering new lines unrelated to their existing business.
Pricing under duress Troubled companies frequently assume additional risks when they are struggling to survive. Distressed insurers sometimes enter into new markets where the risks are unfamiliar, or they may temporarily offer aggressive pricing to attract customers and generate addi-
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Giffin Koerth Forensic Engineering and Science Investigate Understand Communicate www.giffinkoerth.com Rochon Engineering Inc. Forensic Consulting Engineers & Code Consultants. www.rochons.com
40 Canadian Underwriter June 2009
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 Grain Insurance and Guarantee Company Commercial Lines Underwriters www.graininsurance.com The Guarantee Company of North America “Specialized insurance products...professional service” www.gcna.com Kingsway General Insurance Company The Specialty Insurer www.kingsway-general.com RSA Leading car, home and business insurer. www.rsagroup.ca Sovereign General Insurance Company of Canada Since 1953 www.sovereigngeneral.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
GRAPHIC COMMUNICATIONS Informco Inc. Integrated Graphic Communications Specialists. www.informco.com
INSURANCE COMPANIES AIG Commercial Insurance Company of Canada "THE STRENGTH to BE THERE". www.aig.com
INSURANCE SOFTWARE APPLICATIONS Keal Technologies Complete technology solutions for insurance brokers. www.keal.com Tritech Financial Systems Inc. Provider of an enterprise solution to P&C insurance companies and their agents and brokers in Canada
and USA www.trifin.com
PREMIUM FINANCING Third Eye Solutions Inc. Provides Internet-enabled premium financing/payment plan software solutions. www.thirdeyesolutions.com
REINSURANCE Guy Carpenter & Company The world’s leading reinsurance intermediary. www.guycarp.com Munich Reinsurance Company of Canada Complete reinsurance coverage from Canada’s largest reinsurer. www.mroc.com Swiss Reinsurance Company Canada The leading P&C reinsurer in Canada. www.swissre.com Transatlantic Reinsurance Company For all your reinsurance needs. www.transre.com
RESTORATION SERVICES Winmar Property Restoration Specialists Coming Through For You! www.winmar.on.ca
RISK MANAGEMENT The ARC Group Canada Inc. Your Partner in Insurance Law and Risk Management www.thearcgroup.ca
SPECIALTY INSURANCE Firstbrook Cassie & Anderson Ltd. Your Source For Camp Insurance www.nbrown.com William J. Sutton & Co. Ltd. Insuring Special Risks since 1978 www.wjsutton.com
Table 1–– 1989 Correlation Coefficients for Average Premiums & Average Claims0.99 Costs 1986 0.99 0.63 Passenger Automobile Insurance pg38,39,41Fail_v1_DG_VM 6/4/09 Private 4:27 PM Page 14 19861986 – 1989 0.99 0.63 0.990.95 – 2001 0.61 0.95 Ontario Alberta Atlantic Canada 19862002 – 2001 0.61 0.950.09 0.950.76 – 2007 0.60
1986 – 1989 0.99 0.63 0.99 0.76 2002Source: – 2007 0.60 0.09 IBC Insurance Information Division, Private Passenger Automobile Economic Trends Exhibit 1986 – 2001
0.61
0.95
0.95
Source: IBC Insurance Information Division, Private Passenger Automobile Economic Trends Exhibit Shading included rate regulation 2002 –indicates 2007 a period that 0.60 0.09 0.76 Shading indicates a period that included rate regulation
Source: IBC Insurance Information Division, Private Passenger Automobile Economic Trends Exhibit Shading indicates a period that included rate regulation
120 –
450 450 –– 400 –
120 –
40 – 20 –
Average claims costs
0–
$0 – $300
$3,000 –
$600
$900
Average premiums
$3,000 –
Average claims costs
60 –
250 –
400 –
Average claims costs
80 –
300 –
250 –
400 –
100 –
Average claims costs
100 –
300 –
premiums when rate regulation is absent. When rate regulation is present, 250 – 300 – 300 – 80 –80 – 200 – 200 – the dispersion between average claims 300 – 250 – 250 – 200 – 150 – 60 –60 – 150 – cost and premiums is much greater. 250 –– 200 200 – 150 – Table 1 further illustrates the point: it 40 – 100 – 40 – 100 – 150 200 –– 150 – shows the sizeable drop in correlation 20 – 50 – 100 – 15050– – 20 – 50 – 50 – between average claims cost and premi0– 0– 0– 50 – Markham General Advocate General Markham General Advocate General 50 – Markham General Advocate General 0– 0– 0– ums that occurred when stricter regulaMarkham General Markham General Advocate General 0 – Thick black line 0represents the industry average Advocate General Markham General Advocate General – tion of auto insurance rates was introMarkham General Advocate General Markham General Advocate General Markham General Advocate General Thick black line represents the industry average duced in Alberta, Ontario and Atlantic Thick black line represents the industry average Canada. Figure 2 – Relationship between Average Price and Average Claim* (all provinces 1986-2007) To be more specific, stricter forms of Figure 2 – Relationship between Average Price and Average Claim* rate regulation can reduce the capacity of Rate regulated Non-rate regulated $9,000 – 2 – Relationship between (all provinces 1986-2007) $12,000 – Figure Average Price and Average Claim* insurers to make rate changes consis(all provinces 1986-2007) tent with changes in underlying claims Rate regulated Non-rate regulated $9,000 $6,000– – $9,000 $12,000 – – patterns. As a result, an insurer may be Rate regulated Non-rate regulated $9,000 – $12,000 – forced to draw down its capital to pay $3,000 – $6,000 – claims, possibly impairing its solvency in $6,000 – $9,000 – $6,000 – the process. $9,000 –
100 –
Average claims costs Average claims costs
120 –
of rate regulation can weaken or even Figure 1 – Comparing Markham General and Advocate General’s Pricing and Claims Experience to the IndustryGeneral’s Average Pricing and Claims General and Advocate Figure 1 – Comparing Markham disrupt the link between insurance Figure 1 – Comparing Markham General and insurance Advocate General’s Pricing and Claims (automobile policies) Experience to the Industry Average prices and claims. Figure 2 illustrates the Experience to the Industry Average (automobile insurance policies) Frequency Pricing Severity (automobile insurance policies) much closer relationship that exists be(claims per# policies issued) (average premium) (average claim) Frequency Pricing Severity Frequency Pricing Severity 450 – (average claim) tween average claims cost and average 300 – (claims per# policies issued) (average premium) (claims per# policies issued) (average premium) (average claim)
$3,000 – $800
$1,000
$1,200
$6,000 –Average premiums
$1,400
CONCLUSION
$6,000 –
In competitive markets, insurance companies will occasionally run into finan$3,000 – $600 $900 $800 $1,000 $1,200 $1,400 cial difficulties, especially when eco$0 – $3,000 – premiums$1,400 $300 $600 premiums $900 Average $800 $1,000Average $1,200 nomic conditions deteriorate. When Average premiums Average premiums this happens in Canada’s property and casualty insurance industry, PACICC’s job is to ensure policyholders are Table11––Correlation Correlation Coefficients Coefficients for for Average Table Average Premiums Premiums &&Average AverageClaims ClaimsCosts Costs Private Passenger Automobile Insurance protected. Private Passenger Automobile Insurance PACICC launched the Why insurers fail Ontario Alberta Atlantic Canada Ontario Alberta Atlantic Canada series of research reports to stimulate 1986 – 1989 0.99 0.63 0.99 1986 – 1989 0.99 0.63 0.99 discussion about solvency issues in the 1986 – 2001 0.61 0.95 0.95 1986 – 2001 0.61 0.95 0.95 property and casualty insurance indus2002 – 2007 0.60 0.09 0.76 try. It is important to learn from past 2002 – 2007 0.60 0.09 0.76 Source: IBC Insurance Information Division, Private Passenger Automobile Economic Trends Exhibit failures in order to strengthen our capacSource: IBC Insurance Information Division, Private Passenger Automobile Economic Trends Exhibit Shading indicates a period that included rate regulation ity to reduce the risk of insurer failure in Shading indicates a period that included rate regulation the future. PACICC’s latest research demonstrates bling the company” in Claims this manner that inadequate pricing of insurance is tional revenue. For example, Figure 1 – Comparing MarkhamFigure General 1and Advocate General’s Pricing and Figure 1the – Comparing Markham General Advocate Pricing and Experience theand Industry Average proves toGeneral’s be successful, butClaims more often by far the most pervasive insolvency risk compares pricing experience forto auExperience to insurance the Industry Average (automobile policies) these approaches cause even greater factor. First and foremost, this finding tomobile insurance policies issued by (automobile insurance policies) Frequency Pricing Severity already-vulnerable companies. for highlights the critical importance of trouble General and Markham General Advocate Frequency Pricing Severity (claims per# policies issued) (average premium) (average claim) 450 – the product pricing decisions taken by Canadian property and casualty — two 300 – (claims per# policies issued) (average premium) (average claim) 450 – 300 – insurance pricing the senior managements of insurance insurers that became insolvent and were Claims costs and 400 – 250 – 400 – companies. In addition, it may help inordered to be wound-up300— to the in- need to stay linked 250 – – 200 – dustry average price. In 300 addition to the Anything systemically disrupting the surance supervisors better focus on – 250 – 200 – both of these link between150pricing evident under-pricing, 250 and expected risks that have historically signalled po– – 200 – 150 – companies also incurred higher-than- claims costs increases the risk of insol- tential insolvency concerns, particularly 100 – 200 – 150 – average claims severity and frequency. vency. Experience in Canada and the for insurers underwriting rate-regulated 100 – 150 –– 50 – 50 “gam- United States indicates which There may be scenarios in that stricter forms products. $0 – $300
120 – 120 – 100 –
100 – 80 – 80 – 60 – 60 – 40 – 40 – 20 – 20 – 0– 0–
500 –– Markham General
Markham General
Advocate General
Advocate General
0–
Markham General
Markham General
50 – 0– Markham General Advocate General Advocate General 0– Markham General Advocate average General Advocate General Thick black line represents the industry
Thick black line represents the industry average
Figure 2 – Relationship between Average Price and Average Claim* (all provinces 1986-2007) Figure 2 – Relationship between Average Price and Average Claim*
June 2009 Canadian Underwriter
41
pg42,45Alberta v1__DG_VM
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Application for
Credit
Insurance Brokers Association of Alberta (IBAA) 2009 Convention
David Gambrill Editor
CEOs at the IBAA’s annual general meeting suggest the allowed use of credit for underwriting purposes should be based on improved public education, clear regulation and competitive fairness. “Is credit scoring here to stay?” an audience member asked a panel of insurance company executives at the Insurance Brokers Association of Alberta (IBAA) in May 2009. The seemingly innocent question is loaded: in many Canadian jurisdictions, it is against the law to use a person’s credit scores for the purpose of underwriting auto insurance policies. But credit scoring can also be used legally to underwrite both home and commercial insurance in some jurisdictions. Unsure about what is allowed and what isn’t, brokers and members of the public have recently gone to the press and asked regulators to clarify the extent to which credit scoring is not only legal, but used. Arthur Hagan, deputy superintendent of insurance, kicked off the IBAA’s annual general meeting in Jasper by saying the Canadian Council of Insurance Regulators (CCIR) is undertaking
42 Canadian Underwriter June 2009
a survey of 33 insurance companies to find out who is using credit scoring for underwriting property insurance. Hagan described credit scoring as “a hot issue” at the most recent CCIR meeting in Toronto. Later at the IBAA’s AGM, Peter Blodgett, president of the Insurance Brokers Association of Ontario, called for a “total prohibition on credit as it relates to all personal lines property and casualty insurance in the province of Ontario.” The debate thus stoked, insurance company executives on the IBAA panel suggested any “staying power” of credit scoring would depend in part on three factors: • the transparency of its use to brokers and consumers; • the clarity with which the use of credit as an underwriting variable is regulated; and • whether or not the use of credit would create an unfair competitive disadvantage between insurance companies. Several insurers on the panel pointed out that credit scoring does serve a useful purpose in underwriting.To help illustrate the point, Jean-Francois Blais, president and CEO of Axa Canada, told two stories.The first recalled his early experience as a CEO talking to brokers about what constitutes a good risk. “My first question to brokers was always the same,” Blais said. “It was: How do
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C pg
CIP June
5/13/09
4:39 PM
Page 53
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.
British Columbia
Toronto
Victoria: CIP Society Golf Tournament . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . June 24
PROedge seminar: Succession Planning: Who Will Lead? . . . . . . . . . . . . . . . . . . . June 25 CIP Society Golf Tournament . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . September 21
Edmonton 21st Annual CIP Society Golf Tournament . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . August 24 PROedge seminar: Environmental Liability . . . . . . . . . . . . . . . . . . . . . . . . . . September 18
Hamilton
Saskatchewan
Ottawa
Regina: PROedge seminar: Finance for the Non-Financial Professional . . . . . . . . June 24 Saskatoon: PROedge seminar: Finance for the Non-Financial Professional . . . . . . . . June 25
11th Annual CIP Society Golf Tournament . . . . . . . . . . . . . . . . . . . . . . . . . . September 25
Halifax
CIP Society Golf Tournament . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . September 25
CIP Society Beach Volleyball Tournament . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . August 27
London
11th Annual CIP Society Golf Tournament . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . July 14 Keeping you at the forefront of the P&C industry. The CIP Society. MEMBERS BENEFIT. www.insuranceinstitute.ca/cipsociety
pg42,45Alberta v1__DG_VM
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you define a good client? The answer I got all the time was a client that pays well.You don’t want in any of your business a client that doesn’t pay well.” In helping to determine whether or not a client “pays well,” credit scoring can be used to identify a comparatively safe financial risk. Blais’ second story illustrated how credit scoring can be used to determine an unacceptable risk. “My other story is about the origin of the subprime,” Blais said. “What is the subprime? The subprime is nothing but lending money to a person with a poor credit score at a reasonable rate.This is why we are in this mess today. It’s lending to people who were not able to repay that money.” Blais concluded that basically insurers are using credit scoring as a means to identify financial risk before insuring it. “But we have to be careful that we use it with the knowledge of the consumer and that there is education around this, and that there is some regulation so that there is no misuse,” he said. Robin Spencer, president and CEO of Aviva Canada, observed that credit scoring has “underpinned so many parts of insurance for literally decades, if not centuries, particularly on the commercial lines side.” He thought it would be inappropriate for Canadian insurers to turn their backs on the technique altogether. “This is a fantastic way of being able to use one of the variables that allow us to price, hopefully, more accurately for appropriate risk,” he said. “I don't think we should be scared by this. I think it’s an exciting development in the industry. I think it’s just an education piece, and then we need …a level playing field and clear guidelines.” Shawn Desantis, vice president of personal insurance at RSA, said his position on credit “is that if it is something that will allow us to segment our customers better and understand the price modes better with customers, we will find a way to use it.” He said RSA doesn’t use credit on an individual basis, but does use it at a “higher” (presumably aggregated) level to gain a better understanding of its overall portfolio. “I
Page 13
support any underwriting techniques that would allow us to segment better, as long as there is respect for the customer,” he said. Charles Brindamour, president and CEO of Intact Insurance Company of Canada, said the future use of credit scoring would depend on two factors. “The first is information,” he said, noting that the credit scoring debate in Canada is relatively new. “There is a big information gap [in Canada] that does not necessarily exist in other jurisdictions. In fact, in the United States, the use of credit scoring is fairly well defined.” The second issue with credit scoring, he said, is how it is used. “In other words, it’s the sloppy use of credit
“[Credit scoring] is a fantastic way of being able to use one of the variables that allow us to price, hopefully, more accurately for appropriate risk. I don’t think we should be scared by this.” scoring that is causing the growth of the problems ... I think if the actions taken based on a poor credit score are adverse, this is a problem with social implications.We [at Intact] don’t deny access to our product for poor credit scores.” Many of the insurers on the panel agreed that consultation with regulators would go a long way towards resolving the transparency issue. As it stands, the public does not know enough about the extent of its use, said Diane Brickner, president and CEO of Peace Hills Insurance. “We at Peace Hills do not use credit scoring,” she said. “I have issues with credit scoring and one of them is the lack of transparency to the broker and to the client… My concern would be that you as a broker [should] know what we are doing with our credit scoring and why insureds are being [judged] by credit.” Ken McRae, president and CEO of Wawanesa Mutual Insurance Company, said the opportunity to air publicly some
of the issues around credit scoring made him “kind of happy” that it’s coming out as an issue. “It’s becoming [obvious] that it is being used more than most people thought, and we’re very supportive of this being reviewed by a number of groups — including regulatory and political forums — so that there can be clarity on whether it is on fact an acceptable political or social variable,” he said. But even when the public is educated about why and how insurers use credit scoring, consumers still don’t want to be assessed by their insurer for credit risk, said George Cooke, president and CEO of The Dominion. “When we ask consumers whether or not they find credit scoring acceptable for use in auto insurance and home insurance, the vast majority say, ‘No, they don’t,’” said Cooke. “When you explain to them the [argument] about segmentation and price differential, they understand, but they still tell you,‘No, they don’t.’ When you then ask them why, they tell you they don’t understand the connection between a credit score and the price of an automobile product or a credit score and the price of a homeowners’ product. They do understand [the relevance of] the type of vehicle, the condition of the repair of the house, the number of [driver] convictions, the number of claims made. You get to the point where you say: ‘Okay, the public doesn’t get it.Your customers, your policyholders, don’t want this. They don’t like it.’ So I say to myself:‘Do we need to use it?’ And the answer is very clear,‘No, you don’t.’” A further issue arises when some companies go ahead and use credit scoring, while others do not. “When our competitors use it and we do not use it, are we being selected against?” asked Brickner. She said when a customer is rejected because of a particular criterion like a credit score, “that person has to go somewhere [for insurance], and so it comes to us. And if it’s not good business, how are we going to compete?...Either all should be allowed to do it, or all should not be allowed to use it.”
June 2009 Canadian Underwriter
45
pg46,47Catlin_v1_DG_VM
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Domestic
David Watts
Aviation Underwriting Manager, Catlin Canada
For the first time in the country’s history, Canadian airlines are being led by a Canadian-based insurer. Market capacity always ebbs and flows over time. But despite Canada having the second-largest general aviation market in the world, little domestic capacity had returned to Canada during the last two market cycles. As a result, there has been a distinct lack of a domestic aviation market in Canada. Consequently, much of the Canadian aviation business had been placed in a London-centric manner, since the London (England) insurance market is still the largest single centre for aviation insurance. Lloyd’s, of course, is not a single entity but a collection of individual risk-takers who make up a market within a market. The other members of the insurance market are various companies whose underwriting rooms are located in the city of London within close proximity to the Lloyd’s building.The London market has the premier position as lead underwriter of all the worlds’ aviation business outside the United States. As everyone is aware, global market capacity rises and falls. It is interesting to note that in Canada, the change in capacity over the market cycle is exaggerated, as the global group of play-
46 Canadian Underwriter June 2009
ers that write aviation business also need to meet Canadian licensing parameters. In addition, any U.S.-tied capacity gets arrested due to OFAC limitations, since much of the servicing of Cuba comes from Canadian operators. One benefit of having domestic capacity available for airline placements is a spillover effect into the other classes of aviation business we write. If one can write lines on a brokers’ portfolio of airline accounts, it does give an underwriter the ability to consider other aviation classes when the broker is prioritizing market approach. There is also the relationship factor that becomes much stronger with a domestic presence. Worldwide, there has almost always been overcapacity; this has translated into a strong competitive aspect to the market. The almost-perpetual state of competitiveness has posed a challenge for insurers to maintain underwriting discipline and underwrite the business at an acceptable rate.The size and value of the individual aircraft lost — and, as a result, the sizes of the total bill each year to pay for these losses and other numerous partial and attritional losses — produces potential large variances in annual loss consequences.These two factors work together to create an airline sector with highly volatile results. Aviation as a class can be broken down into various subsectors.A basic and common classification includes the subsectors of airline, manufacturers,
Illustration: Graham Roumieu
Flight Path
pg46,47Catlin_v1_DG_VM
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general aviation and space. In the airline sector, the global aviation market consists of something in the region of 300-400 risks (depending on how you classify an “airline”). Individuals in this category would operate 16,000-20,000 jet and turbo prop units; from these, premium must be generated to pay the claims arising from the sector. Statistically, there are somewhere between 20-30 total losses each year (interestingly, this figure has been steady since the 1950s, notwithstanding the enormous growth in the industry over the intervening years). Currently there is approximately US$1.5 billion worth of premium within the global pool (post 9-11, it was US$3.8 billion). Incurred losses are averaging US$1.5 billion; of that, US$750 million on average is considered attritional. No single insurer has the financial resources to retain a risk of the size of a major airline or even a substantial portion of such a risk. Each airline insurance policy has to be effected with a number
There is a distinct advantage to being a leader market, given that a known lead insurer has preference to obtain negotiated terms at a higher premium. of insurers each taking a share. At one time, all airline risks were placed on a complete subscription basis. In other words, there is one set of terms and all participating underwriters wrote the risk on that basis.Today, most airline risks are placed on a verticalized basis to ensure the lowest possible pricing is achieved. In effect, each participating insurer bids for their share, negotiating a price for their particular share. One underwriter acts as leader for technical matters, such as agreement of terms and conditions other then pricing, as well as administration of claims.The leader sets the initial terms from which many of
the follower’s terms are predicated (i.e. pending the pecking order… 5%, 10%, 15% off leader). In order for another broker to develop alternate terms in such a finite market, they need a valid and known alternate lead. Being known as a viable lead prioritizes you as a market in the broker’s mind. With this in mind, Catlin Canada has stepped in as a lead insurer. It is the first time any Canadian airline has been led by a Canadian-based insurer.There is a distinct advantage to being a leader market, given that a known lead insurer has preference to obtain negotiated terms at a higher premium. The lead insurer also gains the benefit of the extreme capacity currently enjoyed by the aviation insurance purchasing public. Since arriving in Canada three years ago, Catlin has worked very hard trying to position itself as a preferred domestic aviation insurance market. Within the small world of aviation insurance, this represents an important coup.
."(%* 3*"% y $MBJNT BOE 1SPEVDU 17 years in the travel and financial services industry.
June 2009 Canadian Underwriter
47
pg48,49Court_v1_DG_VM
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Race
to the Courthouses
The Supreme Court of Canada’s decision in Tech Cominco may send parties racing to Canadian and U.S. courts to obtain a ruling in their preferred legal forum. David Cameron
Partner, Burchell Hayman Parish
Burchell Hayman is a member firm of Arc Group Canada
Early this year, in Tech Cominco Metals Limited v.Lloyd’s Underwriters et al., the Supreme Court of Canada declined to end coverage proceedings brought in British Columbia by an insurer, notwithstanding the existence of prior and parallel proceedings having been brought in Washington State by the insured. With the Supreme Court’s decision, the race to courthouses in British Columbia and Washington State by the insurer and the insured may be replaced by a race to the finish line, with both parties attempting to obtain a final ruling in their chosen legal forum. If so, any substantive merits of this decision may be rendered meaningless, as technical or tactical procedures, such as filing first, may prevail in the end. At some point, the Supreme Court may have to render a more far-reaching opinion.That is, if the court wants to better ensure procedural technicality does not trump the court’s desire to see a matter heard in the most appropriate legal forum.
48 Canadian Underwriter June 2009
THE TECH COMINCO CASE The battle between the insured, Tech Cominco, and its insurers, including Lloyd’s Underwriters, followed the discharge of waste material into the Columbia River in British Columbia. The waste material accumulated in the Upper Columbia River and Lake Roosevelt in Washington State. Private citizens and Washington State in 2004 sued Tech Cominco in U.S. District Court, seeking to hold it liable under an American statute for environmental property damage purportedly caused by the contamination. As a result, Tech Cominco commenced action in Washington State against its insurers, seeking a declaration of coverage. On the same date,Tech Cominco’s insurers commenced actions in British Columbia, seeking a declaration that the insurers had no obligation to defend or indemnify Tech Cominco for any of the claims. Following this race to courthouses, Tech Cominco’s insurers brought applications before a judge of a U.S. District Court seeking dismissal of Tech Cominco’s action on the basis that the more appropriate legal forum for hearing the claims would be British Columbia. However, these applications were unsuccessful. In response,Tech Cominco brought an application before the B.C. Supreme Court seeking an order to stay the B.C. actions, arguing that the appropriate legal forum was Washington State —
pg49NewJune9/09
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especially in light of the U.S. District Court’s decision that it had jurisdiction to preside over the coverage matters. Notwithstanding this decision in the United States, both the British Columbia chambers judge who heard Tech Cominco’s application and the B.C. Court of Appeal dismissed Tech Cominco’s pleas, deciding that a multiplicity of proceedings is only one factor to be taken into account when deciding the appropriate legal forum for the determination of a matter. At the heart of this jurisdictional dispute is the B.C. Court Jurisdiction and Proceedings Transfer Act (CJPTA), legislation intended to codify principles to determine jurisdictional issues. Section 11 of the act requires a court to consider a number of circumstances when determining whether a court inside or outside British Columbia is the more apprpriate forum in which to hear a proceeding. • The comparative convenience and expense for the parties to the proceeding and for their witnesses in litigating in British Columbia or an alternate forum. • The law to be applied to the issues in the proceeding. • The desirability of avoiding multiplicity of legal proceedings. • The desirability of avoiding conflicting decisions in different courts. • The enforcement of an eventual judgment. • The fair and efficient working of the Canadian legal system as a whole. Before the Supreme Court of Canada, Tech Cominco argued s. 11 did not apply to situations in which a foreign court had asserted jurisdiction. Writing on behalf of the court, Supreme Court of Canada Chief Justice McLaughlin rejected this argument, stating s. 11 is intended to constitute a complete codification of the common law test for determining the appropriate forum. In its fallback position, Tech Cominco argued the assertion of jurisdiction by a foreign court “is a factor of overwhelming significance in the determination of whether the local forum is appropriate.”Therefore, as a result of the U.S. District Court’s decision to assert jurisdiction, B.C. courts are bound to stay the parallel B.C. actions. The Supreme Court rejected this argu-
ment, too. Even if it were to be found that the actual assertion of jurisdiction by a foreign court is a factor overriding all others, the legislation should allow for this, the Supreme Court ruled. Furthermore, McLaughlin wrote, policy considerations do not support “a foreign court’s prior assertion of jurisdiction” as an overriding and determinative factor. To do such, she wrote, would precipitate a rush to the courthouse by the parties to secure a prior assertion of jurisdiction in
a preferred jurisdiction, irrespective of whether it was the appropriate jurisdiction. The chief justice acknowledged that allowing the B.C. actions to proceed “places the parties in the difficult position of having legal proceedings on the issue of insurance coverage in two separate jurisdictions.” But as she noted, the court’s principal focus is to ensure, to the extent it can, that an action is tried in the jurisdiction with the closest connection to the action and the parties.
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June 2009 Canadian Underwriter
49
pg50,51Property_v1_DG_VM
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Measuring Property Coverage Limits
Klaas Westera
Executive and Business Consultant, K. Westera Services Inc.
Reconstruction cost is the appropriate measure for determining property limits, although many feel that market value is the more intuitive answer. There has always been a lot of confusion in the market as to what dollar limit should be used in property policies, be they residential or commercial. Terms used to define the limit, such as market value, new construction and reconstruction, contribute to the confusion. The correct answer, reconstruction, is quite straightforward. Knowing why reconstruction is used can help to make the concept clear and understandable to everyone in the market.
COMMON MISCONCEPTIONS Most of us have experienced conversations with others who feel proper coverage should be equal to the market value of the property. After all, if that was the amount paid for the property, shouldn’t that be the amount used to insure it against loss? Others feel coverage should be equal to the amount quoted by a contractor for new construction of the building. This seems to make sense, especially when it comes from a credible contractor.
50 Canadian Underwriter June 2009
However, both of these views are wrong. Market value is a speculative, market-driven number that involves many factors, including land, location, the building and its fixtures, services, neighbourhood, landscaping, access, local supply and demand and many others. Market value is usually much higher than the cost to rebuild, although in some instances it can be lower. New construction quotes, although they are closer to the true cost of reconstruction than market value, also miss the target in significant ways. Many of the individual costs within new construction quotes are wrong; many more are missed altogether.These quotes can easily deviate from the actual reconstruction cost total by 30% or more.The exact percentage error will vary on a case-by-case basis, but a significant error is fundamentally true in all cases. When a property loss occurs, the coverage should include the total amount of all of the anticipated costs associated with the reconstruction of that property back to its previous state in a very timely manner.The anticipated costs associated with the reconstruction of the building are as follows:
Costs Associated with Urgency Property losses are not planned. When they do occur, there is an immediate need to rebuild as soon as physically possible. Apart from the serv-
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ice imperative of getting families and businesses back into their homes and buildings, other financial drivers contribute to the need for urgency. These drivers include costs associated with temporary relocation, business interruption and temporary operations, among others. Minimizing these costs, which increase over time, means urgency must be applied to all reconstruction efforts. That means the price of services, labour and materials will be higher compared to the costs associated with pre-planned construction projects. Incremental cost (Approx.): 5%.
Demolition and Debris Removal Major losses almost always require the demolition of still-standing structures and the removal of debris. This must be done for safety reasons and to prepare the site for reconstruction activities. Debris includes not just above-ground building debris but also foundation cement and materials. In addition, it includes soil contaminants resulting from the loss event and dangerous materials like asbestos. The incremental costs created by this activity can range from 1% in minor losses up to 150% in extreme cases. Incremental cost (Approx.): 5%. Architect Fees In new construction, architectural fees are spread over many similar and identical homes being built in one or more subdivision projects. Commercial contractors also minimize costs over many similar new buildings from site to site. But in reconstruction, no such economy of scale exists. New, one-of-a-kind plans need to be drawn up from scratch as quickly as possible so that planning can begin. A premium is paid for the custom work and for the shortened lead-time. Residential/Small Commercial Incremental Cost (Approx.): 10% to 25% Large Commercial Incremental Cost (Approx.):4.5% to 15% Specialty Structures Incremental Cost (Approx.) 16% to 20%
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Materials and Labour Loss reconstruction projects are forced to pay premiums for all services, materials and labour. All benefits from purchasing in bulk and scheduling activities well in advance are lost. These higher prices could be further inflated if the loss occurred during the wrong season, or if local labour resources and materials are scarce. Incremental costs might vary wildly depending upon exact local circumstances.To grasp the full ramifications of this, just consider a scenario in Whistler, B.C., in which a commercial building suffers a total loss and needs to be reconstructed at this moment in time. Based on the short supply and increased demand for materials and labour in the area because of construction associated with the 2010 Olympic Games, the
Market value is usually much higher than the cost to rebuild, although in some instances it can be lower. materials and labour costs would be incredibly higher than under normal circumstances. Incremental Cost (Approx.): 7.5% to 50%
Worksite Access and Collateral Damage Under new construction, worksites have a lot of room for work areas and material storage. But at reconstruction sites, there is typically less room because of debris, landscaping, fences and other buildings. This causes more work and material storage to be done further away from the site, thus extending project time and cost. In many cases, physical access requirements result in collateral damage to existing property on and beside the insured’s property. Getting heavy equipment through to tear down dangerous walls and structures serves as a good example of incremental collateral damage expense. Incremental Cost (Approx.): 1% to 2%
Inflation If a loss occurs nine months into a policy, inflation might well have increased material and labour costs dramatically since the policy’s inception. And yet the insurer must pay the higher prices to meet the policy’s terms. This type of additional cost is not incurred for new construction because materials and labour costs are usually negotiated ahead of time.Take the cost of structural steel, steel studs and reinforcing bars, for example: for all of these materials, prices increased by well over 40% between 2004-05 due to market shortages. Inflationary and wild price fluctuations cannot be predicted easily and can become extra costs for insurers. Incremental Cost (Approx.): 0% to 5% General Contractor Profit and Overhead These two items are pretty standard in the construction industry, but in reconstruction the percentages are taken against a higher cost. This increased amount covers extra costs incurred during the management of a more complex re-construction project. If the total net increase in cost for reconstruction versus new construction is only 25%, then the approximate incremental cost for profit and overhead would be real. Incremental Cost (Approx.): 5%
SUMMARY Once all of the factors involved with re-construction versus new construction are understood, it becomes evident that re-construction costs will always be demonstrably and significantly higher. The incremental percentages listed can be argued one way or the other and will vary from reconstruction project to project. But the fact remains that these incremental costs are real and need to be included in property limits to protect the insured and the insurer alike. The author would like to acknowledge that e2Value, an information service provider to the Canadian property and casualty industry, supplied some of the data used in this article.
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MOVES & VIEWS
UPCOMING EVENTS: FOR A COMPLETE LIST VISIT
www.canadianunderwriter.ca
AND CLICK ‘MY EVENTS CALENDAR” ON THE HOME PAGE
1
Cathy S. Ramsundar was appointed president of the Toronto Insurance Women’s Association (TIWA). TIWA is the Toronto chapter of the Canadian Association of Insurance Women (CAIW). She received the appointment at the associations’s annual general meeting on May 19. Ramsundar is an associate insurance broker with Mitchell Sandham Inc. in Ajax, Ontario. She has worked in the general insurance arena since 1974. Nancy Carnahan has assumed the role of TIWA’s first vice president and Michelle Cole-Kennedy its second vice president.
2
Dan Lawrie Insurance Brokers Ltd. in Hamilton, Ont. has achieved the Gold Standard Broker status by Risk Management Standards. Gold Standard Brokers meet rigorous international guidelines for best practices in all aspects of broker management, Dan Lawrie [2] pointed out in a press release. The process to become a Gold Standard Broker requires a scored third-party operations audit of the following components of a broker’s office: human resources; information technology; finance; customer service; organiza-
52 Canadian Underwriter June 2009
tion capacity and producer/ CSR activity. Brokers must achieve and maintain a score of 90% or better on their overall weighted audit (there is a review audit every two years in order to maintain the Gold Standard Certification).
3
ACORD, a global insurance data standards body, presented its Innovative Implementation Award to Temple Insurance and Frank Cowan Company for their work in improving information exchange in commercial insurance. “We were familiar with ACORD through reinsurance projects we had completed in the London market,” said Peter Walker, executive vice president and CIO of Temple Insurance Company. “Although the Canadian managing general agent business environment is different, we felt we could leverage our knowledge and understanding” of ACORD to streamline the exchange of data with clients in the Canadian context, he added. ACORD said its standards have been widely used for personal lines and commercial lines in the United States and have received acceptance in the London market with reinsurance transactions. But “the Canadian implementa-
1 tion is unique functionally and geographically, and shows the extensibility of the data standards.”
4
The 28th Annual Ontario General Insurance Hockey Tournament has raised more than Cdn$30,000 for the Niagara chapter of Big Brothers Big Sister and Camp McGovern. The event took place in Fort Erie and Welland on Apr. 17-19 and was organized by a committee comprised of members from the Niagara South Insurance Brokers Association, Ontario Insurance Adjusters Association—Niagara Chapter, CARSTAR, Woodhouse Disaster Cleanup and a group of insurance industry members from Kitchener-Waterloo.
5
The Institute for Catastrophic Loss Reduction has been accepted as an advisory institution into the working
2 group of the United Nations Environment Programme Finance Initiative (UNEP FI). UNEP FI is a global partnership between the United Nations Environment Programme (UNEP) and the financial sector. More than 170 institutions, including banks, insurers and fund managers, work with UNEP to understand the impact of environmental and social considerations on financial performance. The UNEP FI Insurance Working Group (IWG) established an academic working group in 2008. The mandate of the academic working group is to provide a research foundation for the development of “principles for sustainable insurance,” and to support a global network of insurers proactively addressing environmental, social and governance (ESG) factors. The UNEP FI IWG is an alliance of insurers and reinsurers committed to integrating ESG factors into their core
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tax activities, while also guiding reinsurance strategy. Hoskins previously served as executive vice president and CFO at Old Mutual US.
7 business strategies and operations to enhance long-term company value.
6
Shelly Gobin, senior vice president and CFO at Kingsway Financial Services, has left the organization. Daniel Brazier will assume the responsibilities on an interim basis. Brazier was previously CFO of the wholesale banking division at Standard Chartered Bank. He has been involved in strategy development, business transformation and finance re-engineering during his career.
7
ING Canada officially became Intact Financial Corporation, after shareholders approved the name change in May. The name change reflects the acquisition by institutional and retail investors on Feb. 19 of all the shares held by ING Groep in the company. As a result of these transactions, ING Canada became an inde-
8 pendent and widely-held Canadian company without any ties to its previous majority shareholder. “Our new name says it all,” Charles Brindamour, president and CEO, said in a release. “Intact is not only an affirmation of a new corporate identity; it is a reflection of our promise to get our customers back on track. As we proceed on our journey, we will continue to take the company to new levels by taking full advantage of our solid operating platform, our financial position and our strong team.”
8
Richard Hoskins has been appointed executive vice president and CFO of the North American region of Aviva North America effective May 11. Aviva’s North America region includes its Canadian property and casualty company and its U.S. life and annuity business. Hoskins will lead Aviva North America’s finance, actuarial, risk management, capital and
9
RSA has launched its new Marketing Academy along with an accrediting Marketing Foundation Program. Launched in St. John’s in early May, the academy is a resource centre to support the company’s goal of investing in the skills and development of its staff. The two-day marketing foundation program is one of a series of ‘best practice’ programs available through the Marketing Academy’s training curriculum. It will cover topics such as customer insight, brand management, proposition development and marketing communications.
10
The Economical Insurance Group (TEIG) has entered into an agreement with Policy Works Inc. to deliver a commercial lines data exchange solution between the Policy Works Commercial Management System (CMS) and TEIG’s brokerEXPRESS Web-quoting facility. Expected to be completed in Summer 2009, the integration of TEIG’s brokerEXPRESS quoting site with Policy Works is intended to provide TEIG’s
brokers with round-trip data exchange capability. The integration would allow TEIG brokers to upload commercial lines risk and rating detail directly from Policy Works into brokerEXPRESS and download quotations back into Policy Works. “This will reduce double entry of data and significantly improve response times on new business, effectively enabling brokers’ to deliver better overall customer service,” TEIG says in a press release.
11
The Niagara South Insurance Brokers’ Association (NSIBA) has launched a Web site that allows consumers to search for information on members and insurance related topics. “Using an insurance broker is all about having access to choice and information,” Jeff Reuter, president of NSIBA, said in a release. “And by launching a new and improved Web site, we are inviting consumers to look up our members, the insurers they represent and a number of useful resource items.” The site also provides useful information such as glossary of terms, insurance tips, industry links and downloadable forms. The site’s address is: www.insuranceniagara.com.
June 2009 Canadian Underwriter
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More wishes will be coming true this year thanks to the 15th Annual Starlight Insurance Gala, held in support of Starlight Starbright Children’s Foundation. The event was black-tie, but that didn’t stop guests from “taking a walk on the wild side” — the theme of the evening. Sixteen wishes were sold, raising a grand total of Cdn$150,000.
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Announcement
Scott Lennox BMath, ASA, FCAS, FCIA Linda Goss, Senior Vice President and Chief Actuary, of The Economical Insurance Group® is pleased to announce the appointment of Scott Lennox, BMath, ASA, FCAS, FCIA, to the position of Vice President, Pricing and Research and Development. Scott is a Fellow of the Casualty Actuarial Society as well as the Canadian Institute of Actuaries and brings with him years of industry experience. In his role with The Economical Insurance Group, Scott is responsible for directing all product, pricing and research and development analyses for all lines of business across the country and for all of TEIG’s member companies. The Economical Insurance Group is one of the largest property and casualty insurers in Canada with $1.9 billion in annual premium volume and $4.4 billion in assets. Based in Waterloo, Ontario, this Canadianowned and operated company services customers’ needs through branches and service offices across Canada and in the United States.
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The Ontario Risk and Insurance Management Society (ORIMS) hosted its AGM and dinner on May 21 at the Royal York Hotel in Toronto. ORIMS president Steve Pottle introduced and thanked the 2009 council; he then announced a Cdn$5,000 donation to Habitat for Humanity before turning the spotlight over to Dave La Fame, a singer-comedian who can impersonate more than 200 different performers.
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Announcement
Chris Van Kooten BMath, FCAS, FCIA Linda Goss, Senior Vice President and Chief Actuary, of The Economical Insurance GroupŽ is pleased to announce the appointment of Chris Van Kooten, BMath, FCAS, FCIA, to the position of Vice President, Corporate Actuarial. Chris is a Fellow of the Casualty Actuarial Society as well as the Canadian Institute of Actuaries and brings with him years of industry experience. Within The Economical Insurance Group, Chris is responsible for all reserving analyses, Corporate Planning, dynamic capital adequacy testing and reinsurance information requests for Actuarial Services. The Economical Insurance Group is one of the largest property and casualty insurers in Canada with $1.9 billion in annual premium volume and $4.4 billion in assets. Based in Waterloo, Ontario, this Canadianowned and operated company services customers’ needs through branches and service offices across Canada and in the United States.
June 2009 Canadian Underwriter
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Catlin Canada held an officewarming event at their new Toronto office on May 2. The open house saw clients and friends partake in food, drinks and music spun by a DJ.
www. 360 -value.com/underwriter 800.931.9228
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More than 100 industry representatives attended the 50th Annual Reception of the Quarter Century Club, held May 6 at the Hilton International in Toronto. The event was a roast for Debbie Robinson, executive director for the Canadian Litigation Counsel (CLC). During the festivities, Gilbertson Davis Emerson LLP and McCague Peacock Borlack McInnis & Lloyd LLP each donated Cdn$2,000 to Camp Bellaleo on Belwood Lake.
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Friends and members of the Insurance Brokers of Toronto Region (IBTR) saddled up for a good time at its annual Friendship Night on May 7 at Spirale Banquet Hall. Guests enjoyed good food, drinks, loads of prizes and ample networking opportunities.
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June 2009 Canadian Underwriter
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The Property Casualty Underwriters Club (PCUC) held its May luncheon in Toronto on May 20. Speakers Jack Lee, vice president of BFL Canada, and Joel Baker, president and CEO of MSA Research Inc., discussed ‘The World’s Financial Crisis: The Effects of Systemic Risks on the Property/ Casualty Insurance Industry.’
The 28th Annual Ontario General Insurance Hockey Tournament raised more than Cdn$30,000 for Niagara chapter of Big Brothers Big Sister and Camp McGovern. The event took place in Fort Erie and Welland on April 17-19. It was organized by a
committee including members from the Niagara South Insurance Brokers Association, Ontario Insurance Adjusters Association (Niagara Chapter), CARSTAR, Woodhouse Disaster Clean-up and insurance industry members from Kitchener-Waterloo.
ADVERTISERS’ INDEX ACE INA Insurance Applied Systems Canada, Inc. Blouin, Dunn LLP
See all of our Insurance Industry Event Photos Online within the
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Canadian Underwriter June 2009
Broker Builder Corp. Compu-Quote, Inc. Crawford & Company (Canada) Inc. Cunningham Lindsey Canada Custom Software Solutions, Inc. e2Value Inc. FirstOnSite Restoration
7 5 19 17 67 (IBC) 49 9 68 31 36, 37
Great American Insurance Group
29
The Guarantee Company of North America
39
i-hire.ca
43
Intact Insurance Company
2 (IFC)
Insurance Institute of Canada
21, 44
Keal Technology
10, 11
PolicyWorks
25
RIMS Canada Conference 2009, St. John’s
35
RSA
15
TIC Travel Insurance
47
WICC Quebec Chapter
63
Xactware
59
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Lawyers’ Professional Indemnity Company (LAWPRO)
‘Survival Strategies — A Bridge Over Troubled Waters: Local, National and Global Perspectives’ provided the thematic basis for the CIP Society’s 2009 Symposium. Delegates participated in interactive group discussions and seminars, and heard keynote speeches by Warren Jestin, senior vice-president and chief economist, Scotiabank Canada; Glenn Gibson, global chief strategy officer of Crawford & Co.; and Dr. Lloyd Atkinson, a global economic specialist and best-selling author.
Duncan D. Gosnell Executive Vice President and Secretary for the Board.
The LAWPRO Board of Directors is pleased to announce the appointment of Duncan D. Gosnell to the new position of Executive Vice President and Secretary for the Board. Mr. Gosnell joined LAWPRO in 1995 as Vice President, Underwriting, with responsibility for the company’s professional liability insurance program, and later for its customer service department. In his new role, he will retain these responsibilities, as well as undertake additional, executive-level assignments and assume chief executive responsibilities on an acting basis if needed. Mr. Gosnell holds degrees in both law and engineering, and is called to the bar in both Nova Scotia and Ontario.
See all of our Insurance Industry Event Photos Online within the
LAWPRO provides malpractice insurance and risk and practice management programs to about 22,000 Ontario lawyers, and title insurance in all Canadian jurisdictions. LAWPRO’s TitlePLUS title insurance program is the only all-Canadian title insurance product on the market today.
ONLINE PHOTO GALLERY at canadianunderwriter.ca/gallery June 2009 Canadian Underwriter
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The Property Casualty Underwriters Club (PCUC) held its Spring Thaw on April 30 at the Rosewater Room in Toronto. The annual event added some sunshine to everyone’s day. Attendees warmed up to great company, cocktails, food and special entertainment.
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