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
S E PT E M B E R 2 009 A Business Information Group Publication #40069240
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Millions of Canadians rely on us for their security.
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And we rely on you to deliver it. All across this vast and beautiful country, the majority of Canadians depend on their Insurance Broker to advise them on their insurance needs; and that all-important sense of security. None of this would be possible without the services of insurance carriers of the highest calibre. The Insurance Brokers Association of Canada and our members are proud to count so many of the country’s renowned and trustworthy insurance companies as our friends and business partners. It is comforting indeed to be working with insurers that share a common commitment to the customer, providing the coverage they need, the value they seek and the service they deserve. It is with heartfelt thanks that brokers right across Canada pay tribute to the insurers we unhesitatingly recommend to clients, secure in the knowledge of their professionalism, cooperation and efficiency. Thanks to such partnerships, millions of Canadians rest assured that they, their families and all they possess, remain safe and secure. Your Best Insurance is an Insurance Broker
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VOL. 76, NO.9, SEPTEMBER 2009 CANADA’S INSURANCE AND RISK MAGAZINE. PUBLISHED BY BUSINESS INFORMATION GROUP
www.canadianunderwriter.ca
Sustaining the Boom
34
With Baby Boomers slated to retire from Canada’s property and casualty insurance industry en masse, the industry has responded by launching an impressive recruitment drive that aims to bring new, young blood into the profession. This approach may have overshadowed the equally important need to retain key people who have the experience and knowledge to pass along to the newcomers. BY VANESSA MARIGA
FEATURES
22
14 Public Boards
ITV Goes Public
Some of our current financial difficulties can be traced back to the way public companies have responded to regulators’ reactions to crises.
Insurance Bureau of Canada (IBC) is planning a public campaign to let homeowners know how important it is to value their homes correctly.
BY WILLIAM G. (BILL) STAR
BY CRAIG HARRIS
56
50 Insurance 2020
Deducting Benefits
Brokers need to start hustling now to catch up with technological changes that will change the face of how insurance is bought and sold in 2020.
When a personal injury action proceeds to trial, a debate arises as to who gets credit for income replacement benefits paid to a plaintiff by an insurer.
BY RICK RESTELL
BY BELINDA BAIN
4
Canadian Underwriter September 2009
18 Demographics
46 E-discovery
The Insurance Institute of Canada has released new research that identifies promising candidates for recruitment into the property and casualty insurance industry.
The courts have created a set of principles designed to guide the production of computers and relevant electronic files for use as evidence. BY JOSEPH OPPENHEIM
BY PETER HOHMAN
28 Fraud Analytics Data analytics are becoming much more sophisticated, allowing insurers to use them for the purpose of fraud detection. BY WES GILL
44 Mediating Expectations Sometimes mediations fail because trial lawyers do not manage their clients’ expectations properly, creating a situation in which insurers can’t settle with clients who expect to receive a “pot of gold.” BY BOB DOIRON
54 Open-Door Policy An insurer emphasizing transparency and disclosure over its desire to protect itself will earn the new business it seeks. BY FRANK CAIN
62 Modelling Change History will ultimately trump risk managers and country risk analysts who use static, mathematical models to predict the dynamism of human behaviours. BY PETER BEECHING
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Prou udly Se elects
Prou udly Se elects
2009 2 U Underw writers of the e Year 2009 2 U Underw writers of the e Year
The follow wing individ duals are being b recog gnized by the Canad dian Brokerr Network for their The follow individ duals and are being b recog gnized Canad Broker Network for their excellence ewing in underw writing t their under what the dian r role of an urnderwriter standingbyoffthe really is: standing of nderwriter really is: excellence e in underw writing and t their under f what the r role of an u to write great busine ess that sattisfies the clients’ c nee eds and cre eates a win-win for the e broker to write great busine ess that sattisfies the clients’ c nee eds and cre eates a win-win for the e broker er. What se ets these underwriterss apart from m other hard d working underwriters u s is their and insure er. What se ets these underwriterss apart from m other hard d working underwriters u s is their and insure attitude. They T comm municate in an open an nd effective e manner, and a they go o out of theiir way to attitude. They T comm municate in an open an nd effective e manner, and a they go o out of theiir way to explain heir mak ke suggest suggestions, ions, ifif nec nec cessary, to to help help our our explain th thee reasonin reasoningg behind behind th th heir decisio decisions ns and and mak ke cessary, member b brokerages s place the risk elsew where. The eir consiste ency and h helpful natu ure have member brokerages b s place the risk elsew where. The eir consiste ency and helpful h natu ure have made them m outstand ding underw writers who are a pleas sure to work k with. made them m outstand ding underw writers who are a pleassure to workk with.
Ke evin Auger Ke evin Auger Encon Group
Encon Group
Mickie Johns son
So overeign Gen eral M ickie Johns son
Rob berto Lopez Rob berto Lopez Zurrich Canada
Zurrich Canada
Brenda B Luca a
Brenda B CNALuca a
Angie Ramdeyo
Enccon Group
Intact Insurance
Paul Jackson Enccon Group
Juanita Mo orris-Chabot Juanita t Avviva Canada
Angie Ramdeyo Intact Insurance
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GCAN Av viva Canada F more info For ormation on the Canadia an Broker Ne etwork, conta act Steve Fry ye at (416) 36 68-7990.
So overeign General
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FThe For info ormation onrthe Canadia an T more Canad ian Broker Network i Broker Neetwork, contaact Steve Fryye at (416) 3668-7990. is:
T Canadian Brokerr Network is: The i
C CNA
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VOL. 76, NO.9, SEPTEMBER 2009
PROFILE
12 New Vistas The professional odyssey of Justin MacGregor, incoming president of the Insurance Brokers Association of Canada (IBAC), has taken many interesting tacks — including a fateful break-up with the banking world in 1977. BY DAVID GAMBRILL
SPECIAL FOCUS
8
Editorial
10 Marketplace 66 Moves & Views 68 Gallery
Editor David Gambrill david@canadianunderwriter.ca (416) 510-6796
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Associate Editor Vanessa Mariga vanessa@canadianunderwriter.ca (416) 510-6793
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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 Subscription Rates: 2009 Canada 1 Year $35.95 plus applicable taxes 2 Years $56.95 plus applicable taxes Single Copies $10 plus applicable taxes Annual Statistical Issue (included with above subscription) or separately $38 plus applicable taxes Elsewhere 1 Year $42.00 2 Years $68.00 3 Years $95.00 Subscription Inquiries/Customer Service Gail Page (416) 442-5600 ext 3549 gpage@bizinfogroup.ca
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Canadian Underwriter September 2009
There’s a lot more to Swiss Re than reinsurance. Isn’t it time you found out how much more? Don’t let the name mislead you; there’s a lot more to Swiss Re than reinsurance. Commercial insurance, industrial insurance, large corporate risks and specialty insurance. Insurance for aviation and space as well as environmental and commodity markets. Financial tools like insurance-linked securities and catastrophe bonds. Yet every service we offer and every challenge we face for our clients receives the same commitment and the same hands-on expertise. Why? Because no matter what business you’re in, we’re always dealing with the same raw material: risk. And what we create is always the same: opportunity. If you didn’t have the opportunity to visit with us at the RIMS Canada Conference, find out more about our insurance offerings or contact one of our experts at www.swissre.com/insurance
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EDITORIAL
Short-Sighted Mathematics
‘How can I help seeing what is in front of my eyes? Two and two are four.’ ‘Sometimes, Winston. Sometimes they are five. Sometimes they are three. Sometimes they are all of them at once. You must try harder. It is not easy to become sane.’ George Orwell, 1984 David Gambrill, Editor david@canadianunderwriter.ca
8
Private auto insurers’ claims costs have increased demonstrably over the past few years in both Alberta and Ontario. It therefore seems axiomatic — as obvious as saying “two plus two equals four” — that insurers must raise their rates. All the more puzzling, then, why the Alberta Automobile Insurance Rate Board (AIRB) recently signed off on a 5% decrease in the province’s auto insurance rates, effective November 2009. The decision is “curioser and curioser,” as Alice would say in Wonderland, because when it was made, the Alberta courts had just flip-flopped on the constitutionality of the province’s Cdn$4,000 cap on minor injuries. Yes, as the AIRB stated publicly in its decision, the Alberta Court of Appeal did restore the cap. This no doubt results in greater certainty for insurers about their claims costs; this, in turn, establishes the terrain for rate decreases (or at least, more forgiving rate increases). But the “greater cost certainty” arising form the most recent Alberta cap decision is illusory. Virtually everyone in the insurance industry knew the Alberta Court of Appeal decision would be further appealed to the Supreme Court of Canada. Indeed, the AIRB made its decision on rates known a mere seven days after plaintiffs’ counsel advised the press they would be seeking leave to appeal the decision to restore the cap to the Supreme Court of Canada.
Canadian Underwriter September 2009
And so now the province’s auto insurance industry remains in a state of confusion about the status of the cap. Only this time, it is stuck with a rate decrease, which is in no way justified by the claims numbers. The Insurance Bureau of Canada (IBC) asked for a 6% rate increase if the cap were to be restored. The board said it had “considered the claims increase of insurers” in its decision, but it is unclear whether that situation was ignored, since the rate board ultimately went with the estimates provided by its own actuaries instead. This is a clear-cut case of politics interfering with the natural order of the private auto insurance universe. Unfortunately, what’s shaping up right now will probably play out in the media as a confrontation between insurers and the public over auto rates. In fact, this has already happened in Ontario. As of press time, it appears a very public protest by the medical-rehab community has caused the province’s finance minister to delay his decision concerning reform to Ontario’s auto insurance product. Basically, the medrehab community wants the finance minister to reject a recommendation that would reduce the mandatory medical and rehabilitation benefits for non-catastrophic claims from Cdn$100,000 to Cdn$25,000 (converting the Cdn$100,000 coverage into an optional benefit instead) — a move that meets
with wide approval among people in Ontario's auto insurance industry. Alas, the spectre of public discontent with auto insurance rate increases is overshadowing the major — and negative — role political expediency is playing in this debate. Even though the industry’s financial numbers say “two plus two equals four” and rates must be increased to make up for claims costs, politicians and regulators, ever mindful of public clamoring each and every time insurance rates go up, are saying “sometimes it’s three, sometimes five” — whatever it takes to keep potential voters happy. Trouble is, what keeps the public happy today will not keep it happy tomorrow. Insurers want to decrease premiums, too, but they can’t do it if they will go bankrupt in the process. The financial reality is this: if insurers’ rate increases continue to be too modest — or supplanted by politically expedient decreases — the need to increase rate will only become more acute as claims costs continue to escalate in the future. The worst-case scenario for the public would be for insurers to cut their losses and bail out of writing an unprofitable product. Then what will the politicians do to make the public happy? If there was ever any a time not to succumb to the temptations of political expediency, now is that time. Now is the time to remember that two plus two does indeed equal four.
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Canadian Market CLIMATE NOT A GOOD BAROMETER FOR P&C 2009 Q1 RESULTS The weather in 2009 Q1 was not as bad as it was during the same period last year, but the underwriting results of Canadian property and casualty industry took a beating nonetheless, according to the 2009 Q1 MSA/Baron Outlook Report. According to MSA, the industry’s net income was Cdn$322.3 million in 2009 Q1, down 45.3% from the Cdn$588.8 million profit the industry reported in 2008 Q1. The MSA figures exclude data from ICBC, MPI, SAF, Lloyd’s and some Quebecregulated insurers. On the positive side, the industry wrote 3.6% more net premium in 2009 Q1 than it did in 2008 Q1. And the industry’s underwriting loss for 2009 Q1, at Cdn$179.2 million, was less than the Cdn$341-million hit it took in the same quarter of 2008. “Industry underwriting results as at the first quarter of 2009 show some improvement over the first quarter of last year, but the difference is negligible once the effect of reserve discounting is stripped out,” MSA president Joel Baker writes in the report. “The undiscounted industry combined ratio [in 2009 Q1] came in at
100.7[%] versus 100.01[%] in [2008 Q1].
PLAINTIFFS SEEK LEAVE TO APPEAL ALBERTA CAP LEGISLATION TO SUPREME COURT OF CANADA Alberta’s auto cap legislation will be challenged at the Supreme Court of Canada. The Alberta Court of Appeal ruled in June that a Cdn$4,000 cap on insurance claims for minor auto injuries does not infringe the Canadian Charter of Rights and Freedoms. The plaintiffs in Alberta Court of Appeal case, Peari Morrow and Brea Pederson, have instructed their counsel to seek leave to appeal the decision of the Alberta Court of Appeal to the Supreme Court of Canada. Fred Kozak, counsel for the plaintiff, confirmed his clients’ instructions in an email correspondence with Claims Canada magazine. Kozak went on note that he expects to complete the application brief and supporting documents later this summer. The filing deadline is Sept. 11, 2009.
ALBERTA AUTO RATES TO DECREASE BY 5% IN NOVEMBER 2009 Basic auto insurance rates in Alberta will decrease by 5%, according to the province’s Automobile Insurance Rate Board (AIRB). The rate reduction follows public hearings in which the Insurance Bureau of Canada called for a 6.4% rate increase.
10 Canadian Underwriter September 2009
According to the AIRB, the decrease is mainly a reflection of the Alberta Court of Appeal’s decision to uphold the province’s Minor Injury Regulation, which restores the cap on the amount an individual can claim for minor soft-tissue injuries. Expected claims and administrative costs, in addition to declining investment rates and increasing claims costs for insurers, were taken into account when proposing the rate decrease, the AIRB notes in a release. The decrease will take effect Nov. 1, 2009.
VANCITY SELLS P&C SUBSIDIARY TO THE CO-OPERATORS Vancity, Canada’s largest credit union, has agreed to sell Vancity Insurance Services Limited (VISL), its subsidiary for home, auto, travel and business insurance, to The Co-operators. The price tag of the deal, which is subject to regulatory approvals, was undisclosed. VISL is a wholly owned subsidiary of Vancity that provides insurance through 17 retail branches in Greater Vancouver and Victoria, as well as an inbound call centre. The VISL portfolio includes approximately 28,000 residential, 48,000 auto, 10,000 travel and 2,000 commercial insurance policies. Under the terms of the agreement, The Co-operators subsidiary, Federated Agencies Limited, will acquire
VISL, including all its service locations on Sept. 1, 2009. Squamish Insurance Services is not part of the purchase agreement and will continue operations as usual.
2009 KELOWNA WILDFIRES SMALLER THAN FIRES OF 2003 Several wildfires raged through the Kelowna area of B.C. in August, forcing more than 11,000 residents to evacuate their homes. As of press time, the 2009 fires were collectively about 7% of the size of the Kelowna fires in 2003, which resulted in 3,385 insurance claims totalling Cdn$200 million. And while the fires ate up the province’s trees, a combination of factors — including wind patterns and risk management practices such as clearing up potential fuel sources around properties — have thus far contributed to preventing huge property losses in 2009.
Risk Management COMMODITY PRICING IS FOOD SYSTEM’S GREATEST RISK: AON REPORT Commodity price risk ranked Number 1 on a list of greatest risks faced by the food system, agribusiness and beverage industry, according to the 2009 U.S. Food System, Agribusiness and Beverage Industry Report.
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Issued by Aon Corporation, the report is based on data from Aon’s Global Risk Insight Platform, 2009 Global Risk Management Survey, and other proprietary databases. Price volatility is a tremendous concern and a sizeable risk for both sellers and buyers in food system, agribusiness and beverage companies, the report found. These respondents also reported the lowest state of preparedness in regulatory and legislative changes (55%), cash flow and liquidity (57%) and economic slowdown (57%). These areas are typically more complex, difficult to control, carry a degree of unpredictability and are enterprise-wide, according to survey respondents. The top two risks with related losses in the past 12 months were commodity price (67%) and economic slowdown (43%), according to the report.
2009 Q2, marking a dramatic decrease from the 221 suits filed in the previous quarter, according to Securities Litigation Drops in Q2 2009: An Advisen Quarterly Report. “There were 37 securities class action suits filed in the
second quarter, down from 70 cases the quarter before,” said John W. Molka III. “But the pace has picked up a bit again in July. As has been the case over the past couple of years, companies in the financial sector were especially
in the plaintiff bar’s crosshairs.” Federal securities class action suits still represent a large portion of securities suits against public companies, but they no longer account for the majority of securities suits, researchers noted.
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.
Claims NUMBER OF U.S. SECURITIES LAWSUITS DROPS IN 2009 Q2 The number of securities lawsuits filed in the United States dropped significantly in 2009 Q2 when compared to the first quarter of this year, but the decrease may only represent a temporary lull, reports Advisen. One-hundred-and-forty securities cases were filed in
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September 2009 Canadian Underwriter
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PROFILE
Exploring New Vistas David Gambrill Editor
Fortunately for the Insurance Brokers Association of Canada (IBAC), “the banks never got” Justin MacGregor, its incoming president, when he first started looking for work in 1977. One of the many ironies in Justin MacGregor’s intriguing professional career is that the incoming president of the Insurance Broker Association of Canada (IBAC) was about six months shy of becoming a banker. Every five years, the government is mandated to review Canada’s Bank Act. And every five years, it seems, IBAC is engaged in a Battle Royale with the banking industry on the issue of whether banks should be able to sell insurance out of their local branches. Thus, it seems odd now to think the future leader of Canada’s national brokers’ association, a man who has loved the insurance business since he entered it in 1977, may well have been involved in the banking industry if he had his way when he was young.
MacGregor, now at Martin Merry & Reid Ltd., was 17-1/2 years old when he graduated from private school looking for a job in the financial services industry. At the time, he wanted to work in the financial services sector in the city of London, England, and he wanted to find work that would allow him to travel. “Initially, I set my sights on the banking industry,” MacGregor recalls. “I had interviews with a number of banks — Lloyd’s Bank, Bank of England. I was offered a number of jobs, but none of them would employ me until I was 18.” MacGregor contemplated two options while he waited until he was old enough to be a banker — work, or go to university. He elected to give work a shot. If that didn’t pan out, he would go to university. He saw a career brochure for Sedgwick Forbes Marine Ltd., which offered him a job. “I was given the choice between marine and reinsurance,” MacGregor says. “I had no clue what reinsurance meant, but since I enjoyed sailing…I had some idea what marine might mean. So I took marine. That’s how I ended up in insurance. And banks never got me.” Until now, that is. In particular, the banks can look forward to hearing from MacGregor and IBAC about what has turned out to be the cyberspace equivalent of the
12 Canadian Underwriter September 2009
Bank Act review issue. Recently, IBAC asked Canada’s solvency regulator, the Office of the Superintendent of Financial Institutions (OSFI), to clarify whether a bank Web site is the same as a bank branch for the purpose of selling insurance. OSFI recently determined that a Web site is not a bank branch. Therefore the Bank Act's prohibition against banks selling insurance from their branches does not apply to a bank selling insurance on its Web site. “I think some people have interpreted the decisions that have come out of OSFI as being negative decisions,” MacGregor says. “I don’t see them as that. I see them as clarifying that technology has overtaken decisions that were made a number of years ago.” MacGregor stresses this is a consumer protection issue, not a competition issue. “We have never had an issue with banks selling insurance,” he said. “There are certain things about an insurance transaction that we believe should be maintained and sacrosanct. One is, the Canadian consumer should not be disadvantaged at a point of time they are granted credit. Financially, there’s no other time than you feel more naked than when you are standing in front of your bank manager asking for a loan approval. And if he says, ‘Would you like insurance with that?’ what are you
going to say? You’re going to say yes because you don’t want your answer to prejudice the key reason that you’re there, which is to get a loan. … “We want the activity of granting credit and the activity of providing insurance — they are two very different transactions — kept separate...That applies no less equally to transactions on the Internet.” Certainly the role and activities of the banks in the insurance sector will be a key issue for IBAC going forward during MacGregor’s term as president. “We’re not in a Bank Act review stage right now, but the spotlight isn’t off it,” he said. But whereas the Bank Act review often inspires a spirit of solidarity and unity among brokers across the country, other issues both internal and external to IBAC make the national organization an interesting place to be. IBAC is a place where provincial broker associations come to debate issues, and not all provincial associations are steering in the same direction. Not surprisingly, coming from a broker with a background in sailing and marine underwriting, MacGregor uses the language of a fleet commander in describing his leadership approach to brokering the various provincial interests brought to the national IBAC table. “IBAC is a little bit like a fleet of yachts,” MacGregor said. “They all take slightly different
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courses, but at the end of the day the objective is to get over the line, and we’ll all be there together. You won’t necessarily all take the same course. You won’t necessarily all agree on the same issues.” For that reason, he adds, “discussion at the IBAC board table is always a very interesting place to be.” MacGregor said his commercial insurance background, somewhat of a rarity for IBAC past presidents, brings a valuable perspective into the mix. MacGregor is the first head of the Toronto Insurance Conference, a forum for commercial insurance brokers, to head up IBAC since 1987. By choice, MacGregor’s commercial experience extends be-
yond marine hull underwriting. After a brief, two-and-a-half year hiatus from Sedgwick in the 1980s, MacGregor returned to the fold in time for the founding of Sedgwick Energy. Sedgwick Energy is an amalgam of Sedgwick Offshore, which focused totally on offshore development and production, and a nucleus of people — including MacGregor — from Sedgwick International, which did work involving downstream petrochemical operations, mining and resources. “That led to me handling the Canadian oil and gas business,” MacGregor said. “When I made the move back to Sedgwick, I realized I didn’t want to do just marine hull business for the
rest of my career. And here a company I enjoyed, a company that I knew, was giving me an opportunity to build on the previous experience that I had and expand my horizons into new areas. Of course all of my marine colleagues thought I was stark, raving nuts. But they didn’t see it the same way [as I did]. I was in it for an adventure and something new and a chance to expand my horizons and that’s indirectly what led me to Canada.” MacGregor arrived in Canada in time for the 1988 winter Olympics in Calgary. Two years later, Toronto became the focal point of his business. “The reason for my moving to Toronto [from Calgary] was to try and
accelerate the understanding and the relationship between the Canadian operation and the U.K. parent,” he said. “It worked very well in Calgary because the oil and gas business needed access to the London market. But for other lines of business, the London market could play a role.” Throughout his time in Canada, he has seen the Canadian commercial insurance industry take a nuanced approach to the London insurance market generally. “Ironically, even though I came from London, we probably ended up with more business in the domestic market,” said MacGregor, who returned to London, England in 1995 after the expiration of a work permit. Sedgwick promptly turned around and asked MacGregor if he wanted to stay in Canada to launch Sedgwick Marine Cargo Services. Contrary to initial expectations, MacGregor said his link between the Canadian and London markets “didn’t really accelerate the growth of the London market [in Canada], but it did improve the understanding of what they were able to offer and probably finessed the use of the London market rather than expand its use.” After Marsh bought Sedgwick in 1998, MacGregor moved to Willis, where he worked for about three years. He joined Martin Merry & Reid Ltd. about three and a half years ago.
September 2009 Canadian Underwriter
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Opinion/Analysis
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Controlling Public Corporations The financial problems we are experiencing now have a number of historical roots, including changes to ownership of public corporations.
William G. (Bill) Star
Founder, Trillium General Insurance Company
This decade will undoubtedly go down in history as the worst time for public corporations.This has been a time of radical change, far more than we have ever seen in business, and it is not over yet. When you see the recent changes in the United States and Canada, with governments becoming involved in the automobile industry, you can see this is just the beginning. Both countries have become shareholders in General Motors and the United States is a large shareholder of Chrysler.We also see the U.S. government taking a strong stance towards financial organizations, even dictating salary caps for different management positions (particularly CEOs).
PERILS OF ‘MARK-TO-MARKET’ The financial problems we experienced in 200809 had historical roots. Most of the problems were a result of poor regulations and/or the lack of safeguards in the United States. Compensating
14 Canadian Underwriter September 2009
for this, governments suddenly overreacted, attempting to exert greater control over corporations and creating many unreasonable accounting regulations. The housing crisis, for example, started back in the ’90s, when speculators, builders, banks and financial institutions took far greater risks than they should have.The situation at American International Group (AIG) is a good example of an insurer taking on risks that it did not fully understand. It provided guarantees, not recognizing the risk involved in an out-of-control housing market. Low down payments and inadequate credit checks resulted in many speculators and homeowners investing in properties they could not afford. Then the antiquated, “mark-to-market” accounting rule was applied to banks and financial institutions that held mortgages on properties that were considered to be valued less than the mortgage. Governments immediately reacted, particularly in the United States, and considered many of the banks and other financial organizations to be insolvent. It would have been better had governments simply relaxed the “mark-tomarket” rule and subsequently reviewed the financial position of the banks and financial institutions.
Illustrations by Rémy Simard/www.i2iart.com
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REGULATORY RESPONSE The fact is that governments typically overreact to situations, trying to deal with them on a short-term basis. Many problems we face in Canada stem from the United States, but we have also had situations in Canada in which governments have acted without just reason.A good example of this was Confederation Life several years ago. It was deemed to be insolvent partly because of the “mark-to-market” rule. Many of their investments were temporarily valued much lower than their carrying costs, but, after they were taken over by a receiver, it was ultimately found that the assets were greater than the liabilities. It was obvious they were not insolvent, and yet they were deemed to be so simply because of accounting rules. The situation was very different in the United States, where companies like Enron and WorldCom featured executive management and directors that were found to be responsible for many accounting irregularities and improper
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actions by U.S. regulators. To make matters worse, the U.S. Securities and Exchange Commission (SEC) found in January 2008 that a practice leader working at the time for Enron’s auditor,Arthur Andersen, Michael Odom, had not picked up on Enron’s financial misrepresentations. Arthur Andersen has had several problems in the past, going back many years. They settled shareholder litigation involving Sunbeam for US$110 million in 1997. One year previous to that, they were fined over problems involving the audit of Waste Management. In 2000, they received US$52 million in fees from Enron, including consultant fees totalling US$27 million. Since that time, most public companies have discontinued the practice of allowing their auditors to perform consulting or actuarial services. Due to these major problems involving management, directors and auditors, the United States introduced the Sarbanes-Oxley Act (SOX) on July 30, 2002. This act called for new disclosures by management and accountants and placed the
financial responsibility for companies directly on the CEO, the CFO and accounting firms. SOX created a great deal of additional expense for reporting corporations due to its detailed requirements and, particularly, the certification by their auditors that the corporation had complied with the act.This meant all companies listed on U.S. stock exchanges had to comply with the act, including Canadian and other foreign companies listed on the New York Stock Exchange. A few years ago, at a conference in Chicago, Illinois, I asked U.S. Senator Michael Oxley if he felt that the cost of complying with SOX was justified. I also asked him for his opinion about what value corporations received from this act. His response was that people had lost confidence in the stock market and he felt that SOX had brought back a great deal of comfort to shareholders. However, what he failed to recognize was this: after the attack on the World Trade Centre of Sept. 11, 2001, there had been a collapse in the market. The economic
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recovery from this event was a normal, anticipated proces. It was not the result of SOX.
INDEPENDENT DIRECTORS Following the introduction of SOX, the SEC and the Ontario Securities Commission (OSC) started to make several changes in the control of public corporations. One important change was to require that independent directors control boards of public corporations. Unfortunately, there was no requirement that the independent directors have any knowledge pertaining to the business of the corporation. In many cases, directors felt they were responsible for the operation of the corporation — i.e. as opposed to being responsible for its management — and started to micromanage the company. For a period of time, a number of companies, especially in the United States, had boards that would suddenly decide to replace the CEO of the corporation when there was a reduction in the stock
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price. The thinking was that they would eliminate any liability on their part by making a change, even if there was nothing wrong with the operations or the results. In some situations, it was just a matter of earnings or sales being off because of market conditions and the board had overreacted. Even today, we find a number of corporations that have boards trying to micromanage the company rather than relying on the ability of the management team that has more knowledge and experience than the board members. A good example of this is what happened at AIG, which was the world’s largest insurance corporation. It was built up to that size and controlled by Hank Greenberg, a well-known CEO. Greenberg was forced out of AIG in 2005, when an accounting fraud investigation by Eliot Spitzer, then New York attorney general at the time, cast a cloud over his leadership.All criminal charges and some civil charges laid against Greenberg during Spitzer’s investigation have since been
dropped, although some civil charges remain unresolved. However, rather than AIG board members backing Greenberg during the Spitzer investigation — and thus risking that they might possibly be forced out themselves — they decided to replace Greenberg instead. Considering what happened next at AIG, which subsequently required about US$170 billion of federal funds to avoid bankruptcy, you have to seriously wonder whether it would have been different if Hank had still been in charge. After all, he had the knowledge and ability to build the company into the largest — and most profitable — insurance organization in the world over the years.When a company has problems, you need an experienced person in charge to deal with difficult situations. As I said earlier, we can expect many changes in the way public companies are controlled in the future, particularly in the United States.This has been a very interesting decade of change and before it is over, we will see more.
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Refining
Recruitment Strategies
Peter Hohman
President and CEO, Insurance Institute of Canada
The Insurance Institute’s second round of demographic research about Canada’s property and casualty industry suggests the industry’s techniques to recruit and retain employees may be in need of an update. The Insurance Institute of Canada’s recently released report, A Demographic Analysis Part II – Recruitment and Retention Issues in the P&C Insurance Industry in Canada, concludes with this inescapable and significant fact: “In the next 10 years, a proactive, strategic approach to human resource management is essential for industry sustainability,” says Richard Loreto, president of RAL Consulting Inc. and research consultant to the Insurance Institute. “The current economic situation and the attitude that ‘We have always done it this way,’ are constraints that must be overcome.” The first study, released in May 2008, was all about raising awareness (even a few alarm bells) about the Canadian labour force’s significant impact on the property and casualty insurance industry. For example, we learned that: • The industry’s workforce is aging. In 2007, 49% of those working in the insurance industry were between the ages of 41 and 60. In the general labour force, the number is 45%. • Industry employees tend to retire younger, by two to three years. • Retirement projections will have a significant impact on the industry’s labour force: 25% of the 2007 labour force could retire between 2012 and 2017; in BC, the retirement projection is 38%; in
18 Canadian Underwriter September 2009
Crown corporations, it’s 39%; and for the management category, 40% could retire by 2017. “Now, in light of our current economic climate, some would suggest that these retirement projections may be wrong,” says Loreto. “But it is important to recognize that even if some mature workers delay retirement and the timeframe shifts a little, the projected numbers or proportion of workers eligible to retire stays the same and therefore the pending mass exodus and leadership gap is still looming.” In anticipation of these departures, the industry needs to be recruiting more. As the research identifies, there are not enough entrants to replace those exiting the industry. Compared to the overall labour force and the minimal standard that there should be one person entering the work force for every worker who can retire, the industry’s entry-to-exit ratio is very low (0.4:1). Furthermore, it has been in a pattern of steady decline for some time. Research suggests the targeted recruitment of youth, including immigrants/new Canadians and aboriginals, is critical in an aging work force.The research also tells us retention and succession planning around younger employees/recent entrants and mature workers is critical to the industry’s sustainability. The findings of the Insurance Institute’s second research study follow up on a recommendation in the first report that there is a need for systematic industry-wide and company-specific workforce planning related to four cohorts – youth, immigrants, aboriginals and mature workers. This second report has been compiled as a resource guide to help organizations create the strategies needed to meet a company’s hiring needs, training and development assessments and the potential leadership gaps.
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“The most fundamental recommendation is that employers should develop a human resource management strategy that is comprehensive and researchbased,” Loreto writes in the second report. “This resource provides those concerned about human capacity issues with a whole range of information — greater understanding of incentives and drivers, tools and checklists to reference and examples from other sectors — that will help in the development of the necessary multi-pronged approach for recruitment and retention.”
SAMPLE QUESTIONS FOR RECRUITERS Shared “old school” values If research suggests that those under 30, just like those in their 50s, are as concerned about salary, benefits, job security, opportunities for professional growth and advancement and working with respected colleagues, what impact might that have on your recruitment and retention strategies? The question implies these “old school” values translate across all generations when it comes to work. As a result, the insurance industry may want to adopt a more competitive edge when it comes to these career aspects. In addition, co-op, internship, cross-training, coaching and mentorship programs between mature workers and students/ new recruits may serve multiple purposes. Eliminating barriers If research indicates that immigrants/new Canadians make up a significant part of our youth; that visible minorities have higher levels of education than non-visible minorities; that the most common field of study is business, management and public administration; that many people in visible minorities work in business, finance and administrative occupations; and that resources abound to assist employers with the recruitment and retention of recent immigrants, in addition to helping immigrants secure solid employment in a new or chosen field, then what affect might that have on your recruitment and retention strategies? 20 Canadian Underwriter September 2009
Referrals If a majority of the industry’s employees is satisfied with their current jobs, and if that same majority is recruited into the industry by family and/or friends, then what impact might that have on your recruitment and retention strategies? At a minimum, it suggests that all employers review, augment and/or promote their referral bonus program. Mature workers Assuming there is a need to retain mature workers, and given that research shows three-quarters of survey respondents who intend to retire within the next five years say they would be interested in working post-retirement (mostly to earn additional income, especially on a part-time basis), then what impact might this have on recruitment and retention strategies? Companies might consider shifting from incentives for early retirement to incentives for phased retirement. Flexibility becomes the name of the game with mature workers in terms of where, how and for how long work is done, as well as flexibility in compensation plans designed to meet life cycle needs.
End of 'laissez faire' recruitment If research shows that recruitment and retention tools currently in place do not meet the needs or offer the necessary incentives for current or future prospects, even though survey respondents perceive both targeted recruitment and retention tools as effective, what impact might that have on your recruitment and retention strategies? The survey results suggest an existing,‘laissez-faire’ attitude towards emerging labour market issues, as well as the need for a systemic shift in the approach employers take to recruitment and retention. The Insurance Institute of Canada’s research has already had a significant impact on Career Connections, the career awareness program coordinated by the Insurance Institute on behalf of the property and casualty industry. (See sidebar for more information). For employers, we anticipate the research studies provide employers with the impetus and information needed to develop and implement appropriate strategies to meet their future human resource requirements. For a copy of the research report, please visit www.insuranceinstitute.ca or call 1-866-362-8585.
CAREER CONNECTIONS CHANGES DIRECTION The Institute’s demographic research studies have already had a significant impact on Career Connections, the career awareness program coordinated by the Insurance Institute on behalf of the property and casualty industry. In response to the research, the programs’ next five-year strategic direction, to be launched in Fall 2009, includes an expanded outreach and audience mix. The focus for the past five years has been to inform and educate 14-24 year olds (i.e. those in secondary and postsecondary schools) about insurance in general and the merits of an insurance career. But based on the identified need and discussion about the targeted cohorts in the research studies, Career Connections’ strategic direction will evolve our messaging and our outreach to an
expanded audience between the ages of 14-44, with an emphasis on engaging graduates and career-changers between the ages of 20 and 35 (which includes new Canadians/visible minorities). Expanding our audiences to include career-changers means adopting a variety of new media strategies. Mainstream career media, e-marketing and social networking sites are included in the mix of vehicles we will use to reach an audience of recent graduates and those currently in the workplace and considering a career change. Visit the Career Connections Web site at: www.career-connections.info to view the new videos and messaging that have been developed to promote the variety of careers in insurance to our expanded audiences.
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Craig Harris Freelance Writer
An industry ITV working group is employing a public awareness campaign targeted at homeowners. Insurance Bureau of Canada is spearheading a major public awareness campaign aimed at educating consumers about the importance of insurance to value (ITV) and its impact on their property values. A summary paper by the IBC’s working group on ITV, to be released this fall, is calling for a significant push to increase homeowner knowledge about how the industry calculates the value of their properties. The working group is composed of insurer, broker and agent representatives and has been meeting since February 2009. “We found out early on that many homeowners don’t know that much about their most important asset,” says Bob Fitzgerald, chair of the ITV working group and an executive vice president with Aviva Canada. “It is somewhat surprising how little people know about basic things, such as how old their homes are, how large their homes are or the square footage.” Fitzgerald says the public awareness campaign is perhaps the most prominent part of a three-
22 Canadian Underwriter September 2009
pronged strategy designed to tackle the ITV issue, which has plagued brokers and insurers across the country. ITV has to do with property values being undervalued, meaning that insurers aren’t collecting enough premium to pay for claims.The dilemma becomes particularly acute when insurers’ policies guarantee to pay for the full replacement cost of a home that has not been insured to its full value. Two other aspects of the IBC’s campaign involve an industry-wide series of established best practices for usage of and training on ITV calculator tools, and a broker-specific code of best practices that could be adopted by provincial associations. Consumer education is critical, Fitzgerald says, because without it the industry will not get the right kind of information no matter how much progress is made on ITV calculation models. “We want to show consumers why it matters and inform them of how valuations work and what they should know,” he notes. “If they shop for homeowners insurance, here is what they need to know and how to get their paperwork up to date.” The campaign will involve links to Web sites, brochures and “support material” for sales staff. It is expected to kick off early in 2010. Establishing industry-wide best practices is another important component of the IBC working
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group strategy, Fitzgerald notes. “This really comes down to a few areas, such as use of ITV calculation tools and training. We have to find ways to make the valuations easier and clearer for brokers, insurers and consumers.” Fitzgerald says the working group is intent on developing “10 or 15 data points that, if done correctly, will guarantee at least a 95% accuracy. We are interested in seeing how we can work with ITV vendors to develop that. Also, we need to look at the frequency of re-evaluations. Should they be done annually, or every three or five years?” ITV vendors say they generally support the framework of the working group. But they caution any specific recommendations about products should involve their direct input. “I think we need to have input from all the ITV vendors, but the question is: are those 10 or 15 data points the right parameters or requirements?” says Todd Rissel, chairman and CEO of e2value. “I would not go into a broker’s office and tell them how to bind coverage or what exposures need to be covered off, so there has to be some understanding that they may not understand the [valuation] products as well as we do.” Chris Lang, president of PowerSoft, says ITV calculation tools have to be straightforward and focused on the primary users. “In terms of best practices, I think the most obvious step is to ensure that the ITV tool is designed specifically for brokers in Canada,” he observes. “Any model should not ask questions or use terminology that brokers either don’t understand or don’t have access to in terms of information.” He cites several examples of ITV software models being too complex or detailed, such as the requirement that brokers use correct wage rates for construction trades in their area or overly specific breakdowns for the type of exterior walls. “It is important to know if the exterior of a building is brick, concrete, wood or siding, but it is not necessary to go into detail about whether the wood is board and batten
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or clapboard, and if it is vertical or horizontal. That doesn’t make a big difference in the valuation.” Lang says PowerSoft introduced a “short-form” version of its EvalWorks product in September. “It contains 20 questions that will cover about 80-85% of homes in Canada,” he says. “It won’t cover them all, because there are some exceptions, but we are talking about the majority.We got tired of waiting for the industry to come up with something so we developed it. There is no need for a broker to spend 45 minutes doing an evaluation; it should only take 10-15 minutes tops.” Fitzgerald says ITV vendors have been consulted regularly since the IBC work-
One principle became clear. We should not be competing on the replacement cost calculation of a house, period. ing group began. Rissel and Lang have each confirmed this. [MSB was contacted for this article, but declined to comment. Xactware is another ITV vendor active in Canada]. The competitive pressures of the ITV vendor industry are well known, says Brenda Rose, vice president at brokerage Firstbrook Cassie and Anderson. “We are very wary of competitive issues within the ITV vendor community, but this is a public issue that directly affects our industry,” says Rose, who sits on the IBC working group along with two other brokers. “Any of the vendors we are talking to appear to be quite open and willing to participate. This is their product line after all. They know how their tools work better than we do; we need their input “ The broker-specific best practices developed by the IBC ITV working group will likely build off the discussion paper released by the Insurance Brokers Association of Canada (IBAC) this past spring.1 “We have to make sure the industry is aligned with the best practices of the sales force,” Fitzgerald says. “We want to be able to
take best practices established at a national level, and then have provincial broker associations adopt them into their code of practice.” Rose says some of the recommendations emerging out of industry discussions will require a long-term perspective. “Some of this may evolve over time and take a bit longer,” she notes. “For example, the neutral forum for evaluating the accuracy of ITV calculators will take some work. We are seeking some mechanism to be used for evaluating ITV products and results.What form this will take is still subject to discussion.” ITV vendors are not against the idea, but want to see the details, according to Rissel. “I think this could be a great idea, but it has to have definite purpose, definite steps and definite criteria,” he says. “It is really more about how this could work on a practical level. If it keeps changing, then you have a moving target, and it is hard to hit a moving target. Insurers ask us and our competitors on a regular basis if our products provide the right numbers, and we have to be accountable for that.” Fitzgerald says the working group is clear that there is no need for an industry-sponsored ITV entity, since plenty of competition already exists at the ITV vendor level. “Brokers want to have the ability to validate the ITV tools, and it is the brokers or agents who are doing this at the point of sale,” he says. “There is no interest on the part of the working group in having any kind of industryowned ITV solution.This will have to be done by aligning the sales force practices with what insurers are doing on an individual basis.” However, there may be an opportunity for a “clearinghouse” of actual loss data from insurance companies, which could be run against ITV calculator models. Lang says PowerSoft has supported this idea for some time. He notes that some vendors collect this loss data from individual companies, but not all insurers are willing to share this information. “We have asked groups like the IBC if they could set up a clearinghouse of
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actual loss data,” Lang says. “For example, let’s say the IBC collects 25 losses over the last quarter and submits that to all vendors. They could run it against their models and see how these perform and compare. Adjustments could also be made if the calculators are off.” The working group is also discussing the notion of insurance companies “sanctioning” the use of specific ITV calculators. The purpose of this recom-
mendation is to validate the performance of ITV products, not reduce competition, Rose says. “Why would an ITV vendor not want an insurance company to sanction their product?” she asks. “I cannot see why an ITV vendor would not want to cooperate with that process. We are not saying that any one insurer will tell brokers they have to use this one tool, but we do expect that the ITV vendors will stand
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behind their products and participate in this process.” Rissel says there are three main ITV vendors to choose from in Canada, and there is a real benefit to this competition. “It is beneficial for the end-clients, brokers and insurers,” he says. “If you don’t have that competition, there can be complacency, and I think we saw that in the Canadian market in the past.” Both brokers and insurers say they want to keep competition amongst ITV vendors alive and well in the valuation of property. However, Fitzgerald and Rose stress that companies and intermediaries should not use various ITV tools as competitive levers to gain market share. “One principle became clear early on in our working group meetings: we should not be competing on the replacement cost calculation of a house, period,” Fitzgerald says. “As insurers, we compete on price and product, not on who can get the lowest replacement cost from an ITV tool. So the question is how do we get a proper rebuilding cost as a class?” Rose said a fundamental premise is that brokers and insurers should have a choice in which ITV tool they use. “We also believe that ITV should not be used as a competitive lever,” she says. “The right number is the right number. How we come up with that right number is the real issue.” Coming up with that right number will be the focus of the IBC working group over the next few months, according to Fitzgerald. He expects to see specific results of the working group’s three-pronged strategy implemented in early 2010. “There are no silver bullets here,” he says. “This is a difficult issue that did not just arise in one part of the industry or from one group. It will have to be solved with several different players in the industry working together. The good news is that there is a lot of traction, good dialogue and agreement on guiding principles.” 1 See “Establishing ITV Best Practices,” Brenda Rose, Canadian Underwriter, April 2009: Page 14
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Fighting
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Fraud Analytics with
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Property and casualty insurance fraud is estimated to be a Cdn$1.3-billion business, making detection and prevention through advanced technology an important cost-saving strategy. Every single homeowner and vehicle owner is a victim of insurance fraud because the costs associated with fraud translate into higher premiums. Like a hidden tax, fraud losses are factored into financial models so we all pay for it in the end. Fraud costs the global insurance industry billions of dollars every year. Besides the actual losses that occur from fraudulent claim payments, costs include the investments made in resources such as analysts, investigators, prosecutors and technology to detect fraudulent activity. Also costly is the wasted effort — not to mention the negative effect on the consumer — of taking action against a suspected account or transaction that ultimately proves to be legitimate. Industry estimates vary from country to country, but are consistent in that fraud is a noticeable cost and a growing concern. The estimated cost for general insurance fraud in Canada is Cdn$1.3 billion per year. This is equivalent to saying that approximately 10-15% of the claims paid out annually are fraudulent.
28 Canadian Underwriter September 2009
So why are insurance companies not doing more to detect and prevent fraud? The usual answer is that fraud detection is not “cost effective” and, if it is done incorrectly, can have a negative impact on customer service levels. A 2007 survey of North American property and casualty, life and health care insurers1 noted the top three challenges to fighting fraud were the excessive cost of investigation, delayed claims adjudication and that it’s ultimately cheaper to pay the claim. Historically, fighting fraud has been expensive and inefficient because it is an extremely laborintensive activity. Today, however, advanced analytics technology can be used to make fraudfighting processes more effective, efficient and economical.This new technology is able to handle the complexity and massive volumes of information that must be analyzed to identify suspected fraud. Today’s cutting-edge software tools and techniques provide insurers with the ability to manage the collection, organization, integration and storage of customer and transaction data. Once data is gathered, stored and organized, the application of predictive analytics and other advanced techniques helps identify fraudulent activity.The end result is reduced expenses, increased profits, increased shareholder return, less impact on daily business activities and a more positive image for the insurer. Taken individually, these techniques and tools are effective on their own in fighting fraud. But taken together in an integrated framework, they
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are optimally effective and increase the returns to the user.
Insurance Rules and Database Searching The most common fraud-detection techniques used today employ business rules and comparisons with information from other databases to identify suspected fraudulent activities. Each transaction is tested against a series of predetermined algorithms or rules. Depending on the results of each test (or combination of tests), aggregate scores are assigned and compared to pre-established threshold values to determine the highest propensity of fraudulent activity to take action against (for example highfail, medium-pass but monitor, low-pass) Such rules can include: • X claims in the last X years • Claim amount over $X,000 • Policy within XX days of inception/endorsement • Consults claims chaser (loss assessor) before doctor • Car "torched" and insured has fire coverage • Readily admits liability • Absence of forcible/violent entry • Registration document in another name • No police report • Property damage/personal injury inconsistent • Multiple versions of accident • Valuations, receipts are excessive • X similar claims paid in XX months • Renewal date less than XX working days • Changes in sum insured/coverage in last X months • Whiplash injury < 72 hours after accident (soft tissue damage takes this long, typically, to be felt) • Time delay in reporting claim • Insured overly aggressive • Vehicle struck by rental car • No independent witnesses – family and friends only • Inconsistency with police report • No proof of ownership • Non disclosure of previous claims or convictions • Valuations, receipts do not exist 30 Canadian Underwriter September 2009
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Searching internal and third-party databases is another technique used by many organizations. Firms search these databases looking for matches with existing or prospective customers to determine if the customer is a known fraudster or on a “hot list.” These are good techniques and used today across the industry.To be effective, however, the rules and databases must be maintained constantly so that they keep up with current fraud activities and schemes, which are ever-evolving and dynamic in nature.What limits the effectiveness of insurance rules and database searching is that they are not predictive and tend to look only at a single customer in isolation.
Advanced analytics enable companies to generalize fraud patterns for automatic detection by identifying typical patterns. Anomaly Detection Anomaly detection is a grouping of techniques that are used to look for outliers or anomalies in data for new or previously unknown fraud patterns. Profiling is one of the analytical approaches used. When profiling, the analytics tools use models of expected behaviour based on historical data related to individuals or peer groups and then compares that data against current data to find deviations from predicted norms. Clustering is another technique. In this instance, data is analyzed to identify abnormal groups of claims. Claims that differentiate in relation to a grouping selected via segmentation or profiling are identified for possible further investigation.This technique also identifies where values of outliers are abnormal in relation to each other. Anomaly detection is beneficial, yet it requires a strong understanding of the data and must be “trained” continually through the building of profiles and seg-
ments. Like rules and database searches, it looks at customers or transaction in isolation and has a short life cycle given the ever-changing and advancing nature of fraudsters and their schemes.
Advanced Analytics (Complex Patterns) Advanced analytics enable companies to generalize fraud patterns for automatic detection by identifying typical patterns and using them to score new applications or claims automatically for fraud propensity. Predictive modelling techniques such as decision trees, neural networks and regression analysis take data associated with historically known fraudulent cases and use advanced analytic techniques to develop models from the data.When applied against new data, these models predict the propensity for a fraud (sometimes known as a “fraud risk score”). These analytic techniques not only help detect fraudulent activity that has already occurred, they also can be used proactively to determine the propensity of a claimant towards fraudulent activity in the future. The challenge here is that like with the first two techniques outlined above, the evaluation looks at each customer and transaction in isolation. Social Network Analysis (Associate Link Patterns) Social Network Analysis (SNA) facilitates detection of unexplained relationships using direct and indirect links between seemingly unrelated parties and transactions. Using modelling techniques such as association/sequence analysis, link analysis/path analysis and fuzzy matching, SNA enables companies to visualize a customer or transaction in relation to other parties and transactions. SNA uses readily available data such as names, addresses, phone numbers and parties listed on a claim to determine relationships.These relationships can then be reviewed for their propensity to infer fraudulent activity. An example of this could be as simple as a customer or transaction that is associated with a known fraudster. Not that the known fraudster is the customer or
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party to the transaction, but rather that they are somehow associated with the customer and transaction — perhaps listed as a witness or an employer. Depending on the associate link, further investigation may be required to determine the propensity for fraud. Link analysis can also identify “rings” of association — a pattern that shows several parties being linked through the concept of “six degrees of separation” rather than directly.This ring may be coincidence or
Page 14
it may indicate organized crime activity. SNA has the advantage of looking at information beyond what is associated with a specific customer or transaction. It provides the techniques and visualization capabilities to take into account information associated with the customer or transaction both directly and indirectly, providing a more robust base of information. This enables better fraud detection both proactively and after it has occurred.
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A FRAUD FRAMEWORK Each of the techniques outlined above can be used singly to detect and prevent fraud. However, by far the biggest return on investment in the fight against fraud comes to those firms that integrate the above techniques into a fraud framework. Such a framework enables firms to leverage their investments in data integration activities, case management tools and workforce.The integration of analytic techniques allows for fraud detection once it has occurred and also allows insurers to prevent fraud either at the on-boarding process with the customer or at the time the claim transaction is initiated.A framework integrates analytics techniques that help identify the propensity of fraudulent activity using not only information associated directly with the customer or transaction, but also information associated through links with the customer. Fraud is a dynamic, fast-moving crime. New schemes arise frequently and fraudsters are becoming more and more sophisticated in their use of technology. As a result, fraud detection and prevention techniques and tools must continue to evolve. Initially just a rules-based process, fraud detection and prevention now incorporates advanced analytics and social network analysis, driving significant incremental improvements.Yet this is only the beginning. As fraudsters evolve their criminal activities, fraud fighters are expanding their use of current technologies; at the same time, they are preparing to add to their arsenal of prevention tools and techniques within comprehensive fraud frameworks. These nextgeneration technologies include textmining software to identify key words and patterns in documents and voice patterning to analyse vocabulary, phraseology, voice tones and inflections. A successful fight against fraud must be undertaken bearing in mind the growing need to reduce overall fraud-related costs.Today’s advancements in database integration and advanced analytics provide the necessary tools and techniques to accomplish this effectively, efficiently and economically. 1 The State of Claims Fraud Detection and Prevention Survey, CMP research, May 2007.
Sustaining the Boom
As roughly a quarter of the workforce in Canadaâ&#x20AC;&#x2122;s property and casualty insurance industry prepares to retire sometime during the next decade, a lot of discussion has centred on recruiting youth to replenish the industryâ&#x20AC;&#x2122;s ranks. But the retention aspect of the equation is equally important, and the industry is now looking at retention strategies that would offer flexible work arrangements to members of the Baby Boomer generation contemplating retirement. By Vanessa Mariga
34 Canadian Underwriter September 2009
The
Baby Boom generation is perhaps the most popularized generation in history. Each stage of this cohort’s life has shaped society at large, re-writing expectations and experiences for subsequent generations. Having challenged North America’s traditional value systems in the ’60s and ’70s, and having reconfigured the economy from a labour-based economy to a service-based economy, the Boomer generation has affected change, and will continue to affect change, in a way unlike any other. As Baby Boomers prepare to retire, many employers have started to reconsider the traditional retirement program. There is a new emphasis on retaining the talent and experience of about-to-retire Boomers, in addition to recruiting new and younger talent. The thinking here is that if employers get creative and offer flexible, part-time arrangements, perhaps they will succeed in sustaining the boom, so to speak. In late August 2009, the Insurance Institute of Canada released the second part of its demographic research study of the Canadian property and casualty industry, A Demographic Analysis – Part II: Recruitment and Retention Issues in the P&C Insurance Industry in Canada. The first phase of the report, released in May 2008, offered a snapshot of the industry’s demographics. The average age of the workforce was 41 and roughly one in every four employees in Canada’s property and casualty industry is preparing to retire sometime during the upcoming decade. The report also showed a failure on the part of the industry to draw in enough new talent to fill the impending shortage. With this is mind, companies need to start thinking and strategizing for the inevitable day when the mature worker cohort (those between the ages of 55 and 64) decides to retire.
September 2009 Canadian Underwriter 35
COVER STORY
Sustaining the Boom When it comes to recruitment and retention strategies, traditionally much of the focus has been placed on recruiting fresh, new talent. Indeed, the Institute’s most recent research affirms that targeting young workers is vital to the perpetuation of many organizations within the industry. But Part II of the Institute’s demographic study also notes that other options can and should be explored. One alternative area of focus is on retaining the mature worker. Mature workers constitute a large percentage of the industry’s current demographic. They have the most experience, and hence knowledge. When they decide to leave, likely within the next five to 10 years, companies will face a dearth of workers to help get the job done. More important than just filling the seats, however, will be the need to replace the corporate memory or knowledge gaps that arise when mature workers leave the workplace. Their wisdom is not generally replicated through reading training manuals or attending seminars. Research indicates the employers are not the only ones who benefit by slowing the drain of experienced talent. Mature workers are suggesting that, if the options were made available to them, they would gladly pursue ‘semiretirement’ or work part-time on a more flexible basis. People working in the insurance industry generally see their jobs as much more than a means to pay the bills. They appear to enjoy the social aspects of the work, the challenges and the opportunity to do meaningful work. Is the industry capitalizing on these opportunities? What would a phased or semi- retirement program look like? What opportunities exist to retain mature workers, in addition to recruiting from similar service-type industries? What would be the challenges and benefits of such a program? Passing on the cold turkey The Insurance Institute surveyed more than 2,800 people working within the Canadian property and casualty industry. These workers represented 23 companies, with six companies accounting 36 Canadian Underwriter September 2009
for 72% of the survey respondents as a whole. Forty-three per cent of the workers surveyed fell within the demographic category of the Boomer generation (between the ages of 43 and 62). “The historical model of the labour market is that you have young groups of people who go to school and grad-
The historical model of the labour market is that you have young groups of people who go to school and graduate and come out ready to work, and a much smaller group of older people who retire at a fixed age. The whole phenomenon of the Baby Boom, at least in the case of Canada, has changed that. uate and come out ready to work, and a much smaller group of older people who retire at a fixed age,” says Richard Loreto, author of the report and president of R.A.L. Consulting. “The whole phenomenon of the Baby Boom, at least in the case of Canada, has changed that.” Previous generations of workers suffered from a variety of physical ailments
as a consequence of working within labour-based economies. But for Boomers, working in a service economy, the nature of the work has been much less demanding on their bodies. As a result, “work is now a more likely component of the retirement period than it has been historically,” Loreto says. “The majority of people, including those in the property and casualty industry, are now doing the kind of work that you can carry much further into life.” Loreto’s research found that threequarters (73%) of respondents who intend to retire within the next five years would also like to work postretirement. Why? Forty-six per cent of respondents cited additional income as the leading reason to continue working, followed by interest or enjoyment in work (37%). Six per cent of respondents were interested in starting a new career, while 90% expressed an interest in staying on to work with their current employer, the research found. Maria Blackmore, a vice president at a major reinsurance brokerage, is planning to retire next year, having worked in the industry since 1973. But although she is ready to slow things down a bit, she doesn’t want everything to grind to a complete halt. “I would like to have some kind of contract or part-time involvement in the industry after retiring,” she says. “For one thing, I feel like I acquired a lot of information and learning is an ongoing thing. I want to keep myself active. I don’t want to go from full-time work straight into fulltime retirement.” Blackmore has worked with the same organization for decades. She is an active volunteer with the Insurance Institute’s Ambassador program. For her, meaningful work involves sharing her experiences with up-and-comers, as well as keeping lines of social activity open. Blackmore emphasizes these “intangible” factors over the need to maintain a bank balance. Staying active and involved will go a long way to helping maintain quality of life, she says. Ken Rayner, president of CULE Insurance, has been working in the insurance business for 40 years. Last year,
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COVER STORY
Sustaining the Boom he and a business partner launched CULE, and he has no intention of retiring anytime soon. “I do think that people are working longer than what might be expected of them,” he says. “If you enjoy your job, there’s no reason why you wouldn’t want to continue doing it.” For Rayner, the intangible benefits of working in the insurance industry help to keep him fully engaged. “It’s a very social industry and it’s a very close industry,” he says. “You get to know a lot of people.There are loads of opportunities to get out and do things and see things that I don’t believe you would have the opportunity to do if you were retired.” Uncommon option Blackmore doesn’t believe semi- or phased retirements are common. The Institute’s latest demographic research supports her belief: only 44% of the workers surveyed reported having a formal phased retirement program available to them. More specifically, 53% of the mature worker cohort reported not having a phased retirement program available to them. And it’s not just a matter of employees being unaware of what’s available. Employers themselves admit they simply don’t offer many options. A 2008 Manpower study surveyed 30,000 employers in 28 different countries. In Canada, 67% of employers responding to the survey said they did not have a retention strategy in place for older workers. Only 24% said they did, whereas 9% weren’t sure. The health care and oil and gas sectors are excellent examples of industries that have begun to address the problem, Loreto says. That’s because those industries have already experienced the massive talent shortages predicted to affect Canada’s property and casualty insurance industry. “The numbers show the P&C industry is not the youngest industry going,” Loreto says. “It’s an industry in which people tend to retire a bit younger than the rest of the labour force, so its time will come in the next five to 10 years.” Helen Bozinovski, vice president of human resources at Aviva Canada, says determining when people plan to re38 Canadian Underwriter September 2009
tire has become a new challenge for an organization to manage. “People have different plans for themselves for retirement,” she says. “Some never want to retire. We have people still working past 70 and still very, very active. It’s not a given that 65 is retirement age anymore. It’s when the individual chooses.” Some might argue the recent downturn in the global economy has taken its toll on retirement investment plans,
In Canada, 67% of employers responding to a survey said they did not have a retention strategy in place for older workers. Only 24% said they did. causing people to think about working longer. Loreto acknowledges this might delay the talent shortage, but any such delay would likely be temporary. After all, he adds, “an economic crisis doesn’t cause us to get any younger.” Although mature workers would consider extending their careers, employers still need to be creative in how they entice them to stay on, Loreto says. People may not be interested in working post-retirement if it means being chained to a desk. Working as a mentor, continuing involvement in industry charities or working on special projects are elements of a successful retention strategy, Loreto says. The key element in all of these is flexibility.
Informal flexibility Susan Gunn, human resources director at Willis Group, says 69% of her organization’s North American workforce is over the age of 40. “If we don’t start feeding the talent pool and transferring knowledge, we’re going to have a huge issue,” she says. “So how do you do that in a way that people feel good about it, gets them interested and excited and moves the ball forward?” Earlier this year, Willis implemented a flexible working arrangement program available to all employees. The uptake has been tremendous, Gunn says. Now, heading into 2010, the HR department is brainstorming how to up the ante and draft a phased retirement program. One option is to enrol the employee contemplating retirement into a program that gradually reduces the number of workdays in the week; during this time, the semi-retiree would be buddied with someone to transfer knowledge, resources and learnings. “A lot of times, when people go from 150 km-h to 0 km-h, it’s hard,” Gunn says. “This way allows them to explore what it would be like to work three days a week instead of five, allowing them to discover other things they could be doing to fill up their days. It’s great for morale, treats people with dignity and respect and helps to build an awareness that their contributions to the company have been recognized.” Bozinovski adds that Aviva Canada encourages flexible employment relationships rather than implementing a formal program. “It’s a view that managers should have a very personal understanding of all of their employees,” she says. “By understanding the personal needs and aspirations of their employees, they will be in a better place to help determine what the best way is to change their job when it comes to continuing growth within their role.” Willing to work with employees to design a custom-made, semi-retirement program, Aviva Canada is in the process of brainstorming how it can bring even more options to the table. As it stands, in order to collect a pension, an employee must formally resign from the
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Sustaining the Boom
organization. Bozinovski says it might make sense to allow willing employees to be brought back part-time on a contract basis instead. Such opportunities exist to bring employees back into the workplace on a special projects basis, as a backup for an employee who is off on short-term disability or seasonally, Loreto says. The very nature of insurance and reinsurance makes the industry a prime candidate for offering seasonal contracts, Blackmore adds. Opportunities abound during the busy reinsurance renewal season and the winter season for primary insurers, when claims volumes increase. Both are ideal times when seasonal contracts might work for an insurance professional in semi-retirement. George Kehagias, director of human resources at Crawford & Company (Canada) Inc., says his organization, like many Canadian organizations, must still formalize a phased retirement program. As it stands, Crawford employees who are semi-retired are sometimes brought back on a contract basis to help clients with whom the 40 Canadian Underwriter September 2009
Like any good sports team, you need a balance between young, strong, up-and-coming talent and the experience of the mature players to have a winning team.
employee had forged a solid relationship with over the years. “We have a lot of clients that have 30- or 40-yearlong relationships on key accounts and we really don’t want to lose that relationship, continuity and familiarity,” Kehagias says. The key to maintaining these relationships is to allow flexible working arrangements, he adds. After surveying all of the different cohorts, flexibility was consistently listed as a top criterion in an ideal job, Loreto says. But “if you probe that, flexibility means different things to different cohorts,” he adds.
The core worker (aged 25 to 54) wants flexibility to take children to dental appointments and such. But for the mature worker, flexibility might mean having time to be with an aging parent or play a round of golf. “I think it becomes a question of the mature worker finding the right balance between work and leisure,” Loreto says. Dan Lawrie of Dan Lawrie Insurance Brokers in Hamilton, Ont., says he has had positive experiences with re-hiring employees. Recently, a long-time employee who had worked as a commercial producer with the brokerage for 15 years decided she wanted to spend more time with her granddaughter. Lawrie threw her a retirement party. He then brought her back to the office the next day on a part-time basis in the marketing department. “She’s happy and we haven’t lost that experience and she can continue to contribute,” he says. Knowledge transfer “Like any good sports team, you need a balance between young, strong, up-andcoming talent and the experience of the
COVER STORY
Sustaining the Boom mature players to have a winning team,” Lawrie says. “When you talk about phased retirement and flexibility, that’s where we can retain the knowledge of these people and the experience.” Michael Kyritis, vice president of human resources with RSA Canada, agrees. “In parts of the business in which we have more employees at or near retirement eligibility, we have a planned transition, allowing for the successor to be mentored by the retiring employee,” he says. “Where we can plan for it, we don’t wait for our employees to retire before replacing them. It’s a win-win scenario — we are able to transfer valuable knowledge and build important relationships and the retiree has a greater opportunity to create a greater legacy.” RSA Canada is planning to formalize its mentorship program, he adds. Bozinovski says knowledge transfer should be a key element of any formalized approach. “It’s one of those things that a lot of organizations are worried about — losing that corporate memory that you can’t quite write down in a procedural manual,” she says. “It is really [about] being able to support the organization’s business continuity by benefiting from [the retirees’] wisdom.” Back to the Boomers Employers need not be short-sighted, Loreto cautions. They shouldn’t focus exclusively on retaining employees in the insurance industry with whom they have forged lengthy relationships. People working in other, financial services-based industries may also be looking for a challenge after retiring from their careers. Certainly the skills they forged during their working life can easily be transferred to an insurance industry career. Allen Bowles, for example, worked in the education industry for 30 years. When he retired at the age of 55, he found himself at a loss with all of his new-found spare time. His father owned and ran an insurance brokerage in Sudbury, Ontario when he was growing up, so the opportunity to enter the insur42 Canadian Underwriter September 2009
ance industry as a second career seemed more like a homecoming to him. He spent the first four years of retirement working with Freedom 55/London Life before joining a local brokerage. At the insurance brokerage, he adapted some of the expertise he acquired during his 30-plus years as an educator; he quickly realized there is a strong correlation between the two lines of work. “Basically we [brokers] are teaching all of the time,” he says. “The teaching models that I developed over my career have really helped me here.”
A lot of times, when people go from 150 km-h to 0 km-h, it’s hard. Phased retirement allows them to explore what it would be like to work three days a week instead of five, allowing them to discover other things they could be doing to fill up their days. Lorie Guthrie Phair, principal at LePhair & Associates, suggests mature workers like Bowles offer much-needed skills in the relationship-building aspect of insurance work. She points to a 2007 Talent Matters report, published by Deloitte and
the Toronto Financial Services Alliance, in which researchers found that workers in the mature cohort thrive at building relationships. “Part of our value-add is to make complex scenarios simple and easy for clients to understand,” she says. “That’s what’s so good about the mature generation. That’s what they were always good at.” Younger generations are very strong at adopting technology, she adds, but mature employees “know how to simplify things for co-workers. They know how to talk to people and sell and communicate.” Kehagias also observes the mature generation “is wired differently.” For him, “that generation brings an incredible work ethic and loyalty to an organization that offers real benefits. Their energy and initiative can serve as a source of information and inspiration for newer workers.” Targeting the Boomer cohort requires more than just organizing career fairs and visiting schools though. “It takes a fair bit of networking to reach this cohort,” LePhair says. “Either through referrals or word-of-mouth.” Kehagias suggests collaborating with community partners to target mature workers. “These might include community centres, libraries, retiree associations, professional associations” he suggests. “There are recruitment and placement agencies that specifically target older workers, much like they target truck drivers or specialty areas. Advertising in industry publications is another way.” Associations such as Canadian Association for Retired People (CARP) may also serve as a resource for employers looking for ways to develop innovative retention and recruitment strategies, Loreto adds. Kehagias says education plays an important role in preventing any potential ageist behaviour from arising in the workplace. “Mentoring, respect and understanding the value of what an older worker brings to the organization, as well as the legal component of age-based discrimination, are all important pieces of what a training program would entail,” he says.
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Mediation:
The Wider Context Letter to the Editor
Bob Doiron
Vice President, Claims, Peace Hills Insurance
When I read the article ‘Why Mediations Fail’ (published in Canadian Underwriter’s March 2009 issue), I felt compelled to respond. Contrary to how it is presented in the above article, there is a much broader context to the negotiation and settlement of a loss, of which mediation is one aspect. For example, the article leaves out the frequently acrimonious relationship fostered by many plaintiffs’ counsel in the lead-up to the mediation, negotiation or litigation. When the table is set in such a fashion, why would the plaintiff lawyer expect the defence to bring sugary treats? Here are some specific examples of plaintiff lawyer tactics that foster this acrimonious relationship: First, it has happened that plaintiffs’ counsel have been secretive about their client’s injury and didn’t provide enough information for an adjuster to properly quantify the loss and reserve appropriately.
44 Canadian Underwriter September 2009
Without proper information, we are left to speculate as to what the reserve should be. If we undershoot the mark and we need to significantly increase the reserve several years later there is a lot of explaining to do. There is a stunning lack of understanding by plaintiffs’ counsel that we are a highly regulated financial institution that must get our reserves right for a multitude of reasons.
When the table is set for an acrimonious relationship, why would the defence be expected to bring sugary treats? Perhaps plaintiffs’ lawyers should read the ‘Why Insurers Fail’ article, written by the Property and Casualty Insurance Compensation Corporation (PACICC), and published in the June 2009 edition of Canadian Underwriter. When
you have spent several years speculating about the magnitude of the injury, and you get binders of information dropped on you on the eve of mediation, arbitration, negotiation or trial involving a claim that is presented as a very serious injury, you look at that information from a jaundiced perspective. Anecdotally, I would say 80% of surveillance is done because we get little or no information from plaintiffs’ counsel, or because our dealings with a certain firm or lawyer indicate they are engaged in ‘file building.’ Adjusters are under extreme pressure to reserve accurately within the year a loss is reported. If they can’t get it overtly or don’t trust the source, what other options do they have? Plaintiffs’ counsel have encouraged clients to ‘doctor-shop.’ Any adjuster who has been working on personal injury files for three years can rhyme off a list of
pg44,45_Letter to Editor (Sept09)_v2_DG_VM
doctors a plaintiff has or will have seen throughout the life a file upon finding out who the plaintiff’s counsel is. If a plaintiff has a family physician they have seen for 20 years and gets injured, does that physician suddenly become so incompetent that they can’t comment on the injury or make the necessary referrals? We in the insurance industry are wise to ‘sanitized’ medicals that plaintiffs’ counsel have sent back to physicians several times in order to delete information that they think might be detrimental to their clients. Alas, plaintiffs’ counsel have been known to plant the seed of unrealistic expectations in their clients’ minds and then blamed the insurer for failing to pony up with the lotto. In addition, there have been instances in which plaintiffs’ lawyers have acted in a totally uncooperative fashion, delayed bits and pieces of evidence, didn’t return calls, ignored an insurer’s correspondence that virtually pleaded for information and then told their clients the insurance company was deliberately delaying matters as a stall tactic. So when the plaintiff finally agrees to mediate and we arrive on the scene, it’s not a complete picture to suggest, as Kwinter’s article does, that mediations fail primarily because insurers are supposedly not providing appropriate authority. Lest you think I am accusing all plaintiff counsel of such behaviour, this is simply not the case. The only practice I have listed above that is frequent, I would say, is the withholding of information by plaintiffs’ counsel. Our company has piloted a ‘Planned Settlement’ program, which we rolled out 18 months ago. The entire program is based on a principled approach of cooperation and early mutual disclosure focused on the injured party. Despite interest in the program, the uptake has been disappointing. More recently, we have taken what we believe is a very principled approach to claims falling within Alberta’s Minor In-
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jury Regulation (MIR) cap. Essentially it offers a two-tiered settlement: it allows a plaintiff to collect the cap amount now and, if the cap is ultimately declared unconstitutional, an agreed-to amount plus interest at a future date. The uptake has been modest to say the least. Exactly whose interests are paramount when plaintiffs’ counsel won’t even consider it?
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I cite these two examples of our initiatives — there are more — to illustrate that we continue to engage in initiatives that promote a cooperative relationship with plaintiffs’ counsel. We will continue to do so in spite of the reluctance of plaintiffs’ counsel to join us in setting the table together, so that all may walk away feeling they have been treated with decency and respect.
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pg46,48Discovery_v2_DG_VM
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Fo llow g the in Joseph Oppenheim
McLennan Ross LLP McLennan Ross LLP is a member firm of ARC Group Canada.
a i l r t e
With new protocols established, courts are less reluctant to order parties to produce their hard drives and laptops to retrieve data. With the integration of the Sedona Canada Principles into the rules governing discovery, courts are becoming more willing to order parties to produce their hard drives and laptops. As email and social networking Web sites continue to replace verbal communication, electronic discovery can unearth significant paper trails.
duced to writing. The advent of email, instant messaging and social networking forums such as Facebook have led to the unintentional creation of paper trails that can be particularly relevant in insurance litigation. These communications are often “deleted,” but remain stored in a computer’s electronic memory. Generally they can only be retrieved by forensic data recovery experts who require access to the entire hard drive. Traditional discovery rules are not easily applied to electronically stored documents. Prior to 2008, courts tended not to order production of a laptop or a hard drive because the relevance of documents that might be found in the hard drive were outweighed by the negative effect it would have on privacy and confidentiality interests.1
BACKGROUND Fundamentally, all records relevant and material to the issues in the pleadings must be disclosed and produced. The provincial rules of court include discovery rules that were drafted with respect to paper documents. In most cases, relevant paper records are often standardized — income tax returns, for example — and can be easily identified, retrieved and produced. But information technology has led to fundamental change in the way documents are created, used and stored in both the private and commercial realms. In particular, communications that were traditionally verbal and not recorded are now re-
46 Canadian Underwriter September 2009
THE SEDONA CANADA PRINCIPLES A number of judges, lawyers and government representatives from across Canada collaborated in 2006 to draft a set of recommendations with respect to e-discovery issues.The group is known as “Sedona Canada.”2 In January 2008, Sedona Canada published The Sedona Canada Principles. The principles are intended to be a set of guidelines and recommendations for lawyers and courts in establishing a measured approach to e-discovery compatible with the discovery rules in all the Canadian provinces and territories. Since publication, the principles are being incorporated into
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revised rules of court and practice directives across Canada.3 The principles are designed to strike a balance between the following factors: • the obligation of litigants to preserve and disclose relevant documents; • the costs to recover and produce the documents (which can be very high); and • protection of confidentiality, privacy and privilege.
APPLYING THE SEDONA CANADA PRINCIPLES In a recent British Columbia Supreme Court case, Bishop (Litigation guardian of) v. Minichiello, the defendants sought production of the hard drive of the plaintiff’s family computer. The plaintiff alleged the defendants caused a brain injury, which affected his sleeping patterns and ability to work. The defendants’ theory was that the plaintiff’s ongoing fatigue was caused by his late-night computer use as opposed to the brain injury.Thus, they sought access to the hard drive for the limited purpose of determining when the plaintiff logged in and out of Facebook. The plaintiff argued that various family members used the computer for business and personal purposes, and privacy and confidentiality would not be protected. The court ordered that the hard drive be produced to an independent forensic data recovery expert that was agreed to by both parties (and appointed by the court if necessary). The expert’s fees would be paid for by the defendants. The expert’s role was limited to reviewing the hard drive and isolating the information sought by the defendants. In its analysis, the court balanced the numerous factors set out in the principles, and articulated the following general rules: • electronic data stored on a computer’s hard drive are “documents.” • the court has the discretion to deny an application for production of electronic documents in the following circumstances: • where thousands of documents of
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only possible relevance are in question; or • where the documents sought do not have significant probative value and the value of production is outweighed by competing interests such as confidentiality and time and expense required for the party to produce the documents. • the court must also assess whether the order sought is so broad it has the potential to delve unnecessarily into private aspects of the opposing party’s life. The court took note of the fact the defendants were seeking only the “metadata” stored on the computer’s hard drive. “Metadata” is not a document created by a user; rather, it is a report of recorded data that is generated by computer software. It is evidence of what the user does with the computer and when. In this case, that information was particularly relevant. The privacy issues were addressed by placing restrictions on the
The advent of email, instant messaging and social networking forums such as Facebook have led to the unintentional creation of paper trails that can be particularly relevant in insurance litigation. type of information that could be searched for and produced. The costs involved in obtaining the information would be borne by the defence. The Ontario Superior Court applied a similar analysis in 2008. In Vector Transportation Services Inc. v. Traffic Tech Inc., the corporate plaintiff alleged that the defendant, a former senior executive, had stolen the plaintiff’s customers in breach of a confidentiality agreement.The motions judge ordered the defendant to produce his personal laptop to the plaintiff’s forensic data recovery expert in order to inspect the computer for emails containing the names of the plaintiff’s clients or customers. The defendant appealed, and the Superior Court dismissed the defendant’s appeal on the ba-
sis that the motions judge had correctly taken into consideration the factors set out in The Sedona Canada Principles.
COMMENTS Electronic discovery is increasingly becoming part of the litigation process. The Sedona Canada Principles are helpful guidelines to manage effectively the competing interests that arise in the process. However, the issue of cost is a significant hurdle in being able to use the e-discovery process to its full potential. The vast amounts of electronically stored information, created by widespread use of computers and the Internet, has substantially increased the cost and burden of discovery. Forensic data recovery experts are often prohibitively expensive, with fees often reaching the tens of thousands of dollars. E-discovery will therefore not be fully used in most cases. However, as illustrated in the Minichiello case, there may be circumstances in which it makes economic sense to use this process. 1 See for example: Privest Properties Ltd. V. W.R. Grace & Co. – Conn (1992), 74 B.C.L.R. (2d) 353 (B.C.C.A.); Desgagne v. Yuen, 2006 BCSC 955; and Roeske v. Grady, 2006 BCSC 1975. 2 Sedona Canada is associated with an American non-profit law and policy think tank called the “Sedona Conference.” Its website is: http://www.thesedonaconference.org/ 3 In the preface to the The Sedona Canada Principles, Justices Campbell (Ont. S.C.J.) and Scanlan (N.S.S.C.) state: “Since publication of the initial draft, various jurisdictions have made reference to the principles in projects involving possible changes to the rules or practice notes to accommodate e-discovery. Substantive rule revision in the provinces of B.C. and Nova Scotia over the next year or so is expected to adopt the principles. In Ontario, a recent report on civil justice reform has recommended adoption of a practice direction that would encourage reliance on the principles.” I note that in Alberta, the principles have been used in its Court of Queen’s Bench practice note dealing with e-discovery.
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Brokers need to start hustling now to prepare for the dawn of a new consumer age in 2020 A.D. The year is 2020.While getting ready to head out on summer vacation tomorrow morning, Mr. Convenience suddenly remembered that the hovRick Restell ercraft was still insured for storage. Being 2 o’Restell Strategic Partners clock in the morning, he decided to contact his insurance broker. “Computer, Program, Insurance,” he says into his handheld personal device. “Subject, Hovercraft.” After a brief pause, an automated voice replies: “Connected to database of John Smith Agencies of Springfield.Your transaction request?” “Amend coverage on hovercraft to active.” Another brief pause. “Transaction complete,” the automated voice announces. “A confirmation has been sent to your personal device. Coverage has been added based on your account instructions.” For those of you in the insurance business who are still handling requests with the aid of printed CSIO applications, this scenario probably appears far-fetched. But the technology to do this already exists: your cell phone already takes your voice commands, and the soon-to-be-released
50 Canadian Underwriter September 2009
Microsoft Natal recognizes your voice, face and movements. A device could be programmed to ask what you need and take your commands and process them as if you typed them on a keyboard. This device in your home could be used to search recipes in the kitchen, find car parts while working in the garage, call the fire department if there was smoke, access company Web sites or databases to place orders or simply find information. Once the world accepts a newer, easier way to handle a transaction, there is no turning back. When my mother convinced my Dad to buy an automatic washing machine, she never again washed clothes by hand. She didn’t have to understand how the machine worked, she just knew it saved time and energy — her time and energy. In the example above of life in 2020, the automatic transaction in this scenario didn’t just happen without any preparation. Mr. Convenience has a good insurance broker who established his accounts properly and gave his clients good advice along the way. When he first introduced himself to the broker, Mr. C. was calling to see about coverage on his new home.The broker, call him Mr. Smith, suggested they review his needs. They spent a few minutes exploring options and discussing what Mr C. wanted from his insurance program. They talked about what deductible he
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was comfortable with on his vehicles and home; what form of coverage he felt had the best balance of price and coverage and how he wanted his account operated. The operation of Mr. C.’s account was perhaps the most important part of their conversation. The discussion involved: • payment method; • contact method; • access codes; • where to find specific account information; • the name and contact points for his assigned broker; and • where to find general insurance information. When he got off the phone, Mr C. used the text message he received confirming all the details to enter codes and passwords in his home computer system, allowing him to access his file whenever and however he wanted. His needs were known, his broker had given his best advice and now he didn’t have to worry about it. If he needed to make a change or wanted to ask a question, he knew how. Access was 24/7, as he had requested. He could call his broker, send an email, send a text message or he could access the account himself and make his own change. The Technological Revolution happening today rivals the Industrial Revolution; it will transform the way we live and work. Traditionally, the insurance industry is among the last to adopt new technology, but today the insurance business has some pretty tech savvy participants. If insurance clients see transactions are easier and faster, that’s what they will want — just like my Mom wanted that washing machine. How many companies are left selling wringer washers? Up to now, many broker management systems have been used as little more than accounting systems to figure out how much to pay insurers and for renewal lists. Efforts to bring about SEMCI (single-entry, multi-company interface) haven’t advanced much in 20 years. Each company uses its own portal for brokers to access their systems; lots of brokers and insurers still print documents and mail them to each other, even though the technology to send these same 52 Canadian Underwriter September 2009
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materials by electronic means has existed for a long time. The excuse not to move forward with technology — i.e. because insurance is a mysterious, personal business about which the average consumer has no idea and therefore must seek out professional help on every decision — is ludicrous. Consumers now book their own travel, so much so that travel agents are disappearing before our eyes. Online stockbrokers are dominating that industry; what isn’t online is being done through the banks. If you had asked stockbrokers
about this 20 years ago, they would have said the process of researching companies and trading stocks would be outside the capabilities of the average consumer; that banks were incapable of providing the level of expertise required. Boy, were they wrong! The consumer of 2020 will be a lot like the Gen Y customers of today.That’s because they will be the decision makers in 2020. The Baby Boom will be largely irrelevant; offices will be run by staff members who, today, seem impossible to motivate. The majority of consumers in 2020 will be those who are among the most demanding and knowledgeable right now.This is of course assuming that brokers will be able to keep clients happy until 2020! Here’s a profile of the consumer you are starting to see now. They: • have more active lifestyles. They don’t have time to come to your office; • live in a global 24/7 environment. They are not restrained by where they are or what time it is; • are comfortable with technology and expect to use it;
• will buy online, but only if the online ordering technology is easy for them to use; • are not responsive to traditional marketing. For example, they use the National Do Not Call Registry and TIVO — digital video recording that allows subscribers to select programming of their choice, at the time of their choice (i.e. bypassing traditional advertising); • made 31 billion searches on Google last month; • have hundreds of on-line “friends” to ask if they need help; and • expect you to be an environmentally sustainable company and don’t want the paper copy. The switch to adoption of new business methods is not going to be easy for the average broker. Most brokers have used technology to reduce the amount of contact with their clients, and the opposite of this strategy will be required. Every administrative duty will need to be looked at for effectiveness; the extra time automation frees up should be spent creating a better relationship with the client. To be successful a broker will have to: • keep Web site content fresh and useful; • use blogs and forums to allow clients to interact; • develop a social network for staff; • create efficient processes for simple transactions; • hire and train brokerage staff members who have a thirst for knowledge, willingness to embrace technology and a desire to communicate effectively; and • work together with other brokers on joint initiatives to share the cost of new technology and to create new products and brands that will move them toward the future. All of the direct writers and a few independents are taking these actions now, investing heavily in the future. There is ample evidence that 60% of Canadians will choose to buy direct in the near future. Independent brokers will fight hard for the remaining 40%. Brokers who are still using the insurance technology equivalent of a wringer washer may find themselves at a distinct disadvantage to both direct writers and independents that are selling with the automatic model.
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INSURANCE BROKERS ASSOCIATION ONTARIO
Page 1
89 th Annual Convention
Wednesday, October 21st – Friday, October 23rd, 2009 The Fairmont Royal York Hotel, Toronto, Ontario Thursday, October 22, 2009 IBAO’s Annual KEYNOTE SPEAKER: Convention is Donald Cooper, Human Marketing & Management the biggest and Since 1991, international business speaker and coach Donald Cooper has devoted himself to helping businesses in over 40 industries throughout the world to redefine and reinvent themselves to create a significant competitive advantage, improve management effectiveness and increase most exciting profitability. Having spent 20 years as a world-class manufacturer (Cooper Sporting Goods) and 14 years as one of Canada’s most innovative Cooper knows what hard work is all about. He got his start working at his family’s business – Cooper Canada at the age of 6. Cooper insurance retailers, Canada went on to become the world’s leading manufacturer of hockey equipment and Canada’s largest maker of both sporting goods and fine broker event on leather goods. After leaving Cooper Canada, he founded Alive & Well, a unique women’s apparel and gifts “warehouse boutique” that fundamentally reinvented the very idea of what a retailer could be and attracted international attention. In just 3 years, it garnered seven awards for marketing, the Canadian service and business excellence and community involvement, including being voted Canada’s Outstanding Innovative Retailer in 1991. benchmark work on vision, mission, marketing and management effectiveness has helped businesses create clarity, commitment and insurance His accountability about where they’re going, and how they’ll get there. industry calendar. EDUCATION PROGRAM AT A GLANCE: CSR SEMINAR: Effective Strategies for Managing Workplace Stress and Boosting Your Productivity
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MEMBER’S SEMINAR: CEO PANEL Due to an overwhelming response to stay with our 2008 format, IBAO is pleased to announce that back by popular demand, our CEO Panel will be moderated by Evan Solomon - CBC Television Broadcaster, Journalist, Author and one of Canada’s best moderators to participate in a round table discussion with our CEO’s. This year, the Panel will be comprised of five top executives from leading property and casualty underwriters: Jean-Francois Blais, President & CEO – AXA Canada; Robin Spencer, President and CEO – Aviva; George Cooke, President and CEO – The Dominion; Kevin McNeil, President & CEO – Gore Mutual; Charles Brindamore, President and CEO – Intact Insurance.
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This year, don’t question whether or not you should stay for our closing night. IBAO will be hosting its 2nd Annual Award of Excellence Gala where we will be recognizing brokers for their contributions to the industry and community. Once again, we were able to acquire Toronto’s own local celebrity Dina Pugliese, Co-Host of “BT-Breakfast Television” as our Awards Host! Also featuring the entertainment of six-time Juno award-winner Colin James who has driven his 10-album, 25-year career with his blues influenced guitar mastery and soulful vocals!
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Protection from
Opinion/Analysis
Covert Ops Any insurer that puts the customer ahead of its corporate protection strategy earns the business it seeks.
We can thank the movie industry for exposing the hidden world of covert activities — think James Bond and Jason Bourne.We are rapt by the Frank Cain entertainment provided and our attention is Michael Palermo & transfixed to the action before us. If it’s intrigue Associates Insurance Ltd. we want, with a generous amount of suspense and excitement thrown in for good measure, then without doubt we get our monies’ worth. What has this world got to do with business in general and in particular, the insurance business? Well, for starters, covert activity is not what one would expect of the business world. And yet there have been startling examples of late, unabashedly laid out by the media, of how financial institutions can be made to go wrong. Ultimately the burden of consequences fell on those who entrusted probity to a management that should have known better and should have acted with propriety. Governors and regulators as the overall seers obviously let their guard down. In Canada, the insurance industry has, by its enviable record, maintained a consistently elevated
54 Canadian Underwriter September 2009
position of good corporate governance, with very little exception. Good corporate governance is the accepted and expected standard of operation. It is therefore obvious when there is even the slightest deviation from the norm, causing good governance to take a back seat to a pronounced permutation born of maladministration and imprudent management. For the most part, despite comparatively minor situations that have arisen, little harm has hung around long enough to create an unforgiving memory. But from the perspective of the insurance-buying public, what is expected in terms of what the industry has to offer? Foremost, some indication is sought that the insurer will literally place themselves in the shoes of the buyer, clearly defining what they would want were their positions to be reversed. Insurers will do this through the medium of brokerage representation (unless they are direct writers), explaining product availability, the extent of coverage limits and detailing risk types that they will accept as risk bearers — all with reliance upon a history that has proven itself viable. Admittedly, this will not come as news to anyone familiar with the manner in which insurance normally operates. But regardless of whether a
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person is a novice or veteran of the insurance business, he or she will not view as “normal” any indication from an insurer that it is engaged in some kind of Jason Bourne-style of covert operation; that the insurer is holding back on information (i.e. reasons for non-renewal) crucial to the policyholder; and which, by remaining silent, leaves the policyholder left to trudge cheek-by-jowl with the broker through a maze of complicated procedures to re-establish the consumer’s former position. This, by the way, is not to say a policyholder may not have been instrumental in creating a situation in which an insurer opts to withhold reasons for underwriting actions. Naturally, questions — if not concerns — arise when such information is not forthcoming. Is the information being withheld for fear of possible legal backlash? Has the insurer simply failed to walk in the shoes of the policyholder, leaving the policyholder to ponder their
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uncertain fate with another insurer (and the stigma of a questionable character that might result)? If an insurer withholds information for legal reasons, is that not doing harm to the insurance company’s status as a professional organization, on the theory that a professional
Duty of care is a two-way street. For an insurer it means self-recognition and demonstration of acceptable conduct. body would observe the basic rules of duty of care and put them into practice? Duty of care is a two-way street. For an insurer, it means self-recognition and demonstration of acceptable conduct, which in turn will encourage a policyholder to act with equanimity within the insurance purchasing process. For a
policyholder, if that equanimity is not achieved, his or her fate has pretty much been sealed, since any attempt to reverse the situation would likely fail — worse than a case of crossing the Rubicon. In this situation, it becomes the onerous task of the insurance buyer to find his or her way out of the woods with the help of an understanding and thoughtful insurance broker. Whether insurance or any other business, it is generally accepted that “getting the job done” — a manager’s credo if there ever was one — means reliance on good corporate governance. Good corporate governance, which eschews covert operations, carries with it the ability to seek out, identify and bring to an element of success the insurmountable. Any business that puts the customer ahead of its personal protection strategy earns the business it seeks and gains the respect of those to whom it hopes to capture.
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The Right to Reimbursement
Belinda Bain Partner, Gowlings (Toronto Office)
Thanks to student-at-law Shannon Beddoe for her assistance with research in connection with this paper.
When a personal injury action proceeds through to trial, in many cases the plaintiff has had, and may continue to have, access to income replacement benefits — otherwise known as short-term and long-term disability benefits — from an employer or insurer. In circumstances in which the plaintiff has a valid claim against a third party for recovery of income loss, questions arise concerning who gets what credit in connection with those income replacement benefits. Leaving aside specific statutory provisions that apply in the case of motor vehicle accidents, two main issues arise with respect to income replacement benefits paid and payable in this type of scenario. The first involves whether income replacement benefits the plaintiff has received ought to be deducted from any amount he or she
56 Canadian Underwriter September 2009
recovers from the tort defendant on account of loss of income.The second issue involves whether the payor of those benefits is entitled to recover any portion of the benefits back from a plaintiff who recovers damages on account of income loss from the tort defendant.
DEDUCTIBILITY OF INCOME REPLACEMENT BENEFITS In Ratych v. Bloomer1, the Supreme Court of Canada observed that the primary aim of the law of torts in awarding damages for personal injury must always be to compensate victims for losses actually sustained. Accordingly, as a general rule, income replacement benefits received by a plaintiff ought to be brought into account and deducted from awards for lost earnings.This general rule is subject to two exceptions. The first relates to charitable gifts. The second exception is the “private insurance exception.” This bars the deduction from a tort damage award of benefits derived from private policies of insurance, funded independently by the plaintiff. To prove that income replacement benefits are in the nature of “private insurance,” plaintiffs must cite evidence of some type of consideration
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When a personal injury action proceeds through to trial, who gets credit for income replacement benefits paid to a plaintiff by either the employer or insurer?
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given up by them in return for the benefits. Accordingly, the issue often boils down to who paid the premiums in respect of an income replacement policy — the plaintiff, or his or her employer. Where an injured employee can show the benefits received flowed from some form of payment made directly or indirectly by the employee, the analogy with a private insurance policy is a strong one, and a good argument for nondeduction exists. In Lavaute v. Canada (Attorney General)2, the current status of the law regarding the general rule of non-deductibility and the “private insurance exception” from Cunningham are summarized as follows: • The general rule is that a plaintiff in a tort action cannot recover twice for any loss arising from an injury. • There is a “private insurance exception” to the general rule. To qualify, a plaintiff must show evidence that the benefits he or she received were in the nature of an insurance. In other words, the plaintiff must show evidence that he or she provided some type of consideration in exchange for the benefit. • If the benefits do not fall within the “private insurance exception,” then they must be deducted from the damages recovered, unless the third party who paid the benefits has the right of subrogation.
PAYOR’S RIGHTS OF RECOVERY Contractual right to reimbursement v. common law principles of subrogation A second issue arises with respect to whether a payor is entitled to recover income replacement benefits it has paid out to an employee who has a cause of action to recover income loss from a third party. In this regard, a distinction is to be made between a pure contractual right to reimbursement and a common law right of subrogation. Specifically, if there is an express provision within the underlying plan, policy, or an accompanying reimbursement agreement stating that benefits must be repaid upon recovery of income loss from a third party, then the situation is one of a contractual 58 Canadian Underwriter September 2009
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right of reimbursement and common law principles of subrogation do not come into play. Provided that valid consideration for entering into the contract exists, then the contract for reimbursement will, on first appearance, be enforceable.3
The issue often boils down to who paid the premiums in respect to an income replacement policy — the plaintiff, or his or her employer. As noted by Craig Brown and Julio Menezes, “the right of subrogation in insurance arises under common law and its operation is governed by common law principles. The general principles have, however, been modified by statute in Canada. In addition, the parties to an insurance contract may modify them for the purposes of that contract (emphasis added).”4 In the case of British Columbia Life & Casualty Co. v. Meek5, Supreme Court of British Columbia Justice W.B. Scarth explained the distinction between the common law right to subrogation and the right to subrogation (or perhaps more appropriately “reimbursement”) that arises by virtue of the terms of the contract as follows: “The parties may, by the terms of the contract, provide
that one party is entitled to be subrogated to the rights of the other,” Scarth wrote in the decision. “…If subrogation is a matter of contract, one looks to the terms of the contract to determine the parties’ rights and obligations.” In Meek, Scarth found a contractual right of reimbursement, due entirely to express provisions within the underlying documentation, overrode common law principles of subrogation. At Paragraph 28 of his decision, he stated: “Here, one must look to the contract, including the Reimbursement Agreement, in order to determine the parties’ rights and obligations. They are clear…They impose an obligation on the employee to recover from the third party the benefits paid by CU&C and to indemnify CU&C for those benefits.” Meek was discussed in detail in the subsequent case of British Columbia Life & Casualty Co.v.Mallette6. 1619 (Prov. C.J.). In particular, it is noted that in Meek, the additional provisions in the contract between the insured and the insurer, as well as in the reimbursement agreement, “…imposed an obligation on Meek to recover from the third party an amount sufficient to reimburse the benefit plan for all of the benefits advanced. The provisions were also found to eliminate any right Meek might have had to deduct from the debt any legal fees incurred in recovering the damages, and that as a result, Meek was required to repay her benefits in full despite the fact that she had not been fully indemnified by her wage loss claim.” Accordingly, it is clear a distinction is to be made between a pure contractual right to reimbursement, versus a common law right of subrogation. If there is an express provision within the underlying plan, policy or reimbursement agreement stating that benefits must be repaid upon recovery of income loss from a third party, then the situation is one of a contractual right of reimbursement. Common law principles of subrogation do not come into play, and reimbursement flows regardless of whether or not the plaintiff has been made whole by the third party tortfeasor (the party
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Celebrating 75 Years as the ‘Voice of Insurance in Canada’ Jardine and Young Limited opened its doors for business on November 18, 1933, in the grip of the Great Depression. Norman F. Jardine and his staff of two launched Canadian Underwriter magazine on January 1, 1934 and – for 75 years – Canadian Underwriter has been known as the voice of insurance in Canada. In his inaugural editorial Norm Jardine wrote,
“To those that have given us advertising contracts and paid subscriptions, we extend our sincere thanks. We appreciate your confidence in us and can assure you that, if determination means anything, we shall prove ourselves worthy of it.” The founders of Canadian Underwriter certainly proved their worthiness and 75 years later, the staff of the magazine are very proud and determined to uphold the legacy of quality and service that Norm Jardine and his team provided to the Insurance Industry. All of us at Canadian Underwriter would like to thank you, our subscribers and advertisers, for your business, support and encouragement. Sincerely,
Steve Wilson Senior Publisher
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that has committed a civil wrong) in connection with his or her income loss.
Common Law subrogation Separate and apart from a contractual right to reimbursement is the question of whether a payor of income replacement benefits may be entitled to recover any portion of the amounts it has paid according to common law principles of subrogation. Essentially, this question turns on:(1) whether the underlying policy or plan is properly considered a contract of indemnity, and (2) whether the plaintiff has been made whole in connection with his or her loss. Regarding a contract of indemnity, in Gibson v. Sun Life Assurance Co. of Canada7, the judge reviewed Glynn v. Scottish Union & National Insurance Co.8 and wrote: “The basic principles of insurance law as they apply to such a contract [ie. a disability benefit policy] are well settled so far as the right of subrogation is concerned; if the policy is a contract of indemnity the doctrine of subrogation applies; if it is not a contract of indemnity, there is no right of subrogation.” The mere classification of a policy as accident and sickness insurance, or some other category of insurance, does not determine whether the policy is truly an indemnity policy. That determination rests on how closely the policy bases benefits on an estimate of the insured’s actual loss of income. The key factor in this determination is how the benefit quantum is derived. Policies that pay a stated amount without reference to the insured’s income would not be classified as income replacement. Where the benefit is stated as a proportion of the insured’s pre-disability income, the policy may or may not be one of income replacement. The court will look at the offsets stipulated in the policy. If the policy allows the insurer to deduct most of the insured’s potential post-disability receipts, it will likely be deemed an income replacement policy, giving rise to common law rights of subrogation on the part of the payer. The common law principle that an insured must be made whole before the
Page 14
insurer is entitled to subrogate has been consistently applied by Canadian Courts in cases relating to income replacement benefits.9 The same principle has more recently been applied in Robichaud v. Clarica Life Insurance Co.10 The Robichaud case discusses subrogation rights in the context of disability benefits, and relies on the Supreme Court of Canada’s statement in Somersall v. Freidman.11 According to that decision, “it has long been the law, in the absence of contractual terms to the contrary, that the insurer’s right of subrogation will not arise until the insured has been fully indemnified.”
The requirement that a plaintiff be fully indemnified before a payor can exercise its rights to subrogation may not always be a simple rule to apply. The requirement that a plaintiff be fully indemnified before a payor can exercise its rights to subrogation may not always be a simple rule to apply. Plaintiffs often do not recover 100% of their actual loss in tort litigation; instead, they often accept settlements that fall somewhere short of making them whole. A related issue is whether a plaintiff has been fully indemnified if the need to pay legal fees renders his or her net indemnification less than 100%. In Confederation Life Insurance Co v. Causton,12 the court held that if legal fees or other costs reduce indemnification to only partial
indemnification, then the insurer does not have a right to subrogation. As the court put it: “There is no requirement that an insured plaintiff pay for legal services ‘out of pocket’ so that his or her insurer may encroach upon the litigation damage award.”
CONCLUSION Interesting issues arise in connection with deductibility, reimbursement and subrogation rights in respect of income replacement benefits. The general rules are straightforward. Income replacement benefits received by a plaintiff are to be deducted from any recovery of income loss from a tort defendant, unless they fall with the private insurance exception. Where there is a clear contractual right to reimbursement, the payor is entitled to recovery of the benefits paid to a plaintiff who recovers damages on account of income loss, irrespective of whether the plaintiff has been made whole in respect of his or her income loss. In the absence of a clear contractual provision, common law rights of subrogation come into play. Under contracts of indemnity, a payor’s right of subrogation will not arise until the insured has been fully indemnified. 1 [1990] 1 S.C.R. 940] 2 [2004] N.S.J. No. 335] 3 see, for example Cunningham, supra at page 122; Robichaud v. Clairca Life Insurance Co. [2007] O.J. No. 3648 at paragraph 13; and Confederation Life Insurance Co. v. Causton (1989), 38 C.C.L.I. 1 (B.C.C.A.) 4 Insurance Law in Canada (1982) Carswell Co., at page 314 5 [2005] B.C.J. No. 1619 (S.C.) 6 [2005] B.C.J. 1619 (Prov. C.J.)] 7 (1984) 45 O.R. (2nd) 326 (H.C.J) 8 [1963] 2 O.R. 705, 40 D.L.R. (2d) 929 (C.A.) 9 (see, for example Confederation Life v. Causton (1989) 60 D.L.R. (4th) 372 (BCCA) and British Columbia Life and Casualty Company v. Meek (1999) 10 CCLI (3rd) 10 (BCSC) 10 [2007] O.J. No. 3648 (S.C.J.)] 11 [2002] 3 S.C.R. 109, at paragraph 53] 12 [1989] B.C.J. No. 1172 (C.A.)]
September 2009 Canadian Underwriter
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Model Predictions Opinion/Analysis
Peter Beeching Freelance Writer
Country risk models are a case study in how financial risk models led us into a credit crisis.
els is suspect. Should they be supplemented with — or replaced by — a more dynamic, qualitative, evidence based historical approach?
On the heels of the October 2008 subprime mortgage credit collapse has emerged not only the worst financial contraction since the Depression, but “collaterally,” discreet burials of patients bearing their surgeons’ mistakes.That is, country risk analyses (CRA) gone off track. When the patient dies, who suffers? The client, of course.1 But since most commercially available country risk profiles are proprietary, client confidentiality also seals survivors grieving CRA errors. What of CRA’s embedded assumptions? While there are many, let us consider a case study based on public information for a partial review. To review a few: Venezuela’s mishandled nationalizations of foreign direct investments (FDIs) and why this happened. This same analysis can be applied to assessing the wrongs of our contemporary financial crisis. The bottom line is that risk modelling, in failing to properly account for unpredictable dynamics of complex human behaviour, can only go so far in calculating risk. Obviously, predictive capabilities of abstract, math-based, quantitative mod-
first year of government,Venezuela’s FDI dropped by 42%. In 2000, its’ net FDI moved higher than its’ 1998 figure. But come 2002, FDI plunged to US$800 million from its 2001 figure of US$3.7 billion; net FDI was negative for the first time under Chávez. Since then, FDI has fluctuated. In 2006, a presidential election year, gross FDI was negative for the first time under Chávez.2 As of May 1, 2007, Chavez nationalized the last oil production sites under foreign control in the Orinoco Oil Belt . Until then, companies could negotiate terms of their nationalization. Oil production in “the Belt” covers an area of roughly 55,000 square kilmotres generating an estimated 1.3-trillion barrels of “oil in place,” ranking the area among the world’s largest extraheavy oil reserves. After 2007, it has been co-ventured between Venezuela’s state-owned PDVSA (ownership stake, 60% plus) and foreign subsidiaries (making up the difference). Previous arrangements gave PDVSA a minority stake.3 On Feb. 28, 2007, CBS reported Chavez had previously announced intentions for a majority stake by May 1, 2007 in four heavy oil-upgrad-
62 Canadian Underwriter September 2009
HUGO CHAVEZ AND NATIONALIZATION According to Forbes, in 1999, in Hugo Chávez’s
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ing projects run by British Petroleum PLC, Exxon Mobil Corp., Chevron Corp., ConocoPhillips Co., Total SA and Statoil ASA.4 According to the U.S. State Department, Chavez decreed in February 2007 that the strategic associations convert to joint ventures, giving PDVSA a 60% stake by Apr. 30, 2007. ConocoPhillips and ExxonMobil refused to migrate their investment stakes in three of the four associations. Result; Venezuela took over their investments. Both companies claimed expropriation, filing claims against Caracas.5 Whether or not this does in fact constitute “legislated theft” is not the point. The point is that such sentiments, as well as (principally American) FDIs’ perceptions of Chavez as a dictator, raise critical CRA issues. For example: What was the earliest awareness of Hugo Chavez as an emergent player in Venezuelan politics? Was there any legitimacy to the way the government treated FDI players in that country? Did anyone’s analysis include a review of the foreign investors resenting Chavez’ policies? These questions highlight CRA’s transaction orientation. Any enterprise making significant transactions and/or partnerships within another country needs to know the history and stability of its foreign partner. Why? Because if it commits resources to an area, it expects a return on its investment (ROI). Hence, due diligence includes knowing relevant history about a foreign jurisdictional partner. Hugo Chavez led an unsuccessful army coup in 1992 against then-president Carlos Andres Perez. Prior to that, the BBC reported, Chavez and fellow officers founded a secret movement inspired by Simon Bolivar. So, if Chavez was not on radar before 1992, exactly when was he factored into CRA Venezuelan analyses? In other words, why would ConocoPhillips and ExxonMobil cry foul as of Apr. 30, 2007? CRA’s transaction orientation sets itself
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up to fail for two reasons: It doesn’t properly monitor real events capable of impacting future business affairs. It victimizes itself on the basis of its evidence/data bias selection.6
NUMBERS AND HISTORY What, then, is the bridge between CRA modelling and better incorporating “long-tail” historical analysis? A diversion may help. Modelling, myth vs reality, map vs territory, a 2003 Hewlett Packard study, 7 says important things about modelling. First of all, it points out that modelling, which is critical to country risk analyses, is based upon abstraction. It likens the use
CRA modellers have the reality game turned inside out. Instead of looking into their models... they might do better to look at how the world “got this way.” of models to the use of maps. But “what must be understood is that the map is not the territory,” the HP study points out. “The only model that will behave as the original system is [the original] system itself.” And the ‘original system’ upon which the model is based is dynamic, the study further notes. “Chaos theory has its implications, suggesting that forecasting is a black art and should be left well alone,” the study says. “This is wrong. Chaotic systems are not necessarily impredictive, they just have limits on how long trajectories can be trusted. Weather forecasting can be considered reliable for five days.To say that a system is chaotic without the timeframe is pointless when considering whether a model will produce useful predictions.” Transferring HP’s analysis of complex issues affecting business modelling to CRA, where do models calculate humanity’s passions? Where do CRA analyses address issues of justice, discrimination, exploitation, hope, despair and skewed
male/female demographics creating sexual competition? Leaders arise from nowhere, correcting injustices “their people” collectively seek to eliminate. Others simply capture power, exploiting the mantra of “justice to the people,” thus re-triggering the same grievances later. Against this bottom up backdrop of human drama, commercial corporations are top-down, command-obedience structures designed to respond to market challenges. Political jurisdictions (assuming no ideologies of justice and social mobility) can be seen in the same way: much like businesses, they establish laws to create social cohesion, protect sovereignty and predict human behaviour. CRA modelling, as practiced between corporate and political entities, may have validity, but “the map is not the territory.”The CRA model is not the nation where citizens live.
MODELLING THE FINANCIAL CRISIS CRA modellers have the reality game turned inside out. Instead of looking into their models, software and tools, they might do better to look at how the world “got this way.” Is how North America “got this way” just a case of modelling selectively adopted strategies and abstracted worldviews for the purpose of maximizing return at someone else’s expense? The nuances of human behaviour can help explain (and may have even predicted) the current credit crisis in a way that mathematical models did not. Subprime mortgage lending — i.e. low-interest, adjustable-rate mortgage lending by financial institutions to NINJAs (people with no income, no jobs and/or assets) — followed a subprime ethical standard, the potential consequences of which lenders ignored while the going was good. Simply put, when the American economy was performing, 40-year mortgages performed.These marginally collateralized instruments were then spun off into derivatives sold globally through third-party financial institutions to Swedish farmers, Australian fishermen and who knows to whom else.
September 2009 Canadian Underwriter 63
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This happened while North American manufacturers and service industries outsourced to foreign, low-cost labour markets. When petroleum prices were hiked in 2008, and employment decreased in concert with high debt (a result of the mortgages, the trade deficit and Iraqi and Afghan military expenditures), did it take a genius to figure out that credit would collapse? Historians are rarely surprised by these seemingly inexplicable, sudden turns of events. According to Niall Ferguson, “self-satisfied bankers” living in the moment dismissed as alarmist any warnings of “a drastic decline in…liquidity through the global financial system.” Ferguson himself warned prior to the crisis:“We should be cautious about expecting the good times to last indefinitely.” 8 Early warnings about higher subprime mortgage defaults were also ignored before October 2008. One warning, for example, could be found in The Evolution of the Subprime Mortgage Market, 9 published in January 2006 and written by Souphala Chomsisengphet and Anothony Pennington-Cross. Also, in his May 2007 report to the Berkshire Hathaway AGM, board chairman Warren Buffet warned that: “rising defaults in the subprime mortgage business have been exacerbated by securization of these loans…Subprime mortgages are offered to poorer people with blemished credit records. The loans are often packaged up and sold…to investors as mortgagebacked securities. ‘Once you package those things and sell them through major investment banks, discipline leaves the system.’”10 Why didn’t anyone listen? Did models account for Niall Ferguson and Warren Buffett as Cassandras when cash flowed like champagne from the spigot? Back to history’s long tail. North America’s post-1945 prosperity was an unnatural economic bubble, a historical warp, created by America’s emergence as the world’s most powerful economy. With the recovery of Europe and Asia, North America faced greater foreign competition, leading ultimately not to “the
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decline of America, but rather about the rise of everyone else.”11 Ferguson’s bankers may have lived in the moment up to 2008, but Ferguson contends the West has been in decline since 1945, despite its military victory in the Second World War.12
We should be cautious about expecting the good times to last indefinitely. Do CRA practitioners take into account this kind of long-tail, historical research? According to one study, 274 military coups occurred between 1946 and 1970 in 59 countries.13 Taken out of any historical context, do these numbers have any predictive power for a risk manager? In The Legacy of Secrecy,14 published in 2008, the authors argue that the same members of the American mafia — under Carlos Marcello — assassinated President Jack Kennedy, his brother Bobby, and “brokered” the murder of Rev. Martin Luther King Jr. The authors used evidence-based research for their devastating analysis. Given that it took 46 years for evidence of a triumvirate murder conspiracy to come to light, how, one might ask, could a contemporary model possibly assess the potential for a future coup elsewhere? On what basis? Some predictive algorithm? Or evidence? Coups are like Christmas presents: they are planned in secret and delivered overnight as a surprise! What third party, other than a co-conspirator, would know of one in advance? Evidence based research is the only thing that cuts it. Of course, if risk managers are really bent on forecasting the future, they could always ask an astrologer. But be careful: as the BBC reports, astrologers can be arrested for making political predictions.15 1 Pablo Triana, Lecturing Birds on Flying; Can Mathematical theories destroy financial markets, John Wiley and sons, Hoboken, NJ., 2009. Pg 246. 2 As Venezuela Nationalizes, Investors
Worry, Oxford Analytica. 09.10.08,6:00 AM ET http://www.forbes.com/2008/09/09/ venezuela-chavez national izationcx_091 0oxford.html?feed=rss_business 3 Venezuela Decrees Nationalization of Last Foreign Controlled Oil Fields. February 27th 2007, by Gregory Wilpert – Venezuelanalysis.com http://www.venezuelanalysis.com/news/2245 4 Venezuela To Seize Foreign Oil Projects State Oil Companies Will Take Majority Stake In Foreign Oil Projects; Chavez Calls Bush “King Of Liars” CARACAS, Venezuela, Feb. 26, 2007, http://www. csnews.com/stries/2007/02/26/world/main 2519183.shtml 5 Venezuela 2008 Investment Climate Statement-Venezuela Openness to Foreign Investment,http://www.state.gov/e/eeb/ifd/200 8/101026.htm”http://www.state.gov/e/eeb/ ifd/2008/1010 6 Wikipedia. 7 Modelling, myth vs reality, map vs territory, Hewlett Packard, 2003. http://www. hpl.hp.com/techreports/2003/HPL-2003246.pdf 8 Niall Ferguson, The Ascent of Money, Penguin Books, London, 2008, Pg 7. 9 Souphala Chomsisengphet and Anthony Pennington-Cross, The Evolution Of the Subprime Mortgage Market, http://research.stlouisfed.org/publications/review/06/01/ChomPennCross.pdf 10 http://www.market watch. com/News/ Story/subprime-defaults-made-worse-securitization/ story.aspx?guid={817 DADC53315-4D00-97BA-6D6F91543 C58}&dist=MorePulse 11 Fareed Zakaria, The Post American World, W W Norton & Co Inc., New York. 2008. 12 Niall Ferguson, The War of the World, Penguin, London, 2006. 13 Explaining Military Coups d’Etat: Toward the Development of a causal model, Ekkehart Zimmermann, April, 1978. h t t p : / / w w w. s p r i n g e r l i n k . c o m / content/p81063625k8475m5/ 14 Lamar Waldron, Thom Hartmann, The Legacy of Secrecy, November, Counterpoint Publishers, Berkeley CA.,2008. 15 http://news.bbc.co.uk/2/hi/south_asia/ 8120859.stm
September 2009 Canadian Underwriter
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MOVES & VIEWS
UPCOMING EVENTS: FOR A COMPLETE LIST VISIT
www.canadianunderwriter.ca
AND CLICK ‘MY EVENTS CALENDAR” ON THE HOME PAGE
1
Philip Howell has been appointed CEO and superintendent of financial services for the Financial Services Commission of Ontario (FSCO). FSCO regulates the province’s insurance industry. Howell most recently served as the deputy minister of economic development for the Ontario government. He also held posts with the province’s Ministry of Tourism and Ministry of Finance. Howell succeeds Bob Christie, who served as FSCO’s CEO and superintendent since 2005.
2
The Insurance Brokers Association of Ontario (IBAO) and SCM Risk Management Services have partnered to develop and introduce an insurance-to-value (ITV) software solution for Ontario insurance brokers and their clients. Independent Brokers Resources Inc. (IBRI), a wholly-owned subsidiary of IBAO, has committed Cdn$150,000 to the research and development of the ITV indexing tool. The portfolio indexing utility, the development of which began in May 2009, will be designed to update existing personal property portfolios to accurate claim replacement costs levels and reevaluate/update portfolios
at the time of renewal. The ultimate objective is to develop an accurate square footage replacement cost value for every property in Canada, an IBAO release says. RMS will use existing proprietary residential inspection and claims databases and other data sources, combined with geographical information services technology, to create an indexing engine to calculate accurate inflation or deflation factors. The new software will be designed to enhance ITV utilities currently being used by insurance brokers across Canada.
3
Cunningham Lindsey has announced a series of executive level appointments.John Seyler [3a] has been appointed director of specialty services, Canadian operations of the company. Prior to the post, he was the director of transportation fleet services in London, Ontario. Martin Moran [3b] has been appointed assistant vice president of Cunningham Lindsey, Desktop Solutions — a newly created position. Moran was most recently district manager for the Edmonton office. Lisa McCabe has been appointed assistant vice president, Western operations. She is now responsi-
66 Canadian Underwriter September 2009
3a
3b
ble for overseeing branch operations in Western Canada. Stephanie Page has been appointed district manager for Edmonton effective Sept. 1. She joined the company in March 2008 as a senior adjuster and will now be responsible for growing and developing operations and relationships in the Edmonton region.
three new CDEPs into the fold. These include: The Economical Insurance Group, its subsidiary La compagnie d’assurance Missisquoi and L’Unique assurances generales inc.
4
Policy Works Inc. has released an updated version of its commercial management system that allows single sign-on functionality with participating Certified Data Exchange Partners insurer portals. When Policy Works users click the ‘Portal’ button on the main toolbar, a drop-down menu appears with all of Policy Works’ CDEP partners. One click on a partner brings the user directly into the insurer’s portal landing page, bypassing the login prompt by securely signing-in the user. The new release also brings
5
Brendan Lanigan has joined Blouin Dunn LLP as a first-year lawyer. Having articled with the firm since June 2008, Lanigan has worked in many areas of insurance defence litigation and specializes in products liability, motor vehicle and occupiers liability cases. He is a member of the Ontario Bar Association and Canadian Defence Lawyers.
6
Lambert Morvan has been appointed chief agent for Canada and senior vice president of Odyssey Re. Morvan has served in senior management and actuarial positions within the Fairfax group of companies, most recently with Northbridge Financial Corporation. He
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MOVES & VIEWS
lic and private companies, financial institutions and governments.
10
5 has more than 12 years’ experience in the Canadian insurance and reinsurance market.
7
Compu-Quote has launched Co-Parison Report for the Web. The new release is designed to allow insurers keep on top of the latest auto changes in the free-market auto provinces. Insurers across Canada can share driver profiles, location and carrier lists, thus reducing duplicate efforts. Users can quote more locations and companies, import custom location lists and change provinces on the fly, a release says. The ‘Co-Parif’ functionality makes it even simpler for users to simulate rate changes on various coverages and study the resultant impact on competitive positions.
8
Canpro Global Services, a Canadian security training solutions company, and GI Security of India, a security
6 services company in India, have entered into a joint venture agreement called Canpro-GI Security. The agreement evolved out of a realization that there is a need for world-class training of security guards to combat increasing modern day terror, according to a release. The joint venture will set up security guard training institutes throughout India. The first training centres are scheduled to be operational at the beginning of October in both Kolkata and Delhi.
The Risk and Insurance Management Society (RIMS) has formed a committee to increase its profile in the standards and practices arena and make it the primary resource in shaping and developing risk management standards. Carol A. Fox, past chair of RIMS ERM development committee, will chair the RIMS standards and practices committee. Wayne L. Salen, member of RIMS board of directors, serves as the first board liai-
son for the committee. Initial tasks of the committee include educating risk managers and organizations on various risk management standards, including ISO 31000 and Guide 73, a release says. “RIMS will now be in a position to more significantly influence the development of risk management-related standards and practices,” Salen said in the release. “For example, RIMS was actively involved in the development of the ISO 31000-Risk Management Principles and Guidelines through the U.S. technical advisory group, which was recently adopted.”
9
The Ontario Bar Association (OBA) has honoured Benjamin Zarnett with the 2009 OBA Award for Excellence in Civil Litigation. Zarnett will receive the award at the gala dinner to be held on Oct. 5 in Toronto. He is a partner in the Litigation Group at Goodmans LLP. His practice focuses on civil litigation, with a special emphasis on commercial cases involving pub-
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The Canadian Association of Insurance Women (CAIW) AGM & Convention was held at the Toronto Delta Chelsea on June 3-7, 2009. The annual convention was an opportunity for CAIW members and guests to network and enhance expertise and knowledge of current industry issues and trends. About 150 people attended from across Canada. Key convention features included business meetings, networking sessions, CAIW board elections and an Education Day. The annual CAIW awards were presented at the “Scandinavian Awards Gala,” including CAIW’s most prestigious award, Insurance Woman of the Year, won by Debby Johnson from the Nova Scotia chapter.
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WICC Ontario Chapter teed up for its 10th Annual Golf Tournament at Angus Glen Golf Club on July 13 to raise funds for research and education in the fight against cancer. Everyone came out a winner with a Cdn$150,000 cheque presented to the Canadian Cancer Society, Ontario Division. A barbeque lunch, fine dinner, draw prizes and two silent auctions kept guests entertained throughout the event.
ADVERTISERSâ&#x20AC;&#x2122; INDEX ACE INA Insurance A.M. Best Applied Systems Canada Inc. Berkley Underwriting Managers Canada, Ltd. Best Doctors Canadian Broker Network canadianunderwriter.ca Canadian Underwriter magazine Chubb Insurance Compu-Quote, Inc. Crawford & Company (Canada) Inc. Creechurch International Underwriters Limited Cunningham Lindsey Canada e2Value Inc. FirstOnSite Restoration FM Global The Guarantee Company of North America Great American Insurance Group i-hire.ca instouch.com Insurance Brokers Association of Canada (IBAC) Insurance Brokers Association of Ontario (IBAO) Insurance Institute of Canada Intact Insurance McLarens Canada Swiss Reinsurance Company Canada WINMAR XL Insurance Zurich Canada
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9 27 25 37 43 5 45, 67, 69, 71 59 29, 49 75 (IBC) 21 47 11 39 16, 17 15 26 41 32, 55 57 2,3 (IFC) 53 33, 64 76 (OBC) 31 7 51 19 23
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Canadian Underwriter has now started Tweeting! Follow us on Twitter: www.twitter.com/ CdnUnderwriter
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The Toronto Insurance Womenâ&#x20AC;&#x2122;s Association (TIWA) celebrated summer in style with their 6th Annual Pub Night on July 23. A few hundred insurance industry guests enjoyed a summer evening at Fionn McCoolâ&#x20AC;&#x2122;s in downtown Toronto.
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Friends and colleagues of the late Ciaran Shannon will hold a tribute evening on Oct. 23, 2009 to raise funds for the education of his children. Shannon came to Canada in 2001 and joined Marsh Canada as a general insurance broker. He quickly rose within the sales ranks to become the Number 1 producer, a tribute site to Shannon says. In 2005 he left Marsh to join Hub International as a senior member of the executive team. He returned with his wife, Avril, and three children to Ireland in 2007, when he was appointed sales manager of Arachas, Ireland’s largest broker. Shannon also made his mark on the football pitch. He played at the national level in Ireland; upon moving to Canada, he graced the pitch in Toronto, where he was named club MVP of the Gaels during his tenure. On June 27, 2009, Shannon was fatally injured in a car accident. He is survived by his three daughters and wife,
For the past three years, Enterprise Rent-A-Car has chosen WICC as its charity of choice and has organized its golf tournament to raise funds for this worthwhile cause. On July 21 at Wyndance Golf Club, 148 golfers — including Enterprise’s insurance partners, dealerships, vendors and others — spent the day together playing golf and raising much-needed funds for The Canadian Cancer Society. The funds raised through the event totalled Cdn$16,693.66 and Cdn$7,500 was donated from the Enterprise Rent-A-Car Foundation Canada.
who is expecting their fourth child. Details of the tribute evening can be found at: www.ciaranshannoncanadatribute.com The event will be held at PJ O’Briens in downtown Toronto, 39 Colborne Street, south of the King Edward hotel, starting at 5:30PM. Corporate sponsorships, silent auction prize donations and any help offered would be much appreciated. To donate directly to the education of Avril and Ciaran’s kids, please go to the Web site, and click on the donate button.
Jan Brownridge, BA Hons., FCIP, CRM Vice President
Kenneth B. Irvin, President and Chief Executive Officer of Munich Reinsurance Company of Canada (MROC) is pleased to announce the appointment of Jan Brownridge to the position of Vice President, Property Department and Regional Manager, Vancouver. Ms. Brownridge will be responsible for the facultative territory of Saskatchewan, Alberta and British Columbia. In addition, she will be retaining her function as head of the region’s property portfolio. Ms. Brownridge joined the company in 1996 as an Underwriter in the Vancouver Regional Office and subsequently was promoted to Senior Underwriter, Manager and then Assistant Vice President in 2003. As current Chair of the Marketing & Communications Committee for the Insurance Institute of BC she is an enthusiastic supporter of numerous industry initiatives. MROC is Canada’s leading non-life reinsurer, with offices in Toronto, Montreal and Vancouver. With approximately 10,000 employees at over 50 locations around the world, Munich Re is one of the world’s leading risk carriers in the field of reinsurance.
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Riverfront Medical Services marked their 20th Anniversary on July 9 with an evening celebration at Marben Restaurant in Toronto. Dr. Sheldon Levy, president and medical director, along with Anna Tsaggarelis, executive director of business development and operations, welcomed more than 170 guests from the insurance industry to join in the celebrations.
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INTQ93285_Broker_Ad_CDN_Underwriter.indd 1
8/24/09 3:00:59 PM
g w p brand engineering
46 spadina avenue, suite 200, toronto, on canada m5v 2h8 t: 416.593.4000 / f: 4001
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Project Manager: Jeremy
Creative Team: Carla/Bogdan
Publication(s)/Description: CANADIAN UNDERWRITER Ad #: Q93285
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