Canadian Underwriter October 2011 by Annex Business Media

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

OCTOBER 2 0 1 1 A Business Information Group Publication #40069240

Playing Fair by Vanessa Mariga

Power and Responsibility By Bryan Yetman

Saying ‘I’m Sorry.’ By Geoffrey Rowan, Norm Letalik and Irene Bianchi

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VOL. 78, NO.9, OCTOBER 2011 CANADA’S INSURANCE AND RISK MAGAZINE. PUBLISHED BY BUSINESS INFORMATION GROUP

www.canadianunderwriter.ca FEATURE

16 COVER STORY

Administrative Penalties Challenging Claims Ontario has changed its regulations to allow insurers to challenge debatable treatment plans. BY BRYAN YETMAN

Social Media Young brokers discuss how they use social media technologies in their business today.

BY DAVID GAMBRILL

82 Adjuster Education

Risk management means something different for small and medium-sized companies than it does for large companies.

Insurance industry organizations have collaborated to create a new training program intended to help adjusters better handle serious auto injury claims.

BY ANDREW CLARK

54 Designer Coverages

More than ever, brokers must make sure their clients’ global insurance programs comply with local regulations.

Ontario’s new optional benefits have caused brokers to provide ‘designer’ coverages for their clients.

‘I’m sorry,’ can be the toughest thing to say, particularly if it can be held against you in a court of law.

BY JANA ZITA

BY FRANK CAIN

BY GEOFFREY ROWAN, NORM LETALIK

Canadian brokers caution that demutualization is not necessarily the best path for mutuals.

AND IRENE BIANCHI

20 Demutualization

70 Municipal Bike Liability What are the legal duties of municipalities to protect cyclists riding both on and off highways?

Long-term connectivity solutions between brokers and carries must support CSIO XML standards, respect brokers’ guiding principles, ensure data integrity and, most importantly, increase efficiency.

BY VANESSA MARIGA

90 Identity Theft Businesses can secure customer information by following basic tips and protect themselves with data breach coverage.

66 Plain Language

BY EDUARD GOODMAN

A marine insurer takes a new ‘plain language’ approach to marine insurance policies.

94 Virtual Investigations

BY ROSEMARY ADAMS

BY DAN DANYLUK

34 SEMCI Standards

BY VANESSA MARIGA

38 Risks Great and Small

Think Local

Apology Legislation

Ontario is discussing a new system of administrative monetary penalties, which would allow regulators to penalize companies without quasi-criminal legal proceedings. Brokers and insurers welcome the move, citing precedents in other areas of Canada.

78 Consolidation and Tech

How claims investigators can use social networks as a tool for verifying claims. BY CHARLES DÉRAGON

For brokers in a consolidating 98 Stable Condition market, technology has become A.M. Best gives Canada’s P&C a key factor in deciding where to insurance market a stable outlook, noting improvements in place a book. BY KARL GREENLAW Ontario auto and Solvency II’s potential effect on consolidation. BY VANESSA MARIGA AND DAVID GAMBRILL

BY PAT DUREPOS

BY BELINDA A. BAIN AND ERIN FARRELL

October 2011 Canadian Underwriter

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VOL. 78, NO.10, OCTOBER 2011

PROFILE

Editor David Gambrill david@canadianunderwriter.ca (416) 510-6796 Associate Editor Vanessa Mariga vanessa@canadianunderwriter.ca (416) 510-6793

14 Destiny’s Broker A fourth-generation insurance broker in Stratford, Ontario, IBAO’s incoming president Rick Orr is a strong advocate for the best of the profession’s traditions. BY DAVID GAMBRILL

SPECIAL FOCUS

Senior Publisher Steve Wilson steve@canadianunderwriter.ca (416) 510-6800 Associate Publisher Paul Aquino paul@canadianunderwriter.ca (416) 510-6788 Account Manager Michael Wells michael@canadianunderwriter.ca (416) 510-5122 Advertising Sales Christine Giovis christine@canadianunderwriter.ca (416) 510-5114

Art Director Gerald Heydens Art Consultation Pylon.ca Production Manager Gary White (416) 510-6760 Subscriptions/Customer Service Gail Page gpage@bizinfogroup.ca (416) 442-5600 ext 3549 Circulation Manager Mary Garufi mgarufi@bizinfogroup.ca (416) 442-5600 ext 3545 Print Production Manager Phyllis Wright President Bruce Creighton Vice President Alex Papanou

Editorial

10 Marketplace

Connect with Canadian Underwriter

102 Moves & Views

twitter.com/CdnUnderwriter

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104 Gallery

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Canadian Underwriter October 2011

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EDITORIAL

The Fire This Time

A recent earthquake west of Vancouver Island has again raised the debate about whether fire following should be part of a comprehensive earthquake insurance coverage. David Gambrill, Editor david@canadianunderwriter.ca

Canadian Underwriter October 2011

In a year in which the Canadian insurance industry has seen it all, a 6.4 earthquake struck west of Vancouver Island, B.C. in September. The tremor could be felt on the island, in the Greater Vancouver Area and as far as Kelowna, B.C. No tsunami warning was issued and Earthquakes Canada reported no major damage. Coincidentally, the quake happened within a week of the Fraser Institute issuing a report warning of the dangers of splitting insurance coverage for a natural disaster. Thankfully, the earthquake on Sept. 9 was not strong enough to test the inherent weakness in how insurance coverage in B.C. and Alberta currently deals earthquakes and the fires they ignite. As it stands now, B.C. and Alberta homeowners are covered under their standard homeowner policies for damage caused by any fires following an earthquake. But they are not covered for damage caused by ground shaking unless they purchase separate earthquake coverage. To eliminate this split coverage, insurers have proposed to exclude coverage for fire following an earthquake from standard homeowner policies. Instead, they would offer comprehensive earthquake coverage that would include coverage for fire damage caused by earthquakes. Alas, the B.C. and Alberta Insurance Acts currently do not allow fire following an earthquake to be excluded

from standard homeowner policies. Nor do they seem likely to in the future. The issue is complicated, and both the B.C. and the Alberta governments seem resolved to maintain the status quo. In their defence, the provinces say that if an exclusion were to be made for fire following earthquakes, then consumers who currently have coverage for fire following earthquakes under their standard homeowner policies would suddenly have no coverage unless they purchased the optional earthquake coverage. To that we would say that if consumers live in an earthquake zone, they should probably be purchasing earthquake insurance anyway. Indeed, some have argued that earthquake insurance should not be optional; it should be part of the standard homeowner policy. That of course raises the issue of higher premiums for consumers and higher deductibles, obviously a non-starter for governments that seem to be bent on maintaining fire coverage at all costs, even if it means splitting insurance coverage for earthquakes. The status quo, however, is bad news for consumers. Take-up on optional earthquake coverage is about 60% in B.C. and Alberta, and less than 5% in Ontario and Quebec. So for a substantial minority of the population in western Canada, and an overwhelming majority of the population in eastern Canada, homeowners will receive insurance coverage for

fires following an earthquake, but no coverage for damage caused by ground shaking. This is going to lead to all kinds of confusion and trouble in the future, as the Fraser Institute points out in its study, Preventing Disaster After a Disaster: Lessons for Canada from U.S. Experience. The study outlines what happened to U.S. policyholders when Hurricane Katrina wiped out major sections of Louisiana and Missouri in 2005. U.S. homeowners had coverage for wind damage in their standard policies, but not for flooding. The result was a whole lot of litigation against insurers, as adjusters tried to distinguish between damage caused by wind and water. This is not an easy task: adjusters were often looking at cement slabs where houses used to be before the hurricane hit. The lawsuits resulted in claims payment delays, skyrocketing premiums, larger deductibles and insurers withdrawing coverage in certain catastrophe-prone coastal areas. Why? Because public authorities, through litigation and settlements, were essentially asking insurers to pay for flood damage, even though insurers had not collected premium for the flood risk. Itâ&#x20AC;&#x2122;s not hard to conceive of something like this happening in Canada as well. Governments and the industry should discuss how to avoid split coverage in the event of an earthquake.

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MARKETPLACE

Claims HURRICANE IRENE BLOWS THROUGH QUEBEC AND MARITIME PROVINCES The verdict is still out on insured losses caused by Hurricane Irene’s three landfalls, but loss estimates for the Caribbean range as high as $1.1 billion. The remnants of Hurricane Irene, which had weakened to a post-tropical storm, lashed parts of Quebec and the Maritime provinces on Aug. 29, leaving hundreds of thousands of people without power, downing trees and dropping up to 80 mm of rain, the CBC reported. As of press time, the storm left more than 3 million people without power and 23 people dead in the United States, and more than 200,000 without power and one man dead in Canada, the CBC reported. As a Category 1 hurricane, the storm caused an estimated $200-million to $400million of insured losses on Aug. 26, when it made landfall in the Carolinas. Earlier that week, it caused an estimated $300- to $600-million in insured losses as a Category 3 storm in the Caribbean, reported EQECAT. AIR Worldwide placed its preliminary loss estimate in the Caribbean between $500 million and $1.1 billion

HURRICANE MARIA SIDESWIPES CANADA IN NEAR MISS Hurricane Maria didn't live up to its expectations when it made landfall as a Category 1

10 Canadian Underwriter October 2011

hurricane in the Avalon Peninsula area of Newfoundland on Sept. 16. The Canadian Hurricane Centre (CHC) predicted on Sept. 15 that Maria’s highest winds would pass through the Avalon Peninsula with wind gusts of 100 km-h in the warning area, and 120 km-h or higher in the watch area. But on Sept. 16, the CHC issued a bulletin saying the region had been spared the worst of the storm, as strongest winds were to the right of the track/centre. The highest winds were far enough from the centre at landfall that they did not pass over land, the CHC noted. Winds did gust to 100 km-h in a few exposed locations around Avalon, with a peak wind of 103 km-h reported near Cape Pine, the CHC reports. Rainfall totalled about 60 mm on the Burin Peninsula and the South Coast, with St. Lawrence receiving 63 mm and Burgeo registering 61 mm. Only 13 mm fell over St. John’s.

MAGNITUDE 6.4 EARTHQUAKE HITS WEST OF VANCOUVER ISLAND A Magnitude-6.4 earthquake that hit just west of Vancouver Island, B.C. on Sept. 9 caused more than 100 aftershocks — the largest being a Magnitude of 4.9 — but no significant damage has been reported, according to Earthquakes Canada. The initial 6.4 quake was felt from across Vancouver Island, Greater Vancouver and even in Kelowna. The initial quake resulted in more than 100 aftershocks, according

to Earthquakes Canada. “The largest aftershock occurred three minutes after the earthquake and had a magnitude of 4.9,” it reported. “The remaining aftershocks were in the magnitude 1-3 range and approximately 50 km offshore, thus too small and too far offshore to be felt or cause any damage.” In concert with several media reports, Earthquakes Canada said “there have been no reports of damage” in connection with the quake.

Risk Management ONLY “MINUTE” CAUSAL CONNECTION CAN RESULT IN U.S. REGULATORY ACTION AGAINST CANADIAN COMPANIES A “minute” causal link between a U.S. claim and a Canadian company is all that is required for the U.S. Securities Exchange Commission (SEC) to flex its muscle against Canadian companies. Jay Cassidy, senior vice president at Marsh Canada, made the observation as a panel member at the Risk and Insurance Management Society (RIMS) Canada’s Annual Conference in Ottawa. Cassidy noted the United States adopted the Foreign and Corrupt Practices Act in 1977, and the act remained virtually dormant over the decades. But as a result of the Bernie Madoff financial scandal, as well as the

global economic downturn, authorities are putting more emphasis and energy into going after companies with illegal practices and their individual directors, he said. For Canadian companies, the causal link that needs to be established in order for the U.S.’s Securities Exchange Commission (SEC) to enforce the act is “minute,” Cassidy continued. “From a Canadian perspective, we need to keep our eyes on this,” he said. “There doesn’t need to be a close proximity geographically: a Canadian owned and operated company that doesn’t even have its feet in the U.S. is at risk. “If funds flow through a U.S. bank, or if your servers are hosted in the U.S., the SEC can exert its enforcement.”

Canadian Market CANADIANS HAPPY WITH THEIR INSURERS DESPITE PREMIUM INCREASES: J.D. POWER Despite widespread premium increases, customers in the Western and Ontario/Atlantic regions of Canada are notably more satisfied with their auto insurance company this year than they were in 2010, according to the J.D. Power and Associates 2011 Canadian Auto Insurance Study. The study measures insurance customers’ experiences with their primary insurer.

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Conducted in July 2011 and published on Sept. 15, the study is based on responses from 11,286 auto insurance policyholders. National overall satisfaction averages 740 on a 1,000point scale in 2011 — 13 points higher than in 2010. Primarily driving this increase are considerable improvements in customer satisfaction in the Western and Ontario/Atlantic regions, while satisfaction in Quebec decreases slightly from 2010, the study says. “Despite the relatively large proportion of customers who have experienced a premium increase, some auto insurance companies were able to mitigate the negative impact on satisfaction by providing proactive communications and helping customers explore various options for reducing costs,” said Lubo Li, senior director and practice leader of Canadian financial services and insurance at J.D. Power and Associates.

Canadian federally regulated P&C insurers also saw their net income drop, from $1.96 billion in 2010 Q2 to $1.47 billion in 2011 Q2. Net premiums earned improved for federally regulated insurers on a consolidated

basis. The figure increased from $16.6 billion in 2010 Q2 to $17.3 billion in 2011 Q2. Canadian federally regulated insurers saw their net premiums earned increase from $12.9 billion in 2010 Q2 to $13.4 billion. Foreign

insurers saw this figure grow from $3.7 billion to $3.9 billion. Net investment income for Canadian and foreign insurers on a consolidated basis declined from $1.8 billion in 2010 Q2 to $1.6 billion in 2011 Q2.

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Thereâ&#x20AC;&#x2122;s strength in numbers.

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Each of these Broker symbols represents 1,000 insurance brokers, every one a member of their local Brokers Association, and every one of them drawing on the professionalism and efficiency of Canadaâ&#x20AC;&#x2122;s highest calibre insurance carriers to serve millions of insurance buyers across the country, earning their trust and loyalty. Since its inception in 1988, the Broker Identity Program has served to dramatically raise the profile and enhance the professional reputation of our insurance brokers, and thereby reinforce, and assure the perpetuation of, the broker distribution channel in Canada. In that time, consumers have come to readily recognize the broker logo championed by IBAC and its 11 member associations. Seen by millions of consumers to represent trust and peace of mind, and by hundreds of politicians and legislators as the embodiment of â&#x20AC;&#x153;people powerâ&#x20AC;? in every community across the country, the campaign goes from strength to strength each year. And 2011 is no exception. Without your active support and cooperation as our friends and business partners in this quest for customer satisfaction and loyalty, it would be a different story. So it is with heartfelt thanks that we pay tribute to you and the partnerships we mutually enjoy.

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PROFILE

Destiny’s Broker David Gambrill Editor

Rick Orr, presidentelect of the IBAO, has a family tradition in the broker business that traces back to the late nineteenth century. Insurance Brokers Association of Ontario (IBAO) presidentelect Rick Orr has a family dynasty of more than a century in the insurance broker business. One gets the impression his pathway to becoming an insurance broker was a product of destiny rather than the result of a personal career choice. “I guess it’s kind of in your blood when you’re a fourthgeneration insurance broker,” Orr said in a sit-down interview at the Insurance Brokers Association of Canada (IBAC)’s annual general meeting in September 2011. “It started with my great grandfather in 1895, and we just grew up with it.” Literally, you might say. The office of Orr Insurance Brokers Inc. is located in Stratford, Ontario in the original Orr homestead built by Orr’s greatgreat grandfather in 1874. “It’s kind of neat to go the office every day, and you’re home,” he says. Despite a family tradition of more than 116 years in the insurance broker business, Orr

14 Canadian Underwriter October 2011

says he never felt pressured to become an insurance broker. “A lot of credit goes to my father, who was Tom, not Ken,” Orr says with a smile, signaling one of his infamous, good-natured jabs at popular IBAC veteran Ken Orr. [Ken Orr has held several senior executive positions with IBAC through the mid-2000s]. “My Dad never, ever pushed us into the industry. He always said, ‘Do what you want,’ and my brother Jeff and I both ended up following in his footsteps.” Still, tradition looms large in the professional background of the 43-year-old broker. It also shapes Orr’s personal ethos about how brokers might conduct their business in the future. Orr envisions brokers re-dedicating themselves to their successful, traditional activities of building personal relationships with clients, community involvement and collaboration. From a very early age, Orr’s father introduced his son to the essence of what it means to be an insurance broker. “Some of my memories as a child were following Dad to house fires late at night, watching him interact with claimants and the fireman, and helping to put people’s lives back together,” he says. “As a kid, I just stood back and watched Dad helping people. It’s the same message I give to my [producers]: ‘What do you do? You help people after there’s a problem.’ That’s what we really do as an indus-

try and that’s something I saw that I liked and I ended up going down that path.” Orr enrolled in the insurance program at Mohawk College in Hamilton, Ontario in his early twenties. He then joined the Hartford Insurance Company in Toronto, where he worked for two years in the commercial underwriting department. While at The Hartford, he first met his wife Jane, who was a senior underwriter there at the time.

Some of my memories as a child were following Dad to house fires late at night, watching him interact with claimants and the firemen, and helping to put people’s lives back together. Jane eventually went to work for Intact (then Wellington Insurance) in Kitchener, Ontario. In 1992, Orr got the call from his Dad: “We’ve had a producer leave. If you want to come back and help, now would be a really good time.” Orr joined the Stratford brokerage in 1992 and married Jane in 1993. Given his family’s long history in the business, it is not surprising Orr believes brokers gain a great deal of strength by drawing on their traditional roots. “My theme for my year as [IBAO] president is: ‘Be a

broker, be involved,’” he says. “To me, it’s undeniable that the success of the brokerage industry for generations has been because they’ve been so involved with their clients and their communities. Brokers are just an integral part of the community. They know their clients, they interact with their clients. That’s been our success for generations.” He sees the community work of his great grandfather in Stratford as an example of what he means. “They call him the Grandfather of the Park System,” Orr says. “The park system that we have in Stratford today, which inspired the Stratford Festival, would not have been there had he not challenged government.” In 1912, the local government wanted to place a railway line along the Stratford riverfront. Orr’s great grandfather insisted the riverfront should be reserved for parkland. He campaigned door-todoor calling for a public plebiscite. The citizenry voted against having the rail tracks along the riverfront. Succeeding generations of Orrs have carried on that tradition of community involvement. Over the past two years, Tom Orr has been co-chair of Stratford’s hospital capital campaign. Jeff Orr, Rick’s brother and business partner, was co-chair of the Rotary Recreation Complex Capital campaign. Rick now sits on the local hospital foundation and chairs the Stratford Parks Board (the fourth generation

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of Orrs to chair the parks board). “IBAO consumer studies clearly show that consumers actually want their brokers to be part of the community, not just a sign on the building,” Orr says. Which brings us to brokers establishing a presence in online communities. Orr expects technology to be a major item on the agenda during his term as IBAO president. Although he describes himself as “not a tech guy,” Orr has participated in a number of broker technology organiza-

tions and projects, including serving as a broker representative on the board of the Centre for the Study of Insurance Operations (CSIO) and a member of IBAC’s technology committee. From this vantage point, he is excited about projects that aim to improve brokercarrier connectivity. He also believes there is a place for brokers in the social media space. But Orr cautions brokers not to allow emerging technologies to distract them from their storied tradition of local, face-toface community interaction.

“I’m a little concerned that some of the brokerages are getting so big, or are hiding behind technologies, they are not getting as involved in their communities or with their clients as we need to be,” he says. The key is balance. That means recognizing and adopting existing and emerging technologies, and adapting problematic technologies so that they fit better with the broker business model. “One of the messages over the next year or so will be: ‘Brokers need to look at their business models,’” Orr says.

“In today’s world, technology is driving consumer expectations. Consumers need different interaction than what we’ve done in the past [longer hours, for example, or improved online services]. We need to update our business model in the way we transact business. I’m not saying we need to become a virtual broker or call centre. We just need to progress. You need to adjust your business model.” Related to technology and adjusting business models, collaboration with industry groups and stakeholders will be another key theme during Orr’s IBAO presidency. In particular, Orr is looking for a collaborative approach towards improving online consumer interaction. “Insurance companies are renowned for competing with each other,” he says. “They attempt to compete with each other and build better technologies. But every time an individual insurance company builds a better consumer-facing piece of technology, it actually disadvantages the brokers, because now we have all of these individual pieces of technology out there distracting the consumers.” The focus should be on improving consumers’ interaction with brokers through broker driven technology, Orr says. “The effort we have to put in [as brokers] is to convince the companies that this is the right direction and that this is a good idea,” Orr says. “We need to work together.”

October 2011 Canadian Underwriter

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Power and Responsibility

Bryan Yetman

Chair, Insurance Brokers Association of Ontario

A subtle, but important change was read into Ontario’s Statutory Accidents Benefits Schedule (SABS) on July 1, 2011, allowing insurers to battle fraud. Basically, insurance companies were given the ability to say no to treatment plans they feel are suspicious. Given that Ontario’s accident benefit loss ratio is well over 160%, this change might have a significant impact. Will this work? In the short term, I think it is safe to say yes. However, I believe the one-million-dollar question is: ‘Will this work in the long term?’The answer to this question depends on how the industry implements these changes into their claims process.

HOW THE CHANGES WORK To be clear, insurers have always had the ability to say no to suspect treatment plans. However, they had a tight timeline in place — 10 business days — to render their decision. For example, a rehab clinic would typically submit a treatment plan. If an adjuster disagreed with the recommendations, the insurer had 10 business days to reassess the consumer and decline the treatment plan. If unsuccessful in its first attempt, the rehab clinic could always resubmit the treatment

16 Canadian Underwriter October 2011

plan with minor changes and the whole process would start all over again. However, if at any point an adjuster failed to respond within 10 days, the treatment plan was automatically deemed approved and the insurer was left with no choice but to cut the cheque. In a system geared toward getting an injured person treatment as quickly as possible, this seems to be a sensible consumer protection measure. However, as files began to pile high, an interesting game of cat and mouse emerged: it became clear the clinics that submitted lots of paper had a distinct advantage. The changes made on July 1, 2011 do not eliminate the 10-day window, but they do make other important changes. Among them, once an insurer has declined a treatment plan, it can continue to refuse any subsequent presentations based on the medical evidence of their original assessment, avoiding the need for reassessments. This eliminates assessment costs and frees up time to address ongoing files. A second major amendment is that an insurer now has the right to ask a clinic to furnish any information that will help the insurer to determine its liability for payment. This includes in-

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Ontario’s regulator has given the insurance industry new powers in the fight against auto insurance fraud, and insurers will need to use them responsibly.

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specting originals of assessments and requesting a statutory declaration from the clinic regarding goods and services provided. Last, but not least, an adjuster can request confirmation of the identity of every provider involved in the delivery of such good or services for care.

GREAT POWER, GREAT RESPONSIBILITY This past August, you may have read an article in the Toronto Star that ran alongside a picture of Dr. Danny Grossi getting into his Maserati.The article publicized allegations of a $1.3-billion scam involving some 300 clinics working the system by allegedly “borrowing” the credentials of medical professionals who were unaware of the patients’ existence. The article cites a lawsuit being commenced by The Economical against Grossi, who is the director of the Toronto Regional Medical Assessment Centre. The Economical is one of four companies alleging that Grossi and the operators of assessment clinics cheated them, according to an April 2011 post on the Insurance Bureau of Canada (IBC)’s Web site. The insurers allege Grossi and other defendants used the information of 55 car accident victims to submit fake invoices to three insurance companies. Grossi denies the accusations against him, which have not been proven in a court of law. It is encouraging to see FSCO laying more charges in connection with auto insurance fraud. Politicians are getting involved as well, with the Ontario Conservative and Liberal Party election platforms also addressing the issue. Auto insurance fraud is similarly gaining the attention of an honest public looking for ways to reduce insurance costs. With all of that being said, the insurance industry must be aware of risks associated with the new reading of the SABS. I cannot help but remember the line in the blockbuster movie Spiderman, in which the young hero Peter Parker is warned by his uncle: “With great power comes great responsibility!”While I am not a big comic book fan, this warning seems all too fitting for our industry. I’d

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be lying if I said I was not a little skeptical of how our industry will respond to these changes over time. The risk is as follows: either the industry will use its new-found powers responsibly or, alternatively, it might ultimately fall into the trap of viewing each and every claim and clinic as suspicious. If the industry falls into the trap of unwarranted suspicion, it certainly would not be the first time the industry’s inability to uphold the intent of a regulation invites something more restrictive. For example, consider the priority of payment rules within the SABS (the

The risk is this: Either the industry will use its new-found powers responsibly or, alternatively, it might fall into the trap of viewing each and every claim and clinic as suspicious. rules that dictate which insurer is responsible to pay for a person’s treatment). In this area of the law, it has always been the intent of the SABS that consumers receive fast and efficient treatment for their injuries. As such, the first insurer to receive an application for SABS was to respond to treatment. If later it was determined that another insurer was responsible to pay for the treatment, a process would facilitate the transfer of the file to the appropriate carrier. All the while, the transfer would appear seamless to the injured party. But for some reason, a few carriers adopted a variety of techniques to discourage a consumer from submitting

an application for accident benefits to them, pointing them to other carriers instead. As a result, consumers’ treatment would get stuck in the midst of disputes between insurers. This is an example of how what was originally thought to be a clear policy eventually invited tighter regulation. Now, new priority of payment regulations threaten fines or penalties for insurers attempting to direct insureds to different companies, labeling these as unfair or deceptive acts or practices.

MAKING THE CHANGES WORK Perhaps the million-dollar question I should have asked earlier is: What will the industry do to ensure that these changes do work in the long term? As the ability to refute suspicious claims becomes more widely known, will insurers implement clear processes and procedures to help identify when they might use their new authority or, alternatively, when to pay the claim? Or will they leave these decisions to the discretion of individual adjusters, who may apply these new rules in a variety of ways, thus inviting further clarity (if these tools are not ultimately rescinded altogether)? I guess time will tell. The success of these changes rests not only with the industry, but also FSCO, which is sometimes accused of applying the rules inconsistently. These changes will require quicker access to mediation, which has taken up to nine months in the past.To be fair, FSCO has added a number of new mediators and has automated its booking process. Early indications show a reduction in wait time, which can be as quick as 60 days. If these changes create difficulty for fraudsters, we might also see a reduction in the number of mediated files. This in turn may speed up the process even further. It is not my intent to criticize the changes. In fact, like many others, I welcome them. However, I do want to point out a few risks in the hope that the industry will engage in thoughtful discussion, so that we as an industry can maximize the opportunity these changes present.

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Demutualization and the Public Good Opinion/Analysis

Dan Danyluk

CEO, Insurance Brokers Association of Canada (IBAC)

Any participation issues facing mutual P&C companies today are more about communication than about organizational structure. Education may therefore be the more appropriate remedy than demutualization. Canada’s federal government recently asked for public feedback on a proposed regulatory framework that would allow property and casual mutual insurers to demutualize. The initiative follows an announcement in December 2010 that The Economical Mutual Insurance Company planned to demutualize. From the insurance broker’s perspective, this is a timely discussion and one in which it is worthwhile for the industry and government to engage. Insurance brokers have a rather special interest in this discussion. Unlike any mutuals in Canada, which have a direct interest in the consequences of how a demutualizing regulatory “regime” takes shape, a broker’s viewpoint is based on how these changes might affect their customers — the Canadian public. Mutuals sell product mainly through the broker network, as do most stock-company insurers. Therefore, when looking for the most appropriate product for their customers, brokers represent a large gamut of mutual and stock organizations.This gives the insurance broker an objective view of how the different models (mutual or stock) are faring and which products they offer

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are the most appropriate for customers. Brokers also bear witness to trends taking hold of the marketplace in the short to medium term.

P&C MUTUALS It is important to underline one issue in any discussion regarding the Canadian financial services sector; that is, the fundamental difference between the wealth management industry and the risk management industry.The principal goal of wealth management (the core activity of banks and life insurers) is the maintenance and accrual of wealth through such instruments as investing, interest and dividends. Consumers lend their money so that this money grows in value, only to be withdrawn at some future point — ideally, at a significantly higher value than when the money was initially lent. The principal goal of risk management (the core activity of the property and casualty sector), however, is to provide service/protection in the event of an unforeseen event that creates an economic loss. The goal of that protection is to place people exactly in the same financial situation as they were prior to the loss event.

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Seeing the very different relationship that exists between life policyholders versus property and casualty policyholders and the capital of their respective organizations, let’s now turn to a discussion on how P&C mutuals should approach the question of demutualizating. The Insurance Brokers Association of Canada (IBAC) made a submission to the Government of Canada about demutualization, in which we note that mutual property and casualty insurers have, both in conception and execution, a different mandate than their non-mutual counterparts. In our view, the regulation of the demutualization of property and casualty insurers ought to be primarily concerned with maintaining the broad public policy objective of preserving and enhancing the quality, cost and continuity of financial services primarily (but not exclusively) outside of major urban areas. A mutual organization is generally well suited to meeting this policy objective. If, however, the government finds demutualization to be warranted under

certain circumstances, we would like those companies proposing demutualization to make a credible commitment to undertake the following: • Provide a clear rationale as to why the transformation into a publicly held company is preferable.

Regulation of the demutualization of property and casualty insurers ought to be primarily concerned with maintaining the broad public policy objective of preserving and enhancing the quality, cost and continuity of financial services primarily (but not exclusively) outside of major urban areas. • Provide demonstrable proof that the existing tools available to mutual insurers — such as amalgamations with other mutual property and casualty insurers, raising capital via outside loans

etc. — is not sufficient to meet their requirements. • Provide a clear indication of how the newly transformed mutual will provide the same level of quality, cost and continuity to the same diversity of constituents in the delivery of its services. The demutualization of property and casualty insurers raises a series of conceptual and practical problems. Three will be identified here. All three relate to the relationship between policyholders and the mutual itself. First, unlike in mutual life insurance, in mutual property and casualty insurance, no direct connection exists between present constituents (policyholders) and the assets of the mutual. The constituents of property and casualty mutual insurers subscribe to their policies on an annual basis; once their policy expires, so too does their membership in the mutual. During their subscription period, policyholders do not enjoy an individual claim to any of the mutual’s assets. They enjoy the “insurance” or “protection” of their

A large loss

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personal assets that the mutual (pooling of capital) provides. Second, and flowing from the first point, the assets of a mutual are essentially community assets built up over generations by those living in the community. Hence third, present policyholders have no more right to claim the assets of the mutual than past policyholders. Or to put it another way, both present and past policy holders have built up, through capital accumulation, the ability of the mutual to be able to offer this “protection” — in essence, the sole purpose for the mutual’s existence. In light of the above three points, it should be clear it is conceptually difficult — if not impossible — to determine a clear line of property rights flowing from policyholders to a property and casualty mutual’s assets. That is to say, deciding how to apportion the benefits of demutualization is a difficult task, both conceptually and practically.

MUTUALS AND PARTICIPATION In many respects, mutual insurers are facing the same problem as other public participatory institutions — namely, a declining interest of the relevant constituency in participating in the governance and development of their public institutions. The disciplines of political science and sociology have been studying the decline of public participation for over three decades now and no firm conclusions have been drawn. Thankfully, more specific work has been done on the topic of mutuals and cooperatives. Research suggests the single biggest reason for the decline in participation among these societies is the lack of education offered to executives, managers and members about the nature of their relationship to their cooperative or mutual. A second reason is that mutual societies lose their focus and cease to deliver the services desired by their members. In our estimation, given the solid track record of mutual insurers in delivering quality, cost efficient and consistent services to their

members, we think mutuals need to make more of an effort to address the first area of concern and not the second. Based on the above analysis, we feel that if proposed regulations surrounding demutualization are too lax, those charged with the governance of a mutual insurer may be tempted to view demutualization as a quick fix to what in fact is a communications problem and not one of organizational form. We would therefore encourage the department of finance to place demutualization within the broader social and economic context, and seriously consider the role mutual insurers play as a financial infrastructure in smaller communities and recognize the model they provide for democratic and voluntary organization of citizens in the furtherance of realizing their collective needs independent of direct state support. In other words, IBAC believes mutual insurers provide an excellent example of where organizational form can promote enlightened self-interest in the furtherance of economic development and a sense of financial security amongst citizens.

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Insurance 2.0: Embracing the Digital Age Young Broker Roundtable, Supported by RSA Canada

David Gambrill Editor

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The Personal is the Professional Young brokers engaged in social media discuss the importance of personal relationships in their professional business, and how emerging technologies can help their cause. Talk to young insurance brokers today about their use of social media and you might easily conclude that, with apologies to Carol Hanisch, “the personal is the professional.” As individual brokers increasingly plug themselves into a ubiquitous global online conversation that never sleeps, the effects on their professional careers and business life can be profound. Once plugged into the social media, the Cult of Personality kind of takes over.This means a constant exposure to reputational risk and the need to monitor the online space diligently for prospects, business opportunities and 24/7 servicing of clients.

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For some, the time, effort and expense required to keep up in the wired world is simply overwhelming. For others, the huge risks involved by exposing oneself to social media have resulted in a cautious, ‘wait-and-see’ approach. But for many young brokers engaged in the rapidly evolving social media space, the future was yesterday. Brokers make a living by communicating with people. And the media through which people are communicating have changed. Thus, brokers need to change, too, they say. Once brokers take that plunge into the foreboding waters of social media, what happens next? What does entering the world of social media mean for the business? How do brokers cope with these new demands that social media place on their time? For what, exactly, are brokers using these new technology platforms? And most importantly, is anyone actually making any money as a result of immersing themselves in social networks? Canadian Underwriter put these and many other questions to six young brokers at a roundtable discussion entitled Insurance 2.0: Embracing the Dig-

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I don’t know if you guys heard of the Barbara Streisand Effect? There were these pilots that photographed an entire hillside of California and they put it online so people could look. I guess Barbara Streisand’s home was on there and she didn’t want people to see her home in these shots. So she called the sites to try and have it removed. In doing so, it created this online chaos. All of a sudden, people started copying it and posting it everywhere. It was power to the people, right? It seems like the power has shifted.

ital Age, supported by RSA Canada. Most participants in the roundtable discussion on technology were associated with RSA Canada’s Making Partner program, an exclusive broker education program. They represented brokerages

from across the country, from B.C. to Quebec and the Maritimes.All were under the age of 45.The discussion was held on Aug. 3 at The Spoke Club in Toronto.

SOCIAL MEDIA: A WORKING DEFINITION When people use the term ‘social media,’ they often think of the obvious online platforms — Facebook, Twitter, YouTube. But as the young brokers at the roundtable noted, the boundaries of media are a bit fuzzy. Some definitions might include not only the online social networks, but also the physical devices on which the platforms are loaded. Some brokers include in their definition of ‘social media’ the emergence of smart phones such as iPhones, BlackBerry devices, Androids and all of

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the various applications for use on these devices. In this conception, tablets might be seen as a form of media. Other definitions focus on the ‘social’ aspect and therefore include what some may see as more conventional forms of technology in their definition. Blogging, for example, in which individuals publish regular, online commentary, might also be viewed as a form of ‘social media,’ even though it is happens on a more conventional Web site. A fixed definition is also tricky because of the rapidly changing nature of technology. In 10 years, definitions of social media may be referring to Google+ or 4square, or any number of other not-yet-conceived platforms. “YouTube is almost old technology,” observes Cory Young of Rhodes & Williams Ltd. in Ottawa. One feature of social technology is the power it gives people to communicate with one another directly, without filters and without gatekeepers. Part of its appeal is that it gives anyone in the world a soapbox. This has drastically

changed the nature of how people relate to companies, brokers note.

POWER TO THE PEOPLE “It’s almost like the power has gone from the corporations to the people,” says Kevin Sigouin of Westview Agencies in Powell River, B.C. “I don’t know if you guys have heard of the Barbara Streisand Effect? It’s this big thing that happened down in California. There were these pilots that went down and

photographed an entire hillside of California and they put it online so people could look. I guess Barbara Streisand’s home was on there and she didn’t want people to see her home in those shots. So she called the sites to try and have it removed. In doing so, it created this online chaos. All of a sudden, people started copying it and posting it everywhere. So suddenly you had thousands of Barbara Streisand [home postings]. It was power of the people, right? It seems like the power has shifted.”

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And that shift can sometimes wreak havoc on corporate brand names, notes Alex Teper, who works in the insight and customer experience segment of RSA Canada. “It’s no longer just the brands talking to the consumers, right?” he said. “They can talk back.” Brokers and insurance companies would be the first to admit this is a “scary” time for maintaining an impeccable brand name. Companies are acutely aware that a disgruntled consumer could very easily tape a phone conversation with a company CSR who’s having a bad day and post the audio clip online for all the world to hear. And it’s not just an insurer’s reputation at risk.Young tells the story of one consumer’s social media crusade against an insurer that came under the headline ‘My Insurance Broker Sucks.’ Brokers and insurers note that people often don’t often say anything about the insurance industry unless something is going wrong or expectations have been frustrated. How do brokers confront this reputational risk? Call it ‘The Don Draper So-

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lution.’ In the television series Mad Men, senior advertising executive Don Draper says: “If you don’t like what people are saying about you, change the conversation.” Similarly, young brokers believe social media can help insurers and brokers change the tide in a conversation weighted against them, turning a consumer’s hurt feelings, frustration and

How do brokers confront reputational risk? If you don’t like what people are saying about you in the social media, change the conversation. vituperation into a competitive business advantage. “I heard a story about a car rental company,” says Young. “A guy I was talking to included something [on Twitter] about how upset he was about the length of time it was taking to get a rental car from Company A. While he was still waiting for his car, he got a tweet back from a competitor apolo-

gizing for Company A and saying,‘Next time you come to Toronto, your free rental is on us. It will only take 10 minutes.’They were able to use social media tools to their advantage, just because they were monitoring what was going on. More applicable to the insurance industry, remember that tweet about ‘my insurance broker sucks’? Well, that client is now a very satisfied new client in our brokerage.”

THE CULT OF PERSONALITY Social media, because of their emphasis on individual personal relationships, can favour brokers over insurers, young brokers say. “That’s a big advantage that we have as a broker,” says Vincent Gaudreau of Gaudreau Demers & Associates Insurance Inc. in Montreal, Quebec. “We can interact with people because we are real people. [Insurance companies] can’t do that with their Twitter accounts.They can’t use personal stuff to establish relationships on the Internet as an individual.That’s the same with directs. Directs are usually big companies, so they cannot use that personal touch with

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their Twitter accounts or social media either. I think that’s a good thing for brokers.” Young observes that his business and personal lives can “overlap” in the worlds of Facebook and Twitter. “I went on [social media] doing things like tweeting for Rhodes & Williams, but also as just a guy who has a kid, who wants to go camping this weekend and likes to fish,” he says. “That’s from a prospecting standpoint, as opposed to servicing existing clients. People want to do business with people. If all I do is go on there and spout out information about insurance, I might be giving out a hell of a lot of information, but there’s nobody listening. If you are sitting there talking to somebody because they go to the same gym as you or they have kids and are interested in the things you are doing, you have an audience for what you have to say. It’s a fine line.You have to be careful about what you are saying.” Banking on personal relationships can be a double-edged sword, given the social media’s cult of personality. It’s “very subjective” what offends potential or actual clients, says Andrew Chow of RSA Canada’s technology group. “What you think is not offensive or controversial could be interpreted otherwise, especially if the communication comes from someone representing the company or brand. Have you had people say, ‘I can’t believe you tweeted about that’?” This explains why it is important to have an internal guide for social media use, as well as dedicated staff frequenting social media channels on behalf of the brokerage. Of course, this raises resource issues. Brokerages, as opposed to insurance companies, for example, are often small businesses and simply don’t have the same level of staffing to dedicate to the online space. As a result, business strategy and the desired level of engagement frequently guide a broker’s presence in the online space. In terms of business strategy, social media appear to be better at bringing in personal lines business than large commercial business. “For us, social media play different parts in different segments in which we do business,” says Ryan Mitchell of Mitchell Sandham in

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Toronto. “I think personal insurance, I can see that being all online. I think [personal lines coverage] can all be purchased, done, bound, done, pink slip [through social media channels]. “But in large commercial lines, I think social media play a small role. I think they won’t replace the face-to-face [interaction] on complex commercial accounts.” This is not to say social media do not

The bigger challenge online is that a new platform can grow so quickly. Before, you had slow and steady companies. Now, all of a sudden, you say ‘Wow’ and a company takes off in the online space. And so how do you avoid investing in the metaphorical Betamax machine? play a role in large commercial lines. Brokers are often tweeting information or posting on Facebook links to research that might be of interest to large corporate commercial clients. But in the large commercial segment, social media tend to be used for the purpose of “prospecting,” or making the initial contact with a client, as opposed to closing the deal. For example, a commercial client may read something a commercial broker

tweeted online, like the piece, and then contact the brokerage to do some business later down the road. But once that initial contact is made within social media, the client will often do research on the brokerage in the more conventional online space, before making a call to transact the business.

CHASING FADS? Are some social media better than others? Brokers aren’t throwing all of their eggs into one basket. Brokers use platforms and applications based on the presence of consumers in that space. “You’re not going to go in and invest a bunch of time [on a social media platform] if nobody’s on it,” says Colin Brien of Macdonald Chisholm Track Insurance (MCT) in Nova Scotia. “What application do we decide to use? It’s based on where our customers are, and what people are using. If they’re on Google+, then I’m on Google+.” One thing holding brokers back is the rapid speed and scale at which consumer communication preferences change. “The bigger challenge online is that a new platform can grow so quickly,” says Teper. “That’s the scary part now, right? Before, you had slow and steady companies. Now, all of a sudden, you go ‘Wow’ and it takes off.” Teper observes that whereas it took Twitter two years to reach 1 million users, 4square reached the same mark in only one year. It took 44 days for 4square, basically a location-based sharing tool, to go from 5 million to 6 million users. “That’s overwhelming,” Teper says. And so how do you avoid investing in the metaphorical Betamax machine? Sony released its version of the video recorder in 1975, when its sales ran neck-and-neck with its rival videotape format VHS. Four years later, sales of VHS recorders had left beta technology in the dust and VHS made up 70% of the North American market. The pace at which technologies emerge and disappear is much different now. In the first two years of its existence, Facebook had 100 million users. People can move quickly from platform

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to platform and already a great deal of buzz is surrounding the potential of Google+, which launched in late June 2011. Google+ promises a social networking experience akin to that of Facebook, but with different bells and whistles, and with the potential for tieins with Google’s existing offerings.While intrigued by the buzz, brokers are waiting to see if their clients and potential clients gravitate to the site first. This whole aspect of waiting out the popularity of certain technologies before diving in can seem like chasing fads — an occupational hazard of keeping up with emerging technologies. So what criteria do brokers use to separate the wheat from the chaff? Sigouin says he does his homework first. “Are my customers there?” he says. “Is it open? Is it closed? Facebook is open, you would say. It has enough people there. They are growing. Are there avenues to join in so I know where the conversation is going long-term, so the conversation is going to sustain itself for longer than it will somewhere else?”

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If brokers don’t keep on top of these new technologies, their competitors certainly will. But how much of a boon would that be to a competitor? Do brokers know how much money they are making as a result of social media? Many admit their measurement of the business and contacts they generate from social media is not comprehensive. Young says measurement is complicated because so many of the platforms are integrated with one another. “Can I tell that it started at Twitter, and then they went to my blog, and then they saw my Facebook page, and then they went over to my YouTube channel and then they ended up at Rhodes & Williams?” said Young. “If they had the time to sit there and tell me all about it, maybe they would. But generally they don’t.They heard about us ‘through your Web site.’” Teper notes measurement tools are available that can more precisely define

social media traffic such as Facebook hits and Twitter followers. Certainly insurers seem to be keeping a closer track of the amount of business they generate from Web-based platforms. For brokers, however, it seems to be more of a gut feel. “If I get one policy back, then the 20 minutes I spent to set up [the platform] is coming back.You know what I mean?” says Brien.

JUST DO IT Fear of reputational risk and the lack of clarity around measurement are too often held up as reasons not to engage the social media, young brokers say. “I do think we’re glamorizing this a bit and putting a mystique around it,” says Rob Rasberry of PBL Insurance in Toronto, Ontario. “We do have to be smart about how we use it. But it’s like the telegraph or the telephone was, and then the Net came.We just have to be part of this. It’s how people communicate today.” “You don’t have to solve the world’s problems the first time you log into Twitter,” adds Young. “Try it, get a feel for it, learn a little bit, and get on it.”

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STRAIGHT UP

SEMCI

Pat Durepos President, Keal Technology

Any long-term single entry multiple company interface (SEMCI) solution has to support CSIO XML standards, respect Insurance Brokers Association of Canada (IBAC) guiding principles, ensure data integrity and, most importantly, increase the broker’s efficiency. Considering the wide gap between broker management systems (BMS) and insurance company back-end technology infrastructure, the property and casualty industry has had to rely on a variety of applications to create electronic data exchange. These have involved company portals, broker middleware and data scraping, to name a few.The techniques represent necessary building blocks on the path to SEMCI. But many brokers and increasingly insurance carriers now recognize some of their long-term limitations.

34 Canadian Underwriter October 2011

THE CHALLENGE These initial attempts at SEMCI addressed a very real challenge facing the broker distribution channel. Brokers and insurance companies have their own perspectives on the data they need to collect and store for transactions. They organize their own data in sometimes subtly different ways.This lack of validation and standardization makes the integration of data between systems more complex and prone to errors and re-inputs. In this environment, real-time electronic data exchange is difficult, if not impossible. Increasingly, the P&C industry is realizing the shortcomings of early data exchange projects and moving away from short-term solutions. A big part of that move is the guiding set of principles advocated by the Insurance Brokers Association of Canada (IBAC) for real-time data exchange between brokers and insurers. These guidelines clearly state: • transactions must originate from and return to a broker’s management system; • all data transmissions must strictly adhere to Centre for Study of Insurance Operations (CSIO) XML standards;

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• variations dictated by any unique characteristics of individual insurer systems are to be addressed on the insurer’s side of transmissions, rather than programmed into broker management software. While IBAC is testing out these principles in a data exchange project currently underway with multiple BMS vendors and insurance companies, it is not necessarily pursuing an industrywide SEMCI “solution.” IBAC has rightly outlined the parameters for how brokercarrier communications should be streamlined, leaving the vendor marketplace to deliver real-world applications that work. This is the direction SEMCI is heading and productive individual solutions are starting to emerge. And these are coming to market. In fact, some are in place right now.

is required on coordination between BMS and carrier systems, process orchestration and implementation. Progress in policy change is imminent in a matter of months. It is important for brokers to test any purported SEMCI solution against the principles enunciated by IBAC.The Keal Connect service sends CSIO XML data in real-time from the BMS directly to York’s broker support systems.The transaction starts and ends in the BMS, with no additional broker software or middleware

REAL-WORLD SEMCI

necessary.The workflow is the same for the broker. Data integrity is maintained at both ends of the transaction process through close adherence to standardized data elements and fields. Most importantly, the broker experiences increased efficiencies in the form of reduced data entry and less “clicks and screens.”

York Fire & Casualty is one example of an insurance company that can communicate and integrate directly with a BMS without any middleware or third party software required by the broker. Brokers using Keal’s sigXP BMS are able to perform inquiry and new business upload for auto and property directly with York. Keal Connect uses a connectivity solution provided by iter8, called communic8, that integrates data with insurance company policy administration, staging areas or support systems. This eliminates the need for any broker-required middleware or third party software. Brokers can work in their BMS and focus on their own business without worrying about data translation or exchange problems.This greatly reduces duplicate data entry, overlapping brokercompany workflow and resultant inefficiencies. The next big opportunity is policy change and endorsements. This is a complex area for many reasons, and has long been a thorn in the tail of brokers seeking efficiencies in routine but dataintensive transactions. The fact is, however, that modern technology solutions can overcome this hurdle. A sharp focus

36 Canadian Underwriter October 2011

IBAC has rightly outlined the parameters for how brokercarrier communications should be streamlined, leaving the vendor marketplace to deliver real-world applications that work.

SEMCI’S EFFICINCIES The last point is key and, in fact, measurable. Keal has studied the amount of time it takes a broker’s office using Keal Connect to complete a transaction versus a broker using regular methods (i.e. traditional duplicate entry portal or middleware). It takes a customer service representative (CSR) 2.5 minutes to complete a transaction with Keal Connect versus nine minutes for regular methods. That 6.5-minute — or 70% less — time difference may seem relatively minor in isolation. But when you multiply that by dozens or hundreds of CSRs and thousands of transactions, you can see the potential for vast efficiency improvements. In the broker’s office, every click represents money. Measured in another way, we clocked how much longer it would take a CSR without a true interface like Keal Connect to complete the same amount of

transactions as a CSR with the interface in a given day. We estimate that, on average, it would take an extra one hour and 43 minutes for the CSR without the interface to do the same amount of work. Again, multiplied across all staff, that is a potentially huge time and cost saving (or burden) for brokers. These efficiencies are clearly beneficial for brokers. But what about insurance carriers? The obvious advantage for insurance companies is the integrity of the data. Through Keal Connect, insurers receive accurate information that can be integrated directly into their operating systems, with greatly reduced data entry or corrections.The company’s brokers have much greater ease of use in conducting routine transactions such as inquiry, new business and endorsements. That means less time spent on manual intervention. The reality is that for brokers and companies to truly interface and share information, there must be data integrity. Data that has integrity is identically maintained during any operation such as transfer, storage or retrieval. Put simply in business terms, data integrity is the assurance that data is consistent, certified and can be reconciled. It also means that any true real-time data exchange solution has to benefit both the broker and the insurance company. There are no shortcuts to SEMCI. York is one example of an insurance carrier demonstrating tangible commitment to the independent broker distribution channel. It was able to bring the Keal Connect integration project for policy inquiry and new business to brokers in less than two months. The same potential exists for virtually any carrier in the Canadian P&C marketplace. The big-picture advantage of true SEMCI solutions for insurance companies is that enhanced broker efficiency means a stronger distribution channel. Those carriers committed to independent brokers should regard working, functional real-time data exchange solutions as a weapon in their ability to compete with banks and direct writers. It’s time to move from shortcuts to investments in real-world SEMCI solutions.

Thank you to our partners for their support in 2011. We will continue to innovate, so let’s keep the conversation going in 2012.

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Smaller-Sized

Risk Management The importance of risk management for small/medium enterprises.

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â&#x20AC;&#x153;Risk managementâ&#x20AC;? can mean different things to different organizations. By virtue of their size, large organizations are often thought to be more interested and engaged in risk management. As a result, little attention has been paid to delivering risk management advice and expertise to small- and medium-sized enterprises (SMEs) in Canada. This segment can be defined as companies with fewer than 100 employees. More than 98% of Canadian registered companies fall into the SME segment under this definition, according to 2008 data compiled by Statistics Canada.

RISK MANAGEMENT FOR LARGE COMPANIES For some organizations, risk management includes incorporating risk management strategies into aspects of their business planning, strategy, corporate vision and/or mission. Professional risk management departments might deliver the services. The full-time role of these individuals or their departments is to focus on opportunities to mitigate, transfer or avoid risks

38 Canadian Underwriter October 2011

facing their organizations. Some organizations even consider effective risk management as a key to their success and profitability; consequently, they actively promote a risk management culture within their organizations. Organizations with this level of risk management maturity often have more than 100 employees, multi-provincial or international operations, a significant geographic spread of assets and in some cases are publicly traded.They probably incorporate risk management as part of their corporate governance. They intentionally source and hire third-party consultants and an insurance broker with a depth of risk management experience. They are also likely to engage experts to assist with business continuity planning, product recall, etc. to contribute towards their risk management program and advise on risk management strategies in their specific areas. Historically, these types of organizations have comprised the target market for providers of risk management advice and solutions.

RISK MANAGEMENT FOR SMEs In contrast to the above, for some companies, risk management may simply mean making a decision to buy insurance from a broker to transfer risk. These companies often do little to

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For some companies, risk management may simply mean making a decision to buy insurance from a broker to transfer risk. These companies often do little to change their operations to mitigate or avoid risks and likely don’t see the value in investing in improving risk management practices, since they don’t often receive a direct and immediate premiums savings on insurance they purchase. Organizations viewing risk this way typically have local or regional operations with fewer than 100 employees.

change their operations to mitigate or avoid risks and likely don’t see the value in investing in improving risk management practices, since they don’t often receive a direct and immediate premium savings on the insurance they purchase. Organizations viewing risk management this way typically have local or regional operations with fewer than 100 employees.The organizations’ founders often manage them, and they may or may not have a controller or chief financial officer in place. If they do have a controller or CFO in place, his or her role is likely incredibly broad: it might include anything and everything from handling accounts payable and receivable to making decisions about the organization’s insurance program. These companies are commonly known as SMEs. Due to their size, they often cannot afford to have dedicated resources focused on risk management. And yet, these organizations need risk management as much as or more than the larger organizations described above for the following three reasons:

Attitudes and behaviours Attitudes and behaviours become more difficult to change with time. As organizations age, they reflect certain attitudes and behaviours that become entrenched as standard operating procedures or generally accepted ways of doing business. Once entrenched, it becomes more difficult to change or 40 Canadian Underwriter October 2011

adjust an organization’s culture to become more risk aware or adverse. This can be particularly problematic for an SME that has grown to a point where it is beginning to do business with larger organizations. These larger companies may conduct audits of their business partners [i.e. SMEs], and evaluate everything from their internal accounting controls to their risk management practices. Examination of similar factors may also be part of the due diligence process when an SME is being considered as a potential acquisition. If an SME does not have appropriate risk management and controls already in place, the larger company may rule it out as a candidate for acquisition or reduce the valuation.

SMEs and large losses Small organizations are susceptible to large losses. Some might think big organizations have big losses and small organizations have small losses, but this is not necessarily true. In most instances, the size of two organizations with identical operations has little or no bearing on the severity of a single loss if neither has a history of losses. For example, one contractor could have 100 service vans on the road on any given day. A smaller contractor with identical operations might have only 10 service vans on any given day. If both organizations have only one accident that year, it is nearly impossi-

ble to predict which organization is more likely to have the larger loss. The chance of a large loss makes incorporating risk management strategies as important for SMEs as it is for large organizations.

Skin in the game SME owners have a lot of “skin in the game.” Intuitively, most people would think larger organizations take risk management more seriously because they have more to lose. However, when large, publicly traded, widely held companies take on risk, its potential financial impact is ultimately spread across all shareholders, which can be hundreds — and possibly thousands — of individual or institutional investors. The implications here are that shareholders might experience a dip in share price or reduction or elimination of a dividend.This stock, however, is probably only a small portion of an employee’s or investor’s widely diversified portfolio, and the financial loss isn’t actually realized unless the stock is sold. Also, revenue from share appreciation isn’t likely the investors’s sole source of income. In contrast, for SMEs, the same risk and the impact of any subsequent financial loss are typically concentrated with the one or two people who have equity in the company. In addition, those holding equity in an SME typically have the majority of their personal assets invested in their organization and draw an annual

eeping Canada’s insurance industry in line and on good behaviour is a big job. Every now and again, a regulator must step in and, depending on the severity of the misstep or breach of market conduct, levy a penalty. In some jurisdictions, regulators are well equipped to deal with the spectrum of misconduct that might occur. But in others, specifically Ontario, experts from all corners of the industry insist the Financial Services Commission of Ontario (FSCO) is operating within an archaic framework that has virtually no middle ground available for a response. If an industry member (either an individual or company) is found to have breached Ontario’s Insurance Act, FSCO is left with either an “administrative response” — which typically takes the form of a cease-and-desist letter, in conjunction with an undertaking — or it can refer the matter to a quasi-criminal court proceeding. Experts suggest there’s not much “quasi-” about the latter option. If the matter is referred to the criminal courts, punishment is severe, reputations are destroyed and the process becomes lengthy and expensive. On the other hand, at the opposite end of the spectrum, cease-and-desist orders are seen as mere slaps on the wrist, with little or no deterrent power. What’s needed, experts maintain, is a middle ground for regulators to exercise their authority. The regulator should be able to pursue swift penalties weighted to the severity of the breach . And these penalties should be made public. Ideally, a regulatory regime should allow a distinction between intended acts and unintended breaches, and the penalties should serve as a deterrent. Overall, such a middle ground — as exemplified by a system of administrative monetary penalties (AMPs) — would help foster a more transparent environment, with greater accountability between regulators and industry members.

October 2011 Canadian Underwriter 45

COVER STORY

Playing Fair Currently, the insurance sectors in British Columbia, Saskatchewan, Alberta and the federal jurisdiction under the Office of the Superintendent of Financial Institutions (OSFI) have provisions for AMPs. No system is perfect, but experts point to OSFI’s AMP regime as a shining example of where to start in the design of such a scheme. That system has clearly laid out, in tiers of severity, which offence results in which penalty and why, experts say.

FSCO followed suit. In its June 2011 Statement of Priorities and Strategic Directions, FSCO identified the contemplation of the implementation of AMPs as a priority. Since that time, the writ has been dropped in Ontario for an Oct. 6 election. As of the time of this writing, everything in the provincial legislative pipeline is basically stopped until the election is complete and a new gov-

Put Some Teeth into It As noted above, British Columbia, Saskatchewan, Alberta and the federal jurisdiction currently have AMPs in their respective legislation. But a crosssection of industry groups is pushing for a similar tool to be added to other jurisdictions’ regulatory toolboxes — particularly in Ontario. Simply stated, the AMP system is a civil penalty regime that secures compliance with legislation through the application of monetary penalties. Monetary penalties may be imposed based on the type, frequency and severity of the infraction. Most penalties are graduated and will take the compliance history of the client into consideration. The penalties do not affect companies compliant with legislation. In 2008, while providing input on Ontario’s auto insurance review, Insurance Bureau of Canada (IBC) recommended the adoption of AMPs to address industry regulatory breaches in the absence of criminal intent. About two years later, when the Ontario Ministry of Finance released its budget in March 2011, the province included a budget provision that suggested incorporating AMPs into the province’s Insurance Act. Scott Blodgett, a spokesman for the Ministry of Finance, said in an email to Canadian Underwriter that the The Mortgage Brokerages, Lenders and Administrators Act and the Credit Unions and Caisses Populaires Act each provide for the superintendent of financial services to impose AMPs, so the recommendation in the budget would bring the Insurance Act in line with existing legislation. 46 Canadian Underwriter October 2011

IBAO strongly supports the development of an AMP system in Ontario in the immediate future in order to ensure the remedial standards applied to the industry are fair, appropriate and consistent with market standards throughout North America and other progressive jurisdictions. ernment formed. However, that hasn’t prevented industry stakeholders from pushing for the adoption of AMPs. The Insurance Brokers Association of Ontario (IBAO) sent a submission to FSCO in September 2011 calling for the immediate implementation of AMPs. In a letter to FSCO superintendent and CEO Philip Howell, IBAO’s CEO Randy Carroll said: “IBAO strongly supports the development of an AMP system in

Ontario in the immediate future in order to ensure the remedial standards applied to the industry are fair, appropriate and consistent with market standards throughout North America and other progressive jurisdictions.” Dan Danyluk, CEO of the Insurance Brokers Association of Canada (IBAC), echoed that sentiment. “AMPs give regulators a gradient of response. I think that’s really important. Across the country we have fine regulatory authorities, and this seems to be a reasonable tool for them to have so that they have an option for a reasonable escalation in terms of penalties for insurers who are in contravention of market principles.” Brokers aren’t the only industry players voicing support. Insurance company CEOs have expressed support for an AMP system as well. George Cooke, president and CEO of The Dominion, says he would be happy to see an overhaul of the regulatory regime that would give regulators more flexibility to respond to breaches of market conduct. “I am very much a fan of having a complete regulatory mechanism that hangs together,” Cooke says. “And these fines and penalties have to be consistent with the mandate and the authority that these regulators have been given by government. The regulators have the mandated authority. Now someone has to give them the tools to do their jobs. Otherwise it’s like calling a plumber to fix something and then telling him he can’t use a wrench. It doesn’t make any sense.” Vivian Bercovici, a lawyer at Heenan Blaikie, says AMPs could do more than simply hold industry stakeholders accountable. If implemented properly, AMPs would cause the regulator to be held up to a higher degree of accountability and transparency. “I think AMPs, done properly and well, bring a measure of discipline, accountability and transparency that you won’t otherwise have,” she says. Currently very little, if any, information is made public about the different enforcement remedies resorted to by regulators in non-AMP jurisdictions. A

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Playing Fair well-designed and implemented AMP system would include disclosure requirements to ensure public knowledge and confidence in the regulatory regime. By making it clear how AMPs work, and by clarifying publicly the connection between breaches and penalties, it is hoped industry stakeholders will no longer be left guessing about what factors were taken into consideration or why a matter was referred to the criminal court. Moreover, companies or individuals experiencing glitches in their operations might now be more willing to come forward and self-disclose, since the fear of being criminally prosecuted has been removed, Bercovici says. Ernie Gaschler, executive director of the Insurance Brokers Association of Saskatchewan, agrees. “Coupled with the monetary penalty itself, I think the publication of what happened and why this is considered appropriate is important to the brokers, insurers, and also to the public. I think the two go handin-glove, and I think that’s what lends strength to the monetary penalty if the regulator deems it to be the appropriate response,” he says. IBAO’s submission notes that FSCO must clarify the manner in which a breach is deemed “material” and when it justifies a quasi-criminal prosecution. “Any objective or subjective criteria FSCO relies upon in making such an assessment are not articulated in the act and the industry has been left to decipher these salient factors without adequate regulatory guidance.”

Two Extremes Currently in Ontario, the only way for the province’s insurance regulator to levy monetary fines for statutory breaches is through the quasi-criminal courts. “Current remedies for statutory breaches range from the ‘slap on the wrist’ of a cease-and-desist order to the laying of a criminal charge – there is no in-between,” says Barb Sulzenko-Laurie, IBC’s vice-president of policy and senior advisor. “AMPs provide regulators with the ability to respond quickly and fairly in the event a breach arises and merits 48 Canadian Underwriter October 2011

some type of penalty to serve as an individual or group deterrent. When designed and working well, AMPs enable the regulator to issue a sanction with teeth, but not to engage approaches that are exceedingly punitive given the nature of the infraction.”

If you shoot a bird with a shotgun, there’s not going to be much bird left. Similarly, if you shoot an elephant with a pea shooter, it might not feel it. It’s about picking the right shot for the type of target. For legal experts, there’s nothing “quasi-” about pursuing a matter in the quasi-criminal stream under the Provincial Offences Act (POA). “The company, and in some cases an individual officer, is charged by way of an ‘information,’ the laying of a formal criminal charge,” the IBAO submission says. “The process then followed is criminal. The case is heard by an adjudicator expert in criminal matters. The standard of proof in such a hearing is criminal: beyond a reasonable doubt. And, if the party is found guilty, the conviction is criminal.” Jim Hall, Saskatchewan’s superintendent of insurance, says that while referring the matter to court proceedings is an extreme response, he does

not believe it will result in criminal charges as suggested by IBAO. “I can see the confusion and stigma when you think someone has been charged with a criminal offence, but it isn’t a criminal offence under the Insurance Act. You do appear in court, and there is a fine or penalty that’s levied, but it’s not criminal.” For Bercovici, the bottom line is this: “If you have a company, particularly foreign companies, and they are charged and convicted, and then that conviction is considered in their home jurisdiction, it may be for a relatively benign statutory breach that would be handled civilly anywhere else in the world. But because of the way we have structured it, it becomes a quasi-criminal conviction and it can be used as evidence of moral turpitude or other highly damaging conduct. “These are really serious issues. Plus, I don’t think it is helpful for anyone to be in the criminal justice system. It’s so adversarial. We have a regulatory model and we want to ensure good will and collaboration. We want the parties to be able to talk and self-disclose.” Discourse and discussion between the regulator and the parties is good, and they should be talking. “You want there to be a positive opportunity to work things out amicably, make early self-disclosure and allow the regulated entity the opportunity to work things out with the regulator and not have to worry about being charged criminally,” Bercovici says. “Charging people criminally works in a really hierarchal, rules-based environment, but not in a principles-based environment. It’s such a yesterday’s model and it doesn’t encourage the type of system we want to see.” Hall adds that in his jurisdiction, cease-and-desist orders have been effective, so they have not had to resort to levying AMPs. A key part of that success, he says, is sitting down with the offending party and laying out the range of penalties available to the regulator and working out a solution with the company to correct its behaviour.

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Playing Fair In addition to fostering an environment of mistrust and lack of transparency, the quasi-criminal process is long and drawn-out. This may also act as a deterrent for regulators to implement it, since the stream is intended to deal with the more serious and egregious breaches. Cooke points to an example of misconduct that ended up in the court system. By the time the regulatory system dealt with the matter, the harm to the consumer had been irrevocable, he said. “Many years ago, one of my competitors purchased a brokerage and proceeded to divert the business away from other markets — Dominion being one of them — to their own company. But they used my rates, not their own. That’s absolutely taboo. The regulatory mechanism took many months before anything happened. So they continued to convert all of the business. At the end of the day, they ended up in a quasicriminal exercise. The hearing wasn’t made public, though it should have been, and the company pleaded guilty and was fined $80,000. “But the business had already been moved. There was no remedy to turn back the clock, put things back where they ought to be. There was no remedy for consumers who ended up in a [different] place for reasons they knew nothing about and then, going forward, [felt] the impact of a rate adjustment when the proper rates were imposed.” In this example, Cooke said, the consumer would have benefited if the system wasn’t as cumbersome; if the regulator could have stepped in quickly and asserted its authority; and if it could have issued a significant penalty without the long, drawn-out process.

Peer Review Existing AMP structures in Canada vary from jurisdiction to jurisdiction. In Alberta, the maximum fine amount of an AMP is $10,000. British Columbia’s Financial Institutions Commission (FICOM) can levy fines of up to $50,000 for a corporation and up to $25,000 for an individual. These fines 50 Canadian Underwriter October 2011

increase to a maximum of $200,000 and $100,000 when the issue is taken to the criminal courts. Saskatchewan has maximum AMP fines of $100,000. The regulator has an option to order an additional $100,000 to be spent by the insurer on public education initiatives. Quebec has granted its regulator the authority to fine up to $1 million under its AMP scheme.

The regulators have the mandated authority. Now someone has to give them the tools to do their jobs. Otherwise it’s like calling a plumber to fix something and then telling him he can’t use a wrench. Most jurisdictions report they rarely feel the need to invoke their AMP scheme. Quebec’s Autorité des marches financiers (AMF) reported in 2010 that its monetary penalties represented more than 50% of penalties imposed in Canada. A majority of these penalties were for illegal distribution of securities, but they still have a deterrent value for the financial sector at large. “In many of the actions launched in the past year, we sought penalties in excess of the minimum amounts prescribed by law for deterrent and exemplary purposes,” said Jean St-Gelais, AMF’s president and CEO, in a statement. So far in 2011, Alberta’s Superintendent of Insurance has levied two AMPs under its Insurance Act. One was a $25,000 fine against the Alberta Motor Association Insurance Company for entering into a prohibited related party transaction. The other was a $130,000 penalty against RSA Canada for refusing to issue, renew or cancel private passenger automobile insurance polices. To date, these represent half of the total number of AMPs levied in Alberta in 2010. Looking back

to figures since 2005, the number of fines has dwindled over the years, with activity peaking in 2006-07, when 17 AMPs were issued in Alberta. FICOM’s Web site contains one record of an AMP being administered in 2006 to a Cost Rican insurance company that failed to pay a claim. The insurer was assessed a fine of $50,000 and each of its principals $25,000 each. Chuck Byrne, CEO of the Insurance Brokers Association of British Columbia (IBABC), says that even though AMPs are not often invoked, brokers in B.C. still see immense value in having them. “IBABC has always been a proponent of the need for AMPs, particularly for provincial regulation,” Byrne says. “The history is that, going back 20 years, our superintendents of insurance certainly needed to see AMPs brought into being. Since they have been introduced here, I don’t know that they have been particularly aggressively exercised, which is a good thing. I can definitely tell you that we are supportive of it and are proud that our province has the ability to get to matters quickly with proper fines and the ability to decide things without going to the courts.” For Danyluk, the mere presence of AMPs is enough to condition behaviour. “If livestock is kept behind a fence that gives them an electrical charge whenever they step out of the boundaries, eventually the animal gets used to the fact that if they go outside of the boundaries, they get charged,” he says. “Even when the fence isn’t on, they don’t go outside the boundaries. Looking across the country, we’re not talking about an industry that preys on consumers or regulators who are struggling to contain wild beasts. I think it’s a responsible set of tools so regulators have more in their arsenal. It makes great sense to me.”

Drawing a Bright Line In jurisdictions both with and without AMP schemes, one improvement would be the inclusion of a “bright lines” test that clearly establishes the criteria used to distinguish between intended breaches and unintended breaches,

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COVER STORY

Playing Fair

experts suggest. In other words, an AMP system needs to allow a regulator to adjust the severity of the punishment to reflect intent of the breach and, in more severe cases, identify the intended act as a criminal offence. “You really want to build into the system the bright lines, making it very clear that when you’re on one side of the line, it’s criminal,” says Bercovici. Some of the Canadian jurisdictions have come close to including a bright lines test, but no one has explicitly laid one out in insurance statutes, Bercovici says. “One of the main distinctions between criminal and civil liability in our justice system is intent,” she says. “To be found civilly liable, we look at the circumstances and we make a judgement based on the balance of probabilities. If we charge them criminally, then the standard of proof is ‘beyond a reasonable doubt.’” [A caveat: strict and absolute liability offences can end with criminal convictions, regardless of intent to commit the act.] “If something terrible happened in your company, and it happened because of a computer glitch, the outcome could be terrible,” Bercovici says, giving an example of the difference between breaches. “But you could be a really good CEO, running a really great shop, and sometimes these things happen. “If you have a situation in which someone deliberately tampered with your computer, you get the same result: people were charged the wrong rate. “But [in the deliberate tampering example] there is intent to cheat the system and in the other [the computer glitch], there is not. I think that the circumstances of those two breaches should be treated very differently and should be addressed with different enforcement remedies.” Cooke agrees. He outlines a scenario in which the programming logic of a multinational company’s computer system is done in a different jurisdiction. A mistake is made and the rates are incorrect. “That kind of offence is a much less serious offence than if someone 52 Canadian Underwriter October 2011

deliberately charges rates that are unapproved,” he says. “This kind of [AMP] scheme would allow the superintendent to have the discretion to differentiate between those two offences. At the current time, both are described as failure to charge approved rate.” Regulators are reluctant to go down an extreme, quasi-criminal path to penalize an offence that is not extreme, Cooke says. “Or alternatively, what happens is something that’s extreme gets treated as though it’s not extreme

because they still don’t go down the path,” he says. “If you’re going to give regulators the responsibility for doing these things, then you have to give them some authority to impose their regulatory will.” Cooke adds that if someone is “frequently stupid,” that shouldn’t necessarily go on unpunished. “But your punishment system should be flexible enough that the superintendent should have some room and some discretion to be able to adjudicate those things, in my view,” he says. IBAO’s submission to FSCO describes a recent case in which Alberta and Ontario regulators addressed the same breach by the same company. Alberta directed the case through its AMP system. “The matter was handled efficiently and fairly, allowing the parties to incorporate lessons learned and carry on business with minimal interruption,” the IBAO’s submission says. In Ontario, although the regulator conceded there was no intent on the part of the convicted party, the matter

was sent through the criminal courts. “The resulting plea bargains and very hefty fines made against this firsttime offender were and continue to be viewed by the industry as having been over-zealously punitive,” IBAO’s submission says. That’s not to say AMPs should only address non-serious matters, IBAO stresses. It means “only serious matters [that] arose because the breaching party acted intentionally warrant criminal prosecution.” Not all intended offences should be streamed into the criminal system, the IBAO adds. These may be more appropriately dealt with by means of cease-anddesist orders or AMPs. “Again, long-established principles of law and justice affirm this approach,” the IBAO notes. “One that recognizes an act committed with intent as being qualitatively and significantly different from one committed as a result of negligence and sloppiness or an oversight… “In making this determination, the regulator shall adhere to criteria to be articulated with respect to the ‘bright lines’ test; such criteria supporting the notion that only the most serious, egregious and offensive cases [that] undermine and threaten the integrity of the regulatory system, and where such actions were done with intent, should be prosecuted criminally.” Danyluk illustrates this point. “If you shoot a bird with a shotgun, there’s not going to be much bird left. Similarly, if you shoot an elephant with a pea shooter, it might not notice. This is the key thing, it’s picking the type of shot for the type of target.” By striking the right balance, by allowing a more measured approach of hitting a party on the bottom line and publicizing it, AMPs can serve as a strong deterrent, Bercovici says. “When you fine someone and you publicize it, it works. It’s reputational harm, it’s financial harm, the offending party is going to clean up its act. They just don’t want that kind of attention. Monetary penalties are usually the best motivators. Fines tend to do the work.”

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Stylizing Protection

Frank Cain

Michael Palermo & Associates Insurance Ltd.

Thanks to the actions of an unscrupulous few, brokers and their clients are left to pick and choose between optional coverages, leaving open the question of which might be needed. Jennifer Faircloth’s article ‘Auto Reforms and Broker Liability’ (Canadian Underwriter, June 2011) is a reminder that a broker’s duty of care is immutable. It cannot be compromised, and the weight of defence, successful or otherwise, will be born of the burden of the broker’s actions — or the lack of them — in the financial protection of the client. Ontario’s auto reforms do not change the fundamental and historic principle of the broker’s professional obligation, which is to prevent dereliction of duty in the proper and correct administration of a client’s protection. But they do clearly bring to the surface the dichotomy

54 Canadian Underwriter October 2011

between insurance prior to the introduction of so-called no-fault insurance, as introduced in 1990, and what insurance stands for today. Prior to 1990, unless an auto claim had all of the earmarks of being black or white in terms of responsibility, loss assessment for resultant injuries and related costs was largely based on circumstantial evidence and the credibility of an answerable witness. It was also a time when the strength of legal representation allowed the defendant to go into a neutral corner, secure in the knowledge that the arguments in their favour would be hard-fought, even if they were not necessarily overwhelmingly convincing. For whatever reason ‘no-fault’ was considered a better alternative, to my mind, this has resulted in a concession to defeatism.

BROKER/CLIENT DISCUSSIONS POST-NO FAULT Enter the broker, cheek by jowl with no-fault. Now, black or white is the determinant in all but the most egregious of accidents, or if constitutionality is questioned.A claim is covered or it isn’t.

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If we as brokers are to adhere to the “stylize protection” concept, we are walking into a trap. In my considered opinion, a broker would be well advised to counsel the client to buy the fullest protection available under AB. This would follow the acceptable practice of what was sold to the client prior to Sept. 1, 2010.

Check the chart. What was purchased? Was something left out because it was not considered purchase-worthy at the time? Check it again. How about now? Want it added? No? Okay. But let me warn you: I’ll be back in a month and I’ll check again. In fact, if my brain doesn’t get too muddled in the meantime, I’ll check again in three weeks because I really don’t know when you’ll need the other coverages.You may need them next week. Oh, so you think I’m a nuisance? Well, dear client, that’s my job. It’s what I am expected to do. Tell you what, dear client: since I am not a soothsayer, a seer or omniscient teller of fate, allow me to make a suggestion. Coverages were taken away from standard accident benefits on Sept. 1, 2010 because of excessive and sometimes dubious claims, resulting in a profit-losing auto insurance product. I think what you should do now is restore the coverage sections you previously had. Some limits will not be the same, however, but the premium spent will be well worth it. That’s my recommendation. If you have understood what I’ve said, I’d like you to confirm to me in writing. Otherwise, you and I — and not the third party in an accident — may be in hot water. In fact, can you give me two notes? The second one will refute any notion that the first note did not arise out of your own free will and volition, despite my request of you. (Note to me: Get our E&O insurer to seek out the best lawyer available).

56 Canadian Underwriter October 2011

THE ‘STYLIZE PROTECTION’ TRAP Over the past 21 years or so during which accident benefits (AB) have morphed into what we have today, AB remained somewhat static in some areas while in others coverages broadened over time. So rather than today’s situation, in which brokers and clients pick and choose coverage to “stylize protection,” there were frequent changes to do just

If you have understood what I’ve said, I’d like you to confirm to me in writing. In fact, can you give me two notes? The second one will refute any notion that the first one did not arise out of your own free will and volition, despite my request of you. the opposite – to give the insurance-buying public even greater access to broader coverage. Now, because of the actions of a few to debase the system for unjustifiable financial reward, the majority of right-thinking people (who are not the problem) have been left to pick and choose coverages that might not be required today but could be required tomorrow. The disturbing corollary is that to regain what was taken away does very little to enhance their pocketbook.To restore broadest coverage, there can be a premium consideration of upwards of $400 — and in some cases, beyond —

with some coverage sections limited by the insured’s financial means. If we as brokers are to adhere to the “stylize protection” concept, we are walking into a trap. In my considered opinion, a broker would be well advised to counsel the client to buy the fullest protection available under AB. This would follow the acceptable practice of what was sold to the client prior to Sept. 1, 2010. This practice was not condemned, refuted or disclaimed by insurance companies, the Financial Services Commission of Ontario (FSCO), the Insurance Bureau of Canada or other regulatory bodies. If a broker or other industry voice can justify doing otherwise with impunity, I would like to hear about it. Left to consider is this: it is one thing for an insurance broker to maintain strict adherence to the moral, legal and fiduciary responsibility he or she has to the client in the ordinary, everyday world of long-accepted coverages, wordings and practices. It is quite another for a situation to have been deliberately developed, as in the case of AB reform, that places the broker in a situation from which it is very unlikely he will be unable to successfully extricate himself. After almost 60 years in this business, I feel as though I am no longer dealing with the science of insurance and the governance of risk but rather with some kind of dreaded thin line of perspicacity and the spin of the lotto wheel that, in either case, could easily disintegrate into disaster. Is that a rousing cheer I hear for an alternative?

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Geoffrey Rowan Partner, Managing Director, Ketchum Public Relations Canada

I’m Sorry Partner, Insurance and Tort Law Practice Group, Borden Ladner Gervais LLP

Irene Bianchi

Senior Vice President, Claims, Corporate Services & Strategic Sourcing, RSA Canada

Several Canadian jurisdictions have introduced ‘apology legislation’ over the past few years.The legislation is intended to allow one party in an accident to express regret without worrying that the apology will be used against them in a court of law. But what are the implications of saying, ‘I’m sorry’? What is the impact of this legislation on a party’s reputation? Will it affect the party’s legal case? And will the apology affect insurance coverage? Canadian Underwriter hears from three main actors in an insurance claim involving a party that apologizes — a public relations expert speaking

58 Canadian Underwriter October 2011

about the party’s public reputation, a lawyer defending the party in court and the insurer providing insurance coverage for the party’s liability claim.

A PUBLIC RELATIONS PERSPECTIVE Geoffrey Rowan, Ketchum Public Relations One can argue about whether the world’s second oldest profession is law or public relations. But for as long as the two have existed, a dynamic tension has existed between them over when, if ever, to say: “I’m sorry.” Both professionals have a duty to serve and protect their organizations, but they approach this duty from different perspectives. The lawyer’s responsibility is to protect from legal liability. The communicator’s role is to protect reputation, which is linked to an organization’s license to operate. Breaking it down a bit, the lawyer tries to protect the organization from criminal and civil liability. Obviously, it would not reflect well on the company if its CEO and board of directors were

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Apology legislation introduced throughout the country allows people to express regret without fear that the words “I’m sorry” might constitute an admission of liability in a court of law.

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to be jailed. Likewise, shareholders (and insurers) tend to frown at the prospect of hundred-million-dollar class action settlements. So the lawyer advises: “Keep your mouth shut.” And if you are unable to do that, then by all means make it a non-apology apology. Something like: “We’re sorry that you feel something terrible has happened to you.” The PR person’s obligation is to protect the company’s reputation. It’s a little harder to put a price tag on that — especially when the corporation’s legal department is making a forceful case that a $200-million damages award might dampen the bonus pool a bit. But it’s not impossible to infer the value of reputation. At its most basic, the value of reputation is the value of all forward sales. For a public company, it is the difference between a company’s market capitalization and its book value. (You could also add the premium an acquirer would be willing to pay over market value.) Why do apologies work? Well first, they only work if they are sincere. A non-apology apology can inflame the situation. People who feel wronged, abused, mistreated or disappointed by an or-

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ganization sometimes want nothing more than to hear the organization acknowledge that their pain and suffering is real.They want the organization to acknowledge its role in causing the pain and suffering, and to express genuine sorrow for that. Also, they want to hear the organization promise not to do it again. When people are upset, or when they feel there is a lack of honesty, they are more likely to sue. They feel they have to in order to force the truth out into the open. An apology is not a panacea. What do you do if you’re not at fault? What if the level of your involvement and fault is not clear? First and foremost, you let your humanity show. If there is human pain, you address that first. Counsel may advise that you have a fiduciary duty to protect shareholder value by minimizing exposure to liability. But if you create a greater risk to shareholder value by undermining your good reputation, then you have done a great wrong. So start with human concern. Address the issues provoking the human anxiety and potential conflict. If people are in pain, acknowledge their pain. If you don’t know the cause of that pain,

promise them you will find out and you will tell them. Also tell them you will take responsibility if it is yours. Don’t point fingers. If you choose a different route, and assume a defensive posture, those who wonder about you will have no choice but to attack you.That can only result in a damaged reputation, which is associated with real costs. A real apology, on the other hand, can be cathartic. It can be a new beginning.

A LEGAL PERSPECTIVE Norm Letalik, Borden Ladner Gervais Humans are not perfect. We make mistakes. We commit wrongs. Our parents teach us from an early age that when we hurt someone physically or psychologically, the right thing to do is to say you are sorry and to apologize for your actions. We are also taught that contrition is good for the soul. So saying you were wrong and that you are sorry for your actions is not only good for the person receiving the apology, but it is also good for the person giving the apology. In this way, apologies can have a cathartic effect for both the person receiving and giving the apology. Apologies are a way

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When a large loss is suffered, it’s always in the best interest of the organization responsible to step up and take accountability for getting people back on track. If that means making an apology, this can only benefit all parties in terms of demonstrating good faith and intentions. If it doesn’t act quickly enough to take responsibility, there is a much higher chance this will lead to an adversarial recovery process. of stopping, accounting for one’s actions, admitting a wrong and then hopefully learning not to repeat the same wrongs going forward. In some instances, an apology alone is enough for people to forget the wrong committed and then to carry on. In other situations, an apology is not sufficient redress and a remedy from the courts might be pursued, typically through tort actions such as a claim in negligence. Even when court actions are pursued, however, a plaintiff might not be as aggressive in seeking maximum damages if the defendant has admitted that he or she was in the wrong and proposes reasonable compensation for damages suffered by the plaintiff. In our current legal culture, based as it is on the determination of fault and the calculation of compensation, an apology can also be seen as an admission of liability.Therefore, the smart legal thing to do is to say nothing, admit no responsibility for the wrong and deny that any psychic or physical damages have been suffered. This inevitably leads to hard feelings, yet the courts are only equipped to compensate by awarding monetary damages. Courts cannot offer psychic healing other than ruling either for or against one of the party’s positions. So the following conundrum was presented: injured people are looking for an admission of fault and an apology so that there can be some psychological closure for a wrong act, but the legal system militated against people offering apologies. This problem was especially pernicious when the wrongs involved the death of a loved one, such as in the case of medical malpractice; someone was wrongly convicted on the basis of a false identification by a witness; or severe

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physical and psychological injuries resulted from sexual abuse in residential schools, to name but a few vexing examples. Apology legislation is a way of addressing this impasse. Apology legislation was first introduced in Canada in 2006, when British Colombia introduced the Apology Act. Saskatchewan followed shortly thereafter with its Evidence Amendment Act, 2007.This led to the Uniform Law Conference of Canada developing a Uniform Apology Act modeled on the B.C. and Saskatchewan legislation. Ontario used the Uniform Law Conference of Canada’s work as a model for its Apology Act, 2009. Manitoba also introduced similar legislation in 2008.

In the United States, about 30 states now have apology legislation in place, as do virtually all Australian states.The acts state an apology made by or on behalf of a person does not constitute an express or implied admission of fault or liability by the person in connection with a matter, and cannot be taken into account in any determination of fault or liability in connection with a matter. It also states that despite any other act or law, evidence of an apology is not admissible as evidence in any civil proceed-

ing, administrative proceeding or arbitration as evidence of fault or liability. This simple but effective legislation goes a long way toward allowing us to do the right thing, apologize for our wrongs without fear that the apology might be used subsequently as a battering ram to impose liability against the person making the apology.

AN INSURER’S PERSPECTIVE Irene Bianchi, RSA A large loss is an ordeal for everyone involved, especially the claimant. When a large loss is suffered, it’s always in the best interest of the organization responsible to step up and take accountability for getting people back on track. If taking accountability includes making an apology, this can only benefit all parties in terms of demonstrating good faith and intentions. When a company doesn’t act quickly enough to take responsibility, there is a much higher chance this will lead to an adversarial recovery process, usually involving litigation. Anyone who has been involved in litigation would agree it’s a process best avoided. It significantly hampers the speed at which people can start moving forward and rebuilding what was lost. Ironically, the perceived legal implications of making an apology are what can often lead to litigation. Apology legislation helps to allay these concerns by facilitating a corporation’s ability to do the right thing without fear of reprisal. It can help put everyone’s mind at ease in situations in which several parties within a company — i.e. the executives, communications and legal departments — can’t agree on a message or a course of action because of the potential backlash. Swift action is of essence in

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any crisis situation, so this legislation lets a company act quickly instead of getting bogged down (internally) in the ramifications of what is said or done in the process of trying to do right by the people affected. In the instance of an insurance claim, when a customer shares responsibility for an error or omission, it’s still our job to help them recover their loss. Insurers take this role seriously. Acting in the

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best interest of a customer should always be the priority. It may well be a reflection on the state of society that we need legislation in order to make it ‘okay’ to apologize. However, in my 25 years of experience, I’ve never seen an instance in which an apology has backfired on a company in terms of a disproportionate settlement related to a perceived ‘admission of guilt.’ Nonetheless, there is a peace-of-

mind element to the legislation that encourages all internal parties to focus on the claimant as a priority and less so on potential legal problems down the road. In fact, if an apology is not made or accountability not taken quickly enough, this can significantly affect the health of the organization. Failure to act quickly sends the wrong message to all stakeholders about the company’s integrity and corporate citizenship. Also, it creates a perception that the company is not able to stand by the quality of products or services that customers can

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64 Canadian Underwriter October 2011

and should expect. Ultimately, this can result in far more damage to financial and reputational health than the cost of settling a claim quickly, with ease, and outside of a courtroom. Apology legislation also helps to provide a sense of relief to brokers. It allows brokers to help their clients get back on their feet without worrying about repercussions related to an apology. Ultimately apology legislation helps everyone focus on doing their jobs; at the end of the day, that means putting the customer first. Each organization should feel free to use the language it deems appropriate in a given situation; if that means an apology, it should only help to make the process a little less painful. Hopefully, this legislation reassures companies that there’s no need to deliberate over how quickly to take accountability on a claim and makes it okay to say, ‘I’m sorry.’

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Simply is Best One mutual is charting a new course for P&I insurance by expanding coverage and turning a 45,000-word policy document into 2,000-word policy document. Rosemary Adams General Manager, Head of Underwriting, The Shipowners’ Club (Vancouver Branch)

Business managers and the public at large have long been confused by the length, complexity and endless exclusion clauses prevalent in many insurance policies. When it comes to specialist areas of cover, Protection and Indemnity (P&I) in the maritime world for example, even experienced generalist brokers can have difficulty deciphering the jargon that characterizes policy documents marine insurers produce. The challenge of comparing the terms of cover to arrive at considered advice on which represents the best value for their clients often results in headaches of migraine proportions. One marine insurer is attempting to ease the pain by dispelling the mystifying jargon, short-

66 Canadian Underwriter October 2011

ening the verbiage, minimizing the exclusions and simplifying the wording of its P&I cover.

MUTUALS AND THE TRADITIONAL APPROACH The Shipowners’ Club, a global P&I insurer with a branch office in Vancouver, is dedicated to the provision of such cover for small and specialist vessels. It has recently embarked on a business strategy of policy wording simplification. The strategy aims to introduce more extensive cover (with fewer exclusions) that is easier to comprehend.The initiative is being rolled out in a series of policies across a number of maritime vessel types that the Club insures. Traditional P&I clubs, including Shipowners, are constituted as mutuals. Owners and operators of smaller maritime vessels — such as fishing boats, ferries, tugs, passenger-carrying pleasure craft, harbour vessels, offshore supply boats and barges — commonly do not see P&I clubs as their natural providers of insurance. They are more used to dealing with commercial, forprofit insurers. In line with this habit, brokers

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also tend to turn to commercial insurers to service such owner/operator clients, often bundling other forms of risk with liability to obtain generalized cover. Sometimes the advantages of having a specialist P&I insurer are not appreciated, especially in the case of an insurer that is a mutual. Essentially a mutual is a community of its customers, who for good reason are known as ‘members.’ A governing board is comprised of operators with knowledge of the maritime industry and the interests of the ‘membership’ very much at heart. A management team pursues a tradition of service for which the Shipowners’ Club and fellow mutuals have been renowned since their foundation (Shipowners was founded in 1855). Consequently, mutuals display a fundamental emphasis on efficiently meeting all justified claims. More than that, a mutual insurer has every incentive to help its members cut their own costs and exposures by adopting the best risk management and loss prevention practices.

CHARTING A NEW COURSE While retaining the advantages of mutuality, Shipowners is departing from the traditional P&I club stance that treats all policyholders, or members, on pretty much identical terms — for example, by employing the same ‘club rules’ for all types of vessel and sizes of fleet. The Club’s new policy strategy is to strip away the numerous claims exclusions distributed throughout the 45,000word document known as the P&I Rules. The result will be a crisp, easy-to-read document in the order of only 2,000 words. Moreover, vessel owners no longer need to consult an insurance dictionary to ascertain the meaning of words well understood by those in the marine insurance market, but little known outside of the market. The aim, in the case of the yacht sector (and a goal that will be applied to other vessel sectors in the future), has been to produce an all risks policy under which the policyholder is insured

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for all liabilities arising out of owning or operating their yacht. The result is a clearer policy wording, specifically designed for the yacht market, containing far fewer words in an altogether less legalistic and easier-to-understand language. Although there are 43,000 fewer words in the new policy wording, wider cover for yachts is assured. Once more, the aim is to provide an all risk policy. The traditional approach, which the Club will still maintain for the very largest yachts over 6,000 GT (gross tonnes), is to categorize cover into 22 different sections. An omnibus rule acts as a safety net for those claim incidents that are not specifically mentioned in the policy. Shipowners’ new policy will

Shipowners has recently embarked on a business strategy of policy wording simplification. The strategy aims to introduce more extensive cover (with fewer exclusions) that is easier to comprehend. consider any marine liability incident within the policy period covered, on the face of it, unless the incident falls within a narrow band of common-sense exclusions. New features of the policy include automatic cover for periods on either side of buying or selling a yacht — the preand post-delivery periods. Previously owners were required to give advance notice of these occurrences. Additional risks covered include uninsured or underinsured boaters risks; primary war P&I and a more relaxed stance on cover for yachts while involved in racing. Cover for war risks is now available on a primary basis. Traditionally, yacht owners would have to find an insurer to cover them on a primary basis — that is, up to the insured value of the yacht — and then look for Protection and Indemnity top-up cover for claims that

may have exceeded that value. Now the cover will be seamless. One policy provides cover from the first claims dollar to the last. The new policy also sweeps away a complicated set of criteria previously in place for water sports liability cover. Now, as a result of providing cover for the water sports equipment carried by the yacht and belonging to the boat’s owner(s) and guests, there are no restrictions on owners and guests getting on the water to enjoy themselves.

ACCOUNTING FOR UNIQUE VESSEL FEATURES All cover is on a fixed premium basis, avoiding some of the misconceptions that P&I clubs spring nasty surprises with so-called supplementary calls. The yachts that Shipowners currently insure are all professionally crewed and are usually referred to as Luxury, Super, Mega or Giga Yachts. However, the new wording is also intended to appeal to non-professionally-crewed private pleasure yachts in Canada, should the Club decide to expand into this sector. Shipowners believe owners and operators in the yacht sector, more than any other, will benefit from the reduction in jargon within their policies. Of course, yachts are just the start. New policy wordings encapsulating the same principles of simplicity and comprehensiveness will soon be announced by Shipowners to cover other vessel sectors, such as fishing boats and passenger ferries. Each category of vessel, naturally, has unique operating characteristics. Just as these have been accounted for in the case of yachts, so, too, will they be accounted for in policies for other types of vessels. Owners and operators of the other types of craft will recognize in their new policy wordings a practical simplification of their policies regarding cover of risks common to their business, more sensible exclusions and less restrictions. For the Canadian market in particular, this policy is a big step forward.

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Belinda A. Bain Partner, Gowling Lafleur Henderson LLP

Erin Farrell Student-at-Law, Gowling Lafleur Henderson LLP

Municipalities have a legal duty to protect cyclists riding both on and off highways, but cyclists also have a responsibility to look after their own safety. Cycling is a billion-dollar industry in Canada. More than 65% of Toronto households have at least one bicycle.1 Unfortunately, as the number of people cycling increases, so too does the number of cycling-related accidents and injuries. As a result, civil claims against municipalities increase as well. What are the legal duties of municipalities towards cyclists on roads and on bicycle trails? And what responsibilities do cyclists have to take care of their own safety?

MUNICIPAL LIABILITY: BICYCLE ACCIDENTS ON MUNICIPAL HIGHWAYS A municipality has a statutory duty to maintain highways2 and bridges. In particular, Section 44 of the Municipal Act3 of Ontario provides that a

70 Canadian Underwriter October 2011

municipality with jurisdiction over a bridge or highway must keep it in a reasonable state of repair or else risk being held liable for damages caused by their negligence. A condition of nonrepair of a roadway can involve not only the surface of the road, but “any aspect of the road and its environs,” including the alignment of the road, obstacles on the side of the road and signage.4 The threshold elements necessary for a claimant to be successful in an action for damages in connection with a bicycle accident on a municipal highway include the state of disrepair of the highway5 and evidence that the non-repair of the highway was the cause of the accident.6 If these elements are met, the onus shifts to the municipality to establish that the condition of non-repair existed notwithstanding all reasonable efforts on the part of the municipality.7 The general standard of care that a municipality must meet in fulfilling its duty to keep a road in a state of proper repair is often cited as: “the road must be kept in such a reasonable state of repair that those requiring to use it may, exercising ordinary care, travel upon it with safety.”8 This liability can be reduced in connection

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Bike Accidents and Municipal Liability

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with the fault of another tortfeasor (wrongdoer)9 or because of the fault of the plaintiff10 under the Negligence Act.11 Liability can be defeated by showing the municipality took reasonable steps to prevent a default from arising12; that it met the current regulated standard at the time13; or that the municipality did not and could not reasonably have known about the state of repair of the highway or bridge.14 In the Ontario Court of Appeal decision of Shearn v. Burlington, a child cyclist accompanied by her father intentionally moved from the safety of the sidewalk onto the grass next to the sidewalk, into a cement abutment, and fell 12 feet into a creek bed.15 While noting that the parent was conscientious,16 the court found the accident was not the fault of the municipality, since nothing in the area would have posed a problem for an average cyclist exercising reasonable care.17 Instead, the accident was a result of the “unfortunate combination of an inexperienced and incompetent bicyclist doing something quite unforeseeable.”18

MUNICIPAL LIABILITY: BIKE ACCIDENTS OTHER THAN ON MUNICIPAL HIGHWAYS Parks The Occupiers Liability Act (OLA) governs municipal liability for accidents on property other than roadways or highways.19 Section 3 of the OLA sets out a general duty of care owed by an occupier of premises to others while they are on the premises. Reasonable care must be taken to ensure persons entering are safe from both the premises themselves and from activities carried out while there. Recreational Trails The duty of care described above is limited in the case of recreational trails. The OLA provides that persons entering such premises20 shall be deemed to have willingly assumed all risks. In these cases, the occupier only owes the person21 entering the trail a duty to not create a danger with the deliberate intent of doing them harm and to not act with reckless disregard of their presence. The 72 Canadian Underwriter October 2011

rationale and objective of these sections of the OLA is to encourage landowners to allow recreational use of marked trails on their land by imposing on them a lesser duty of care.23 This lesser duty might not apply in cases where a fee is paid for entry to the premises, or if the occupier is providing the person with a living accommodation.24 Accordingly, if a trail is marked as a recreational trail, it qualifies for the more limited duty under subsection

Liability can be defeated by showing the municipality took reasonable steps to prevent a default from arising, that it met the current regulated standard, or that it could not reasonably have known about the state of repair of the highway or bridge. 4(i) of the OLA. In these situations, trail users, including cyclists, will be deemed to willingly assume the risk of riding on the trail.The duty the municipality owes to such a user is “to not create a danger with the deliberate intent of doing harm or damage to the person or to his or her property, and to not act with reckless disregard of the person’s presence.” Courts have considered the meaning of “reckless disregard” under subsection 4(1) of the OLA. In the case of Cormack, the issue was whether, in all of the circumstances, a snowmobile driver had proven that a Township had acted “with reckless disregard of the presence of” the respondent snowmobiler

on its property25. In examining the relevant provisions of the OLA, the court found the legislature intended that there be liability only for the intentional acts or omissions of occupiers made in reckless disregard of the safety of snowmobilers on their premises.26 The court found that the phrase “act with reckless disregard” meant “doing or failing to do something which he or she should recognize as likely to cause damage or injury to the person present on his or her premises, and not caring whether such damage or injury results.”27 In the recent case of Herbert, the Ontario Superior Court of Justice looked at “reckless disregard” in the context of a bicycle accident on a recreational trail. The court adopted the definition of “reckless disregard” of an occupier from Cormack, and found it applicable in the context of a bicycle accident on a recreational trail.28 The Herbert case is currently under appeal with no date yet set for the hearing of the appeal.

CONTRIBUTORY NEGLIGENCE OF A PLAINTIFF CYCLIST Cycling by its very nature is a potentially dangerous activity, requiring physical control and good judgment on the part of the cyclist. The court in Herbert made the following observations regarding the inherently risky nature of cycling: “It can be assumed that a cyclist accepts that there are risks associated with a recreational trail; otherwise, he or she would not ride upon the trail. Those risks/challenges may very well be part of the charm or attraction associated with the trail. Riding a recreational trail may cause a cyclist to encounter: elevations and descents, curves and straight paths, different topography and different viewpoints or lack thereof (i.e.: blind spots).”29 In cases involving cyclists who do not exercise reasonable caution for their own safety, principles of contributory negligence are applicable to reduce damages to which a plaintiff might otherwise be entitled.30 Even devastating bicycle accidents commonly result in a significant amount of the responsibility

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Even if liability is found to attach to a municipality in connection with a bicycle accident, speeding and other acts of carelessness can significantly limit a plaintiff’s ultimate recovery. being borne by an injured plaintiff. For example, in Herbert, the plaintiff was an experienced cyclist who was rendered quadriplegic on a recreational trail when he moved to the side of the trail to avoid oncoming cyclists. The plaintiff was found 60% liable for his own injuries based on evidence that he was cycling too quickly, thereby diminishing his reaction time to both the presence of the oncoming cyclist and to a deteriorated edge of the trail.31 In Danco, a plaintiff’s front tire slid on a railway track, causing a serious wrist injury.32 Though the track did not conform to regulations, and the City of Thunder Bay was negligent by failing to warn the public of the known hazard, the Ontario Superior Court of Justice found the plaintiff exercised poor judgment and was thus 70% liable.33 The court wrote: “It appears that through inattention or poor judgment he [the plaintiff] failed to navigate the crossing safely. So, even though the defendant railway established the danger in the first place, and both defendants failed to warn the plaintiff of the danger, he [the plaintiff] must share a large part of the responsibility for the accident and ensuing damages, which could have been avoided. [Emphasis added.]” Similarly, in Kennedy, the court considered the issue of contributory negligence against an inexperienced cyclist who struck a bollard [a short vertical post] when not paying attention.34 The court, in deciding to apportion the degree of Mr. Kennedy's fault at 60% stated: “I am satisfied that Mr. Kennedy contributed to his own damages by failing to use reasonable care and take proper precautions for his own safety. I find that he was not paying sufficient attention as he rode along the pathway. [Emphasis added.]” Therefore, even if liability is found to attach to a municipality in connection

74 Canadian Underwriter October 2011

with a bicycle accident, speeding and other acts of carelessness can significantly limit a plaintiff’s ultimate recovery.

GENERAL BICYCLE SAFETY LEGISLATION Cyclists must comply with other requirements contained in various statutes. Under the Highway Traffic Act [HTA], the term “vehicle” includes a bicycle,35 which generally means cyclists must follow the same rules of the road as other vehicles. Regulation-compliant helmets are also required on roadways or sidewalks in Ontario36 for

those under 18 years of age.37 The helmet must be securely fastened under the chin.38 Parents have a responsibility to ensure their children under the age of 16 comply with the regulation.39 According to the HTA, bicycles must be equipped with a functioning “alarm bell, gong or horn” and sounded whenever it is reasonably necessary to alert pedestrians.40 Finally, there are also rules for cyclists about lighting and reflectors to ensure that they are visible to other vehicles in dark conditions. If biking on a highway when it is dark or 30 minutes from dusk or dawn, a cyclist must carry a lighted lamp displaying a white or amber light on its front and a red light or

a reflector on its rear.41 White reflectors must also be placed on a bicycle’s front forks, and red reflective material on the rear.42

CONCLUSION The above provides a brief summary of the duties owed by a municipality in connection with the use of its roadways and recreational trails by cyclists. Cyclists also have a duty to act reasonably at all times, in order to protect themselves and others from harm. It is hoped that if both sides live up to their respective obligations, the incidence of future injuries from bicycle accidents may be significantly reduced. 1 Dave Meslin, Rob Ford: Cycling advocate? (March 13, 2011) The Toronto Star online <http://www.thestar.com/opinion/article/952946--rob-ford-cycling-advocate> 2 A highway includes the entire municipal road allowance, and therefore in most cases will include municipal sidewalks.Municipal Act 2001, S.O. 2001 c. 25 s. 26 “MA”. 3 Municipal Act 2001, S.O. 2001 c. 25 4 Mero v. Regional Municipality of Waterloo, (1992) 7 O.R. (3d) 102 (C.A.).There are special exemptions to municipal liability for untraveled portions of highway MA s. 44(8).The section protects a municipality from liability for injuries arising from conditions of non-repair in locations where the public would not be expected to go. However, if inappropriate signage causes a party to involuntarily leave the travelled part of the roadway, this exemption does not apply. See Johnson (S.C.J.) at para. 76 affirmed (C.A.) “Johnson”. 5 Johnson (S.C.J.) at para. 76 affirmed (C.A.) at para. 33. 6 McCready v. County of Brant, [1939] S.C.R. 278 and McMaster v. York Regional Municipality (1987), 42 M.P.L.R. (2d) 90 (Ont. Gen. Div.). 7 Roycroft v. Kyte, [1999] O.J. No. 296; see also MA s. 44(3)(b).

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PDS Canada Head Office 416-299-8890

Ontario PDS of Brampton/ Guelph 905-796-6100 PDS of Brantford/ Woodstock 519-751-1900

PDS of Chatham-Kent 519-352-7700 PDS of Cornwall 613-936-1818 PDS of Durham 905-666-7744 PDS of Etobicoke 416-626-7371 PDS of Halton/ Hamilton-Wentworth 905-333-9288 PDS of Huron-Perth 519-482-7371 PDS of Kingston 613-531-7962 PDS of KitchenerWaterloo Inc. 519-570-0438 PDS of Lanark 613-253-7500 PDS of London 519-685-9595 PDS of Mississauga 905-270-3399 PDS of Muskoka 705-645-5745 PDS of Niagara/ Haldimand 905-892-3456 PDS of North Bay & Nipissing 705-494-1000 PDS of Northumberland & PE County 613-475-3338 PDS of Orillia 705-325-8003 PDS of Ottawa 613-822-2734 PDS of Owen Sound 519-376-8022

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76 Canadian Underwriter October 2011

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8 Housen v. Nikolaisen [2002] 2 S.C.R. 235, quoting the Saskatchewan Court of Appeal case of Partridge v. Rural Municipality of Langenburg [1929] 3 W.W.R. 555 (Sask. C.A). See for example Johnson (S.C.J.) at para. 78 affirmed (C.A.) at para. 35. A reasonable state of repair is a question of fact, depending upon all the surrounding circumstances. "[R]epair" is a relative term, and hence the facts in one case

afford no fixed rule by which to determine another case where the facts are different. 9 NA ss.1 and 2. 10 NA s. 3. 11 Negligence Act, R.S.O. 1990, c. N.1 (“NA”) 12 MA s. 44(3)(b). 13 MA s. 44(3)(c); Under MA s. 44(4) and (5) the Minister of Transportation may make specific or general regulations establishing minimum standards of repair for

PDS of Peterborough & Kawartha Lakes 705-799-7777 PDS of Renfrew County 613-732-2335 PDS of Sarnia/Lambton 519-336-2000 PDS of Sault Ste. Marie 705-949-9631 PDS of Simcoe County 705-458-8001 PDS of Sudbury Manitoulin 705-522-3312 PDS of Thunder Bay 807-344-7566 PDS of Timmins & the Claybelt 705-360-1124 PDS of Toronto 905-856-5737 PDS of Windsor & Essex County 519-776-4567 PDS of York Region 905-856-5737

British Columbia PDS of Greater Vancouver 604-501-9992

Alberta PDS of Calgary 403-293-2200 PDS of Edmonton 780-454-4047 PDS of Red Deer 403-342-4666 PDS of Grande Prairie 780-538-3300

Saskatchewan PDS of Saskatoon 306-374-7000

Manitoba PDS of Winnipeg 204-586-1684

Québec

SPD de Lanaudiere 450-932-3597 SPD Laurentides 450-226-8484 SPD de Laval Inc. 450-434-5858 SPD de L’Outaouais 819-772-4040 SPD Mauricie 418-365-5786 SPD Montreal (Est) 514-644-9955 SPD de Quebec Nord-Est 418-653-6666 SDP du Sud-Ouest 450-829-3700 SPD de Vaudreuil Solange 450-510-5559

Maritimes PDS of Cape Breton 902-567-3377 PDS of Cumberland/ Colchester 902-893-7260 PDS of Fredericton 506-457-9074 PDS of Halifax/ Dartmouth 902-481-0874 PDS of Moncton 506-382-8285 PDS of New Glasgow 902-695-3223 PDS of Northeast New Brunswick 506-826-3688 PDS of Northwest New Brunswick Tel: 506-473-4555 PDS of Saint John Tel: 506-633-1108 PDS of Eastern Newfoundland 709-747-2648 PDS of Western Newfoundland 709-686-0726

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highways and bridges; See also O. Reg. 239/02 (Minimum Maintenance Standards for Municipal Highways). 14 MA s. 44(3)(a) 15 Shearn v. City of Burlington, [1990] O.J. No. 2790 affirmed with little commentary at [1994] O.J. No. 3934 (C.A.). 16 Shearn at para 13. 17 Shearn at paras. 25 and 28. 18 Shearn at paras. 25 and 28. 19 Occupiers' Liability Act, R.S.O. 1990, c. O.2 (“OLA”). 20 Defined as "recreational trails reasonably marked by notice as such” as per the OLA s. 4(4)(f) and Herbert at para 14 21 OLA s. 4(1) also includes harm and damage to a person’s property. 22 OLAs. 4.1. 23 Schneider v. St. Clair Region Conservation Authority (2009), 97 O.R. (3d) 81 (C.A.) (“Schneider”) at para. 24 through 29. 24 OLA s. 4(3) 25 Cormack at para. 21. 26 Cormack at para. 27. 27 Cormack at para. 29. 28 ”What is being referenced is something beyond what can be assumed by all of us, as ordinary people know, something unusual, something inherently harmful or dangerous.…the failure of the occupier to address a known danger of this magnitude would constitute “reckless disregard”. Herbert at para. 26. 29 Herbert at paras. 20 to 22. 30 Herbert at para. 165. 31 Herbert at para. 172. 32 Danco v. Thunder Bay (City), [2000] O.J. No. 1208, 96 A.C.W.S. (3d) 334 (S.C.J.) affirmed in [2001] O.J. No. 3442 (C.A.). (“Danco”) 33 Danco at para. 24. The Railway and City were found jointly liable for 30% of the Plaintiff’s damages. 34 Kennedy v. London (City) [2009] O.J. No. 1040, 58 M.P.L.R. (4th) 244 (S.C.J.) (“Kennedy”) at para. 76-78. 35 Highway Traffic Act, R.S.O. 1990, C.H8 s. 1(1) (“HTA”). 36 h t t p : / / w w w. t o r o n t o . c a / c y c l i n g / safety/helmet/helmet_law.htm 37 R.R.O. 1990, Reg. 610 (Safety Helmets) s. 5. 38 HTA s. 104. (2.1) 39 HTA s.104(2.2) 40 HTA 105(7).

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Consolidation and

Technology How brokers can best determine where to place their portfolios.

Karl Greenlaw

CEO, Brovada Technologies Inc.

The markets with which a brokerage chooses to write over the next couple of years will quite possibly determine the sustainability and profitability of the brokerage. In the past, a brokerage chose markets based mainly on insurer rates and available coverage options. Today, other important factors must be considered that are equally or more important than insurers’ rates and available coverage options. The distribution of book to the insurers has always been a factor. But in a consolidating market, where to place a book has become a critical decision point. In deciding where to place a book, brokerages should consider the following questions. The answers to these questions will highlight potential areas of concern as the Canadian property and casualty insurance industry continues to evolve.

78 Canadian Underwriter October 2011

• Will the insurer be around in the next two to three years? If so, will they gobble up an existing market that is already heavily used within the brokerage? • How many more mergers will it take for the regulators to allow the banks to have unencumbered access to the insurance market? • Does an insurer have an equity stake within your brokerage, and what impact would that have if they controlled more of your book through consolidation? • Will these newly formed mega-insurers adjust their commissions? • Do the markets you write with have strong technology solutions that make working with them efficient? If not, are they committed to doing so? • Does the insurer to which you move support automated book transfers that minimize the impact on your staff? Many other considerations could likely be listed, but focusing on these questions should dramatically assist a brokerage in their decision as to where to place their business going forward.

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CONSOLIDATION IN CANADA The recent purchase of AXA Canada by Intact, the pending outcome of Economical’s demutualization and the constant rumors of other major insurers trying to tie the knot have brokers scrambling to find a safe haven for their respective books. Brokers rightly have concerns about the effects industry consolidation might have on their customers. A brokerage heavily marketed into a few large insurers is especially at risk to turmoil once a merger occurs. The merger of Intact and AXA Canada meant many brokers had a very substantial book with one very large insurer. Brokerages need to properly diversify their portfolio to minimize the impact of these mergers. For books disrupted by a merger, a brokerage may choose to allow the transfer if their overall book is still well diversified. Brokers will want to maintain a portion of their books with these newly formed mega-insurers as a good strategy of diversification. However, if over-exposure to one market requires a book transfer, the brokerage should determine the likelihood of the target market to become a part of a merger itself. A high likelihood exists that many of the Top 10 P&C insurers in Canada will become active participants in mergers and acquisitions activity simply to better compete with the new mega-insurer Intact has formed. At minimum, all would entertain an acquisition. But as the saying goes, ‘everyone has their price.’ And when you throw the prospects of demutualization into the mix, “everyone” does mean everyone. The Tier 2 insurers make great acquisitions, since they provide Tier 1 insurers with quick growth revenue and greater access to specialty and commercial lines. Mutuals — more specifically, the provincially regulated mutuals — for the most part provide a very safe location for a book, since it is not as easy for them to be acquired. Other low risks include insurers that are part of a larger organization specifically within the insurance industry. Publicly traded companies, international insurers specifi-

80 Canadian Underwriter October 2011

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cally, face substantial pressure to retain their market position relative to their competitors.

TECHNOLOGY IMPLICATIONS OF CONSOLIDATION Insurers supporting technology that allows once-and-done connectivity will maximize productivity for the brokerage and should be considered when placing books. Several insurers have implemented these types of solutions, such as Dominion, Pembridge and Grenville Mutual. What sets these companies’ implementation apart from the others is the ability of brokers to work almost exclusively within their respective broker management systems. Unlike traditional portals, they do not have extensive pages to navigate or require information to be rekeyed. Some insurers have implemented upload functionality into their existing portals.This also provides efficiencies to the brokerages using them. In addition, insurers benefit greatly from supplying

If over-exposure to one market requires a book transfer, the brokerage should determine the likelihood of the target market to become a part of a merger itself. these solutions, since their costs are minimized internally. A recent Brovada survey showed that, assuming equally competitive rates between insurers, the vast majority of brokerages would move more business to an insurer that supported once-and-done solutions. Grenville’s move into a once-and-done solution is timely. First, it will be positioned with the best upload technology in the marketplace. Second, because Grenville is at low risk of being acquired, brokerages may view them as a safe location to which to move their books. Other mutuals, such as Lambton Mutual, have also realized this opportunity and are following suit. Many mutuals share a common, very modern policy administration system that makes

implementations consistent and very functional. Another key factor is whether or not the insurer taking on a brokerage’s prospective book supports automated book transfers. A manual keying effort to place books can have a large impact on the brokerage and is fraught with errors. Several of the larger insurers support an automated transfer solution that eliminates the rekeying effort. Brokers should request this as a prerequisite to moving books. Insurers implementing a new policy administration system can easily be distracted from providing connectivity solutions such as once-and-done; this should be a concern for brokerages determining new markets. Most of these implementations take five or more years to complete, which can add to the problems of doing business with these insurers. Many insurers realize the disruption that policy administration system implementations can cause; they address it by implementing improved connectivity in parallel. Brokers should feel justified in requesting this kind of information before moving book to an insurer. The potential reduction of commissions resulting from mega-mergers is a real concern for brokerages. In countries such as the United States and the United Kingdom, brokerages have seen commissions reduced under the similar circumstances. Smaller insurers (such as mutuals, for example) will be less likely to reduce commissions. And regional insurers do not wish to reduce commissions.Their solid underwriting position is based on their superior understanding of the local marketplace. As the industry continues to consolidate, brokers and insurers will have opportunities to position themselves to capitalize on a competitive advantage. The key to success will be in picking the right markets that provide stability and efficiency for the longest amount of time possible. Brokerages ignoring these concerns will find themselves regularly moving books at a great expense, both internally and externally, with the risk of a customer shopping elsewhere.

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Putting the Person Back Into the Injury Insurance industry organizations have collaborated to create a new training program intended to help adjusters better handle serious injury claims. Vanessa Mariga Associate Editor

As Ontario sharpens its focus on auto injury claims, the job has become increasingly complex for the adjuster. For the first time, industry organizations are partnering to develop and deliver training that will allow the adjuster to handle serious injury claims better. Over the years, experts contend, the adjusters’ job became that of a “box checker.” Mired in forms and paperwork, it became easier for the adjuster to lose sight of the person who had the injury — an approach that does not always facilitate the best possible path to healing.

GAPS IN TRAINING The Financial Services Commission of Ontario (FSCO) identified this gap during its recent review of Ontario’s auto insurance legislation and recommended improved adjuster training. In response to the recommendation, Ontario Independent Adjusters’ Association (OIAA) partnered with the Insurance Institute of Canada (IIC) to develop ‘Understanding Serious Injury Adjuster Training and Education.’ Over the course of its most recent five-year review of Ontario’s auto insurance scheme, FSCO made a series of recommendations to the On-

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tario Ministry of Finance in early 2009. The province announced in November 2009 that it would adopt several of the recommendations as part of its auto insurance reform package, introduced in September 2010. Among them, it adopted Recommendation 35, which suggested adjusters should be better trained to deal with serious injuries. Recommendation 35 read: “Insurance claims departments need to better focus on the needs of claimants with serious injuries. The IBC [Insurance Bureau of Canada], Insurance Institute of Ontario and the Ontario Insurance Adjusters Association should work together to train adjusters on the needs of claimants with serious injuries to reduce exposure to potential allegations of unfair and deceptive acts or practices.” Tammie Norn, president of Proformance Adjusting Solutions and second vice president of the Ontario Independent Adjusters’ Association, contacted FSCO to ask why the recommendation was made. “At that point, FSCO advised there was some feedback from the health care industry with regard to adjuster training on serious injuries,” Norn says. “[The health care providers] had mentioned they were seeing some not-so-great

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arbitration decisions coming out of FSCO, and some of those had to do with not-so-great adjusting or adjuster knowledge on the serious injury side.” The OIAA formed a strategic committee and surveyed its membership to identify perceived gaps in the current training offerings. “We surveyed the membership,” Norn said. “And the membership said: ‘Yes, we believe in training. We see a need for this type of

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[serious injury] training. And yes, we would love to send our adjusters to something like this.’”

INDUSTRY COLLABORATION OIAA then met with the IIC and IBC to see how the three groups might collaborate to develop and deliver such training. “We had two meetings with the IBC,” Norn says. “From their view, they would support any training of their member-

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ship (the insurance companies), but they’re not an entity that provides the actual training.” The IIC is well known for its specialty in training people in the insurance industry, Norn says. “They have the facilities, the resources and the manpower to develop and deliver the training product.” The OIAA, on the other hand, has the expertise and knowledge base to help identify needs and help create content. “Then we leverage the IIC to deliver that product,” Norn says. “It’s a great partnership.” The difference between this training program and courses currently offered is that the serious injury training will focus more on the injury and the person rather than on the nuts and bolts of the regulations. “It’s not about the Statutory Accident Benefits Schedule, it’s not about accident benefits and it’s not about bodily injury,” Norn says. “It’s about how an injury affects a person and how the different characteristics of a person might affect healing and recovery.” Norn says the serious injury training program is intended to augment the “amazing job of training” insurance companies already do. But the training insurers provide tends to be about the different forms involved in an assessment, and what to do with the forms when adjusters get them. “This [serious injury] training is focusing on how that form might be affected by the person and the psycho-social factors around them,” Norn says. “The course material is much deeper and a reflection of reallife and the different circumstances each injured person may face.”

The training intends to modify the way an adjuster views the claim and injury, by expanding the perspective to include not just the physical ailment, but what external forces may affect the healing of that ailment. Dawna Matton, senior director for Ontario at the IIC, says the program will consist of five modules. Each will be two days in length and they will be spread out over the course of 10 weeks. “Setting it up this way provides the opportunity for participants to have two days of learning, and five days of think-

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ing before moving onto the next module,” Matton says. A facilitator will lead participants through each module. Each module will also have a subject matter expert and possibly a guest speaker specializing in that specific area. The five modules will cover the following topics: • Getting to Know the Injury: Medicine for the Non-Medical. This module focuses on skeletons, muscles and anatomy to give a foundation for the program. • The Person Behind the Injury: Sociological and Psychological Impacts. • Other Contributors: Community Resources. “Local community services, occupational therapists and vocational specialists can have a positive impact on injury healing,” says Matton. This module is designed to teach adjusters the resources available to them and how they might leverage them. • Understanding the Opportunities for the Future, Managing Expectations. “This focuses on the difference between acute and

chronic injuries, and how the adjuster might do some planning for post-injury and treatment,” Matton says. “So when the injury is healed, what happens? Some people are rehabbed, and some

The difference between this training program and courses currently offered is that the serious injury training will focus more on the injury and the person rather than on the nuts and bolts of the regulations. will never heal completely, and that’s huge in terms of healing and the adjustment of the claim.” • Applying the Tools: Case Study and Group Work. The fifth module is key, Matton says. Participants will use all of the knowledge gained in the first four modules to work through a case study.The approach is practical, rather than theoretical, Norn says.

“Participants will have a case presented to them, and they’ll work through it in groups,” Matton says. “As the two days unfold, more information will be added to the case — an additional piece of information, a new development in the injury — in the same way a real claim would unfold. Using what they learned, they will go through and have some lively discussion about the best way to handle it.” The pilot program is targeted for late 2011. With a maximum of 40 participants, the course is structured so that if it is successful, the framework can be applied and tailored to other jurisdictions in Canada. Although the program is not a part of a designation or certification program, participants will receive a certificate upon completion. Norn adds the committee developing the program has updated FSCO on their progress, and accreditation is not out of the question. More information is available at www.insuranceinstitute.ca/seriousinjury.

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to 7.7% in 2011 — a far cry from the -11.7% experienced in 2009 at the height of the recession.

DIVERSIFICATION OF RISKS Globalization faces constant challenges and occasional setbacks, but the overall trend to more diverse international trade continues. The strength of emerging markets in Brazil, India, China and many Association of Southeast Asian Nations (ASEAN) countries represents an important shift in trade patterns for industrialized countries. Unlike many of the developed nations, emerging markets have enjoyed several years of trade-led prosperity, trade surpluses and accumulating foreign exchange reserves. Today, the United States, China and the United Kingdom are the three main destinations for Canada’s exports, according to Statistics Canada. Although the value of Canada’s exports to all three countries increased over the past decade, the share of exports to the United States fell. During the same period, the other two countries’ share tripled, with China recently becoming our second-largest trading partner. It’s clear that many Canadian firms are eager to expand beyond North America. For brokers, these clients face a world of risk when it comes to property and liability exposures. But many don’t realize the varied and of-

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ten intricate compliance and insurance regulations that exist in local jurisdictions. In fact, rules continue to change in critical areas such as admitted versus non-admitted insurance, domestic reinsurance branch obligations, tax exposures and premium payments. Common obstacles need to be identified and addressed with the help of an informed, trusted insurance partner.

LOCALIZING THE GLOBAL As the scope of international trade widens, so too does the number of insurable risks in new jurisdictions, each with their own unique local requirements. Regulators in those countries are responding, often with more stringent insurance rules for foreign-based companies.With the increase in global trade, governments are closely monitoring their insurance laws and invoking protectionist measures to either capture revenue or exert more control over local transactions. For example, Argentina announced new rules effective Sept. 1 requiring foreign reinsurers to open an Argentine branch or otherwise be barred from transacting business. Under the new regulations, local insurers will be prohibited from ceding risks to any reinsurer that has not made itself subject to Argentina’s regulatory authority (Resolution 35.615/2011). Members of the insurance community have pointed out that more than 90% of risks in the Argentine market are now reinsured abroad, leaving the domestic market with limited capacity to meet this increased requirement. Another concern is that more South American countries will adopt Argentina’s position on local reinsurance branches. In other instances, regulators are carefully scrutinizing insurance transactions and activities, particularly regarding non-admitted insurance (coverage of a risk located in a country where the insurer is not licensed). Whereas many jurisdictions such as Canada, the United Kingdom and Australia permit local residents to purchase insurance from foreign-based insurers (under certain rules), other countries like Argentina,

88 Canadian Underwriter October 2011

Brazil, China, France, India, Italy and Mexico do not allow residents to buy coverage from a non-admitted carrier. Penalties for infractions can be harsh. In Mexico, a prohibition on entering into an insurance contract with an unauthorized foreign insurer constitutes a criminal offence, with the potential for substantial fines and imprisonment of up to 10 years. In China, Canada’s second-largest trading partner, local regulators often require payment of premium before coverage is provided, known as “cash before cover.” Depending on the province or municipality, the Chinese Insurance Regulatory Commission (CIRC) may require that a policy cannot

be incepted until the insurer receives the premium payment. CIRC is also more heavily policing legislation for foreign-based insurers and may decide to inspect the local broker’s office to audit files for reference to non-admitted policies. Chinese tax audits can be very rigorous; any large non-admitted claim payment could become liable to local tax regimes. More countries are clamping down on non-admitted insurance, with stringent fines and penalties — often up to $100,000 or a multiple of premium — and even license suspensions. One recent example of regulatory enforcement occurred in Switzerland. An insurance broker there purchased a statutory professional indemnity from a non-admitted foreign insurer. The Swiss Federal Office of Private Insurance considered the contract void and denied the broker’s licence due to the violation. Brokers and their clients must be cognizant that insurance rules and regula-

tions vary greatly from jurisdiction to jurisdiction. Fines and penalties for noncompliance can be costly and damaging for insureds, brokers and insurers. The Canadian insurance market has no choice but to increase awareness of compliance issues around the globe to properly protect clients. This underlines the importance of having the right kind of knowledge, programs and partners in place.

MITIGATING RISKS OF GLOBAL INSURANCE For most global insurance programs, there is no one perfect solution. Coverage options must be tailored to the risks that an individual company encounters in the markets in which it chooses to do business. However, brokers should actively look for key elements in a truly international insurance package policy. The first is that a DIC/DIL (difference in conditions/difference in limits) policy should be able to cover the gaps created through local coverage requirements. A global insurance solution should allow claims to be brought and settled anywhere in the world. It should also provide a policy in each of the countries in the language and customs of that country, supported by an English language master policy. The level of knowledge and experience of the insurance carrier is one intangible factor in choosing the right market for international clients. How often does the company provide updated intelligence on changing foreign market conditions? What is the global reach of the insurer? Does it provide coverage in 130 countries around the world, with access to local underwriting expertise? Does a master global insurance policy accommodate any existing gaps in coverage due to local policy language and nuances? Prudent brokers should expect solid and immediate answers to these questions for their expanding global clientele. The key issue is knowledge. Armed with sound insurance advice, a solid insurance partner and keen awareness of local market conditions, brokers should be confident in helping their clients achieve success on the global stage.

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Identity theft and fraud are a growing problem for Canadian consumers. Businesses can secure customer information by following basic tips and protect themselves with data breach coverage. You’ve probably heard about the identity fraud epidemic in the United States. Unfortunately, this problem isn’t limited to our neighbours to the south.The number of Canadians falling prey to identity fraud is on the rise. In fact, over the past three years, the number of reported identity-related crimes in Canada has skyrocketed by 32% for a loss of $9.4 billion in 2010, according to the Canadian Anti-Fraud Centre’s Annual Report. The numbers are likely higher because a large number of these crimes go undiscovered or unreported. Indeed, the problem prompted this comment from the head of the criminal analysis unit for the Royal Canadian Mounted Police: “Identity

90 Canadian Underwriter October 2011

theft is now probably the most important problem for Canadian consumers.” So what exactly are identity theft and identity fraud? The terms are interchangeable in the United States, but they hold different meanings in Canada. The Department of Justice Canada defines them as:

Identity theft The preliminary steps of collecting, possessing, and trafficking in identity information for the purpose of eventual use in crimes such as personation, fraud or misuse of debit card or credit card data. Identity fraud The subsequent, actual deceptive use of the identity information of another person in connection with various crimes. Identity theft therefore takes place in advance of and in preparation for identity fraud. Although the crimes are better defined in Canada, the methods used to commit them are

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similar in all common law countries — including the United States, the United Kingdom, Australia and New Zealand — because they have similar consumer credit systems. The U.S. consumer credit system evolved to require authenticators for privacy and security purposes, since more than one person might have the same name and birthday. The primary authenticator needed to be something unique to each citizen.The Social Security number (SSN), issued to each citizen by the Social Security Administration, became that identifier. In Canada, the primary authenticator is the Social Insurance number (SIN). Reliance on the SIN parallels use of the SSN in the United States and, to a lesser degree, the use of the National Insurance Number in the United Kingdom and its equivalent in Australia and New Zealand.

Over the past three years, the number of reported identityrelated crimes in Canada has skyrocketed by 32% for a loss of $9.4 billion in 2010. Combine these government-issued national identifiers with centralized credit reporting bureaus, and you have a perfect recipe for a high percentage of identity fraud in these countries. Criminals hold the key to our social and financial identities because they can gain access to our personal information through government agencies and businesses.

IDENTITY FRAUD AT THE BUSINESS LEVEL Businesses of all types keep our personal information on file, often unpro-

tected and easily accessed by criminals. Large-scale data breaches exposing consumers’ personal and financial information are becoming a weekly occurrence worldwide. Canada isn’t isolated from this trend. Recent breaches here underscore how vulnerable Canadians’ information can be. Honda Canada’s breach exposed the names, addresses and vehicle identification numbers of more than 280,000 Canadians who had created personal accounts on MyHonda and MyAcura Web sites. Statistics Canada, the nation’s largest statistical agency, experienced a number of breaches over the past five years that have exposed citizens’ personal information. But the agency did not publicly report the breaches. Liability for failure to act by Canadian entities is affecting the cost of doing business. A lost USB drive containing H1N1 vaccination records has led to a

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$40-million class action lawsuit. The suit, filed on behalf of 80,000 Canadians, was given the right to proceed by Ontario Superior Court Justice Peter Lauwers in April. It alleges a breach of a fiduciary duty, violation of privacy and breach of the Canadian Charter of Rights and Freedoms by the regional health department of Durham Region, Ontario — all because a nurse lost the USB drive in a parking lot.

RISKS FOR BROKERS Regardless of the business size or industry sector, some level of potential liability always exists for data breaches that expose personal information. Even a small business that only sells products B2B and never touches the consumer could still experience a situation that affects the personal information of its employees. Certain industry sectors, however, are particularly vulnerable to data breach incidents. Education, medicine, financial services and insurance areas tend to be among the highest risk for consumers. This is due to a number of factors ranging from the amount and type of data collected, to the amount of access and security available. But every business that takes in personal information, including bank, debit, credit and account information, has a risk. For insurance agents and brokers, the risks are based on the nature of their job. Many brokers meet with clients outside of the office, and thus they rely increasingly on smart phones, tablets and laptops to gather their customers’ personal information for homeowners, auto and life insurance applications. But alongside the convenience of using these technologies comes the duty to protect data on these devices using passwords and encryption. That way, if a device is lost or stolen, the privacy of hundreds or even thousands of people isn’t jeopardized. Brokers also face low-tech risks of creating data exposures when they improperly dispose of paper records.These documents can contain various forms of

92 Canadian Underwriter October 2011

personal information. Life insurance policies hold personal medical information. Auto insurance policies list driver’s license numbers, and credit card/banking numbers. When they’re left next to a dumpster, they’re a treasure trove of information for thieves. It’s not all gloom and doom. Brokers can protect themselves and their clients from unnecessary data exposures by following these basic, affordable practices: • Make sure employees have a unique login and password.Teach them to avoid sharing credentials or using those of a coworker’s. • Develop a policy and procedure for the retention and destruction of paper and electronic information. This will help to eliminate records that are no

Many brokers meet with clients outside of the office, and thus they rely increasingly on smart phones, tablets and laptops to gather their customers’ information. Alongside the convenience of using these technologies comes the duty to protect data on these devices using passwords and encryption. longer needed and to avoid unnecessary exposures. • Use firewalls to protect networks and keep updated anti-virus and anti-spyware software on computer systems. • Encrypt sensitive files. The newest versions of Microsoft Office and Adobe Acrobat applications have builtin encryption features. • Enable proper security and encryption settings when using wireless networks to prevent others from gaining access to your wireless network or computer. • Protect smart phones by enabling the password function and setting up a remote wipe feature. If your phone is lost or stolen you can erase content by sending a remote signal.

HOPE FOR THE BEST, PLAN FOR THE WORST The biggest challenge to information security is that it only takes a small lapse in judgment by one person to cause a data exposure.When that happens, what do you do next? Be proactive about your response to a data security incident. Make sure you have a plan in place before something occurs. Create an internal team responsible for developing and administering an incident response plan. This team should be empowered to make executive-level decisions should an event occur. In a small business setting, the team may consist solely of the owner. Thoughtful incident response plans identify experts who will deal with the situation. These experts should include legal counsel, data risk management experts and fraud remediation specialists. Smaller companies should vet these experts in advance so they know whom to approach in a crisis. For larger operations, it pays to have these experts on retainer so they can be consulted immediately following a situation. Also, it’s worthwhile to maintain outside regulatory contacts, including the company’s provincial privacy commissioner and insurance provider. When planning, it’s important to have in place proper risk-shifting strategies, such as data breach insurance. Data breach insurance is an emerging offering tied to cyber-insurance policies. It’s also increasingly common as an add-on to existing commercial policies or available as mono-line policies in the United States because of the costly notification requirements. In the United States, businesses and government agencies are required to provide written notification of a data breach exposing unencrypted information to all affected individuals. The United States is currently the only country with this requirement, at least for now. But that doesn’t mean consumer notification in Canada isn’t a good idea, or that it isn’t on the horizon.1 This is why having the right insurance coverage in place to cover these costs is important.

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INSURANCE COVERAGE FOR DATA BREACHES There are two types of data breach coverages: First-party coverages typically cover costs involved in providing for notice, administrative handling and consulting of the breach, and the provision of fraud detection tools such as credit monitoring and fraud remediation services for any affected individuals.They may often also include limited coverage for brief legal consultation on the handling of the breach itself. (No defensive costs.) The most robust of these first-party coverages also provides for data breach consulting services for all incidents regardless of whether or not a claim accrues. Third-party coverages cover liability from the perspective of those affected. In other words, they will often cover legal costs to defend civil actions as well as government or regulatory actions. Emerging coverages might cover the costs of related fines, penalties or civil

judgments associated with a data breach incident or identity fraud victims. The evolution of both first- and thirdparty coverages is on a fast track in both the United States and Canada. Both are becoming increasingly available by Canadian insurers for purchase by Canadian commercial entities and businesses.

The evolution of both first- and third-party coverages for data breaches is on a fast track in both the United States and Canada. SO WHAT DOES IT ALL MEAN? Today, information is a commodity businesses and government use to serve Canadians in a myriad of positive ways. However, it is also misused by criminals to commit identity fraud. Thatâ&#x20AC;&#x2122;s why it is so important for both business and government entities to plan for what

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Private Eyes, Public Web sites The explosion of social networking sites has resulted in an infinite amount of information available online, but claims analysts using this information must always keep Charles Déragon relevance in mind. Director, Disability Claims, Group Reinsurance, RGA Reinsurance

It seems everyone is interested in or at least has heard of Facebook, Twitter, Myspace and other social networking sites. Undoubtedly, they are becoming increasingly popular and bringing people closer together.These new networks provide an abundance of possibilities to keep “friends” (real or virtual) informed of our daily status, our activities and even our whereabouts should we choose to do so.This level of sharing has led to the creation of an electronic evidence trail of a user’s thoughts and activities, including photos as created and recorded by the user. Insurance companies have caught on to this trend.They are starting to surf the Web to gather information about claimants as part of the claim adjudication process.The explosion of electronic social networking sites has resulted in an infinite

94 Canadian Underwriter October 2011

amount of information available online. Insurance professionals are increasingly discovering the value of social media for uncovering relevant information about their claimants. Canadian courts have in most cases ruled in favour of the insurer with respect to accessing and presenting information found on social networks to be used against the plaintiff. From these decisions, we can interpret that information on the Web is public and can be used as evidence. There is nothing unethical about an insurance company representative or investigator accessing a claimant’s information on a social networking site not protected with privacy settings. ‘Virtual surveillance’ of a claimant’s public information is no different from video surveillance in any public location.

PROACTIVE CASE MANAGEMENT These new online resources, when employed appropriately and diligently, can help claims analysts compile a “complete” picture of a claim and make timely and accurate decisions. Searching the Web for information should be a key part of a sound proactive case management practice. However, insurance companies need to be strategic when determining how and when to use this

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information. Insurers should not adopt an approach in which each claimant is the subject of a Web-based search. Claims analysts should use Web-based searches appropriately, just like they would use any other tools at their disposal. If warranted, analysts and investigators should search for profile information on search engines such as Google or 123people.com. Search results using 123people.com are presented in a structured way for optimal use.They include results from traditional search engines as well as pictures, videos, email addresses and phone numbers. In addition, you will find social network profiles, blog entries, relevant documents, instant messenger IDs, news and Amazon results. Notable websites are Facebook, Myspace, Flicker, LinkedIn, Blogger, YouTube and Twitter. Foursquare (update on user’s location) and Blippy (what users have purchased) are also good.

BE STRATEGIC Before considering an Internet search on a claimant, the analyst should ask himself the following questions: • What information do I already have on file? • Is this enough to render a decision? • What are the incongruities? Red flags? • What is the chronology of events in the file? • What information seems to be missing or not making sense? If a search is necessary, the analyst should then take a strategic approach to determine: • What sites should be viewed? • What information are we looking for? What are we trying to prove? • The type and relevance of the information available. • The reliability and/or quality of the information.

UNDERSTANDING SOCIAL MEDIA RESOURCES An analyst needs to understand the various media sources and their applications to improve his or her investigation. A Web site is different from a blog or a social media site. Each has its own purpose and “clients.” For example,

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LinkedIn is more suited for a business environment than Facebook. Professionals use LinkedIn for networking and sharing expertise, while Facebook can be used by the masses and allows for more personal interactions.These differences change the way searches are conducted and the type of information gathered. LinkedIn will be better suited for vocational information, while Facebook may reveal the claimant’s personal information.

TIPS FOR A SUCCESSFUL INVESTIGATION • Web searches should be done sooner rather than later, especially if you think a case might go to legal. Plaintiff’s lawyers are well aware of insurance companies searching the Internet; they are advising clients to restrict access to personal information and to be cautious about what they post. • Usually Web sites are static, whereas people are constantly updating their blogs and social media profiles. Infor-

‘Virtual surveillance’ should be only one among many tools a claims analyst has in his or her tool kit. It should not be the only tool. mation found one day can be deleted the next. If relevant information is discovered, the site needs to be visited regularly and the information saved. Clear copies should be downloaded, printed, dated and filed.Always copy the url address. • Analysts need to ask themselves if the results of the search are relevant to the case. • Analysts should also try to confirm the validity of the information with other objective methods. • Analysts unsure about the relevance of information or the process for obtaining such information should refer the case to their in-house legal counsel for guidance.

VALUABLE TOOL, BUT NOT A MEANS TO THE END Claims analysts should be careful with the information obtained on the Web. Often when a search gets a positive

“hit,” there is a tendency to give that information more weight than appropriate. Analysts should always stay focused on the relevance of the information. Apparent inconsistencies observed through photos or comments obtained on the Web should not be taken at face value. Rather, they should be assessed against the claimant’s reported limitations. Obtaining a picture of a claimant dancing, running or playing golf — or comments that he or she is going to a party on a given night — does not necessarily mean they are not disabled. One has to make sure of: • when the pictures or comments were produced; • in what context the pictures or comments were produced; • where the information stands in time when compared to the chronology of events; and • is the information relevant to the actual claim? As in video surveillance, “virtual surveillance” should be only one among many tools the claims analyst has in his or her tool kit. It should not be the only tool. Presenting in excess of 200 pictures without any context will not win you a case. Some insurance companies are establishing private accounts on social networks to better search for claimant information or pictures that might damage a claimant’s credibility. Insurance representatives and private investigators hired by these companies should be aware that courts have forewarned to avoid the practice of creating a social Web site profile for the sole purpose of trying to access information in order to ambush a plaintiff. Companies should consider creating guidelines for Web searches, clarifying who should have access to the Web and social networking sites. In addition, the guidelines should outline the internal process for signoff on authorizing these searches. In the end, it all boils down to good common sense. A balanced approach throughout the investigative process and sound use of available tools are key.

congratulations to CAIW Award winners.

Insurance Information Campaign Award Sponsored by Aviva Canada Winner: Nova Scotia Insurance Women’s Association Essay Contest Award Sponsored by Wawanesa Mutual Insurance Company Winner: Shirley MacKenzie, Manitoba Association of Insurance Professionals Public Speaking Contest Award Sponsored by Intact Insurance Company Winner: Nicholas Homiak, Toronto Insurance Women’s Association Travelers Education Award sponsored by Travelers Canada; Split into three Territories – winners as follows: Western: Edmonton Insurance Association Central: Manitoba Association of Insurance Professionals Eastern: Montreal Association of Insurance Women Cowan Insurance Group Award Sponsored by Cowan Insurance Group Winner: The Manitoba Association of Insurance Professionals Insurance Woman of the Year Award Sponsored by Canadian Association of Insurance Women Winner: Deborah MacDougall, Nova Scotia Association of Insurance Women

The Canadian Association of Insurance Women (CAIW) would like to thank all of the sponsors, donors and participants of our 2011 AGM and Convention held May 25 to May 29, 2011 in Montreal; our event’s success is only possible through your sponsorship! THANK YOU Assurance Chubb Aviva Axa BI&I CEP Forensic Engineering Inc. Chambre De L’Assurance De Dommages Claimspro Discount Donati Maisonneuve Lawyers Elliott Risques Speciaux Gp Inc Enterprise Essor Assurances First General Services Garceau Pasquin Viens Gilbert Simard Tremblay Group Miro Impact Auto

Insurance Professionals of Calgary Insurance Women’s Association of Western Manitoba Intact Assurance Jevco L’Association Des Femmes D’Assurance De Montreal L’Union Canadienne Lapointe Rosenstein Marchand Melancon Lavery Droit – Affaires pg56,57Technology_v1_VM 9/12/07 10:55 London Insurance Professionals Association Manitoba Association of Insurance Professionals Marsh Montreal Association of Insurance Women Nova Scotia Insurance Women’s Association Optimum societe d’assurance inc Pafco

The 2011 - 2012 CAIW Executive and Directors

Philippe Loyer et assoies Portage Mutual Insurance Premiere Generale RefRefexio Disaster Kleenup RSA Sherlock Stein Monast LLP Attorneys Swiss Re The Dominion The Guarantee Company of North America Page 57 Toronto Insurance Women’s Association Travelers Trisura pg56,57Technology_v1_VM 9/12/07 10:55 PM Page 57 Une societe de Markel International Zurich Please accept our sincere apologies for any missed sponsor in our acknowledgement list. The generosity and support of all our sponsors is greatly appreciated.

Front Row L to R: Tracy Fata, BSc, FCIP, CRM - Secretary Gloria Balls, CIP - Past President Lori Duclos, FCIP, CRM - President Jody L. McMillan, CIP - First Vice-President Laura Greening, BA, CIP - Second Vice-President Back Row L to R: Sheila Slowe, CAIB Cheryl Morton, CAIB, CIP Judy Sampson, CIP Lynn Kelly, CIP - Treasurer Panagiota Kalantzis, Attorney Missing from photo: Mary Hooper, CAIB, CIP Brenda Miller, CAIB, CIP

We look forward to seeing you June 6 - 10, 2012 in Edmonton, Alberta

www.caiw-acfa.com

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Serious

But Stable Condition

A.M. Best Company's 2011 Insurance Market Briefing-Canada

Vanessa Mariga Associate Editor

David Gambrill Editor

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A.M. Best assigns a stable outlook to the Canadian P&C industry, noting an improvement in Ontario auto results, but several challenges remain. Meanwhile, as a result of Solvency II, the global reinsurance sector may see some M&A activity. A boost in Ontario’s personal accident results and a discussion of how Solvency II might be a motive for mergers and acquisitions activity in Canada figured among many topics raised at the A.M. Best Company’s 2011 Insurance Market Briefing-Canada. The briefing was held in Toronto on Sept. 8. Two property and casualty insurance seminars were scheduled. One covered off Canada’s primary insurance market, while the other addressed trends in the reinsurance market.

98 Canadian Underwriter October 2011

In the panel discussion on the primary market, panelists noted Ontario’s auto insurance reforms, introduced in September 2010, seem to have already had a buoyant effect on Ontario auto insurers’ auto results. And on the reinsurance side, the disproportionate effect on smaller insurers of becoming compliant with Solvency II may in fact be a catalyst for M&A activity in the future, an A.M. Best panelist observed. In a lead-up to the conference, A.M. Best published its annual report on the state of the union of Canadian P&C insurance, giving the industry a “stable” outlook for 2011-12. The report’s findings provided the backdrop for a panel discussion about the primary insurance industry.

A.M. BEST REPORT: CANADIAN INDUSTRY OUTLOOK A.M. Best maintained a stable outlook for the Canadian property and casualty industry based on the industry’s strong risk-adjusted capitalization in 2010, stable investment income and the doubling of its comprehensive income between 2009 and 2010.

A HUGE â&#x20AC;&#x2DC;Thank Youâ&#x20AC;&#x2122; to everyone in the insurance

industry who joined WiCC this summer at the Canadian Cancer Societyâ&#x20AC;&#x2122;s Relay For Life events. By mobilizing your colleagues, family and friends to support this important cause, you made an enormous difference in the fight against cancer.

WiCC thanks and recognizes our sponsors (in order of their financial contribution) s s s s

Intact Insurance Toronto Insurance Conference Aviva, Novex, Zurich Assured Auto, belairdirect, CAA, Lawyers Professional Indemnity, Economical, GCAN, KRG, Lombard, RSA, Strone Restoration, Wawanessa s Chubb, Canada Car Rental, Desjardins, IBC s Certified Restoration Dry Cleaning Network, Discount Car & Truck, Liberty, Service Master East, XL s Benchmark Rehab, Chubb Claims Staff

WiCC would like to thank all Relay teams and in particular recognize the Top Ten: 1. Team IBAO, captained by Kristin Becker of the Insurance Brokers Association of Ontario 2. Totten Gives, captained by Melanie Pon of the Totten Group 3. Team Linda, captained by Christina Martin of KRG Insurance Brokers 4. Team Lynda, co-captained by Connie Spudic and Lesia Yacht of McLarens 5. Crawfordâ&#x20AC;&#x2122;s Campaign for the Cure, co-captained by Kavita Naraine and John Sharoun of Crawford & Company 6. belairdirectâ&#x20AC;&#x2122;s Stampede for Hope, captained by Lina Tina Tang of belairdirect 7. Crawford RCC, co-captained by Ariff Mawji and George Costandi of Crawford & Company 8. Intact Random Relayers, captained by Adrian Osti of Intact Insurance 9. Ladies of the Knight, captained by Julie Kirk of CG&B Group 10. Crawfordâ&#x20AC;&#x2122;s Quest for the Cure, captained by Silvana Facciolo of Crawford & Company

over

$368,500 raised

s 7I## TEAMS OF industry people raised more than $300,000 s COMPANIES CONTRIBUTED IN SPONSORSHIP s 6ISIT 9OU 4UBE TO VIEW A SPECIAL VIDEO OF THE .ORTH York Relay, courtesy of the IBC: HTTP YOUTU BE Q VX3 QYG

The Top Ten Fundraisers were: Randy Carroll, IBAO Carla Smith, belairdirect Paul Martin, RRJ Insurance Group Anthony Black, CAA John Sharoun, Crawford & Company

Audrey MacLean, RSA Paul Taylor, IBAO George Costandi, Crawford & Company Carolyn Horan, Informco Inc. Jacquelyn Bonikowsky, Crawford & Company

And finally, a round of applause for the WiCC Relay For Life Co-Chairs: Carla Smith, Paul Martin and Robert Landry

Design compliments of

AM Best (Oct11)_DG_VM

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A.M. Best released its Review/Preview Report on the Canadian P/C & Life Markets in September 2010.The outlook expressed a belief that the number of future upgrades of individual Canadian property and casualty insurers would be balanced with the number of downgrades. The ratings agency observed that over the past five years, a majority (85%) of its actions related to the Canadian property and casualty industry have been affirmations. Ninety-seven per cent of rated P&C companies in Canada have secure ratings of B+ or higher, and 84% of companies had Superior (A++/A+) or Excellent (A/A-) ratings as of June 30, 2011. A.M. Best noted the Canadian P&C industry’s financial results improved modestly in 2010. Adjusted net income increased by 3.7% to $2.3 billion, for example, and total comprehensive income rose to $3.3 billion. But significant challenges for the industry remain. These include Ontario auto insurance fraud, the importance of insurance to value (ITV) following the wildfires in Slave Lake, Alberta and pricing adequacy in property lines (most notably commercial property). In terms of challenges, A.M. Best expressed concerns about the ongoing efficacy of the Ontario auto reforms introduced in September 2010. “A.M. Best remains concerned that pricing — with potential regulatory intervention if escalation [of rates] continues beyond regulators’ comfort levels — and reserving for these new coverages may challenge and negatively affect insurers’ future underwriting profitability,” the report says.”“A.M. Best also remains particularly concerned with the level of auto insurance fraud in the system, and whether reforms will curb these dealings.” In addition, the industry faces a number of ongoing challenges in property lines related to price adequacy, weatherrelated claims and scrutiny of insurance to value (ITV). “Based on recent weather-related events and the Slave Lake fires [in 2011], A.M. Best anticipates slight dete-

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rioration in the 2011 property loss ratio,” the report says.

ONTARIO AUTO ON THE RISE Ontario’s personal auto accident results are already showing signs of a drastic improvement, one year after the implementation of the reforms. Jeff Mango, assistant vice president at A.M. Best, offered his thoughts on the effectiveness of the auto reforms during A.M. Best Company’s 2011 Insurance Market Briefing-Canada. The loss ratio for Ontario’s personal auto accident lines had soared to 143.3% in 2010, Mango noted. But by the end of the first half of 2011, that figure plummeted to an estimated 84.3%.

Canadian insurers’ results in 2010 were made worse in part because plaintiffs’ counsel and health care providers were trying to file claims in advance of the Sept. 1, 2010 implementation of Ontario’s auto insurance reforms. Mango described the 2010 results as “horrific.” He said the results were made worse in part because plaintiffs’ counsel and health care providers were trying to file claims in advance of the Sept. 1, 2010 implementation of Ontario’s auto insurance reforms. “We’ve been talking to a lot of companies that just saw an exponential spike in claims activity [before Sept 1, 2010],” he said. “You know reforms are coming, so plaintiffs’ counsel and folks on the medical side tried to get their claims pushed through beforehand. We’ve seen these dramatic spikes in claims activity in U.S. jurisdictions with impending reforms.” Mango also attributed the improvement to stricter underwriting discipline and pricing by insurers; an improved regulatory framework; and an aggressive

approach to tackle fraud within the system. “Getting rate through the market is one thing, but there’s going to be a saturation point where consumer confidence won’t allow any more rate activity,” he continued. “So, rate can go up to a certain point, but it’s additional regulations and additional aggressive activities that are really going to take the auto results to the next level.”

SOLVENCY II AND M&A The disproportionate effect on smaller reinsurers of trying to become compliant with the requirements of Solvency II may lead to future M&A activity, according to reinsurance panelist Gale Guerra, senior financial analyst at A.M. Best Company. In the global reinsurance market, Solvency II is at the top of reinsurers’ regulatory agenda, Guerra noted. And meeting the steep requirements under Solvency II will likely pose a much larger challenge to smaller reinsurers. “This could be a motive for M&A activity for the larger companies with the resources to become Solvency II compliant,” Guerra told the audience of 250 delegates. “Smaller companies with fewer resources may find they have some vulnerabilities in meeting the requirements and some of the larger companies may jump on that.” The Office of the Superintendent of Financial Institutions has said it is taking a wait-and-see approach before deciding which, if any, elements of Solvency II it will incorporate into Canada’s regulatory regime. But that doesn’t necessarily mean Canadian reinsurers will be spared. “Solvency II doesn’t directly impact Canadian insurers and reinsurers,” Guerra said. “However, I think because the Canadian reinsurance market has quite a few global reinsurers, and the Canadian operations are a subset, I think the European parent companies will impose some of the Solvency II requirements on their Canadian subsidiaries.”

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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

Reid French [1] has been appointed CEO of Applied Systems. He succeeds James P. Kellner, a 26-year veteran of Applied Systems, who has served as chairman and CEO since 1998. Kellner is taking on the role of non-executive chairman of the board and remains a significant shareholder in the company. French most recently served as chief operating officer of Intergraph Corporation, a global company specializing in geospatial and computeraided design software. The company has 4,000 employees in more than 50 countries.

Chesterfield Canada Inc. has renewed its sponsorship of Dalton Smith [2], a hockey player with the Ottawa 67s. Smith will continue into the 201112 season following his signing by the Columbus Blue Jackets. The 19-year-old has signed a three-year, entry-level contract. He was the Blue Jackets’ second draft pick (34th overall) in 2010. Smith will have the chance to make the Blue Jackets’ NHL roster, or he will play with the 67s during the coming season. “Chesterfield Canada is proud to have sponsored this young player from Oshawa during his 2010 season and we wish him the very best of luck in his hockey career with the Columbus Blue Jackets,” said Steve Kilrea, managing director at Chesterfield Canada Inc.

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“What attracted us to Dalton, and it seems the Blue Jackets, is his offensive punch and his physical and aggressive nature.”

Jean-Francois Béliveau is joining the Northbridge Insurance team as executive vice president of Quebec, effective Oct. 3, 2011. Northbridge Insurance is currently composed of the existing subsidiaries of Lombard, Markel and Commonwealth. They will be combined into one, united brand — Northbridge Insurance — as of Jan. 1, 2012. Béliveau joins Northbridge from AXA Insurance, where he has led the commercial lines segment since 2005. In his new role, Béliveau will be responsible for developing growth strategies for Northbridge business in Quebec and creating strong relationships with key broker partners. Marc Duguay has been promoted to vice president of underwriting for Quebec.

Granite Global Solutions and Rochon Engineering have reached an agreement on the renewal of a long-term contract with Mike Rochon and Vince Rochon, founders and coCEOs of Rochon, to continue to lead the division. Previously, Rochon Engineering had announced on Sept. 13 that Mike and Vince Rochon would be stepping down from

Canadian Underwriter October 2011

1 the position in October 2011. Since then, they have decided to stay on and lead the division. “We are delighted that Mike and Vince Rochon have committed enthusiastically to a long-term agreement to lead this expert team of forensic engineers well into the future,” said Murray Wallace, CEO of Granite Global. “We have had excellent discussions about the exciting and promising future for Rochon Engineering as part of Canada's fastest growing network of risk management and insurance services at Granite Global.”

KPMG has acquired Vancouver-based accounting firm Berris Mangan. Berris Mangan is a full-service accounting firm that specializes in serving the insurance industry and the service, wholesale and manufacturing industries. “As part of our national strategy to grow through acquisition, we are pleased to welcome the Berris Mangan practice to our Vancouver office and to our KPMG enterprise practice,” said Rob Brouwer, Canadian managing

2 partner of clients and markets at KPMG. “This seasoned team is a perfect fit with our enterprise practice and demonstrates our commitment to this market and to Vancouver entrepreneurs.”

Kanetix Ltd., a Canadian online insurance marketplace, has been acquired by Monitor Clipper Partners (MCP), a Cambridge, Massachusetts-based private equity firm. Kanetix has also named Yousry Bissada as president and CEO, effective immediately. Its co-founders, George Small and Gregory Ellis, will retain significant stakes in Kanetix, each holding a position on the newly created board of directors. “Facilitating the partnership of Kanetix, a company rich in opportunity, the financial and strategic resources of MCP and the proven leadership success of Yousry Bissada creates a real opportunity for the insurance industry,” said Ellis. Small added: “Gregory and I are proud to have worked with the Kanetix team over the past decade and to have built a

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7a company MCP sees as an opportunity for global growth. We are confident the partnership and new leadership will demonstrate amazing results.”

FirstOnSite Restoration has appointed Brad Meekin [7a] to head up its new healthcare and government services business unit. Through FirstOnSite’s Priority Response Emergency Plan (PREP) program, Meekin will assist organizations in the health care and government sectors — including hospitals, retirement residences, longterm care and medical facilities — with business continuity and emergency response planning. Prior to joining FirstOnSite, Meekin was the district manager for ParaMed Home Healthcare. He was also the chief of emergency medical services for the Regional Municipality of York, where he organized the emergency operations centre during the Severe Acute Respiratory Syndrome (SARS) outbreak in 2003. FirstOnSite also expanded its Greater Toronto Area presence with the open-

7b ing of its Toronto East branch. The branch is under the leadership of Steve Gregg [7b], district general manager of Hamilton and GTA, and Jim Mandeville [7c], branch manager of Toronto East. Together, Gregg and Mandeville have more than 20 years of combined experience, hold more than a dozen industry certifications and plan to continue adding knowledge and reliable team members, a FirstOnSite release says.

The Institute for Catastrophic Loss Reduction (ICLR) has launched a new mobile Web site. The site is a “strippeddown, simplified and easy-tonavigate version of the Institute’s main site,” an ICLR release says. The user simply plugs in ICLR’s main URL (www.iclr.org) into his or her smart phone or mobile device's browser and he or she is directed straight to the mobile site. Once there, the user is given the option of remaining on the mobile site or switching over to the standard site. The mobile Web site is suitable for

7c use with BlackBerry devices, Apple products (iPhones, iPod Touches and iPads), as well as Android and other smart phones.

The Boiler Inspection and Insurance Company of Canada (BI&I), a subsidiary of Hartford Steam Boiler Group (HSB), is adopting the brand of its parent company, Munich Re. HSB’s “iconic” locomotive symbol and name will be preserved and appear in the context of the Munich Re brand, a press release says. “The dual brand combines the value of HSB Group’s leadership in equipment breakdown and technical risks with Munich Re’s reputation for forward thinking solutions,” the release says. “BI&I is adopting the dual brand and the acronym HSB BI&I.”

Granite Claims Solutions acquired Torontobased BBCG Claim Services Limited and Saskatchewanbased Allied Claims Adjusters. BBCG will continue to operate under the BBCG

name. It is a niche-market adjusting firm specializing in surety and fidelity bonds, builders’ risk, course of construction, professional errors and omissions and trade credit claims. The BBCG team is led by William E. (Ted) Baker and has offices in Ontario, British Columbia and Quebec. Allied Claims Adjusters is a fullservice adjusting firm providing expertise in professional liability, fire, auto, liability, equipment, oil field, fidelity, inland marine, cargo and boiler and machinery.

Darryl Levy has been appointed president and CEO of Grain Insurance & Guarantee. Most recently, Levy was regional president of Ontario and Western Canada at Rogers Communications. A graduate of the University of Manitoba, Levy is a member of the Business Council of Manitoba, the Young Presidents Organization and the executive advisory board of the faculty of business at the University of Winnipeg. He has also been appointed to the board of directors of Grain Insurance & Guarantee. Headquartered in Winnipeg, Manitoba, Grain Insurance & Guarantee is a Canadian owned and operated property and casualty insurer that serves its customers in all 10 provinces and three territories.

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GALLERY

Sovereign General Insurance Company partnered with the Canadian Tour on Aug. 22 to host the Sovereign Insurance International Team Matches Golf Tournament In Support of The Childrenâ&#x20AC;&#x2122;s Wish Foundation. The event took place at the historic Scarborough Golf and Country Club in Toronto. The Canadian Tour has produced a number of PGA stars including past Masters Champion Mike Weir. The Canadian Tour-sanctioned event pitted three national teams of pros for a purse associated with the International Team Matches Cup. Foursomes paired with a pro from one of the three competing Canadian, U.S. or International teams. The inaugural Sovereign General Trophy was awarded to participating amateur winners. Through this event and others country-wide, Sovereign will raise over $250,000 for The Childrenâ&#x20AC;&#x2122;s Wish Foundation in 2011.

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APPOINTMENT

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

Darryl Levy Curt Vossen, Chairman of the Board, is pleased to announce the appointment of Darryl Levy as President & Chief Executive Officer of Grain Insurance & Guarantee. Mr. Levy brings over 20 years of senior executive leadership experience to Grain Insurance & Guarantee. In his most recent position, Mr. Levy was Regional President of Ontario & Western Canada at Rogers Communications. His experience and success in markets across Canada, in addition to his strong distribution channel experience, is a tremendous asset to the Company. A graduate of the University of Manitoba, Mr. Levy is a member of the Business Council of Manitoba,the Young Presidents Organization and the Executive Advisory Board of the Faculty of BusinessUniversity of Winnipeg. Mr. Levy has also been appointed to the Board of Directors of Grain Insurance & Guarantee. Founded in 1920, Grain Insurance & Guarantee is a leading property & casualty insurer. Headquartered in Winnipeg, this 100% Canadian owned and operated company serves its customers in all 10 Provinces and 3 Territories and is rated â&#x20AC;&#x153;A (Excellent)â&#x20AC;? by A.M. Best. www.graininsurance.com

October 2011 Canadian Underwriter

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GALLERY

The GTA Fellows and their guests gathered for the CIP Society’s annual FCIP Golf Tournament on Sept. 13, 2011 at Clublink’s Wyndance Golf Club in Uxbridge, Ontario. Everyone had a fabulous time despite multiple weather fluctuations throughout the day. A $3,500 donation to the John E. Lowes Education Fund capped off a wonderful evening of cocktails, dinner and prizes.

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APPOINTMENT

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

Brent Chorney Brent Chorney joins Zurich Canada as AVP Marine for Global Corporate Urs Uhlmann, Head of Zurich Global Corporate Canada is pleased to announce the appointment of Brent Chorney as Assistant Vice President Marine for Global Corporate. Brent will be responsible for establishing and growing Marine business for Zurich in Canada. Leveraging Zurich’s leading international program capabilities and his extensive experience in Marine underwriting, Brent will collaborate with the Global Corporate team to broaden Zurich Canada’s product suite and provide added value to our customers through a new Marine offering. As incoming President of the Canadian Board of Marine Underwriters and Canada’s representative on the International Union of Marine Insurers Cargo Committee, Brent brings with him a wealth of experience from a number of progressively senior Marine underwriting and brokering roles held throughout Canada. As one of the world’s most experienced ocean cargo underwriters, Zurich offers tailor-made protection for regional and international transit exposures. Our Marine network includes more than 400 dedicated professionals in 38 Marine offices around the world. As part of Zurich’s global network, we serve Marine customers in 180 countries and territories. We currently manage thousands of local Marine cargo contracts globally. Zurich Financial Services Group is an insurance-based financial services provider and the insurer of choice for many of Canada’s leading corporations as well as the majority of Fortune 100 global companies. Founded in 1872,Zurich has a global network of subsidiaries and offices in North America, Europe,Asia Pacific, Latin America and other markets. Zurich’s 60,000 employees serve customers in more than 180 countries.

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GALLERY

Fred De Francesco and Bill Blakeney hosted a Night at the Races fundraiser at Woodbine Racetrack on Sept. 7. Featuring special guest and Toronto Mayor Rob Ford, the evening trackside fundraiser in support of WICC (Women in Insurance Cancer Crusade) began with cocktails, followed by a multicourse dinner and then casual conversation with attendees and guests during the eveningâ&#x20AC;&#x2122;s thoroughbred races. De Francesco and Blakeney presented WICC Co-Chair Jean Faulkner with a cheque for $20,000 raised by the event.

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

Lori Duclos, BBA (Hons), FCIP, CRM CAIW President 2011 – 2012 The Canadian Association of Insurance Women (CAIW) would like to announce the appointment of Lori Duclos, BBA (Hons), FCIP, CRM as President for the 2011 – 2012 term. Lori is employed by Swiss Re in Toronto, Ontario as Assistant Vice President, Facultative Property Underwriter in Reinsurance Client Markets. Lori is a Past President of her local association, the Toronto Insurance Women’s Association, of which she has been a member since 1989. She has served on CAIW’s Board of Directors since 2004 and on the CAIW Executive Board since 2007. Lori is also a member of the Insurance Institute of Canada, Property Casualty Underwriters Club and John E. Lowes Insurance Education Fund Committee. CAIW is made up of 10 associations across Canada and provides excellent opportunities for their members to better themselves both professionally and personally through networking and continuing education. CAIW members also volunteer their time to put on various fundraising events for local and national charities.

www.caiw-acfa.com October 2011 Canadian Underwriter

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pg110 Internet

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

CLAIMS ADJUSTING FIRMS ClaimsPro Inc. Committed to providing leading-edge claims management services. www.scm.ca Crawford & Company (Canada) Inc. Enhancing the customer experience, every day. www.crawfordandcompany.com CRU Adjusters Calm in the face of a storm. www.cruadjusters.com Cunningham Lindsey International independent claims services. www.cunninghamlindsey.com Kernaghan Adjusters Doing What Is Right®. www.kernaghan.com McLarens Canada International Loss Adjusters and Surveyors. www.mclarens.ca

110 Canadian Underwriter October 2011

PCA Adjusters Limited Adjusting to Meet your needs™ www.pca-adj.com Quelmec Loss Adjusters Identifying, Investigating, Resolving...for over a quarter century! www.quelmec.ca

CONSULTING FIRMS Cameron & Associates Insurance Consultants Ltd. Claims consultants to the insurance and reinsurance community. www.cameronassociates.com Keal Technologies Complete technology solutions for insurance brokers. www.keal.com

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

Walters Forensic Engineering Inc. Providing scientific answers to complex engineering incidents. www.waltersforensic.com

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

ENGINEERING SERVICES Giffin Koerth Forensic Engineering and Science Investigate Understand Communicate www.giffinkoerth.com Rochon Engineering Inc. Forensic Consulting Engineers & Code Consultants. www.rochons.com

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

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

INSURANCE COMPANIES Aviva Canada Inc. Home Auto and Business Assurance. www.avivacanada.com Catlin Canada Underwriting Ambition. www.catlincanada.com Chartis Insurance Company of Canada Your world, insured. www.chartisinsurance.com FM Global The leader in property loss prevention. www.fmglobal.com

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

INSURANCE LAW

Grain Insurance and Guarantee Company Commercial Lines Underwriters www.graininsurance.com RSA Leading car, home and business insurer. www.rsagroup.ca Sovereign General Insurance Company of Canada Since 1953 www.sovereigngeneral.com

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

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

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

RISK MANAGEMENT The Guarantee Company of North America “Specialized insurance products...professional service” www.gcna.com

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

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

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

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CARSTAR’s CONNECTED conference took place Aug. 17-19 in St. John’s, Newfoundland. More than 300 franchise partners and families, corporate employees and vendor and insurance partners attended. During the three-day conference, CARSTAR Corporate employees presented new ideas and programs in areas such as insurance relations, marketing, training and information technology. Following the corporate presentations, attendees had the opportunity to sit in on various information sessions about some of the industry’s hottest topics, including new tools, CARSTAR’s new IT program (created specifically for franchise partners) and CARSTAR’s entrance into auto glass repair and replacement.

ADVERTISERS’ INDEX ACE INA Insurance A.M. Best Aviva Canada Inc. HSB BI&I Brovada Technologies Incorporated CAIW Can-Am Insurance CARSTAR Automotive Canada CG&B Group Chartis Chesterfield Canada Inc. Clyde & Co. CNA Canada Compu-Quote, Inc. Crawford & Company (Canada) Inc. Cunningham Lindsey Canada Custom Software Solutions, Inc. e2Value Inc. Ecoinsurances c/o Chesterfield Group, Lloyds Brokers The Economical Insurance Group FirstOnSite Restoration FM Global The Guarantee Company of North America Grain Insurance & Guarantee Company Great American Insurance Group GroupOne Underwriters InfoCanada

9 43 17 67 47, 49 97, 109 95 73 77 59 41 83 55 114, 115 (IBC) 19 11 33 87 63 29 22, 23 87 39 105 75 57 84

Insurance Brokers Association of Canada (IBAC) Insurance Institute of Canada Intact Insurance Keal Technology MarineOne Underwriters Ontario Insurance Directory Paul Davis Systems (PDS) Pembridge Insurance Company Pencross Financial Corporation PolicyWorks RIBO Risk Management Services – An SCM Company RSA – Royal & Sun Alliance Insurance Company of Canada ServiceMaster of Canada Limited Ship Owner’s Protection Ltd. The Sovereign General Insurance Company SRU - Specialty Risk Underwriters Inc. SUM – Strategic Underwriting Managers Inc Swiss Reinsurance Company Canada Totten Insurance Group The Wawanesa Mutual Insurance Company WICC WINMAR Xactware XL Group Zurich Canada

12, 13 6, 7, 61, 112 21 65 31 101 76 25 79 27 64 37 1a, 1b, 51 85 93 71 42 69 53 89 116 (OBC) 99 91 113 5 35, 107

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CU Seminar ad October 2011

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Putting the pieces together.

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

CIP Society PROedge Seminars:

CIP Society Events:

Edmonton – Finance for the non-financial professional . . . . . . . . . . . . . . . . . October 12

Toronto – CIP Society Wine and Cheese . . . . . . . . . . . . . . . . . . . . . . . . . . . . . October 12

Kitchener – Nuclear Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . October 12

London – Annual Speakers’Breakfast . . . . . . . . . . . . . . . . . . . . . . . . . . . . . November 22

Ottawa – Adv. Construction Insurance: Insuring Large Risks . . . . . . . . . . . . . October 13

Hamilton – Annual Speakers’Breakfast . . . . . . . . . . . . . . . . . . . . . . . . . . . . . December 1

Hamilton – Adv. Construction Insurance: Insuring Large Risks . . . . . . . . . . . October 26

Vancouver – Speakers’Breakfast . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . December 1

Toronto – Adv. Construction Insurance: Insuring Large Risks . . . . . . . . . . . November 13

Toronto – Fellows’Night . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . February 9

London – Adv. Construction Insurance: Insuring Large Risks . . . . . . . . . . . . . January 13

Toronto – CIP Society Symposium . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . April 26

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

GALLERY GALLERY

A.M. Best Companyâ&#x20AC;&#x2122;s 2011 A.M. Best Companyâ&#x20AC;&#x2122;s 2011 Insurance Market BriefingInsurance Market BriefingCanada was held in Toronto on Canada was held in Toronto on Sept. 8. More than 250 insurSept. 8. More than 250 insurance executives attended to ance executives attended to hear A.M. Best rating analysts hear A.M. Best rating analysts discuss the impact of current discuss the impact of current economic conditions and rateconomic conditions and rating trends on members of the ing trends on members of the Canadian insurance industry. Canadian insurance industry. The briefing heard panelists The briefing heard panelists discuss Canadian life, property discuss Canadian life, property and casualty and reinsurance. and casualty and reinsurance.

October 2011 Canadian Underwriter 113 October 2011 Canadian Underwriter 113

CQ Can Underwriter Article ad copy copy.pdf

11-09-27

11:29 AM

Why should you care about Sales Focused Broker?

CMY

"This is a new enhanced product from CQ that helps energize sales.” James Nickelo, senior vice-president, Compu-Quote

More than half of Canada’s brokers are using social networking websites, such as LinkedIn, Facebook and Twitter, for business. Are you? Sales Focused Broker (SFB) is a powerful new product from Compu-Quote (CQ) that helps brokers follow-up on leads from these popular social networking sites, as well as their own brokerage websites. It can also be used with traditional marketing and advertising mediums such as, newspaper, direct mail and the yellow pages.

How would you like to achieve these results with your business? •One broker generates over 11 percent of his leads from mobile devices. •A call centre style brokerage generates over $1million in gross written premium (GWP) each week employing the concept. SFB enhances brokers’ ability to market, sell, and track the effectiveness of marketing channels, advertising and staff. Marketing codes track the origin of each quote. SFB organizes Rating Services data into cohesive reports to help track critical business activities. Use client data collected through Rating Services products PropertyRater and AutoRater. Identify and track possible marketing initiatives, view policy expiry dates, create abeyances, view quote resolutions, generate reports. The gross written premium (GWP) report displays

GWP, number of sales, average GWP per sale for each carrier quoted by the brokerage; broken down by province and line of business. The marketing report displays number of responses, sales and conversion rate for each line of business, breaking them down by each defined marketing initiative. “Brokers are on the cusp of a new way of doing business using social marketing and CQ is right there with the new tools,” says Brian Schwab, executive vice-president, Compu-Quote. With all pistons firing, here’s how SFB works: InsuranceHotline.com, fully integrated with CQ rating systems, is used to drive leads to a broker's website. In Ontario, IBRI's consumer targeting website helps prospects locate brokers and get quotes. Brokers employ iClarify to validate information received from prospects and to improve the quality of insurance to value estimates. Using Individually Rated Commercial Automobiles (IRCA), the web-based module embedded in CQ's AutoRater product, brokers have full underwriting and simultaneous comparative quoting for multiple insurer rate plans. Finally, with CQ ezLeads Plus, brokers track their leads in real-time. Sound complicated? Don’t worry, CQ does all the heavy lifting for you. For more information about what Sales Focused Broker can do for you, visit compu-quote.com or call 1-800-265-0808.

CQ Energize Your Sales copy.pdf

11-09-22

3:09 PM

CMY

www.compu-quote.com

A Full Line of Products to Help Grow Your Business As one of the largest property and casualty insurers in Canada, Wawanesa Insurance has the breadth of products to meet your customers’ diverse and ever-changing needs. With our outstanding claims service, policyholders become customers for life.

www.wawanesa.com

Auto – Home – Business – Farm – Life and Group