The Ontario Broker September 2013 by Annex Business Media

THE ONTARIO BROKER

THE OFFICIAL PUBLICATION OF THE INSURANCE BROKERS ASSOCIATION OF ONTARIO (IBAO) september 2013

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tim hudak

opposing view 04 ceo’s message 06 government update 08 ceo corner 10 a q&a with ontario PC leader tim hudak

12 succession planning 13 wellness matters 14 statistical analysis 15 communication strategies

16 viewpoint 17 financial matters 18 Community View

THE BROKER IDENTITY PROGRAM â&#x20AC;&#x201C; 25 YEARS AND COUNTING... ...thanks to you. 1988 saw the birth of the identity program that put a face on the Canadian insurance broker profession, and gave a voice to our advocacy on behalf of insurance consumers. One of the most important ongoing achievements of the Insurance Brokers Association of Canada, it flourishes and succeeds in large part because of your invaluable support, for which we pay tribute to you and the partnerships we mutually enjoy.

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CEO’s Message The Official Publication of the Insurance Brokers Association of Ontario (IBAO) Published by

Editor Angela Stelmakowich astelmakowich@canadianunderwriter.ca 416-510-6793

Telematics: 6 Questions Brokers Should Ask

Senior Publisher Steve Wilson steve@canadianunderwriter.ca 416-510-6800 Associate Publisher Paul Aquino paul@canadianunderwriter.ca Account Manager Michael Wells mike@canadianunderwriter.ca Account Manager Christine Giovis christine@canadianunderwriter.ca Account Manager Elliot Ford eford@canadianunderwriter.ca Art Direction Sue Williamson The Ontario Broker is published monthly by Canadian Underwriter magazine (www.canadianunderwriter.ca). Canadian Underwriter’s Insurance Group of publications is part of Business Information Group (www.businessinformationgroup.ca), a subsidiary of Glacier Media Inc., a leading Canadian information company with interests in daily and community newspapers and business-to-business information services. All rights reserved. Printed in Canada. The contents of this publication may not be reproduced or transmitted in any form, either in part or in full, including photocopying and recording, without the written consent of the copyright owner. Nor may any part of this publication be stored in a retrieval system of any nature without prior written consent. The articles that appear in this publication represent the opinions of the authors and do not represent or embody any official position of, or statement by, IBAO; nor do they attempt to set forth definitive action standards or to provide legal advice.

Insurance Brokers Association of Ontario 1 Eglinton Avenue East, Suite 700 Toronto, Ontario M4P 3A1 Tel: (416) 488-7422 Fax: (416) 488-7526 Toll Free: (800) 268-8845 (888) ASK-IBAO www.ibao.org Annual subscription is $52 + tax. To order email: contact@ibao.on.ca For information on submitting an article, contact Ashley Hunking Marketing Coordinator ahunking@ibao.on.ca

The Ontario Broker / September 2013

Randy Carroll CEO IBAO Should brokers pay attention to telematics? From where I see things going, the answer is an unqualified “Yes.” Brokers should — and must — pay attention to telematics because telematics is the game changer of the industry. What Napster was to the music industry, telematics is to the insurance industry. To quote Peter Sheahan, our keynote speaker at last year’s Convention: “Change is slow until it’s not.” That being the case, brokers need to pay attention. If driving performance is communicated between the insurer and driver, is there also space for the broker relationship? What exactly do I mean when I say relationship? As brokers, a key driver to your success is the ownership and control you have between yourselves and the customers you represent.

For brokers to continue to maintain their position as a market share leader, that relationship needs to be stronger today than it ever has been before. During our education sessions and roadshows across the province, we have maintained that brokers have to work harder to maintain their relationships with their current customers. You must communicate with customers at least three times a year (that does not include renewals and/ or at the time of a claim). You are probably asking, “So, what does this have to do with telematics?” If you take the time to investigate how a telematics offering works, you will find a major component of that offering is consumer education associated with improving driving behaviours. One of the best videos I have seen to help explain what I am talking about can be found at bit.ly/TelematicsExplained (case-sensitive). After the telematics device is installed in a car, it sends information from the vehicle to the insurer that, in turn, sends information to the policyholder. In this case, that information push to the consumer takes place on a weekly basis. What role does the broker play in all this? Will the insurers that you represent today brand that communication as yours or will you be excluded from the process? Will you be able to explain the billing, the rating and the premium if you do not have access to the data? Will you be able to remarket the insured in the same way you do today?

How can I help my consumers maintain privacy and control their own driving data? Let’s talk about consumer data. If the telematics device sends the data to the insurer, what is included within that data set? Should consumer protections be in place to confine sharing of data to what is being used for underwriting and rating? In the aforementioned video, that would mean only data relating to speed, braking, acceleration and kilometres driven would be shared. However, that is not currently the case. In the race for rate reductions, government and regulators have overlooked consumer protection. The consumer should be the owner of the data — meaning the only person controlling the data, deciding with whom the data will be shared and determining what data will be shared. Just imagine if access to MVRs was no longer possible and the consumer wanted to move from one telematics insurer to another. How would the consumer do this? Would the consumer start at the highest premium, or would he or she be locked in with little to no options? Will telematics force market consolidation? The marketplace is a major concern to me, and it should be to you. As we all know, data is the ace in the hole for many of our insurers. Telematics is not cheap, and not every insurer will be in a position to afford a telematics offering. Today’s very competitive marketplace is being shared

by large, mid-sized and small insurers. For insurers to play in this arena, they need data — and lots of it. They need a massive amount of data that is factor experience-based to get regulator rate approval. That does not mean a few hundred boxes; it means thousands. In the absence of a central database, there are thousands of telematics devices installed by each and every insurer that wants to play in this arena. Remember when the use of credit scoring became contagious and the feedback we received from those who opposed credit was, “We have to use credit. If we don’t, we are at a competitive disadvantage.” Today, the majority of insurers use credit, but

unlike telematics, it was cheap and easy to get. If we fail to provide a solution that is collaborative in scope and allows all of our markets to participate, the competitiveness we enjoy in the marketplace today will all but disappear! So what needs to be done? Simply put, we need the following: • a broker-owned solution, one that allows the broker to be part of the solution and not be excluded. The information push to the consumer must be broker-branded: not insurer branded, but broker-branded; • a single solution that puts brokers front and center, one that allows us to continue to own the communication and educa-

tion aspect of our customer relationship. Consumer protections are needed now, not in 2014; • a solution that allows the consumer to own his or her personal data, control who to share the data with, and have transportability so data can be moved from one provider to the next as the consumer sees fit; and • a solution that maintains the competitive nature of our business and provides an opportunity for all of our markets to participate without driving the cost of insurance up company by company in the hope of bringing them down sometime in the future. Collaboration is the key to a single solution — to a broker-owned, insurersupported solution where

everyone wins and the consumer is protected. Can brokers lead the telematics revolution? Yes, brokers can lead! See you at Convention.

CEO’s Schedule: October 1-3 Tencon Conference October 22 IBAO Board Meeting October 23-25 IBAO Convention President’s Schedule: October 22 IBAO Board Meeting October 23-25 IBAO Convention

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September 2013 / The Ontario Broker

GOVERNMENT UPDATE

Ontario Auto Starts and Stops On August 23, 2013, Charles Sousa, Ontario’s Minister of Finance, announced further details of the government’s plan to lower auto insurance rates by 15% on average. The government committed to this target over an unspecified period of time as part of its deal with the New Democratic Party (NDP) to pass the 2013 budget. The budget legislation passed in June gave the Superintendent of the Financial Services Commission of Ontario (FSCO) the power to set a rate reduction target by regulation and compel insurers to re-file to achieve this target. It also expands

IBAO continues to believe a 15% premium reduction is aggressive and can only be achieved once the key recommendations of the Auto Insurance Anti-Fraud Task Force are implemented.

arising from the last set of reforms. What disappointed IBAO was that there was a lack of progress on licensing health clinics, regulating the towing industry and implementing the new catastrophic definition. Without progress on these fronts, the two-year timeline for the 15% reduction looks even more challenging. FURTHER DETAILS While the two-year timeline announcement was highlighted in the media, what went largely unreported was a policy statement by the Minister of Finance to FSCO published the next day in the August 24, 2013 edition of the Ontario Gazette. Minister Sousa has the power to issue such policy statements, which FSCO “shall have regard to” in making decisions. Of note to IBAO is that FSCO is directed to study whether or not insurers are in compliance with the prohibition of credit scoring in auto insurance, and to study the mandatory collision-reporting threshold under the Highway Traffic Act. IBAO believes that these two items, in particular, are direct responses to our advocacy efforts on behalf of consumers. With regard to the first item, IBAO has raised concerns that credit scoring on home insurance may be subverting the credit ban on auto insurance given that the two products are often sold together with a discount. On the second, IBAO has suggested that reporting a collision under an increased threshold for minor accidents should not be counted against a driver. The current threshold is $1,000, a figure that has not been adjusted in many years. The policy statement also encourages FSCO to implement usage-based insurance, to look at the fairness of the territorial rating system and to explore ways to treat first-time drivers “fairly.” On the last point, IBAO believes that the “First Chance” system in New Brunswick is worthy of exploration for Ontario. As a result of all this activity, the provincial government has many promises to keep — and with an election looming in this minority parliament, auto insurance rates will be at the forefront. As always, IBAO will be advising and advocating on behalf of its members and the consumers we serve.

Arthur Lofsky Government Relations Consultant IBAO

FSCO’s enforcement authority and gives the power to license health clinics. All through this process, Insurance Brokers Association of Ontario (IBAO) cautioned that rate reductions will take time and need to be achieved in a responsible fashion. IBAO wants lower rates for consumers, but it continues to believe that a 15% premium reduction is aggressive and can only be achieved once the key recommendations of the Auto Insurance Anti-Fraud Task Force are implemented. Mandated reductions without identified cost savings could end up making things worse for consumers as insurers may exit certain segments of the market where they are losing money. So it was with high expectations that IBAO was waiting for the next steps in the government’s plan. IBAO was expecting to see progress made in identifying cost savings. The announcement did set a timeline for the promised 15% reduction. Eight per cent on average is the targeted reduction for the first year ending August 15, 2014, with a further 7% in the second year ending August 15, 2015. In addition, insurers are expected to re-file for a 3% to 5% reduction by January 2014. The government has said it believes that this reduction exists in the system

The Ontario Broker / September 2013

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2013-08-16 1:34 PM

CEO CORNER

Jean-François Blais President Intact Insurance

Time for ACTION As Canada’s largest provider of home, auto and business insurance, Intact Insurance is committed to the viability and success of the broker channel. Moreover, we believe we have a significant role to play in helping brokers adapt to the challenges facing our industry and to take advantage of opportunities. With the mounting pressures brought by technology, changing consumer behaviour and the impacts of climate change, to name a few, it is understandable that brokers are looking to us for action on all fronts — and we are responding. One of our primary objectives is to help brokers grow by simplifying their work flows. Last year, we began rolling out our eDocs system to allow brokers to download their Intact personal lines policy documents directly into their broker management systems, eliminating the need for physical paper coming to the brokerage. The system is now compliant with SigXP, Power Broker and, most recently, TAM, confirming that Intact is committed to offering brokers real-time solutions and making it easier to do business with us. We have always believed our brand, products, service and communication initiatives are the keys to brokers’ future success. As a result of the successful integration of AXA and Jevco, Intact now offers brokers the advantage of leveraging a much broader product suite in both personal and commercial lines to drive business growth. We continually assess and review each line of business to uncover new opportunities for brokers. In commercial lines, our expanded offering provides brokers with an insurance solution for any small to medium08

The Ontario Broker / September 2013

sized business opportunity. We will continue to communicate our appetite to better illustrate how the different lines work together to provide your customers with a comprehensive insurance solution. In personal lines, the industry is facing challenging times. We are eager to see how Ontario’s proposed auto insurance reforms will be implemented to secure the long-term stability of the product in the province. We have always pursued a perpetual improvement strategy in personal auto, demonstrated by the pricing, segmentation and claims strategies that we continue to build and improve on. We are continuing to work with the government and other stakeholders to realize meaningful improvements in the short term and over the long run. SUPPORTING PREVENTION EFFORTS The profitability challenge that the industry is facing in personal property has been a strategic priority for years. While sharing information on prevention is not new to brokers who work with us, the need for all of us to get behind prevention education has never been greater. The Insurance Bureau of Canada reports most Canadians are not prepared for the effects of severe weather. Thunderstorms in the Greater Toronto Area in July set a record for the most expensive natural disaster in Ontario’s history — with property damages estimated at more than $850 million. More important, the lives of thousands of Ontarians were interrupted. This gives us great motivation to increase our support to brokers and customers with information and incentives for taking preventive actions. We are most proud that our scale enables us to offer superior customer service in the times when Mother Nature shows us the full force of her strength. Intact’s speed of response, coast-to-coast presence, in-house expertise, network of preferred suppliers and interconnectivity helps us get customers back on track quickly. But our commitment to helping people goes beyond our promise to provide an outstanding experience to consumers who choose to place their trust and confidence in us. Our commitment extends to helping build strong and resilient communities where we live and work.

NEED TO ADAPT The impacts of climate change pose a huge challenge to Canadian society as a whole, and we must adapt. This is a multistakeholder endeavour that will require the active participation of the industry, consumers and governments if we want to be successful in maintaining the availability and affordability of home insurance. It is clear that as an immediate step, the industry must adapt the protection we offer to Canadians to ensure that it remains sustainable in light of the greater prevalence and severity of weather events. We are taking critical actions towards achieving this objective, including continuing to tailor our offerings by type of peril, with differentiation in pricing, coverage, claims management and intensified prevention and loss mitigation incentives. Throughout the remainder of this year and into 2014, Intact will be introducing new coverage limits for sewer back-up, new underwriting guidelines for all policy types and new discounts for customers taking preventive measures. Communication will be at the centre of our execution to help ensure that brokers, customers and consumers understand how insurance is evolving in Ontario and how all of us must evolve in step with these changes. Recent events have focused much attention on our industry, and while we are all too aware of how difficult a time this has been for many, we also see an opportunity for brokers to shine. It is unfortunate that when times are good, consumers may not appreciate the value that brokers bring, and opt for price over personal relationships. But when a customer is faced with a claim, the quality of the advice that you offer, your supportive presence and your experience confirms their investment in your personal brand, and provides an opportunity for you to build loyalty that far exceeds anything else the market can offer. Know that at Intact Insurance, we are truly committed to strengthening the brokers who want to succeed every step along the way. Working together, we will transform each challenge into an opportunity for valuable customer touch points, strengthening your position for the future.

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Auto insurance remains front and centre in the Ontario legislature. Arthur Lofsky, government relations consultant for IBAO, recently asked Ontario PC Leader Tim Hudak about his party’s approach to auto insurance and other issues of interest to IBAO and its member brokers.

Opposing View Q: The 2013 Budget targets in legislation lowering auto insurance rates by 15% on average over an undefined period of time. You and your party were quite critical of this and, indeed, voted against this. Why? Auto insurance rates in Ontario are too high. In fact, they’re by far the highest in Canada. This affects almost every family and many businesses who already feel the pressures of high taxes, unemployment and rising debt. The Ontario PCs have taken action,

because we know that when customers save on auto insurance rates, they can invest this money in what matters most to their businesses and families, helping the economy to grow and attracting more jobs to communities. Your readers can find the full details at www.ontariopc.com/ autoinsurance. But as you mention, we couldn’t support a government promise without seeing a plan to back it up. The simple truth is we’re not going to solve this problem with bumper sticker slogans attached

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to empty promises. That’s only going to cause confusion and disappointment. For example, I’ve heard from brokers who received calls from customers asking for their 15% off discount. Let’s put an end to these misleading promises and put forward real solutions like the Ontario PC caucus has done to bring the muchneeded relief and choice in the system. Q: Auto insurance was a central part of the 2013 Budget. Was there anything in that document from your point of view that was key or critical as it relates to Ontario auto? My vision for Ontario is one where paycheques go up each year, not the cost of living. That’s why I appointed Jeff Yurek from my Ontario PC team to find solutions. Jeff has done a great job, hosting roundtables across the province and talking to both drivers and insurance companies to see where we can make bold changes. We’ve put forward our detailed plan and done some heavy lifting with the help of organizations like the Insurance Brokers Association of Ontario. It’s time the other parties did the same.

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The Ontario Broker / September 2013

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Q: Your party has put forward some initiatives on auto insurance that it says will help lower rates. What are they and how much do you estimate rates could be lowered if all these initiatives were implemented? That’s right, and the full plan can be found on our website www.ontariopc.com/ autoinsurance. Let me give you the highlevel overview. First, we would reduce bureaucracy and encourage more competition so that insurance providers can innovate and offer discounts without having to go through time-consuming bureaucratic

Photo courtesy of Ontario PC Party

hurdles. Specifically, we said the province should adopt a “file-and-use” rate-setting process. This would allow companies to lower prices quicker, ensure greater market competitiveness and encourage a wider range of discount offerings for Ontario drivers. We also need to speed up the amount of time it takes to reach settlements between accident victims and insurance companies. Can you believe there’s currently a backlog of 17,000 cases? This costly and time-consuming hassle is driving up prices. We’ve been pushing the government to stop making excuses and finally crack down on the organized crime outfits that are ripping off the system, sending premiums through the roof for good drivers. We saw this successfully done in places like New Jersey that came down hard on organized crime and saw lower premiums as a result. And, finally, we would demand more accountability within the auto insurance sector itself by making senior insurer executives personally and financially accountable for the conduct of their company. Taken together, these reforms will lead to a fair, well-functioning marketplace for auto insurance and lower prices for consumers. Q: IBAO strongly supports implementation of the Auto Insurance Anti-Fraud Task Force recommendations. Would a PC government implement all 38 recommendations of the fraud report?

We’re on the record as supporting the findings of the Auto Insurance Anti-Fraud Task Force report. We want to see the recommendations implemented quickly so that we can get down to the task of rooting out and eliminating fraud. Our plan would also establish a special unit in the Crown Attorney’s office to investigate and prosecute fraud, something successfully implemented in places like New Jersey and Great Britain. And the province should already be using the Health Claims for Auto Insurance system — an electronic billing system for health care clinics — to help identify abnormal billing patterns. The current government has dragged its feet on these necessary reforms. After all, the task force’s report was released last November. With estimates of the cost of fraud in Ontario as high as $1.5 billion each and every year, it’s vital that we address the fraud issue with urgency to bring savings to Ontario drivers. Q: IBAO believes the new catastrophic definition that is with the Ministry of Finance should be implemented because it is evidence-based and will actually help seriously injured people get benefits sooner. IBAO believes this would alleviate a lot of uncertainty with insurers who, in turn, would be able to plan better and lower rates sooner. What is your position on this? A car accident can be a life-changing event, especially a catastrophic injury. These types of victims and their families deserve

their benefits as soon as possible. But the current system isn’t delivering that. An efficient process with a clear definition of catastrophic injury would speed up processing these types of claims. The current uncertainty around injury definitions and the lack of an evidencebased approach is slowing down getting benefits to injury victims. It also drives up system costs — costs that get passed on to consumers through higher premiums. That doesn’t serve anyone. The government and finance minister must take the Financial Services Commission of Ontario’s review of catastrophic impairment and IBAO’s endorsement of that report seriously. Q: Finally, we could not let you go without asking about the use of credit scoring to price home and other personal property insurance. IBAO believes it is unfair and should be banned. What do you think about our position on this? I’ve had the opportunity to meet with representatives of the IBAO on a number of occasions now, and they have provided invaluable advice and insight into this issue. As I’ve said before, I believe the use of credit scoring provides an incomplete picture of someone’s life and can lead to unfair and unintended consequences. This practice is already illegal for writing auto insurance policies, and I think the government owes the IBAO an explanation for why it persists in other forms of insurance. September 2013 / The Ontario Broker

SUCCESSION PLANNING ent ways, what most people want is this: to live well in retirement, to give back to their families and communities, and to leave a legacy — financial or non-financial. But the need to accommodate living expenses for 30 years of retirement and the desire to leave a legacy can put enormous pressure on assets. Susan Latremoille Director, Wealth Management Richardson GMP Limited

After the Sale of a Business The business has been sold. Where does the seller go from here? Here is the scenario: You have sold your business and are now sitting on a pile of cash. What should you do with the money? In my practice, that is not really the start of the conversation with clients; the start of the conversation is what you want your money to do for you. In my book, The RichLife: Managing Wealth and Purpose, I explained how money is an enabler — not an end in itself, but a means to living the life you want. DECIDE WHAT MATTERS I usually start a conversation about what people want their wealth to do for them in the future by asking the following: “If you can imagine yourself on your deathbed, looking back on today, what would need to have happened for you to feel that you have lived your life without regrets?” While there can be many different responses to this question, it usually encourages some serious thought and lively discussion. Do you want to be more involved in community associations for which you have not previously had time? Spend more time at the cottage? Travel? Build closer relationships with family and friends? Hobbies, sports, art collections? Do you have a favourite charity that you want to spend time or money to help? While most people want to maintain their lifestyles, they also want to look back on healthy and happy children and grandchildren. Do you want to provide the means to help them lead full, productive lives? Although they may express it in differ12

The Ontario Broker / September 2013

THE PLAN While everyone’s needs differ, many business owners in retirement have these two things in common: the need to generate substantial cash flow from investments, and the desire to preserve capital. After talking through desires and concerns, there can be a more detailed discussion about exact income needs. We recap the goals, the strengths of the situation, the opportunities afforded them and any potential barriers to meeting goals. This outlines action steps to move the process to the next stage — the investment policy statement (IPS). We translate what you want your money to do for you into an IPS, which lays out a plan for attaining financial objectives. It considers preferences and constraints expressed by a client, and includes a recommended asset allocation — a breakdown of how money should be invested in various asset classes. As well, the client receives an investment plan outlining portfolio recommendations. There is no cookie-cutter element to how best to manage clients’ money. Each client is different; each has an individual portfolio designed specifically for his or her circumstances. Unlike banking-related investment firms, my firm has no proprietary products, so there is no vested interest in what is recommended. MANAGING RISK Because many business owners have had their capital tied up in their businesses and not a lot of liquid assets, they are sometimes leery of putting so much money into public securities markets. I follow the principles of diversification in all my investment planning and the recommended portfolio reflects this. To manage risk, an asset mix is divided appropriately between fixed income and equities. Different, carefully selected money managers are engaged to manage

different portions of the portfolio. Take the growth part of the portfolio as an example — the equities in the portfolio would most likely include Canadian, U.S., and international equities, both large and small companies, and exposure to emerging markets. A small but still significant part of the equity portfolio would be invested in alternative asset classes, such as hedge funds for protection against undue currency or market fluctuations, and real estate limited partnerships and private equity funds for additional diversification. With different people managing each part of the portfolio, I would monitor on an ongoing basis to ensure the portfolio remains true to a client’s objectives. PRESERVING THE LEGACY We often combine a specialized investment portfolio with an innovative use of insurance. Some owners have said, “I’ve just sold my company for over $100 million in cash. Insurance is the last thing I need!” Take the example of a client who had just sold his business for $20 million. The client wanted an annual income of $1 million to live comfortably and, in addition, wanted to leave an estate of $20 million to his two sons. A tall order, yes? Any financial advisor should be able to take a portfolio of $20 million and generate $1 million of annual income. But how do you preserve the $20 million for the estate? Our insurance expert came up with a solution that would deliver an estate of that amount, even with the client taking the desired annual income. The client also met with an estate lawyer to devise an estate plan to ensure that his wishes for his wife and two sons would be fulfilled. In the end, it was really an understanding of more than just the money part that helped the client establish new directions both in his family life and his financial life. For more information on wealth management advice, e-mail Sandra Balind at Sandra.Balind@RichardsonGMP.com or call 416/969-3051. The text is intended for informational purposes only and is not intended to constitute investment, financial, legal or tax advice. You should seek advice regarding your particular circumstance from your personal tax and/or legal advisors.

WELLNESS MATTERS

Lorraine Dauphinais Director, Prevention and Training Solareh

Achieving Life Balance Finding the right life balance can be challenging. Consider Lucy and Paul. Lucy is a young professional who works more than 60 hours a week. When she gets home from work, she is so exhausted all she wants to do is stretch out in front of the TV, but cannot help but think about the work awaiting her the next day. As for Paul, he has been working at the same company for 20 years, and has a proven track record of availability and performance. He loves his wife, and would have given her anything on their anniversary. Although he knew about it well in advance, Paul had to cancel their anniversary dinner because of work.

Lucy’s and Paul’s lifestyles are all too familiar to many people. There was a time when achieving balance between one’s personal and professional life came naturally. But times have changed. Unlike previous generations, the time and energy devoted to work have taken on massive proportions, often at the expense of our personal lives. Now, it is a constant struggle to reconcile work and other activities, often without much success. TAKE CONTROL The pace that we impose on our lives is almost always in the interest of performance. We want to be the best parents, the best employees, the best everything! But in the pursuit of “everything,” we risk losing sight of what is important. If you have gotten into the habit of coming home from work late every night, does that mean you feel your job is more important than your family life? If you are constantly concerned about your family, your kids and your parents to the point that you have trouble giving 100% at work, does that mean your job is interfering with your personal life? The role that you create for yourself in life, as well as the obligations you impose on yourself, should be based on true aspirations — what you really want to accomplish.

Of course, to achieve balance, there must also be a real desire to break old habits and to focus on priorities. SET YOUR own STANDARDS “I don’t have a choice.” How many times a day do you think this? In reality, though, it is rare for someone to be at the complete mercy of a situation. There is almost always a choice. In this context, remember that there is no universal standard that defines a balanced lifestyle. In fact, everyone has an ability to absorb the pressures and stress created by the various aspects of their lives. What is a hectic lifestyle to some may be seen as enviable by others. That is why each person must set his or her own standards. Do you have a balanced lifestyle? You be the judge. If you want to stop sacrificing your personal life and interests for the sake of your career, it is probably time to stand back and re-examine your life and priorities. Lorraine Dauphinais is Director of Prevention and Training at Solareh, a national company that offers employee and manager assistance programs, return to health and work services, and wellness programming. For additional information, contact Peter MacDonald, Account Executive, at 1-866-796-0812 or by e-mail at pmacdonald@solareh.com.

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September 2013 / The Ontario Broker

STATISTICAL ANALYSIS

Bill Morris Partner Navicom Inc.

BBiC… Two Years Later It is hard to believe that the brokers taking part in the 6th Beyond Best in Class (BBiC) will soon complete the program. Planning for the 7th BBiC session this November is well under way. Since the inaugural group of BBiC brokers

in the spring of 2011, 67 participants representing 35 brokerages have gone through the program. As one of the primary BBiC facilitators — Alex Gallacher being the other — I have had the pleasure of being involved with BBiC from day one and it has proved a fascinating journey. I am often asked by brokers why they should consider signing up for BBiC. It is a great question given the significant time and dollar investment that attending BBiC workshops require. My answer is always the same — I do not believe that maintaining the status quo for most Ontario brokers will guarantee success in the 21st century. We now know that in most markets, it will take more than simply “getting better” for brokers to maintain (or regain) their competitive advantage. The primary objective of the BBiC program is to kick-start transformational change within each participant’s broker-

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The Ontario Broker / September 2013

age — that is, encourage brokers to change the way they think. To be sure, this is not an easy challenge and definitely not for the faint of heart. But let’s take a hard look at why such a dramatic shakeup of the traditional insurance brokerage may be the only way to ensure that brokers maintain market share and remain sustainable over the long run. meeting expectationS It is now a familiar refrain that customer and consumer expectations in all industries are changing at an unprecedented rate. Call it progress, call it entitlement, call it the need for instant and real-time gratification, consumers worldwide are changing the way they choose to do business. Add to this the overwhelming impact of technology and, of course, the Internet — and it becomes very clear that most businesses must learn to adapt or risk eventual extinction. The good news is more and more brokers are starting to ask tough questions about whether or not they really are delivering value to their customers. And some brokers are already well along the road to transforming their brokerages. Two critical concepts that the BBiC program explores in detail are collaboration and innovation — arguably two areas that the insurance industry as a whole has not yet fully embraced. BBiC brokers soon learn that collaboration can be as quick and easy as emailing a fellow BBiC broker for advice or knowledge on a common problem. They also quickly see that fellow broker as less of a competitor and more of a valuable resource. On the other hand, finding ways to introduce innovation into daily brokerage operations or trying to think innovatively is perhaps the greatest challenge of all. While many BBiC brokers struggle with how to be more innovative, they realize they can never stop trying to plant the seeds of innovation and change whenever and wherever they can! So is the BBiC program a good investment? Perhaps the bigger question is this: Can your brokerage afford not to embrace significant, transformational change in the months and years ahead? For information on BBiC, contact Helen Dunlop at hdunlop@ibao.on.ca.

COMMUNICATION STRATEGIES

Lisa Leitch Sales Strategist, Speaker and Coach Teneo Results

Why Should Your Customers Trust You? Recently, I was talking to a prospective customer — a human resources manager — and he quickly informed me the firm was looking at four companies. Ugggghhh! Using my eight steps of consultative selling approach, I asked my best power questions to learn more about the company’s challenges and what representatives really wanted to accomplish. Knowing that I had tough competition, I asked one more power question before leaving: “Is there anything else you need to help you make this decision?” Without even a pause, he asked me to include my bio and said, “Why should we trust you?” Wow! This perspective made me look at the competitive situation much differently. “Why should we trust you?” is not the same as, “Why should we buy from you?” (The latter is a question salespeople usually anticipate.) Your insurance customers are inundated with many insurance options. It seems that wherever we turn, there is a billboard, radio ad or direct marketing postcard encouraging customers to get additional quotes to save money. building trust Your competition, especially direct insurance writers, have turned this into a full-blown price war, and loyalty has been eroded. Who can your customers trust? Here are two strategies that can be used to build trust and differentiate

yourself from the competition: 1. Ask yourself this tough question — why do your customers trust you? If you are having a tough time answering this question, then interview some of your current clients to get their perspectives. Once you figure this out, you will have a secret weapon that differentiates you from your competitors. 2. Use power questions to obtain a true understanding of the business goals and objectives of your prospects. A great way to open the door to a meaningful conversation is to schedule an insurance review or audit. Use the audit as a gateway to find out what is most important to customers so that you can

put together a strategic insurance proposal. You cannot win the trust of your prospects by delivering a quote. To truly differentiate yourself from the competition, ask good questions that showcase your business mindset. If you do that, your prospects will identify you as a peer — not just another salesperson. Lisa Leitch is a Sales Strategist, Speaker and Coach with Teneo Results, a CPSA Training Partner. Teneo Results facilitated workshops sponsored by Economical Insurance, called Provide More Value to Your Clients With a Winning Sales Strategy, throughout Ontario during April and May 2013.

A great way to open the door to a meaningful conversation is to schedule an insurance review or audit.

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September 2013 / The Ontario Broker

VIEWPOINT

Stephen Halsall, CCIB, CPIB President Insurance Brokers Association of Canada

A New Way to Price Risk Technology keeps on changing within the insurance sector in Canada at an unprecedented pace. The past few years have seen the development and rapid growth of an underwriting tool known as “telematics” or “UBI” — usage-based insurance. The term refers to the capture of information about the specific characteristics of a risk and the electronic transmission of that data to another location. This most often relates to auto insurance, and the recording of people’s driving habits and patterns, with this data used by underwriters to price risk. This is used widely in the United States and we have all seen that it is starting to be used in Canada by several carriers. protecting the consumer As the consumer advocate for insurance, the Insurance Brokers Association of Canada (IBAC) is monitoring this development and how it may impact Canadian consumers. As with any new development in the marketplace, there are certain consumer worries that IBAC shares and has agreed on a set of principles — which it is sharing with insurer partners, regulators and suppliers — that we are convinced the entire sector should follow to protect consumers. owner control The first principle we believe to be fundamental is that consumers have the right to the control and ownership of data relating specifically to themselves, their families and their businesses. 16

The Ontario Broker / September 2013

It is a consumer’s choice whether or not to share his or her personal information with an insurer or any third party. Further, consumers who do opt to share their data must have the freedom to educate themselves, to mitigate their risks and to manage their risk profile based on any data collected about them. Consumers will expect that any conclusions drawn will be transparent and that they will have the opportunity to modify the assessed risk profile by amending their driving behaviour. In the context of insurance rating, consumers have the right to know what factors are used in determining their risk status and how variables may impact them. Consumers further have the right to challenge the veracity of information collected about themselves and must be provided the opportunity to correct or stop the collection of information at any time. These ideas closely mirror concepts that are already established in Canadian law under the Personal Information Protection and Electronic Documents Act and similar legislation. intended purpose The second principle is that information must not be collected and used for any purpose other than that for which it was intended. Consumers must be guaranteed that information compiled for one reason — such as assessing insurance risk or credit granting — will not be used for any other purposes, since such practices could

put them at a disadvantage. Similarly, data used to evaluate a consumer’s driving profile for risk management purposes should not affect that same individual in the event of a claim. the right to choice And the third precept — which we hold to be true with respect to telematics or any other insurance model — is that consumers have the right to choice, to qualified and objective advice and to autonomous advocacy. Personal information used for risk assessment purposes should be conveyed in a common standard format to facilitate consumers’ control and understanding of their data. The use of telematics to establish a driver’s risk profile has significant implications for the auto insurance industry. The traditional manner in which insurance is provided to consumers may, in fact, be changing. The fundamental premise of insurance — that the larger population funds the claims of the few — needs to be balanced against the interests of the individual. As data becomes more readily available, insurance companies will have greater capabilities to tailor products specific to individuals or groups of individuals. IBAC will continue to monitor developments in this area across the country, and to advocate on behalf of consumers who may potentially be affected by them.

In the context of insurance rating, consumers have the right to know what factors are used in determining their risk status and how variables may impact them. Consumers further have the right to challenge the veracity of information collected about them.

FINANCIAL MATTERS

Tony Ngo Manager, Industry Programs BMO Bank of Montreal

Cash Management The cheapest money a brokerage owner can find may be closer than he or she thinks — in the brokerage. Accessing that money requires self-discipline and good management of cash, or what accountants refer to as “liquidity.” This can help improve profits, reduce the business risk of the brokerage and even enhance its value. Probably the best mantra when it comes to managing a brokerage’s cash is “in on a jet plane and out by dog sled” — meaning that you should accelerate cash inflow while decelerating its outflow. Brokerages manage two primary cash inflows — premiums from customers and commissions from markets. While the relative mix of agency versus direct bill business varies among brokerages, finding opportunities to speed up cash flow is not unique to either billing system. On direct bill business, consider leveraging your bank’s cash management services to receive commissions from your markets. While this may not necessarily speed up receipt of cash, the predictability of the payment dates is likely to improve as a result of eliminating delays related to mail or manual processing at the carrier. This, in turn, better allows the brokerage to plan its liquidity accordingly. Another opportunity to enhance cash inflows is through premium collection. If a brokerage is consistently providing credit to customers, careful consideration of the costs involved may be worthwhile. For customers who regularly stretch their premiums payable (and hence your commission), this may cause the brokerage to rely more on an operating line and incur interest expense.

Careful examination of the brokerage’s policies on overdue accounts — for example, daily monitoring, collection, cancellation and receipt of electronic payments — will help minimize the associated cash drain. Poorly managed receivables can ultimately result in higher bad debts, an obvious negative on cash balances. Additionally, you may want to consider having clients use a third-party premium financing solution or develop an in-house premium financing offer to alleviate cash strains created by habitually late payers. Ultimately, if the brokerage maintains positive general account balances, consult with your banker about the potential income-generating opportunities that also consider forecasted cash needs. Quite simply, it generally is not advantageous to be booked into an investment and to also be drawing on an operating line. factors to consider Decelerating cash outflows is another important component to liquidity. Some simple steps include controlling petty cash and advances; using credit cards for employee expenses (which

also helps with record-keeping); paying bills only when they are due; and examining any prepaids for advantageous discounts. In looking at payables under general expenses, it is most cost-effective to prepare for them in advance. Separate the payables into 30-, 60-, 90- and more than 90-day due dates and then segregate all payables by type: those offering discounts for early payment, those that demand/charge on overdue accounts and those that allow you to run long. Armed with this information, you will be better able to draw up a suitable payment schedule that maximizes cash on hand. An additional benefit of better under standing cash ins/outs is improved cash forecasting. Knowing well in June that the following February will see a brokerage running tight could prompt advanced changes in cash management or the need to set up an operating line (usually less than 10% of annual commissions). Taking this action in advance, rather than responding to an overdrawn account, is a great insurance policy for your brokerage.

Careful examination of the brokerage’s policies on overdue accounts will help minimize the associated cash drain. Poorly managed receivables can ultimately result in higher bad debts, an obvious negative on cash balances.

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September 2013 / The Ontario Broker

Community View Community Connection

Left to right: Sharon Westra-Walls, Tracy McDonald, Dwayne Yaremko, Shelley McCool, Allison Dearlove, Stephanie Carmichael, Lacey Peacock, Cathy Halley, Angie McCann, Sheryl Olson, Ashley Pettigrew, Jackie McAllister, Lyne Brown, Jim Rivington, Kate Courneya and Jeanie Askham. It was plenty of magenta and plenty of smiles as staff for Lake of the Woods Insurance celebrated the grand opening of its new location in downtown Kenora. The day was made even more special as staff held a charity BBQ, with all proceeds going to the Kenora & Lake of the Woods Regional Community Foundation. The volunteerdriven, charitable organization helps facilitate community philanthropy by working with donors and local charities and providing leadership on issues of community concern.

Shared Learning, Shared Benefits Left to right: Terry Reidel, Ron Schlegel, Lynne Short, Maureen McLachlin,and Brad Lawrence.

We offer customized financial solutions. Talk to us about our comprehensive program for IBAO members... available exclusively from BMO Bank of Montreal For information contact, Tony Ngo Manager, Industry Programs Tel: 416-927-5348 Fax: 416-927-6369 tony.ngo@bmo.com

The Ontario Broker / September 2013

Registered trade-marks of Bank of Montreal.

In late June, the Schlegel-University of Waterloo Research Institute for Aging announced the launch of a three-year project to accelerate the application of research to practice in senior living environments. This project was made possible through a generous donation from The Cowan Foundation, established in 1995 in honour of Frank Cowan, founder of Cowan Insurance Group and Frank Cowan Company. “By donating $300,000 to this program, we are supporting an important initiative that will impact communities across Canada, through shared learning,” Heather McLachlin, president of Cowan Insurance Group, says in a statement. The money will be used to fund a “research application specialist,” who will focus on one major research initiative at a time. The first initiative will address pro moting physical activity with social integration and cognitive stimulation across 12 senior villages operated by the Ron Schlegel family, adds the release from The Cowan Foundation.

Choice. Service. Expertise. At Aviva, our focus is simple – it’s on helping our broker partners win in the marketplace by providing what’s needed to serve and support customers.

Choice At more than 20 times the size of a common restaurant menu, our selection of over 2,000 products – including leisure and lifestyle and Ovation™ from Aviva – offers you the depth and breadth of products you need to meet your customers’ needs. Service We’re committed to helping you do business easier and faster. That’s why each year our Business Development teams travel over 1.7 million kilometres – the equivalent of 150 trips across Canada on the Trans-Canada highway – and our Concierge teams interact with our broker partners over 1.2 million times. That’s once every 26 seconds, 365 days a year.

Expertise With leading-edge expertise in personal and commercial lines underwriting and

claims, we responded to over 3,000 claims within two weeks following the Calgary and Toronto floods. Proof that Aviva is here when you need us. These are just a few of the reasons why Aviva is the right choice for you, and the right recommendation for your customers. Speak to your Account Executive to find out more.

IBAO School of Insurance EDUCATION FOR BROKERS BY BROKERS

FALL OFFERINGS RIBO LICENSING RIBO I

For individuals interested in becoming an insurance broker, the Basic Broker program covers all educational requirements established by RIBO.

RIBO II

Offered over one week to prepare for the RIBO Level II Management Exam, this is an excellent refresher for those already holding Principal Deputy Broker status or those wishing to upgrade management skills.

Date & Cost www.ibao.org/education

RIBO I Orientation Nov 19, 2013 I $100 RIBO I Course Nov 25 - Dec 6, 2013 I $580 RIBO II Course Nov 4 - 8, 2013 $550 Members I $880 Non Members

Beyond Best in Class

Check our website for 2013 education courses and programs ibao.org/register

Beyond Best in Class is a five-day program challenging participants to evaluate business operations against evolving market conditions and overcome technological challenges. It provides tools to materially transform the way participants think about, and manage, their brokerages. The BBiC program is designed to work most effectively with two senior brokerage personnel, ideally one Broker Principal/Owner and one Senior Operations or Department Manager.

Date & Cost

Module 1 - 3 I Nov 12 - 14, 2013 Module 4 - 5 I Feb 11 - 12, 2014 $5500 (two participants per brokerage)

CAIB National Designation

This four-part national designation program takes an in-depth look at technical coverages and business management strategies in the Canadian insurance marketplace. Completing the CAIB designation enhances technical knowledge, general business competency and professionalism.

CAIB Immersion

This program format is offered as a five-day intensive course consisting of hands-on exercises, practice exams and group discussion.

Date & Cost

CAIB 4 I Nov 4 - 11, 2013 $899 Members I $1169 Non Members

Developing a Leadership Mindset Participants learn the powers of influence and how they can be applied in the workplace. The program is completed over four to five months and consists of pre-work, four one-day interactive seminars, implementation exercises, ongoing coaching sessions with a facilitator and progress follow up with the participants’ own Manager or Broker Principal.

Date & Cost

Part 1 Series ($1000) Seminar 1 I Dec 10, 2013 Seminar 2 I Dec 11, 2013 Part 2 Series ($1000) Seminar 1 I Apr 15, 2014 Seminar 2 I Apr 16, 2014

CSIP RETREAT This three-day retreat gives CSR and Personal Lines Managers the chance to be both educated and rewarded for exceptional performance. The program allows participants to step away from day-to-day brokerage activities and into a relaxed, refined learning environment where they become equipped with best practice solutions that define the CSIP program. Held at one of Toronto’s première downtown venues – the Pantages Hotel Toronto.

Date & Cost QUESTIONS? Contact the IBAO School of Insurance at 416-488-7422 or 1-800-268-8845.

CAIB DESIGNATION

Nov 12 - 15, 2013 I $1750 (Members only) ***Includes accommodation, dining, seminars and entertainment.

WEBINARS Getting Started in Commerical Lines This four-part webinar teaches participants the basic foundation of commercial property and liability coverages, including commercial risk assessment.

Date & Cost

Module 1 I Nov 19, 2013 Module 2 I Nov 21, 2013 Module 3 I Nov 26, 2013 Module 4 I Nov 28, 2013 $125 per module or $399 for the full series