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CONTENTS
FEELING Hot, Hot, Hot COPY & FEATURES SENIOR EDITOR Vernon Clement Jones ASSOCIATE EDITOR Donald Horne CONTRIBUTORS Danielle Wade, Julia Palmer, Nikki Heald, Darren Trott, Therese S. Kinal, Peter Bowman, Steve Yendall COPY EDITORS Vawn Himmelsbach and Sophie Nicholls
ART & PRODUCTION GRAPHIC DESIGNER Joenel Salvador
SALES & MARKETING NATIONAL ACCOUNT MANAGER Jesse Rumm ASSOCIATE PUBLISHER Trevor Biggs GENERAL MANAGER SALES John Mackenzie MARKETING AND COMMUNICATIONS Claudine Ting PROJECT COORDINATOR Jessica Duce
CORPORATE PRESIDENT & CEO Tim Duce OFFICE/TRAFFIC MANAGER Marni Parker EVENTS AND CONFERENCE MANAGER Chris Davis
Editorial enquiries tel: 416 644 8740 • Ext: 231 donald.horne@kmimedia.ca Advertising enquiries tel: 416 644 8740 • Ext: 237 jesse.rumm@kmimedia.ca Subscriptions tel: 416 644 8740 • fax: 416 203 8940 subscriptions@kmimedia.ca KMI Publishing 312 Adelaide Street West, Suite 800 Toronto, Ontario M5V 1R2 insurancebusiness.ca Copyright is reserved throughout. No part of this publication can be reproduced in whole or in part without the express permission of the editor. Contributions are invited, but copies of work should be kept, as IB magazine can accept no responsibility for loss.
Polar vortex notwithstanding, it has been Hot, Hot, Hot at Insurance Business. Compiling our Hot List (page 18) for this issue was a labour of love, connecting with the industry’s movers and shakers as well as its rising stars. The talent out there is considerable, and certainly we couldn’t identify everyone deserving of a pat on the back and a moment in the sun. Still, so many on our list have already been acknowledged for the real strides they’re making on behalf of the industry. Eileen Greene (page 20), for example, became the first North American to win the International Women in Sales Award for Insurance, claiming the award in a ceremony at London’s Savoy Hotel. Right here on Canadian soil, George Cooke may now officially be in retirement but he contines to make waves in the industry. Starting on page 10, he offers his take on where insurance is headed, which includes the growing use of telematics. Last year was filled with catastrophe – but what about the cleanup? There are a lot of stories about the strained relationship between restorer and insurer – but how about what works? We took a look at three restoration projects that prove the lamb can lie down with the lion. (pages 38-43).
Cheers, Donald Horne Associate Editor
CONNECT
Contact the editorial team:
donald.horne@kmimedia.ca
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IN THE NEWS
RSA’S PREVENTION TIPS
A TITLE NO ONE WANTS
As insurers and police step up the fight against car thieves, it’s getting harder to determine ‘Canada’s car-theft capital’ Canada may need a new city to call its ‘car theft capital.’ Recent police statistics from 2013 show the theft of 58 vehicles a month in Regina, Saskatchewan, which would place the prairie city near the top of a list no one wants to be on. During the mid-1990s, Regina was known as the ‘car theft capital of Canada,’ but since passed that notorious label onto cities like Winnipeg and Surrey, B.C. The Insurance Bureau of Canada recently released its annual list of the top 10 most frequently stolen vehicles in Canada and the criminals are getting a little more creative in how they operate. “Organized criminals are now dismantling higher-end vehicles and exporting them in pieces instead of as whole vehicles,” says Rick Dubin, vice president of investi-
gative services with the IBC, “because they are less likely to be detected. It’s a trend we will continue to watch.” These vehicles get reassembled as far away as West Africa and then resold, he says. Dubin believes this new creative approach is a reaction to detecting and seizing $8 million worth of stolen vehicles in 2013 by Canada Border Services Agency, working in partnership with IBC investigators at the ports of Montreal and Halifax. The 2000 Honda Civic SiR 2DR sits atop the top 10 list for the second year in a row and high-end SUVs and Ford trucks hold most other spots. “Thieves consistently target the Honda Civic to chop for parts,” says Dubin. “Those parts are easy to resell because there are so many Civics on the road.”
Always caution clients about doing the basics like: leaving the car running with keys in it, making sure that the doors to your home and business are always secured so thieves don’t have easy access to steal the keys, avoid parking in poorly lit areas (it may not be a total solution, but it can help prevent break-ins)
How can the insurance industry work with law enforcement to curb theft? Most insurance companies have SIU Teams in their Claims departments that work closely with the police and law enforcement when required and to prevent theft.
4.0
The top 10 stolen vehicle claims taken at RSA Insurance
3.0 2.5 2.0
The Chevrolet / Silverado is on there twice, but they are different models
1.5 ($) 1.0
1. Chevrolet / Silverado
0.5
2. Chevrolet / Silverado
0
3. Ford Truck F350 SUP
-0.5
4. Dodge Truck Caravan
-1.0
5. Dodge Truck Grand Caravan
-1.5
6. Dodge Truck RAM 1500
-2.0
7. Ford Truck F150 XLT
2007 Accident Benefit Premiums*
2008
2009
Accident Benefit Claims Payouts & Costs*
2010 Total Ontario Auto Estimated Losses & Profits
2011
HOT SPOTS FOR CAR THEFT
Auto Theft by City (per 100,000 people) 2009 figures
PREMIUMS, PAYOUTS, COSTS, ESTIMATED LOSSES & PROFITS IN BILLIONS 3.5
The top 10 most frequently stolen vehicles across Canada are: 1 2000 Honda Civic SiR 2DR 2 2006 Chevrolet Trailblaizer SS 4dr 4wd SUV 3 2002 Cadillac Escalade 4dr 4wd SUV 4 2005 Cadillac Escalade 4dr 4wd SUV 5 2006 Ford F350 Sd 4wd PU 6 2005 Cadillac Escalade Esv 4dr Awd SUV 7 2006 Acura RSX Type S 2dr 2D 8 2007 Ford F250 Sd 4wd PU 9 2007 Ford F350 Sd 4wd PU 10 2003 Acura RSX Type S 2dr 2d
What can brokers do to better prepare their clients to prevent vehicle theft?
8. Ford Truck F350 SD 9. Toyota Corolla CE 4
1. Brantford 2. Kelowna 3. Winnipeg
4. Abbotsford/Mission, B.C.
6. Regina 7. Vancouver
10. Honda Accord EX 4DR
8. Trois-Rivieres
Total Claims 2013 : 912
9. Hamilton
Total Claims 2012 : 1,023
622
5. Saskatoon/Edmonton (tie)
*For private passenger vehicles only
Source: IBC with data from General Insurance Statistical Agency (GISA)
686 659 629 601 575 464 436 425
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STATISTICS
WATER, WATER, EVERYWHERE
Canada - June 2013 Structures/Claims: 25,000+ Economic Losses: $5.3 billion+ Insured Losses: $1.95 billion
Economic losses caused by flood events in 2013
ECONOMIC LOSSES: Canada, $5.3 billion Australia, $2.5 billion United States, $2.3 billion Philippines, $2.2 billion INSURED LOSSES FROM 10 SIGNIFICANT FLOOD EVENTS Low insurance penetration in regions such as China, Indonesia and Southern Africa has meant that insured losses in those regions is fairly insignificant despite the mighty impact of events such as Super Typhoon Haiyan in the Philippines. As a result, Central Europe tops the list of areas most affected by flood related insurance losses, with $5.3 billion in claims. In total, the following ten major flood events caused $9.6 billion in insured losses.
United States - September 2013 Structures/Claims: 25,000+ Economic Losses: $2 billion+ Insured Losses: $150 million
Argentina - April 2013 Structures/Claims: 105,000+ Economic Losses: $1.3 billion+ Insured Losses: $503 million
INSURED LOSSES: Canada, June, $1.9 billion Australia, January, 862 million United States, September, $150 million Philippines, November, $100 million INSURED LOSSES (USD) FROM FLOODING EVENTS IN 2013
6,000 5,000 USD millions
Southern Alberta was hit hard by flooding this past year, with a whopping $1.9 billion of insured losses. But it didn’t come close to the economic devastation in Europe and China. Major flooding in Europe caused the worst economic losses in 2013, topping $22 billion. China, hit by multiple severe flood events throughout the year, follows as the second worst affected region with at least $17.3 billion in losses. In total, $63.2 billion of known economic losses have resulted from flood events in 2013 (estimated to the end of November 2013. Source: AON Benfield).
4,000 3,000 2,000 1,000 0
Central Europe (June - $5.3b)
Canada (June - $1.9b)
Australia (January - $862m)
Argentina (April - $503m)
Indonesia (January - $311m)
India (June - $250m)
India (October - $162m)
United States (September - $150m)
Philippines(November-$100m)
New Zealand (September - $12.5m)
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Central Europe - May/June 2013 Structures/Claims: 100,000+ Economic Losses: $22 billion+ Insured Losses: $5.3 billion
India - June 2013 Structures/Claims: 25,000+ Economic Losses: $1.1 billion+ Insured Losses: $250 million Philippines, Vietnam, China November 2013 Structures/Claims: 1.3 million+ Economic Losses: $5.8 billion+ Insured Losses: $100 million
India - October 2013 Structures/Claims: 75,000+ Economic Losses: $260 million+ Insured Losses: $162 million
Indonesia - January 2013 Structures/Claims: 100,274+ Economic Losses: $3.31 billion+ Insured Losses: $311 million
Australia - January 2013 Structures/Claims: 87,843+ Economic Losses: $2.5 billion+ Insured Losses: $862 million
ECONOMIC LOSSES (USD) CAUSED BY FLOODING IN 2013
New Zealand - September 2013 Structures/Claims: 2,000+ Economic Losses: $20 million+ Insured Losses: $12.5 million
USD millions
25,000 20,000 15,000 10,000 5,000 0 Central Europe ($2.2b)
China ($17.3)
Canada ($5.3b)
Indonesia ($3.3b)
Australia ($2.5b)
United States ($2.3b)
Philippines ($2.2b)
Pakistan ($1.9b)
India ($1.3b)
Argentina ($1.3b)
Russia ($1b)
Cambodia ($1b)
Thailand ($579m)
Africa ($573m)
Other ($438m)
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CYBER LIABILITY
HOW TO OPEN A CYBERCRIME CONVERSATION WITH CLIENTS Almost half of Canadian adults have been victims of cybercrime – so why aren’t clients knocking down the door asking for cyber liability insurance? Greg Markell tells brokers how to open that discussion
A reality today is that we, as a society, are hyperreliant on technology in our day-to-day lives. From industry, to commerce, to our own personal daily activities, we’ve leveraged technology to make things easier on ourselves. Here is where it starts to get scary: in back-to-back years Symantec has tracked Canadians affected by cybercrime, and the results are staggering. When you look at the implications that a cyberattack can have on a business, the numbers get even larger. Online retail has been a highly targeted segment for hackers. For example, Target just recently released that they had fallen victim to a data breach in its U.S. stores to the tune of 40 million customer credit and debit card accounts. This event sounds eerily similar to the 2007 case concerning TJX Cos., when 45 million customer accounts were exposed to possible fraud. The impact on business is significant, and for this reason should be discussed with any client that is holding, or has access to, client data. The estimated cost to TJX Cos. was reportedly $256 million, and involved a number of suits coming from its banking partners. Perhaps more pertinent to the public eye, it had a direct impact on the company share price, which dropped 5 per cent within five days of the announcement of the data breach. With the increasing cost of notification expenses, the evolvement of the Canadian process of certifying a class, and the sophistication of hackers - Canadian businesses need to be very concerned with these trends. While the above cases concern huge North American companies, the dynamic of the Canadian workforce is weighted more heavily toward small to
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medium enterprises (SMEs). With 90 per cent of the workforce working in organizations with fewer than 500 employees in 2012, and 31 per cent of all cyberattacks targeting businesses with less than 250 people (according to statistics from Industry Canada), small business owners should have the same sense of concern as the Fortune 500’s who have full scale Enterprise Risk Management policies. An insurance broker is a client’s trusted advisor, and should try to understand all facets of their business. Cyber-related crime and privacy liability exposures are only going to increase going forward, while businesses will rely more heavily on their e-commerce platforms and their internal computer systems. The opportunity to add value beyond a simple contractual purchase in the insurance-buying cycle becomes something that should be recognized. Even if all operations concerning data handling is outsourced to an outside service provider, the trend in litigation is to name everyone involved. If this is the case a client could be forced to defend themselves in a suit, which is not inexpensive. By helping a client recognize where they could be exposed to a loss as a first step in preventing it. Outside of insurance solutions for cyber-crime, there are many ways to help a client in setting up a first line of defense.
Recently, the government of Canada put out a guide for SME’s entitled: GETCYBERSAFE GUIDE FOR SMALL AND MEDIUM BUSINESSES, which provides a fantastic foundation with which brokers can help clients identify what risk mitigation techniques would provide the greatest value, at the most economic price. Furthermore, it can be used to create a bespoke solution to any client’s risk management requirements. As an insurance broker, and trusted advisor, it is important to try to stay ahead when helping clients mitigate scenarios that could potentially affect their, and their businesses’, livelihood. With this in mind, insurance brokers should not hesitate to ask clients about the strategies they employ when it comes to protecting consumer data. Even beyond consumer data, first party data should be considered as well. It is not uncommon for hackers to target trade-secrets when phishing, and if clients with a single revenue stream are breached it could have a significantly negative impact on their business. There is no shortage of examples of Canadian businesses affected by cyber-crime. With cases being reported daily, a simple Google search can provide countless examples to prepare a broker for a client meeting. Perhaps another simple, yet completely ironic, reminder of how reliant upon technology society has become.
46%
of Canadian adults were victims of cybercrime, resulting in a total net cost of $1.4 billion Even more frightening still: the numbers for 2013 have doubled, and that cost is now estimated at
$3billion
Greg Markell is an Account Executive @ Jones Brown Inc.
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EXCLUSIVE INTERVIEW
STILL COOKE-ING Mergers, mutuals and the state of auto insurance – no topic is taboo in this no-holds barred interview with George Cooke, former CEO of The Dominion
George Cooke stepped away from the insurance industry a year ago – but his passion and opinions burn as brightly as before, and he shows no signs of slowing down. Having gone into his own version of retirement from The Dominion, he remains very much active as chair of the board of directors of OMERS Administration Corporation and, more generally, a guiding voice for the industry. In an exclusive interview with Insurance Business magazine, it seems only fitting this industry icon and visionary talk about his first love – insurance – as he drives out to an appointment in Waterloo about telematics.
Insurance Business: Let’s start off with a hot button topic: can Ontario auto insurers feasibly meet the 15 per cent premium reduction target? GC: I have to be careful with this one. I want to qualify by saying I’m a little bit out of date, having been out of the industry for a year. Having said that, one thing I suspect is reasonably certain is costs have tended to go up over that year. There’s an inflation that sits inside what claims cost – I see no reason that should have abated in any way over the year. A year ago, there was no way – without further changes to the system – that there was a 15 per cent margin available to be passed through in price. It
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didn’t exist. It was an amusing calculation the NDP dreamt up somehow – and they’ve never disclosed how they did it – and the Liberals seem to have endorsed it; albeit having spread it over a longer period of time. There were a number of reform measures that have come forward already – they don’t instantaneously result in reduced costs. They take time to work into the system, and the measures that have come forward, in my view, don’t come close to producing 15 per cent in cost savings.
IB: You were a part of the Anti-Fraud Task Force, and the report that many point to as potentially saving the industry that 15 per cent. Do you still stand by those findings? GC: One of the commitments that the Ontario government made, which was a fabulous commitment,
was to implement the changes recommended by the Task Force that had been set up by former Finance Minister Duncan, dealing with the various issues around fraud. If you read the task force report – and I was a part of that task force – there are certainly estimates in there that say the impact of fraud on average is in the range of 15 per cent of the auto premium. So, if in fact you had implemented those measures and they were in place so they were producing the cost savings that were associated with them, looking for the 15 per cent goal is not unrealistic. The problem is there are a number of measures that are not implemented, and some of those are being altered as they are being implemented. So, you can’t say of the task force 15 per cent savings, ‘here it is today.’ It will be three years in the system or even longer until those savings come out of those types of reforms.
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EXCLUSIVE INTERVIEW
IB: Are there other avenues out there to realize a cost savings for drivers? GC: There are other initiatives that you can undertake to change how this product is defined, or alternatively, the way in which the defined product as it currently exists operates, that would produce additional cost savings. It is clear to me there has not been a healthy dialogue anywhere on how those measures might look enough, or how you would implement them. My personal view is that without further reform of some kind, or much more immediate implementation of the anti-fraud recommendations, the goal of 15 per cent is unrealistic. There’re all kinds of things that can be done. The problem isn’t unsolvable. Just so this is very clear: it can all be introduced in the private sector – there’s absolutely no need to revert to this discussion that people continue to revert to about public ownership. It has absolutely nothing to do with how you work your way out of the high price of insurance.
IB: What is the danger of forcing change? GC: What we need here is to get on with the reform initiatives. But if you come and try to artificially through some expanded authority that they gave FSCO, artificially reduce premiums below the level of cost, all you’re going to do is create huge market availability issues to consumers, and you’ll get a mess in the marketplace. I’m not suggesting slow down, but you need change before you get that kind of premium reduction.
CAT DEFINITION IS CATASTROPHIC
IB: The discussion on catastrophic
definition has been opened up once again. Can costs be tackled by revisiting personal injury tort claims? GC: You have situations, for example, on a personal injury Tort claim, where the prejudgment interest cost is calculated at a number that is two or three times inflation; which is absolutely ridiculous. And that is only the case for personal injury tort in that segment. If you have a liability claim on something entirely different, you calculate interest on a lower rate. If you simply adjusted the rate – which should have been adjusted five or six years ago down to something resembling the rate of inflation – you’d
TIMELINE 1992 Became President and CEO of The Dominion
August 9, 2012 Announces retirement plans, steps down as President of The Dominion of Canada General Insurance Company.
December 31, 2012
Steps down from role as CEO.
June 30, 2013
Steps down as Executive VP of E-L Financial, but remains a Director of The Dominion
get an immediate cost savings in the system. But nobody wants to touch that for some reason, which is absolutely mystifying to me.
IB: Is it worth maintaining the catastrophic definition in auto insurance? GC: There’s been a report on the catastrophic definition; that report is now at least three years [old and came] from an expert panel, and it’s never been dealt with by the government. My personal view – which is a personal view – is to get rid of the catastrophic definition altogether, make it disappear. It was a wonderful idea when it was introduced in the mid ‘90s, but it hasn’t worked properly for anybody. It is imposing costs in the system that needn’t be there, transaction costs among them; when you take that definition out, what you have is the ability as an insured to buy optional coverage, if you want that protection. Those changes were introduced by Minister Duncan back in September of 2011.
IB: What should the minimum policy limits be? GC: You have to change those minimum policy limits to $1 million, arguably $2 million. Ninety-three per cent of the population right now buys in the order of $1 million in spite of the fact that they can buy $250,000, because they need that protection to cover their assets in the event of an at-fault claim. And if you were to pull the CAT definition out, the reason you’ve got to make that minimum policy limit change is to get a better balance of who is paying the resulting premium coming out the other end, in terms of who’s at fault and who isn’t.
POLITICIANS AND LAWYERS
IB: Is that where politicians should be
looking to find that 15 per cent? GC: Those are all changes that could be made without regulation, that will take cost out of the system and make that 15 per cent goal reasonably more attainable, more quickly. I could go on with a list of five or six others – it’s not rocket science to find these things. Quite frankly, if consumers understood it, they would make these choices. I actually think the consumer already buys the optional net rehab attendant care product on a first
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party basis, because the CAT definition is so convoluted, it takes three or four years after an injury to even know if you are going to have access to it.
IB: Do you see resistance to these changes within the legal community? GC: Go ask the trial bar what percentage they take out of a settlement on accident benefits or tort. Just ask those guys if there is a million-dollar settlement, how much is going to the injured person. I think you’ll find the percentage amounts are staggering. If they’re not going to behave sensibly, put some caps in place as to what the transaction costs can be. There are jurisdictions in the U.S. that have done that. All the things that I am handing you are not politically popular; but if you want to get the cost of auto insurance down without harming mom and dad consumer, any one of those would have a material
movement in the cost with a resultant material movement in the price.
DESJARDINS TAKES OVER STATE FARM
IB: The news of Desjardins taking over
the State Farm Canadian operations came as a thunderbolt. How do you see it changing the insurance landscape here? GC: It is going to create quite a power house for Desjardins, if they can actually pull the integration off. I believe it makes them the second largest company in the P&C space, behind Intact. It is interesting, because State Farm has a captive agency force, whereas I don’t know what those issues will be – I have to imagine that captive agency force, in terms of the integration, will have something to say about how quickly it goes. It would be naïve to expect that there won’t be some issues that arise out of it.
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EXCLUSIVE INTERVIEW
Allstate went through this a few years ago, through a major change in how they approach their captive agents, and there were a number of defections and a number of law suits. So if you look at the Allstate example, it is expected you will see something that is not dissimilar here.
IB: Can the Western Financial acquisition tell us anything of how it will play out for State Farm? GC: Desjardins not that long ago acquired Western Financial Group, which was 100 percent broker, and they seem to have maintained those broker relationships. I would venture a guess that a lot of the growth is coming through a direct play in a lot of the urban centres in Alberta. So, likely, a broker impact that is not hugely material in the short term is likely more material in the mid-tolong term. I suspect that Desjardins is much more of a direct play than a broker play.
If you have a liability claim on something entirely different, you calculate interest on a lower rate IB: Desjardins has been a strong proponent of telematics within Quebec and Ontario. Should independents be concerned that they will leverage that product to expand nationwide in the auto insurance sector? GC: So if I were sitting as an independent broker, I would be far more interested in how I was going to exist in a world that will be engaged in change through technology. I would not be worrying what Desjardins has done with State Farm. The issue for the broker is that as it sits – it becomes the critical issue of the moment, and this is actually true for all aspects of distribution – it isn’t the ownership issue; it is now the prevalence of telematics. Once it becomes more widespread, which it will, it is a very disruptive technology. It will transform the way in which products are distributed. If you think of Desjardins, I believe they are the only company in Ontario that is using telematics for purposes of pricing a product. But it likely becomes more of a threat to the brokerage side, simply because telematics – depending on how it is introduced, if you copy what Industrial Alliance has done with it in Quebec – appears to be a very effective and efficient way of using it, taking
the intermediary out of the equation altogether, whether it is a captive agent or a broker.
IB: Did the announcement take you by surprise? GC: There were rumours for several months all over the place that Desjardins was looking. I am surprised to some extent that State Farm sold; State Farm made such a substantial contribution of funds a year or two ago when they injected a huge amount of capital and it looked like they were committed to being here (in Canada). If they had done this two years ago, it would have surprised me less.
IB: Is this just a continuation of the trend of mergers and acquisitions in the channel? GC: We may be in for quite a period of change in the insurance space, and of course the recent acquisition by Travelers of The Dominion is another substantial, financially strong move. They bought something that was roughly four times their own size. Part of the story that isn’t told, I think, means that it (the channel) isn’t more concentrated than it is, because competitors on the life side and the banking side remain quite, quite ‘un-concentrated,’ if you will. It is reasonably un-concentrated, and part of the reason is ownership. The fact that there is no easy way to de-mutualize; so now you are seeing State Farm, assuming it is an asset sale, being taken over. It is not a new way of doing it, but it is the first major way that that’s been done in the P&C business with a mutual for some time.
DEMUTUALIZATION
IB: Demutualization has been on the
backburner for a while. You’ve been quoted several times that it will never happen. Do you still hold that opinion? GC: I imagine somebody is going to ask the CEO at Economical what she thinks of this particular plight, given her almost four year engagement with the finance department in Ottawa around the demutualization program. Going back four years now, you’ll find quotes from me all over the place that state ‘this will never happen.’ Well, it’s been four years, so that looks like a rather good call on my part.
IB: Why is that? GC: The reason for that, quite frankly I still maintain, is that when the life industry
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de-mutualized, there was a very different structure, a very different combination of mutual and non-mutual policy holders, and you had companies with huge international exposure that needed access to world capital markets. So from the federal government’s view, they had a reason to want to do it. I don’t think those similar conditions exist in the P&C space at this point in time, and you don’t see any uniform push from the mutuals to come forward with rules. So, if you’re the finance minister and you’ve got 15 problems that need to be dealt with, why would you spend your time on something that is largely irrelevant? It’s not as if the finance minister doesn’t have other things to do.
IB: Is the State Farm takeover a sign of movement in the mutual space? GC: I’m presuming this is an asset sale that effectively allows what was a mutual presence to move into the Desjardins structure. It is just an interesting wrinkle. One of the joys of being retired is not having my desk flooded with five research reports by 4 o’clock with everybody telling me what they think about this.
SOME FREE ADVICE
IB: The magazine is showcasing Hot
Brokers and the technologies and services they use to make them successful. What is hot out there right now that brokers should be aware of? GC: Telematics. I think that the challenge for the independent broker, any broker or agent really, is to realize that ultimately auto insurance is undergoing a change in how it is measured: the risk selection, rating, pricing equation is going to be done through telematics in some way. Telematics enables a whole suite of value-added propositions to be done with it. Somebody in the distribution chain is going to end up capturing that customer. So, what do we know? We know that we manufacture cars; we know that we sell cars; we know they have to have insurance; we know that they have collisions; and we know that we have to repair them. Along that chain, there’s a whole line of different people that are involved in the equation – but when the technology comes in, when telematics comes in – it is going to change the customer relationship throughout the whole equation. That will impact the insurer, which will impact
the broker – it will be very transformational.
IB: Is the industry – and by extension the regulators – moving quickly enough to embrace telematics? GC: If I am talking to you, I’m moving my lips. If you had a son or daughter and they are talking to each other, their lips aren’t moving at all – they are moving their fingers. They talk in a very different way than we do – and that is the world we are moving to. My advice to any participant in the distribution channel is this change is coming, and don’t ignore it. Figure out how you want to define your interest here – hopefully it will be defined in the context of a better world for the consumer, because that is one that is sustainable long term. Figure out what works for you, and go out and do something about it. There’re a lot of people looking, not a lot of people acting – including the regulators. Regardless of what telematics product they choose, it is going to be a big factor in the distribution area, and there is a lot of companies that haven’t started yet that are going to have to start.
IB: What are you most proud of from your days working in insurance? GC: If I think of one event I was most proud of, it had nothing to do with auto insurance – it had to do with the fact that when I came into the business in ’92, the company I joined had acquired the Canadian Indemnity Company, which had insured the Red Cross. And it was in the early days of all the litigation around tainted blood. In a period when something like this had never been done anywhere in the world, rather than sit back and litigate for years the outcomes related to that, we were able to force a situation involving more than 40 insurers and all the levels of government in Canada, to put an assistance program in place for people that had been affected. While they were still alive, they were getting some sort of compensation, as opposed to something going to their estate 10 years after their death following years of costly litigation. I actually came up with that idea, and quite frankly, at the time people thought I was out of my mind in that it would be impossible to do. But we brought insurers, pharmaceutical companies, reinsurers, and governments together and worked out a settlement.
RECENT WORK HISTORY Previous to E-L Financial Corporation Limited (The Dominion), he was with S.A. Murray Consulting Inc. - a government relations consulting firm – in the capacity of vice president in charge of the Ontario Division, from 1990-1992. Prior to that, Cooke was general manager of the Automobile Insurance Board (now a part of FSCO), from 1988-1989. Cooke left The Dominion of Canada General Insurance Company after 20 years to go to OMERS.
VOLUNTEER / BOARDS • Member of the Investment Committee (The Dominion) 19922013 • Director of the Insurance Bureau of Canada 1992-2013 • Committee Member Hydro One 2010-present • Committee Member AECL 1995-1999 • Member of the Investment Committee Empire Life Insurance Company 1992-2002 • Member, Steering Committee Auto Insurance Anti-Fraud Task Force 20112012 • Chairman Property & Casualty Insurance Compensation Corporation 2009-2011
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FEATURES
PERSEVERANCE
PAYS Receivables insurance is a lucrative market not many brokers are taking advantage of – but should. And all it takes is a little bit of perseverance
As an entry level property and casualty underwriter in 1981, Mark Attley hadn’t heard of receivables insurance, much less realize the trajectory that would one day lead to him becoming president of the Receivables Insurance Association of Canada. “Receivables insurance gives businesses the confidence required to expand sales with buyers without fear of the unpredictable,” says Attley. “It also gives bankers, who are in a position to influence the use of receivables insurance, the confidence to back larger receivables loans at more favourable rates – fostering faster company growth.” Fast-forward to 2008, and Attley, now age 49, has just sold his company Millennium CreditRisk Management – his Ontario-based brokerage with $10 million in annual premium turnover – to Princeton Holdings in Cambridge, Ontario, which also owns Toronto-based Guarantee Company of North America. Although comfortably semi-retired at the age of 52, he agrees to assume the role of president of the Receivables Insurance Association of Canada, later
directing the launch of the new website and broker awareness campaign just last year. And despite enjoying an early retirement, Attley does regret not taking advantage of the receivables market earlier in his career. “If I had to do it all over again, I’d aim my arrow straight at receivables insurance,” says Attley. “It’s a great product with a great future that many more brokers should take advantage of.” Receivables insurance is a set of financial planning tools used by Canadian businesses to protect corporate balance sheets against unforeseen trade disruptions or political turmoil while fostering faster company growth. Attley’s career began in the early 1980s with an invitation from a family friend to begin a management training program at Crum & Forster, a large U.S. commercial P&C insurer with its Canadian headquarters in Toronto. Upon completion of his training in late 1982, Attley was transferred to Ottawa to manage the Crum & Forster branch. His primary objective was to build relationships with brokers in Eastern Ontario. In 1985, with a promotion to Business Development Manager for Western Canada safely in hand, a return from a three-week holiday in England was greeted with several job offers – one of which was to join the brokerage ranks and stay in Ottawa. He decided to accept the offer and remain in the Ottawa Valley, where he and his young family were putting down roots. As a broker, Attley’s focus turned to Ottawa’s burgeoning tech sector, specializing in errors and omissions insurance unique to the needs of fast-moving Information Communications Technology companies. “I knew that having a niche focus is a competitive
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advantage in the commercial insurance market,” says Attley.
AN INTRODUCTION TO RECEIVABLES In 1986, his employer was acquired by a larger Ottawa brokerage company. And after six years, in a desire for more independence, Attley moved to another leading Ottawa-based brokerage, Binks Insurance Brokers, where he was introduced to receivables insurance by Ron Doyle, who had a background as an executive with Trade Indemnity and Export Development Canada (EDC). Attley and Doyle identified an opportunity in what was then a nascent niche for Ontario brokerages, offering receivables insurance – also known as trade credit insurance. Canada’s vastly under-insured state of corporate receivables introduces undue risk on working capital loans, inhibits the amount that a business can be loaned, and also forces higher interest rates on business clients, says Attley, artificially restricting sales growth. “If an adverse economic or political event occurs that affects a company’s ability to be paid for goods or services in transit or already provided, a receivables insurance policy pays out,” he says. “Receivables insurance gives businesses the confidence required to expand sales with buyers without fear of the unpredictable. It also gives bankers, who are in a position to influence the use of receivables insurance, the confidence to back larger receivables loans at more favourable rates – fostering faster company growth.” Other brokers at the firm weren’t much interested in investing the time into developing the market for receivables insurance, says Attley, a largely unknown product line in the Canadian P&C industry. But Attley saw it as another niche upon which he could clearly build his expertise. In 1994 EDC, Trade Indemnity, American Credit Indemnity and CNA largely controlled the receivables insurance market. While the market was immature and structurally tilted in EDC’s favour, Attley and Doyle believed the market was ready for a brokerage that focused solely on the receivables insurance market. The duo knew that receivables insurance would be highly valued by the CEOs, CFOs, Credit Managers and Enterprise Risk Managers in Ottawa’s export-oriented tech industry. “At the time, companies like Mitel, Corel, Nortel, JetForm, Fulcrum, Cognos and hundreds of promis-
ing startups were experiencing an ICT growth boom,” says Attley. What Attley and Doyle understood was that a lack of awareness about receivables insurance and a vastly underserved market represented an excellent new business opportunity. “The first years as a broker specializing in receivables insurance were lean ones,” admits Attley. There were only three underwriters in Canada in the 1990s, and Attley’s prospects were generally unfamiliar with the product. Thus Attley and Doyle’s new company, Millennium CreditRisk Management, was largely engaged in educating prospects, bankers and other stakeholders about the benefits of receivables insurance, while at the same time convincing more underwriters to enter the Canadian market. “In true start-up mode, Millennium ran up its lines of credit, while Ron and I tested the resilience of our loved ones, until the market, and our business, started to mature,” says Attley. “Thankfully, our persistence paid off.”
I knew that having a niche focus is a competitive advantage in the commercial insurance market
OPPORTUNITIES STILL EXIST TODAY Twenty years later, Attley has shown hundreds of Canadian business people and bankers the benefits of receivables insurance over other forms of accounts receivables risk mitigation, but the market is still catching on. “Account receivables is still the biggest unidentified and uninsured exposure facing Canadian businesses today,” says Attley, pointing to less than 1 per cent of Canadian companies currently utilizing receivables insurance as part of their financial planning – or less than 10,000 of Canada’s 1.1 million employer businesses. Canada’s vastly under-insured state of corporate receivables introduces undue risk on working capital loans, inhibits the amount that a business can be loaned, and also forces higher interest rates on business clients, says Attley, artificially restricting sales growth. He believes the receivables insurance market in Canada, valued at $200 million today, will grow to $350 million within five years. “Receivables insurance is not just another insurance product in which a client sees value only after making a claim because receivables insurance doesn’t just sit in a drawer until something happens,” says Attley. “It’s a real business tool, an essential aspect of corporate risk management and also growth management.”
Mark Attley is semi-retired and financially secure
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HOT LIST
Canada’s hottest insurance professionals In this issue, Insurance Business magazine has compiled its Hot List of insurance professionals from around the country who made their mark in the industry. Some hit business home runs like Diane Baker, who started her company RiskAssist Consulting only a year ago, earning the accolade that very same year as the Who’s Who Publishers Top Female Executive in 2013. Some made bold moves, like Ontario’s Rick Orr, who continues to expand the family business, refusing to sit on his laurels as a fourth-generation independent broker. Others created a new product line, like Michel Laurin, who has brought telematics
to Quebec drivers through Mobiliz as president and COO of Industrial Alliance. Then there were those who won industry awards for excellence, like HUB International’s Eileen Greene, who was the first North American to win the International Women In Sales Award for Insurance in London, England. The common denominator is that each and every person on the Hot list brought their A-game to the job – and they gave a little more. And we wanted to draw attention to the influential women in the industry – those who have not only shattered the glass ceiling but shone as brightly, or even more so, than their male counterparts. Who will make next year’s list?
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SCOTT SLEIGHTHOLM commercial lines account executive with Smith Petrie Carr & Scott Insurance Brokers in Ottawa, Ont. WHY HOT?SELECTED YOUNG BROKER OF THEYEAR 2013 had many personal milestones for me. Being a director with the Ottawa Insurance Brokers Association, I organized and planned our annual Open House Tradeshow, which brings out 700+ insurance professionals to network, showcase, and just get together for the evening. It is our biggest event of the year and is a great opportunity for Brokers, Insurers, and Associated Companies to get together. Also, in June, a team of 15 insurance professionals boarded a plane to Peru to climb Machu Picchu. This was a charity event where our team raised over $150,000 for seven local charities through the Dream Mountains organization here in Ottawa. Our team raised the money, paid our own way and spent two weeks in Peru, complete with a five-day hike up and down the ancient Inca Trail to the amazing Machu Picchu. I am currently an Insurance Ambassador for the Insurance Institute, which allows me to speak with Grade 10 students, post-secondary students, and young adults about the possibilities
BRIAN PURCELL broker, James Purcell insurance, Spencerville, Ont. WHY HOT? KEEPING THE INDEPENDENT BROKER CHANNEL VIBRANT When Brian Purcell hears people saying the small brokerages are going the way of the Dodo, he couldn’t disagree more. “With the technology that is out there, there are a lot of opportunities for a small broker to be successful and build great customer service. The customer service just isn’t the same with the big companies,” says Purcell. “When I hear people say the small brokers will be gone, that’s where I have to disagree.” Purcell and his wife Colleen will be taking over the family brokerage from his father James – and it is a career path he is eager to embrace.
within the insurance industry and how exciting it can be. All of the above helped me to be nominated, and win the Young Broker of the Year award from the IBAO. What products or upsells are drawing client interest? There are two big concerns when it comes to client’s insurance products (commercial). One is the overall limit of liability. Many are asking, ‘Do I have enough liability?’ so we are seeing higher limits and increasing general liability with respect to commercial insurance. Also, cyber liability is a growing concern and is being shown in the media more and more. Clients are asking about cyber coverage and, although not necessarily getting the coverage, it is generating the conversation and opening the door. What needs to be changed in the insurance industry? The biggest change that needs to happen in the insurance industry is the negative stigma that persists. Everyone perceives insurance as an old and aging industry. As a young broker and an insurance ambassador, I hope to work with other young brokers, with IBAO, with my brokerage to help showcase that, yes, the older generation is in the industry but the industry is changing with the up and coming young generation.
MICHAEL STACK vice president of Archway Insurance, Amherst, N.S. WHY HOT? MAKING ARCHWAY A MAJOR PLAYER Archway Insurance continues to expand and buy up brokerages in the Maritimes – but that expansion doesn’t come at the cost of jobs or diminished pay and benefits. In fact, Archway can be held up as a model for how a brokerage should operate. “The multiple is going to be there for those guys who are looking to sell,” says Michael Stack, vice president of Archway Insurance. “When I’m talking to brokers about selling their business to Archway, I want them to know how well we’re going to look after their staff.” Part of that care and consideration includes a benefits program that Archway offers to its more than 70 staff, which includes a company matched retirement savings plan; full medical benefits that includes dental; a post-secondary scholarship for employees’ children and flexible work schedules.
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HOT LIST - INFLUENTIAL WOMEN
EILEEN GREENE vice president & partner HUB International HKMB Ltd., Toronto, Ont. WHY HOT? INTERNATIONAL ACCLAIM Having clients across the country, I am so proud that we’ve been able to help my clients with the many stormrelated claims in 2013. There was complete devastation in so many situations, and successfully helping my clients, with these disasters was very fulfilling. After all, what I sell is insurance, and while I hope people don’t need to make claims, when they do, I want that to be as painless as possible. I also attained ‘Legend’ status in HUB International’s annual sales award program – recognition that I achieved the top annual sales award five years in a row. I’m proud that I’ve been able to do this in the first five years with HUB. The real highlight for me personally though was winning the International Women In Sales Award for Insurance that was given out at a ceremony at the Savoy Hotel in London, England this past December. The nominees were from all over the world and from the biggest companies on the planet. It was a huge honour and, as a result, I have been given the privilege of beginning a mentorship with Inga Beale, the first woman to be appointed CEO of Lloyd’s of London.
DIANE BAKER BA FRM FIIC, RiskAssist Consulting Inc., Vancouver, B.C. WHY HOT? BRAVELY LAUNCHES OWN CONSULTING COMPANY After 30 years in the business as a broker and business owner I had the good fortune to have a buyer for my company. The buyer was a business partner, so the transition was fairly seamless for them. Then I was able to engage a new set of supporting business advisors: i.e. web designer, business coach, business partner (non-financial), to launch a full-time career in risk management. What needs to be changed in the insurance industry? The perception of the insurance industry, we as an embarrassing profession can be corrected so easily. We must be PROUD to be in this business. The people in this business: insurers, brokers and support teams, are vital to the Canadian economy. Following disasters like Stave Lake, and more recently the Calgary and Toronto flood and the Lac Megantic train explosion; where are the insurers who are paying substantial losses? They are there to rehabilitate and restore the damaged areas. Can we not hear of the good stories where people have regained their lives over time?
A YEAR OF MILESTONES PHILOMENA COMERFORD president & CEO, Baird MacGregor Insurance Brokers , Toronto, Ont. WHY HOT? FIRST WOMAN CHAIR OF INSURANCE INSTITUTE I am very proud that 2014 marks Baird MacGregor’s 35th year in business and Hargraft’s 140th, and I am honoured to serve as the first woman chair of the Insurance Institute of Canada. My mother, Rose, who began her insurance career at Commercial Union (CU), encouraged me to work part time with her at Tomenson Saunders. Following art college, I accepted a full-time offer in the claims department. Six years later, I joined Jack Baird and Harry MacGregor in a joint venture with Kopas Wray and Cameron, was appointed President in 1990 and became a partner in 2000. Newport (now Tuckamore) became our equity partner in 2007 to facilitate Harry and Jack’s retirement purchase. Hargraft came under our management in 2009 and in 2011, we purchased Tuckamore’s interest in Hargraft, and Baird MacGregor. Hargraft, established in 1874 became a CU agent in 1900 and merged with Wood Flemming in 1960; coincidentally around the same time my mother joined CU. In 1918, George Hargraft became a founding board member of the Toronto Insurance Conference and today I serve on its board representing Hargraft and Baird MacGregor… my six degrees of separation.
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DEBBIE THOMPSON director, business development, Beyond Insurance Brokers Inc., Whitby, Ont. WHY HOT? A LEADER FOR ONTARIO BROKERS I had one big thing that falls in the area of good to great (Jim Collins would call it my Hedge Hog!). It was being able to deliver a message as president of IBAO to the members throughout our province about the importance of our brand. That it is not just a symbol, but that it should be an experience and how powerful our brand can be if we could get all brokers rowing in the same direction at the same time. What products or upsells are drawing client interest? At Beyond Insurance, we have been concentrating on providing risk management advice not just to commercial customers but to our personal lines customers as well, helping them control or reduce their cost of risk; to see the value in the insurance they are buying, and how it can work for them when they need it the most.
What needs to be changed in the insurance industry? Not sure if this is change, but may be more about awareness. The consumer is getting better at understanding the value of insurance, but we still have a lot of work to do in educating the consumer about the abuse that goes on in our industry. Every time I turn on the radio or watch a commercial on TV, there are more and more ads about how you can get or who you need to call to get what you ‘deserve’ if you are injured in an accident. I remember a time when we used to only see these ads on U.S. networks, now it’s filtered over to this side of the border.
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CHRISTINA SALVATORE vice president, Salvatore Insurance Brokers Ltd., Sackville, N.S. WHY HOT? YOUNG BROKER OF THE YEAR Certainly winning the Young Broker of the Year award was a great accomplishment. It was nice to be acknowledged by my peers for my work in the industry. What products or upsells are drawing client interest? Our brokerage specializes in trucking insurance; therefore, my clients and I have many conversations about cargo
insurance, contractual requirements, and freight forwarding. Many trucking companies don’t understand how their risk and responsibilities for their cargo change from a carrier to a freight forwarder. Plus, many shippers are downloading additional responsibility for freight to the carrier, which needs to be examined carefully to ensure proper coverage. Fidelity coverage also seems to enlist strong responses from customers, as we are seeing more and more cases of employees stealing from their employer and it always seems to be that ‘most trusted employee.’
MONIQUE LEROUX president & CEO of Desjardins Group
LINDA PAPADOPOULOS risk & insurance manager, Pearson Dunn Insurance, Stoney Creek, Ont. WHY HOT? ONTARIO’S BROKER OF THE YEAR It doesn’t get any hotter than being named Broker of the Year, and Linda Papadopoulos certainly earned the title through her years of hard work and community involvement. A broker for more than 29 years, Papadopoulos sits on a fundraising committee that supports the Good Shepherd Centre for Hamilton, and is a major supporter and fundraiser for the Women of the Year Award with that city’s YMCA – not to mention being a volunteer career ambassador for the Insurance Institute and Mohawk College, facilitating insurance courses for young brokers and industry professionals looking to pursue a career in insurance. And if that wasn’t enough, she also teaches risk management courses at McMaster University and has developed a mentorship program for young employees at her firm.
WHY HOT? MAKING DESJARDINS A MAJOR PLAYER IN CANADIAN INSURANCE Before joining Desjardins Group, Monique F. Leroux had already made a name for herself as a high-level manager in the world of finance. Held up as an inspiration for women looking to break the executive glass ceiling, the chair of the board, president and CEO of Desjardins Group rose through the company ranks when she first became a member of Desjardins’ senior management back in 2001. “Desjardins ranks among the most stable financial institutions in the world and this is in large part thanks to its capitalization,” said Leroux, following the issuance of $500 million in shares to its Desjardins caisse members. “Acquiring capital shares allows caisse members to show their support towards the development of their cooperative.” Currently a member of the Canadian Council of Chief Executives and the Founders’ Council of the Québec Global 100 network, Leroux is also a member of the United Nations IYC Advisory Group (International Year of Cooperatives, United Nations).
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MIKE GEORGE president & CEO, Trisura Guarantee, Toronto, Ont. WHY HOT? EMBRACING YOUTUBE TO SEND A POSITIVE MESSAGE TO BROKERS Mike George stands out as a CEO, using YouTube videos to send a direct message to independent brokers that Trisura wants their business. I participated in the spending the night Out for Covenant House, Executive Edition – slept on street in downtown Toronto with 70 other execs in November – It was very rewarding.
PHIL KASZUBA president of DMTI Spatial, Toronto, Ont. WHY HOT? MAPPING TECHNOLOGY PROVES VALUE IN FLOODING ASSESSMENT As part of our goal to expand Internationally, DMTI was acquired by Neopost in October 2013. Neopost is a $1-billion organization that does business in over 90 countries with 800,000 customers. The acquisition sets the stage for the introduction of DMTI’s cloudbased technology outside of Canada. Expansion of our location-based ecosystem to help our customers better manage their equity based (insurance/ mortgage) financial decisions was certainly a milestone. What needs to be changed in the insurance industry? Location intelligence needs to be recognized as a tool that evolves the insurance business by increasing speed of decision making, validates the integrity of customer information and helps analyze data to act on trends – increasing the overall business performance. There needs to be proactive risk assessment through location-based solutions: having viable solutions that determine accumulation and risk concentration enable proactive decision making and proper portfolio analysis. The use of location-based solutions during crisis and rebuilding situations like the Alberta flood or Quebec train derailment is important; location-based information can ensure we are providing the right level of emergency services to the families impacted at the same time as ensuring that we manage the risk/exposure of the event itself.
What products or upsells are drawing client interest? As a specialty lines insurer focused entirely on working with our brokers, there is lots of interest in program focus and our online portal solution, warranty business and cyber liability (hopefully we’ll even sell some of it one day soon).
ROBERT BENTLEY president of Marsh’s U.S. and Canada Division WHY HOT? TAPPED TO LEAD CANADIAN AND U.S. DIVISION Robert Bentley was tapped in December to head up Marsh’s U.S. and Canada Division, responsible for the oversight of Marsh’s U.S. core brokerage, Canada, and its insurance services businesses. “Rob brings a diverse background and strong track record of driving business growth and delivering optimal performance to his new role,” said Peter Zaffino, president and CEO of Marsh. “I’m excited about the prospects of him leading the division and working with our business leaders to consistently deliver industry-leading solutions that help our clients thrive.” Bentley rejoined Marsh & McLennan Companies in February following five years at Risk Management Solutions, where he served as COO and a board member. Prior to that, he spent 17 years at Guy Carpenter, where he held several executive positions, including global COO and head of Global Analytics. He most recently served as president and CEO of Marsh’s Insurance Services Businesses unit. MARCH 2014 | 23
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HOT LIST
J. GREG SUTTON president & CEO of Sutton Special Risk, Inc., Toronto, Ont.
CJ NOLAN vice president of business development and sales, Munn Insurance, St. John’s, Newfoundland WHY HOT? FINDING SUCCESS THROUGH CUSTOMER SERVICE There is a recurring theme among brokers who have made it to the pinnacle of the industry – quality customer service. For C.J. Nolan, vice president of business development and sales at Munn Insurance in St. John’s Newfoundland, success is a natural by-product of delivering the best customer experience possible. “Insurance Industry clients know it when a company treats them right,” says Nolan, who followed in his father’s footsteps at Munn Insurance – where is father is president today. “If their insurance provider does not treat them in a fair, sensitive manner, they will move to one that does.” Nolan finished in the top 10 of the Top 30 Elite brokers in Canada, and he credits the health of the brokerage to the strong family commitment to the insurance industry. “I grew up in the insurance business, learning the ropes along with my younger brother, Adam Nolan, with minor office jobs both after school and during the summer months,” Nolan told Insurance Business. “I started in personal lines sales in January 2001 and jumped at the chance to move into commercial insurance sales three years later.”
WHY HOT? FIRST YEAR IN U.S. A SUCCESS Last year was a memorable year for a few reasons. Firstly, we celebrated the company’s 35th anniversary with a number of events throughout the year, culminating with a gala at the Arcadian Court in Toronto, attended by clients and friends from all over the world. 2013 also marked our best year in the company’s history, following a very strong year in 2012, our third best ever. Our continued growth is certainly gratifying personally, but it is a reflection of the great people I am fortunate to have at Sutton. We also marked the successful completion of our first year in the United States. Sutton Special Risk America was incorporated in late 2011, with its head office in New York City. We have written U.S. business since our inception and I always felt strongly about eventually having a presence there. SSRA will enable us to expand and grow all of our product lines and services in the U.S. market.
DAVID RICHARDS CEO, JLT Canada David Richards rises to the top at JLT Canada WHY HOT? A METEORIC RISE He had only joined JLT Canada in 2013 as executive vice-president and national specialty leader for natural resources, but it didn’t take long to rise to the pinnacle of company, being named CEO in January of this year. Richards took command following the two-year restructuring that was initiated by Steve Thomas, the former CEO at JLT Canada, who stepped down to return to Australia.
DANNY SGRO partner, chief sales officer of technology and specialty risk advisor with Jones DesLauriers Insurance, Toronto Ont. WHY HOT? HE IS CANADA’S TOP ELITE BROKER Attributing his success to hard work and dedication, Danny Sgro has seen his career unfold according to his own life script. But a big part of that success has been being able to react to and meet the changing needs of customer expectations. “Ten years ago the buyer wasn’t technically savvy. Now they are,” says Sgro. “They want to take advantage of the efficiencies, the communications as it relates to the Internet; whether to transact online, as some are willing to buy that way as time goes on, or using technology to simply research. Conducting business online is going to have a bigger impact as the demographic of the buyer changes.”
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HOT LIST
FRANK MCKENNA, KENN LALONDE TD Bank Group deputy chair Frank McKenna and TD Insurance president & CEO Kenn Lalonde partner, chief sales officer of technology and specialty risk advisor with Jones DesLauriers Insurance, Toronto Ont. WHY HOT? CREATING JOBS THROUGH EXPANSION One insurer in New Brunswick certainly warmed a lot of hearts by pledging to create jobs after a string of layoffs another company back in November. TD Bank Group Deputy Chair, Frank McKenna and TD Insurance President & CEO, Kenn Lalonde brought smiles to the Saint John area when they announced TD Insurance would be expanding operations and creating 275 jobs over three years in the area. “TD has a long and rich history in New Brunswick,” said McKenna, “and this expansion further demonstrates our continued commitment to the province and to delivering service excellence to our customers.” It was earlier that month that one of Canada’s major insurance firms closed its Moncton, N.B. office, transitioning its underwriting operations to Halifax, N.S. and putting 22 people out of work. It was only days after the Moncton announcement that the same company closed its Hamilton, Ont. office and shifted resources to neighbouring communities.
NORM MCINTYRE senior vice president, Jardine Lloyd Thompson Canada, Toronto, Ont. WHY HOT? A TRUSTED VOICE IN FLEET INSURANCE Thirty-five years in the business hasn’t slowed down Norm McIntyre, who has established himself as one of the major players in the commercial fleet insurance industry. “I have been very fortunate to have some great mentors and friends in my insurance career and I thank them for all their guidance and friendship,” says McIntyre. “People like Steve Palmer, Jerry Ives, Chris Rice, George Lightfoot and Jeff Ives. The one thing that never stops for me is that I learn something new every day.” McIntyre got his start as a fleet clerk with Zurich Insurance, starting on the company side of the ledger before moving from the company side to the broker side, with part of that business being commercial, long-haul transportation. And he has seen it all. “When I first got into the industry, the section of commercial transportation for example, a lot of the owners
DON NORMANDEAU owner, Le Bon Ami Insurance Brokers, La Broquerie, Man. WHY HOT? BIG NUMBERS IN A SMALL MARKET As one of the thousands of independent brokers who have worked hard to build a business, Don Normandeau has certainly earned his place on the Insurance Business magazine Hot List. Getting his start at the tender age of 19, Normandeau began by working at two different Winnipeg brokerages over a seven-year period. Hired on in 2000 at MacNeil Insurance Agencies, Don and Lise became partners in the business in 2003, eventually purchasing all of the shares of the business by 2009. Generating $250,000 in personal revenue on 780 policies, Normandeau has cultivated a strong book of clients in the Steinbach region of the province, coming in 15th among Canada’s Top 30 Elite Brokers.
were hands-on owners who were driving trucks,” he says, “and when you went to meet with them, you met with them at night – because that was the only time they were able to meet, and sometimes they met with you from their truck. That part of the industry has really changed, because now we’re talking to businessmen who have a business in the trucking company – and they have more of an insight into how the money is being spent.” Remaining hot in the industry means being more than just an insurance broker – it means becoming an integral part of your client’s business. “The key to success is you try to become an asset to the management of that company of your customer,” says McIntyre. “You become like a valuable partner – just like his accountant; you get an insight into how his business works, and how insurance can go hand in hand with that to make it easier for him. “Part of my background is risk management, and that becomes very important when you get into conversations about how a client can mitigate his insurance costs and take on some of the risk himself.”
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RICK ORR president of Orr Insurance, Stratford, Ont. WHY HOT? WINNING AWARDS AND EXPANDING THE BUSINESS Winning the Wally Wood Award at the Insurance Broker Association of Ontario gala was just the appetizer for Rick Orr, who crowned this achievement by acquiring seven brokerages in his area of operations in southwestern Ontario. “We were looking for an opportunity to grow Orr’s market presence, focusing on the area we live in and support around Stratford,” says Orr. “We are excited to be able to perpetuate the independent broker distribution system. Each office will remain
SHERIF GEMAYEL president of Sharp Insurance, Calgary, Alta. WHY HOT? BRINGING A FRESH APPROACH TO INSURANCE THAT WORKS “We started it with the idea that we wanted to change how insurance is sold and the approach to selling it. So we took more of an online approach.” Sherif Gemayel, who has exploded on the Alberta insurance brokering scene, is taking on the big banks and succeeding; through catchy online advertising campaigns and being among the first to launch a mobile app for clients in 2010. “I’m 99 per cent sure we were the first brokerage to launch a mobile application for our clients in 2010, which basically gave clients the ability to see some of the policy information, request changes, and submit claims through an app,” says Gemayel. “Now there are a lot of other apps out there. We have re-launched our mobile application, which now gives real-time data for our policy holders, real-time pink cards, tells them when the payments are coming out, how much the payments are, available on iPhone, Android, Windows mobile, BlackBerry… the whole nine yards.” Part of the embrace of new technology includes telematics, through the app Rate My Driving. “Clients love it. We did a soft launch back in June, and we did a hard launch at the end of October,” he says. “We’ve had about 300 downloads before the hard launch, but we’re looking at well over 3,000-4,000 downloads since the hard launch.” Backing up his straight talk are some impressive numbers, like a more than 30 per cent annual growth that has placed him in the same heavyweight class as the direct writers. “Sure the big banks have lots of money, one big bank does about $3 million in new business monthly – so we’re not that far away,” says Gemayel. “But they are not infallible – they’ve just been doing it for so many years that nobody has gone up against them.”
open demonstrating our commitment to communities and local service.” Orr Insurance – a fourth-generation independent brokerage that got its start back in 1895 – is jointly operated by Rick and his brother Jeff. “We hope that a fifth generation will one day take over Orr Insurance and we believe that to be successful in the future brokerages we will need to have the scale to offer consumers what they want,” says Orr. As chairman of the IBAO, it shouldn’t be a surprise that Orr was presented with the Wally Wood Award, given to the broker who selflessly devotes themselves to the association, its members, goals and objectives.
MICHEL LAURIN president & COO, Industrial Alliance, Auto & Home Insurance, Quebec City, Que. WHY HOT? LEADING GROWTH IN QUEBEC We’ve had a lot of growth the last year or two. We’ve been the fastest growing company for the fourth year in a row in Quebec. That’s a very interesting milestone. We’ve launched Mobiliz in 2012, but the impact on the industry has been felt much more in 2013. I’ve been talking a lot at conferences about Mobiliz. I explained the program to the NICC conference in September in front of the industry emphasizing that a small, regional insurance company has been leading in telematics technology. Industry awards or accolades The last one we received was the Celent Technology award 2013 for the launch of the Mobiliz program, which uses technology to rate and change the behaviours of young drivers with insurance through a monthly variable premium. We want this to help young drivers change their behaviours – and it is working.
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HOT LIST
JOE MICALLEF FIRST Insurance Funding of Canada, Toronto, Ont.
KEITH IZSAK Affinity Insurance Services, Prince Albert, Sask.
WHY HOT? SUCCESSFULLY INTEGRATING TWO ESTABLISHED BUSINESSES In 2013, we celebrated our first anniversary as FIRST Canada. It was rewarding integrating two established premium finance businesses and leveraging the skills and solutions developed by our highly experienced staff across two countries. We have a highly talented team of dynamic industry professionals who are well positioned to deliver on our brand promise to offer growth, reliability and innovation to our broker partners.
WHY HOT? SUPPORTING HIS COMMUNITY THROUGH CHARITABLE DONATIONS With 27 years in the industry, Affinity Insurance Services’ Keith Izsak understands that giving back to the community is just part of being a broker. A December donation to Habitat for Humanity Prince Albert of $5,000 was “a community builder,” says Izsak, who felt that the need in the community for decent housing deserved a financial boost. The need is so great, Izsak told his local paper, when you consider that half of the community’s residents are low income. Beyond his generosity, Izsak’s $300,000 in generated revenue from 89 policies written from a book of 1,500 clients places him firmly among Canada’s hottest brokers.
What products or upsells are drawing client interest? Broker loans have absolutely been an area of interest. Defending the independent broker channel is as important as ever. Brokers need greater access to independent funding to help them expand their operations beyond organic growth and funding that enables them to leverage the value of their business without onerous conditions or ties. What needs to be changed in the insurance industry? I think the industry would benefit from greater education of Canadians about the value and expertise an independent broker has to offer. Like accountants, lawyers and bankers - the insurance broker is a trusted advisor for consumers and commercial businesses that can help them protect their valuable assets and indirectly grow their wealth. Independent brokers who embrace this notion can expand their value proposition and secure their valuable standing in the Canadian economy. What do you see happening in 2014? Technology has been, and will continue to be, an influential force in changing our industry’s landscape. Clients are demanding enhanced levels of customer and self service; brokers need ways to streamline their processes. We’re working on our own innovative solutions this year to help our partners and create efficiencies. Stay tuned for more exciting news from us in the months ahead. Industry awards or accolades: Macquarie Premium Funding was awarded Premium Funder of the Year in 2006 by the Australia and New Zealand Institute for Insurance & Finance. What made you choose insurance as a career? I have always been motivated by helping others grow their career and business. I enjoy working with driven and passionate entrepreneurs. The opportunity to work directly with brokers and watch their businesses grow as a result of our collaborative relationship has been very gratifying.
MARK BLUCHER president & CEO of ICBC Mark Blucher has steered the ship for the Insurance Corporation of British Columbia for the past year as interim CEO and president, and has finally and formally been handed the keys of office. WHY HOT? LEADING THE WAY FOR B.C. BROKERS Over the past year, we’ve really refocused the company on making improvements to our service for customers and on keeping rates as low as possible, despite rising claims costs. Our bodily injury claims costs have been increasing dramatically over the last few years and are set to top $2 billion for the first time in 2013. While many external factors are beyond our control, we have begun to make changes to help stem the increase in injury costs. At ICBC, we know we have a responsibility to provide our customers with the best insurance coverage for the lowest possible cost. In order to do this, we have had to adapt to the changes that face many insurance companies.
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RELIABILITY
GROWTH
INNOVATION
MORE THAN PREMIUM FUNDING Your Strategic Advantage
PREMIUM FINANCING
B RO K E R L E N D I N G
E XC LU S I V E S E RV I C E S
Pre-approved terms
Refinancing options
Customized solutions
Fast and easy quoting
Acquisition lending
Wealth management
Commission income
Succession planning
International currency
Dedicated service team
Employee buy-in
Mortgage financing
Call us to learn why we have more to offer.
Joe Micallef Chief Executive Officer joe.micallef@firstinsurancefunding.ca 416 216 1740
www.firstinsurancefunding.ca 1 888 232 2238
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BUSINESS STRATEGY / RELATIONSHIPS
CLIENT RELATIONSHIPS HOW TO DRIVE SALES
There’s no getting around the fact that customers like to do business with people that they like, and in today’s market building effective client relationships is more vital than ever. Nikki Heald explains that, while you may have all the skills, experience, knowledge and expertise in the world, if you can’t get your relationship marketing strategy right you’re never going to see exponential growth in your business
So you think you’re pretty savvy technically, right? You know all your stuff and have spent years acquiring skills and experience. Additionally, you know your product inside out, back to front. You believe you are the technical guru. Unfortunately, you can’t seem to hit your sales targets and don’t understand what’s going wrong… Welcome to the world of relationship marketing – a process whereby sales are increased via the relationships you have created with others. Technical is out; rapport is in! At a time when competition for clients is intensifying and profits are shrinking, building effective alliances has never been more vital. The reality is that business is not business – business is personal and people do business with people they like.
HUMAN NATURE Unfortunately though, not everyone we meet in business will instantly warm to us. Human nature is such that people can be indifferent, inconsistent and unpredictable. Diversities in personality, viewpoint and needs come into play, and rolling out a generic ‘client relationship strategy’ simply won’t work. Successful sales professionals realize that their results are achieved due to a willingness to adapt to their prospect. They individualise their approach to client interactions and build unique connections. They research, ask questions and observe to gain insight. They realize clients are not driven or motivated by
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the same things. Effective salespeople forego taking shortcuts and recognize that outdated selling tips such as ‘always be closing’ are no longer applicable. All too often, opportunities are lost due to assumptions made or jumping in with the hard sell. Today’s clients are seeking a business partner who assists them with the right solution and responds to their needs. If we think about it, the very heart of the sales process should be underpinned by wanting success for our clients, rather than success for ourselves. The underlying goal should be to understand their challenges, create solutions, and add value wherever possible. So, how do relationships influence the sales process?
THE STAGES OF ENGAGEMENT The cycle of sales can be attributed to various stages of engagement identified as follows. Clients are most likely to buy from you when in the moderate and high trust zones – when rapport and credibility have been firmly established. However, time and patience must be observed in progressing through the initial stages. No one likes to be rushed into anything! Each interaction you have with clients, no matter how small, contributes to solidifying and cementing the relationship. Making your clients feel valued and important is essential to a solid foundation and future business prospects. Let potential or prospective clients feel as though they have chosen you, rather than feeling ‘sold’ to. Think about how you and your team currently interact with clients in your business: • What tools do you presently have in place? Is there room for improvement? • Could you try something different or learn new strategies to nurture alliances? Perhaps it’s time to take a different approach targeted specifically at implementing and boosting client engagement.
BETTER AND BETTER The interesting thing about all relationships, including those in business, is that, once established, they have the potential to get better and better. The challenge is to ensure this occurs. Ongoing contact and maintenance should form part of your overall relationship management plan to ensure that clients feel a genuine, rather than token, connection with you. See the ‘10 client relationship tips’ box above for
10 CLIENT RELATIONSHIP TIPS 1. Invest time, energy and commitment into getting to know your client: It won’t happen overnight. 2. Be determined to focus on your client: Remember, it’s about them, not you. 3. Adapt your communication style to suit: A one-size-fits-all approach won’t cut it. 4. Find out their interests and hobbies: Create a database to store the information you learn. 5. Say ‘thank you’ in a tangible way: You don’t have to go to great lengths or expense to do this.
Nikki Heald is a corporate trainer, presenter, businesswoman, founder of Corptraining and co-author of Views On The Way To The Top.
6. Keep in touch regularly: Look for reasons to keep yourself at the forefront of their mind. 7. Generate ideas: Be creative with solutions and provide unique options. 8. Design a shared goal and ask for their opinion: Work together to construct a collaborative alliance. 9. Don’t sell on price: Focus on explaining your value and the outcomes you generate. 10. Finally, invest in ‘interpersonal skill’ staff training: Your employees should understand the importance of complementing their technical ability with connection ability.
some tips that may assist you in building better and more effective relationships. Remember, once you have built solid relationships, those alliances instinctively want you to succeed and are more than happy to refer or recommend you to others. Additionally, some clients are willing to pay more for a product or service if they feel they have a personal connection in place. The decision to focus your energy on a relationship with your client is an unlimited method for increasing sales and capturing new opportunities. MARCH 2014 | 31
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FEATURE / BUSINESS STRATEGY
How to deliver
EXCEPTIONAL SERVICE It’s the little things you do that create a great customer experience, explains Nikki Heald Often we’re so intent on making the sale that we have a transactional view of our clients, rather than taking time to build relationships or demonstrate service excellence. We use them (to increase our profits), abuse them (by giving them inferior service), and then treat them like a one-night stand — attentive today, neglectful tomorrow! Sounds silly? Well, complaints such as “you never call,” “you’re always too busy,” and “why were you late?” are legitimate gripes made by disgruntled clients. In today’s competitive market,
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INSURANCEBUSINESS.CA
DID YOU KNOW?
6–7
It’s times more expensive to gain a new client than it is to retain an existing one
It’s not safe to work on the premise of “no news is good news.” Chances are, if your client is not happy they’ll walk, and won’t even forewarn you of their departure
client service expectations have increased. Clients are savvy, realize they have a multitude of choices, and expect to be treated exceptionally by their insurance brokers. So what is exceptional service? Exceptional client service is about going beyond what is realistically expected of you. It’s about surprising and often delighting clients, turning them into enthusiastic referral sources who will stick with you not only because you do great work but also because of the value you bring. Imagine if you could get existing clients to tell others about how wonderful you are. It would certainly save on many of those marketing and networking costs. Great service is not about just doing your job, it’s also about establishing connections on an emotional level. It’s about adding value and finding ways to be unique. Interestingly, research suggests that emotion influences purchasing decisions six times as often as rationale. Think about it: when something makes us feel good, we are more inclined to buy. Unfortunately, many businesses believe that delivering standout service will cost them too much in staff time, in training and in developing service standards and procedures. These in-focused organizations are only concerned with company profit and cutting costs, and little thought is given to how to make clients happy. Additionally, staff recognition and retention are low, which can also impact significantly on growth and profit. When you think about it realistically, bad service is actually more costly to your brokerage than great service. Bad service creates more than just a negative customer experience — it reduces revenue and drives up costs. It damages public perception, credibility and market reputation. As we all know, a dissatisfied client is more likely to spread
93%
of customers indicated that quality customer service was vital to maintaining brand loyalty
the word about a poor service experience than a positive one. Providing exceptional service is not overly difficult, and it’s important to recognize that even little things count with clients. So what are some simple things you can do to ensure your service is exceptional?
1
RESPOND AS SOON AS YOU CAN
Speed is everything, so try to reply to your clients as soon as you can and keep them in the loop as to your progress. Procrastination doesn’t help anyone, and you’re going to have to respond sooner or later. May as well do it now!
2
LISTEN TO YOUR CLIENTS
Avoid speaking, and really listen to what they’re saying. It’s important you understand what your clients are communicating to you. That way, you will be able to meet their needs successfully and provide the correct product or cover.
Exceptional client service is about going beyond what is realistically expected of you. It’s about surprising and delighting clients, turning them into enthusiastic referral sources
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FEATURE / BUSINESS STRATEGY
If you say you’re going to do something, then make sure you do it. It enhances your professionalism and personal brand, and demonstrates that you value your client SERVICE EVALUATION What systems do you have in place to determine whether your clients are happy? Try to gather feedback — but remember, feedback is only useful when acted upon
3
KEEP PROMISES
One of the biggest gripes in business today is that people simply don’t do what they say they are going to do. If you say you’re going to do something, then make sure you do it. It enhances your professionalism and personal brand, and demonstrates that you value your client.
4
KNOW YOUR STUFF
The perception of your client is that you are the paid expert. That’s why they have come to you. So it is imperative that you keep yourself up-to-date and on top of the game within your profession. Be ready
DELIVERING EXCEPTIONAL SERVICE Lower cost to manage and service client base — higher profits Increased customer loyalty — raises revenue, lowers marketing fees Increased staff loyalty — better service culture
to answer client questions — unfortunately, if you convey a lack of knowledge, then you risk ruining your credibility.
5
GIVE A LITTLE
If a client asks you to do something that really won’t cost you a lot in time or money, then treat it as an opportunity to go the extra mile. By doing so, you will not only have a contented and indebted client, but someone who is more than happy to refer others to you.
6
USE YOUR KNOWLEDGE
Once you’ve built an emotional connection with your client, you will have figured out how they prefer to communicate. Some clients are not detail driven and won’t require excessive information. On the other hand, some prefer to know every step of the process. Learn to gauge your client’s preferences and use this knowledge appropriately in the service experience. Finally, within the insurance and financial services professions, brokers really should view their book of clients as their most valuable asset and take good care of them. More than that, they should take the time to develop long-lasting relationships by keeping in touch regularly, both in good times and bad. It’s not sufficient to wait until renewal time to contact your client; instead, the communication should be ongoing. Remember, you’re not just selling a product but providing expert advice that can significantly impact on people’s livelihoods. So, if you haven’t given much thought to your service levels, then perhaps it’s time to conduct a self-audit. Remember, if you don’t make the client feel valued, respected and important, your competitors will!
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MAKING YOUR CASE BEST ARGUMENT FOR USING A BROKER
MARKET MAKEOVER PRODUCT ECONOMIC TURNAROUND FOR NICHE DEMUTUALIZATION WHY YOU’RE STILL WAITING
4/12/2013 4:12:21 AM
Cover.indd 1
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BUSINESS STRATEGY / SMALL BUSINESS
TOP 5
CHECKS Small businesses and underinsurance Small businesses are always counting costs – but being underinsured is one economy that could sink the whole enterprise. Twain Abbott sets out five essential checks you should do with your clients
F
For a small business, unexpected events or disruptions can significantly impact operations, leading to a serious dent in sales and cash flow or forcing owners to close their doors all together. For all the planning and preparation involved in starting a business, many small and medium enterprises (SMEs) fail to take out an adequate level of insurance cover. A recent survey of 850 SMEs conducted by CGU Insurance found that one in seven felt they may have been underinsured and, more alarmingly, one tenth of small-business owners claimed they didn’t have any cover at all. A decision prompted by the need to save time and money in the short term, or simple complacency, can
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result in devastating consequences for business owners when they find their insurance cover is inadequate. Insurance advisers need to help steer customers away from falling into the underinsurance trap. In doing so we’ll not only prepare them for the unexpected but also protect their investment and livelihood. Encourage business owners to ask themselves if they are ignoring potential risks to their business just to save money, thinking “it won’t happen to me”. When the unthinkable happens, such as a burglary, car accident, machinery breakdown or even a tax investigation, it can cost many thousands of dollars for the sake of saving a few hundred.
1
ENSURE COVER REFLECTS THE TRUE REPLACEMENT VALUE OF STOCK, EQUIPMENT AND BUILDINGS
This is one of the most common ways businesses get into trouble after an event such as a fire or storm. Business owners might choose to insure only a percentage of the replacement value to cut premium costs. However, they are also electing to take on a percentage of the risk. A fire caused by an electrical fault, for example, can cause total loss for a business, leading to significant costs and months of rebuilding. Another pitfall is neglecting to review the insured sum at renewal time or when changes happen to the business. For example, growing businesses may expand premises, buy new equipment or diversify products. When the time comes to make a claim, the sum insured no longer reflects the true replacement value of their business assets. A business’s insurance policy needs to grow with the business.
2
SET A SUFFICIENT INDEMNITY PERIOD FOR BUSINESS INTERRUPTION COVER
Some 81 per cent of SMEs admitted that an unforeseen business disruption would have a severe impact on their business, yet only 27 per cent had business interruption insurance. Of those that had the cover, it’s likely the agreed indemnity period is not long enough. Planning permits and regulations can sometimes add months to rebuilding timeframes, and the time to obtain replacement equipment from the likes of overseas suppliers can also be far longer than first
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thought, so it’s important to consider this when arranging cover.
3
THOROUGHLY ASSESS THE BUSINESS AND ITS POTENTIAL RISKS
Of those SMEs that did feel 100 per cent confident they had the appropriate cover for their needs, significant shortfalls were found. Many did not have insurance cover for business interruption, employee dishonesty, tax audit, and directors and officers liability. It’s also common for small-business owners to arrange insurance only for compulsory cover. This applies particularly to tradesmen and those who work on the premises of others, and to businesses starting up and needing to finance. A small-business owner may only purchase liability insurance, for example, but there are many other risks to the business that they need to consider.
Encourage business owners to ask themselves if they are ignoring potential risks to their business just to save money
4
FOR CLIENTS LEASING PREMISES, BE MINDFUL OF WHAT ISN’T COVERED BY THE PROPERTY OWNER
Property owners often require tenants to insure certain elements of a building, such as plate glass windows or even the building itself, on the tenant’s own policy. In the event of a fire, broken windows by vandals or a burglary, a business owner may find they are not covered but are responsible for repairs under the lease.
5
“Pull quote lani quam voles inciisit resto dolecaeremo distior erspeli
HIGHLIGHT THE IMPORTANCE OF CONTINUITY OF LIABILITY COVER
Many smaller businesses and sole traders cancel their liability insurance while on leave or when they’re between contracts, to reduce premiums. As a result, they often neglect to reactivate their policies when they’re back on the job. Liability cases can end up in court and run for two to five years, leading to hundreds of thousands of dollars in legal fees. Business owners can be left paying these fees to defend their reputation.
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RESTORATION
As the waters receded following the Calgary flood, drying contractors were as thin on the ground as dry land was in the hardest-hit neighbourhoods. The equipment seen as essential to even a typical restoration job was even more scarce. Swamped by flood waters, the Calgary Zoo project was anything but typical, with the demand contractors observe strict restoration protocols in order to protect and care for the thousand or more animals calling the facility home. It was nonetheless a challenge RCC North DKI, the restoration company assigned to the task, gladly took on, deploying a mix of permanent and temporary workers to meet the large-scale project.
HIGH PUBLIC PROFILE Being a public facility and one of Calgary’s ‘crown jewels’ filled with beloved animals, the Calgary Zoo restoration protocol and worker activities were under close scrutiny by the citizens, the media and the insurers. News reporters and television camera crews were a common sight on the property. Competently managed, temporary help crews that would set an example for all other restorative drying contractors in town, were an important element of avoiding the criticism from other contractors.
ONE OF NORTH AMERICA’S TOP 10 ZOOS
A JOB FIT FOR NOAH
Following the Calgary flood, all restoration companies were deluged with cases – but his company was handed a task of almost Biblical proportions 38 | MARCH 2014
• 13 hectares in size • 1,000 animals from 275 species • More than 36 buildings flooded The sheer size of the property (13 hectares) was a challenge, since all the buildings required services concurrently. The logistics of managing and tracking the needs in dozens of buildings – some of which were occupied by animals and rare exotic plants, were formidable. Health and safety protocols required strict enforcement by a team of highly qualified safety officers. Forklifts, semi-trailers, tractors, industrial sewer cleaning trucks, generator delivery and placement vehicles, generator refueling services, contractor vehicles, zoo staff vehicles and industrial all-terrain vehicles moved across the property while people were hard at work.
ACCOMMODATING THE ANIMALS Many of the buildings housed animals that were either dangerous or required a carefully controlled
INSURANCEBUSINESS.CA
environment. These animals included snow leopards, macaque monkeys, ostriches, gorillas, elephants, giraffes, hippos, wild boars, and many others. Some animals roaming the property outdoors, like peacocks, found their way into the drying chambers and areas where work was underway. Odours from carpet adhesive removers, antimicrobial biocides and other solutions required permission from zoo officials prior to use. Zoo officials scrutinized restoration activities to ensure that the animals were not distressed by the disturbance to their habitat. Dust generated from the controlled removal of materials and the heavy industrial vehicles were of particular concern because they could cross-contaminate the animal’s protected areas. Officials were also concerned about mould growth in the animal’s housing and living space. In areas where mould was discovered, a strict mould remediation
protocol was executed by an environmental consultant, who removed the mould and ensured that the structure was decontaminated. COMMUNICATION CRUCIAL While initially the insurance company’s independent consultant’s expectation that every expense shall be will be scrutinized to help save the insurer money and objective of saving the insurer money, the manner in which this project was managed resulted in the contractor being paid at the end of each of the three phases of the mitigation process. Overall, the restoration of the Calgary Zoo was an enormous success for all parties involved.
Acknowledgements Ken Larsen, CR, WLS, CSDS of IDSO Consulting Services, provided technical assistance and documented the drying efforts of this project in conjunction with equipment provided by DryTech International, Inc. and claim/project management by Rocky Cross North of Calgary, Alberta
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RESTORATION
WHEN SMALL CLAIMS BECOME BIG A small clean-up can easily turn into a big restoration project, especially when it is a flooded basement. Kris Gaal shares one example of how restorers have to roll with the punches to keep clients and insurers smiling THE LANGUAGE OF HYDROCARBON CONTAMINATION: PAH’s (polycyclic aromatic hydrocarbons) BTEX (benzene, ethylbenzene, toluene, xylene) TPH (total petroleum hydrocarbons) TRPH (total recoverable petroleum hydrocarbons) TOG (total oil and grease) About the author Kris Gaal is an operations manager with KG Services
Many small claims that come through the restoration firms can sometimes turn into a bigger situation then first anticipated. One of the instances we had was a residential home in northern Ontario. The water discharge line broke off at the sump pump while the home owner was on holidays, flooding the basement with water. The restoration contractors received a call from the claims personnel at the insurance company to asses and begin pumping the water from the basement. Upon inspection, the firm’s technician found that from the high water level, it caused a half-full furnace oil tank to become buoyant, allowing the tank to tip and spill its contents in the already flooded basement. The water can no longer be pumped onto the lawn or into the sewer as it is now a contaminated non-hazardous waste liquid which needs to be manifested, recorded, set up on the waste network and then finally pumped into a MOE licensed truck for proper handling and disposal. Typically the restoration firm is the first responder in a fire, flood, or wind claim. Therefore it is beneficial when a trusting relationship is already in place with an environmental spill response contractor.
Unfortunately, the contents of the heating oil had already been absorbed into the sub grade of the concrete basement floor. After the oily water was disposed of, we began breaking up the concrete and removing it for disposal. At this time, the environmental consulting firm came to discuss the action plan, where we as the remediation contractor, the restoration firm acting as the general contractor and the insurance company acting as the client, had to come up with the best solution for all parties, (especially for the homeowner). Our crews worked quickly over the weekend to remove the concrete and then began to remove all the contaminated soils impacted with hydro carbons (PHC) from the fuel oil. All the impacted soils were loaded into our company roll-off containment bins for transportation and disposal at MOE licensed recycling facility. Once we received the results from the lab indicating the excavation was clean (which is collected, documented and handled by a licensed professional environmental engineer consulting firm), the next step was to backfill where the impacted soils were removed and replace the concrete floor. To make a long story short, the insurance representative and homeowner were happy to see how the restoration firm and spill response company put their heads together to solving the issues promptly and ultimately getting the property owners back into their home. All-in-all, it is always a good fit when restoration firms and excavation contractors partner up, and we are glad to have the restoration industry professionals as a members of our team and a part of our customer base.
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RESTORATION
A HAPPY CLIENT
Lee Quenneville suffered a fire loss to one of his apartment properties in Chatham, Ont. But his tragedy turned to triumph, due in large part to the good working relationship between his insurer Canada Brokerlink and the restoration company, Paul Davis Systems. This is his story When a careless tenant’s activities resulted in an explosion and fire that wrecked a small apartment building that I own, I was left to decide which contractor I would choose to handle the restoration. I had enough on my plate and I wanted to make sure that the situation didn’t get any more demanding or stressful by choosing the wrong company to handle the restoration, especially when I live 150 kilometres from the building. After conducting a substantial amount of research and interviewing the project manager, I decided that I would entrust the project to Paul Davis Systems, and I was extremely pleased with their work. They ensured that all the jobs completed by sub-contractors would be top quality and the project was carried out according on the negotiated schedule. Davis was flexible, upgrading several aspects of the building. He provided good advice on upgrades, which were completed in a timely, cost-effective manner, given the scope of the restoration. Davis also kept me informed of all additional upgrade costs. He coordinated well with my property manager and agreed to us having our own maintenance staff complete some of the less technical repair tasks to cut back on costs repair tasks to cut back on the cost of upgrades. I was kept in the loop throughout the process and was invited to make specific cosmetic choices to ensure my complete satisfaction. He was always patient and made sure that all my questions were answered. My phone calls were
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always promptly returned. You never want to be in a situation where you own a property that is damaged by fire. You will have lots of questions about the repair of your property and your stress level may very well be in the red. It is unfortunate that you have these circumstances to deal with, but you know what? You’re not the first person to go through this and there are experienced specialists around the corner to help walk you through the process of restoring your property to its prior condition or better.
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GREAT EXPECTATIONS Restoration companies are often presented with this request: Turn my Cavalier into a Cadillac through my insurance claim “In general most people understand the value of their claim, putting them back into the position they were in before the damage occurred” says Jarrod Matteis of PDS Chatham –Kent. “However their expectations usually trend upward during the repair wanting us to turn that Cavalier into a Cadillac.” The pressure to meet client expectations, while working within the approved scope for the job, isn’t easy – especially when you add in the state of mind of the client following a disaster. “Obviously we deal with people not on their best day. Some of them recognize that our goal is to help them,” says Matteis. “Then there are those that have the Cadillac expectations. These clients create a greater challenge when it comes to customer service and creating a satisfied client for the insurer.” “But I do understand their frustration,” he adds. “They didn’t ask us to come and renovate their house. If you think, ‘I’m going to renovate my kitchen, get some quotes, schedule it for May…,’ we really don’t have that luxury. The client didn’t ask us to come and tear apart their house. They just want it put back together as quickly as possible. That is what we deal with on a daily basis.” It was Matteis’ company that did the restoration work for Lee Quenneville’s four-plex apartment building (see “A Happy Client”); a successful job that makes Matteis proud to be in the restoration business “The work we did in Chatham for Quenneville, it had the potential for some hiccups along the way,” says Matteis, “but everything went really well and he was easy to work with.” And a large part of that success comes from a good Restoration companies are often presented with this request: Turn my Cavalier into a Cadillac through my insurance claim working relationship with the insur-
ance company Matteis points out. “It is very important to have a good working relationship with the insurer, and not be working against each other,” he says. “The easiest, or best claims, are the ones with which we have a really good working relationship; that they trust us and we trust them, and they back us, and it is never them against us. It is all about building confidence with the homeowner too. “When an insurance company contracts out to a restoration company, the insured needs to know that the insurer has complete confidence in that contractor – and that there is no doubt that the job is going to be done.” From all of his years of working on restoration projects, Matteis offers this piece of advice to brokers. “Home owners need to be aware of potential causes for loss, and read up on the material that the insurers have on how to reduce their risk. Things like changing your washing machine supply lines he says. It wouldn’t help us necessarily, but it would prevent losses.” “This information is available in most insurance offices and on their web sites, unfortunately most of us don’t pay enough attention to these recommendations”, he adds “Not all losses can be prevented as we have seen with this past winter and with the frozen pipes. A home owner can’t always fix, repair or replace certain items but reading the material would at least help them make decisions. It is often said that a claim is proof of the value of your insurance policy. That is why insurers are so particular about the service levels that clients receive. As they say, you don’t get a second chance to make a first impression!
30 crews of two to three repair workers from Paul Davis Systems were working across the Greater Toronto Area in the aftermath of last July’s storm
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THE BIG INTERVIEW / HANK WATKINS
HANK WATKINS: CHANGE IS HERE —EMBRACE IT
To Lloyd’s Canadian chief, the biggest mistake is standing still
From top to bottom, the industry must act boldly in the face of the fast-paced changes that define our times, says Hank Watkins, president of Lloyd’s North America. Property and casualty agents have to recognize and seize new opportunities — and undertake a clear-eyed re-evaluation of the long-term prospects of their premium base. Large carriers need to move swiftly to take on the new risks that accompany evolving industries — and address other challenges such as security threats, changing weather patterns and even demographics.
STANDING STILL PUT IS NOT AN OPTION “One of the biggest opportunities (for the Lloyd’s excess and surplus marketplace) is to reach out to the … retail folks,” says Watkins. “Surplus lines is a great opportunity for them to provide a bespoke product to their customers.” But it has often been a hard sell as E&S can involve hard work and be a little more time consuming, he concedes — though change is coming. Electronic exchanges that will allow the small retail agent “sitting in South Dakota to jump onto an electronic platform” and find E&S quotes are already evolving, says Watkins, who was named to his current post in 2009. Consumers and retail agents can go soup to nuts online with car insurance purchases and there’s no reason that can’t happen in the commercial arena. “Watch this space in the next year or two,” he says.
“It’s going to happen’’ — and open up opportunities for retailers. But the outlook is not all rosy. Take driverless cars, for example. “Think about what the personal auto insurance industry is going to be like in 10 years when cars are self-driving and you no longer have to worry about collisions as much,” says Watkins. “That’s billions of dollars of premiums that’s going to be gone. “I don’t know when autopilot was first put in a jet,” he says. “But if someone told you a generation ago that the pilot gets in a plane, pushes a button and the plane takes off and lands by itself, you’d freak out. But now we live that way.” And, predicts Watkins, we’ll see that same perception arc with self-driving vehicles. “If you are a personal lines guy writing home and auto and that’s your future, I suggest maybe it’s going to change a bit,” notes the San Diego native. “Not this year, not next year, but (a decade) down the road. It’s not here yet but we’re all thinking about it.”
FOR CARRIERS: A CALL TO ACTION “There’s a lot of excess capital in the market,” Watkins says, citing estimates that there is $500 billion of capacity in pension, hedge and other funds. “My hope is that that capital can be used to help companies in emerging fields get more comfortable taking (new) risks by buying insurance” so they can build new industries, hire people — and grow global economies. Insurers are traditionally very conservative but
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“We’re traditionally very conservative, but there’s got to be a way to become a little bolder” Hank Watkins HANK WATKINS: PERSONAL FILE AGE 54 ROLE Oversees the Lloyd’s operations in Canada, Atlanta, Boston, Chicago, Frankfort, Kentucky, Los Angeles, New York and the U.S. Virgin Islands. In 2012, Lloyd’s North America accounted for US$12.3 billion in premiums — 35 per cent of the Lloyd’s global total. CAREER A 30-year industry veteran with stops at Chubb, Barney & Barney, Johnson & Higgins, Marsh and HRH. Started current role with Lloyd’s in 2009. EDUCATION BA from the University of California at Berkeley. Studied at the Wharton School. FAMILY Married with two sons in college and one still in high school. Raised in San Diego and today lives in Connecticut. FAVOURITE SPORTS Skiing and golf. (“I can’t hit the ball as far as my boys these days”)
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“Rowing is a metaphor for my life,” says Watkins. It teaches the value of teamwork, accountability, hard work — and never letting up. “If you’re three boat lengths ahead, make it four” “there’s got to be a way to become a little bolder,” says the New York-based executive. And he’s not alone in this mission of, as he puts it, “shouting from the mountaintops.” XL Group CEO Michael McGavick is also vocal on the subject. “The insurance industry has to try to come up with solutions to the world’s newest risks,” he said at the 2013 Property Casualty Insurers Association of America annual meeting. “We must become more daring.” But not profligate. “We don’t want to do stupid things with our capital, but I think there is a lot of room for innovation,” says Watkins, pointing to cyber-crime insurance as a positive example. The 2013 Lloyd’s Risk Index showed that the threat of cyber crime rose from the 19th biggest concern in 2011 to third in a global survey of 580 top executives. “We’re all affected by cyber risk,” says Watkins, a University of California at Berkeley graduate. But the costs associated with insuring such risks are still not fully understood, and that makes carriers cautious. Bolstered by a peek into history, though, Watkins
maintains a bullish outlook on the lines and he expects the industry to eventually flourish writing cyber crime policies. The space has parallels with employment practices liability in the mid-1990s, he believes. Back then “few companies really knew how to treat employees and there was a lot more discrimination based on race, sex and other things,” Watkins says. Practices began to change as it became clear that there was massive liability for employers, but it was initially difficult for insurers to understand the risk. Eventually carriers developed products — employment practices liability lines — hat today are ubiquitous. “I think that cyber ultimately could be very similar,” says Watkins, who predicts a day when online crime policies — already the source of an estimated $1.3 billion in U.S. premiums in US premiums in 2013 according to Betterley Risk Consultants — are commonplace. “Not next year,” he says. “But I bet it’s going to come.”
NATURAL AND MANMADE CATASTROPHES Understanding the trend toward more — and more severe — natural and manmade disasters is key for the industry, although Watkins sounds a note of caution against making assumptions. “Are we living in a riskier world?” he asks. And if so, “Compared to what? If we were in a covered wagon trying to cross the continent … we would probably think the world was pretty risky.” So in an effort to remain evidence-based in
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LOOKING DOWN THE LINE WITH HANK WATKINS E&S EXCHANGES A dramatic shift. Retailers who today face daunting logistical hurdles to placing surplus lines will soon easily access surplus quotes online. assessing changing risk parameters, Lloyd’s convenes an Emerging Risk Panel about once a month in london and brings together under-writers, academics and other experts to identify new and changing global liability factors. They call it “horizon scanning.” “And we ask, ‘What are the new risks coming down the pike?’” Watkins says. It is this empirical approach that Watkins — who credits his years of rowing in college with honing skills that set him up for success — believes will best guide carriers as they chart a path through the planet’s evolving risk parameters.
LESSONS FROM SPORT Watkins, who graduated from college in 1980, spent much of his undergraduate time on the water with an oar in his hands. It was transformative. “If I had to pick one activity that set my world view, it had to be rowing,” he says, citing the long hours — he rose at five o’clock every morning to make it to practice — and the intense teamwork needed to propel a racing shell. The experience fostered a capacity for hard work and an appreciation for accountability. “Rowing is a metaphor for my life,” he says. Watkins’ coach, Steve Gladstone, instilled key tenets he still leans on. “As Steve would always say, ‘If you’re three boat lengths ahead, make it four,’” because you never know what snags loom ahead. “Hank was a really thoughtful, sturdy young man,” remembers Gladstone, who today is head crew coach at Yale. “Mature beyond his years and a great team guy.” Watkins brings that team-first approach into his work week. “We have offices (in six cities across the country) and every Monday we get together on a call. There are no stripes (meaning rank), even though I’m the president. Everyone comes prepared and everyone contributes and we’re all accountable to each other.”
BUILDING A BASE FOR THE FUTURE The lessons learned as a young man inform Watkins’ efforts to inspire a new generation of underwriting professionals, and he devotes
“Watch this space in the next year or two. It’s going to happen” COLLISION PREMIUMS They’ll crash. Self-driving cars will drastically reduce the rate of collisions — and the need for billions of dollars in premiums. “It’s not here yet, but we’re all thinking about it” DON’T GET LEFT BEHIND Inertia kills. Insurers have to get “bolder” to help new industries develop by underwriting some of their risk. If not, the businesses will move ahead anyway and leave insurers empty-handed. KNOW YOUR HISTORY It repeats itself. Thirty years ago insurers didn’t grasp employer risk. Now everyone carries employment liability lines. Cyber-crime lines fit this head-scratcher to ubiquity model. “Not next year. But I bet it’s going to come” GENERATION NEXT Are demographics destiny? If so, the industry needs a boost. An aging workforce is retiring and young talent is scarce. “It’s a challenge, but imperative, to get the best and the brightest”
significant time reaching out to university students and speaking on campuses. His message: “Come to the E&S space and build specialty products. … Insurance is a fascinating industry. You can learn a lot about lots of new businesses.” But it is an uphill battle. Demographically we’re on the “back end,” he says. “There are a lot of people retiring and we don’t have the right number of 20- and 21-year-olds coming into the field). We all wrestle with how to make it more attractive to young people. It’s a challenge to get the best and the brightest.” MARCH 2014 | 47
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FEATURE / BUSINESS STRATEGY
DOES YOUR NETWORK NEED INSURING? Strategic networks are built on relationships, but what type of networker are you? Julia Palmer explains how strategic networking can be your best insurance in a changing world
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Nearly every job title I have trained to network over the years has shared the sentiment that they dislike networking. There is no escaping the fact that the word “networking” has a dirty connotation in business. In my opinion, this is because most people have been taught the wrong way to network or not been taught at all! It is an expectation of each role in some capacity or another, but unfortunately most people fear, dread or simply avoid it. Worse still are those who feel forced to network and put on a different persona to help them cope, making them quite awkward and sometimes even fake versions of themselves — never nice to meet. The financial services industry is one of the most networked, but the last few years have seen the gaps widen and the pressure increase. Having worked closely with some of the market’s biggest banks, insurers, mortgage originators and financial planners, I know only too well how vital relationships are to
By taking a look at how you network and by making changes to be more strategic, you can increase your influence and operate in stronger networks
success. The good news is: by taking a look at how you network and by making changes to be more strategic, you can increase your influence and operate in stronger networks. There is no doubt that the global financial crisis permanently altered the business environment that we work in, and the rate of change in organizations is only going to increase. With this in mind, I hope to shine some positive light on networking and the consequent networks we produce, with a view to helping individuals and organizations get better returns from both. Apply your networking strategy to all your relationships — organizational, industry, suppliers, stakeholders, clients, community and, of course, personal.
(MODERN-DAY) NETWORKING DEFINED Networking has a somewhat negative connotation, mostly due to how it is undertaken. But this view is changing as people realize the power that lies in having strategic connections that align with their business and personal goals. Let’s define strategic networking by outlining what it’s NOT: It’s not just having 500+ friends on a social networking site It’s not getting as many business cards as you can at a social or business gathering It’s not about knowing lots of people and wanting to have coffee with all of them It’s not simply wining and dining clients or prospects through expensive hospitality It IS about: Planning and establishing key connections Knowing the right people, and knowing them well Building a set of quality two-way relationships — and not simply collecting a large quantity of connections Becoming a trusted ally of your connections and becoming a hub — the “go to” person in a network
ARE YOU AND YOUR ORGANIZATION RELATIONSHIP FOCUSED? The highest-performing companies worldwide are differentiated by their ability to attract, leverage and retain relationships. Networks are more than just your customers; attention must also be given to
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WHAT TYPE OF NETWORKER ARE YOU?
STRATEGIC
This group is the rare few who have invested in two-way reciprocal relationships. Influence, visibility and communication are strong.
INVOLVED
This group is active and often has quite big networks. They can lack focus, which impacts the quality and outcomes from their network.
shareholders, partners, industry, the community and employees. But research has shown that 75 per cent of businesspeople find their existing networks do not support the results they need, and 99 per cent would like specific training on networking and network management. The questions to consider are: Is there a gap between your intention and how you are perceived in your relationships? How conscious or deliberate are you at creating a network that is aligned to your role? How conscious or deliberate are you at managing a network so that it benefits you and those in it? Networks are powerful and relationships are important. Combine these two things with thought to the future and you have strategic networks — a strong set of relationships that can deliver mutual value to those involved. Built and maintained with care, strategic networks can then go to the next level, allowing you to potentially to leverage the power of other people’s networks.
WHAT TYPE OF NETWORKER ARE YOU? Given that we all network in some capacity, it pays to look at how you do this and if it is working. Unfortunately, many people have been taught the wrong skills and may spend a considerable amount of time and effort with no return. On the flip side, we all know someone who is a born networker as well. Start by identifying where you fit and then look at the steps you can take to improve (see “What type of networker are you?” above).
???
ACCIDENTAL
MISGUIDED
This group doesn’t really think too much about networking but may be in the right place at the right time, so get occasional rewards from it.
This group exhibits incorrect skills, and often they are detrimental to relationship building, such as pronounced card collectors.
BENEFITS OF A STRATEGIC NETWORK There is a growing body of research that correlates the importance of relationships with business outcomes. Let’s face it, every time you interact with someone (potentially new or existing in your network) you can either build or lose credibility. The approach you take directly impacts the quality of the networks at your disposal. A strategic network will give you access to people with knowledge and authority. As you build relationships with these people, you will build your own knowledge and also gain authority by association. A strategic network will deliver you introductions, referrals and endorsements that will lift you above the commodity debate. But you’ll need to deliver real value. A strategic network will help build your personal brand and allow you to be introduced as an authority, someone who delivers on commitments, someone worthy of doing business with. In today’s ever-changing world, this is the best insurance against the winds of change that any individual can invest in. Your very livelihood depends not only on what you know but also who you know, who knows you, and, even more importantly, who is promoting you.
Julia Palmer is a respected networking strategist who provides training to create and manage networks that work.
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DIGITAL DISRUPTION
Digital disruption is changing the world around us – but has the insurance industry really grasped the extent of the impact?
T
The topic of technological change and its impact on the insurance industry is a hot one. We continue to read articles about the need to get ahead of the curve and “embrace the change,” yet it seems so hard to actually do something about it. Why? I remember the days when only senior managers were given access to the Internet. It was thought that staff members could not be trusted to use it for business purposes. Would you believe this was only 15 years ago? Even in today’s world, many companies won’t allow employees to access social media, such as Facebook, despite its power to put their products and services before a potential audience of millions. I know of one brokerage that doesn’t even allow staff to access mobile phones, for any reason, during office hours. Will the last disgruntled employee please blow out the candles when you leave? Disruptive technologies have transformed many industries. A decade and a half ago, three young guys developed the Napster MP3 file-sharing network. Within three years Napster had more than 80 million users and seriously threatened the major music industry distribution companies, who responded with legal action rather than embracing the technology. This disruptive technology was ultimately the forerunner to iTunes, which has since become one of the world’s largest distributors of music, movies and television. Many of those traditional music and movie companies no longer exist. There are other examples, too. When was the last time you purchased a roll of Kodak film, or popped into a Chapters bookstore? My local video store is long gone, replaced by a DVD vending machine in the supermarket. Did I mention I can also buy my car insurance while doing the grocery shopping? Advances in technology are providing an environment in which actuaries, risk modellers, insurers, reinsurers, brokers and supply-chain providers have access to more data than at any time
in history. If you need to know how many galvanizediron roofing nails were used in the aftermath of Cyclone Yasi, and the actual labour costs of hammering them into new roofs, by specific street location and house number I can give this to you in less than two minutes. The trick is accessing and extracting this data. Most insurers still struggle with legacy mainframe systems, which have become expensive to maintain and make insurers slow to respond to innovation. Their mentality has been “we must build it ourselves” or “go find one system that does everything.” Eventually this leads to other cost-cutting measures, such as centralization or offshoring entire sections of their business. I find myself scratching my head and asking, “Why do something your customers don’t like when there are alternatives out there?” A truly customer-centric business carefully analyzes customers’ wants and needs and then sources business processes and systems to make that happen. But you don’t need to invent it or build it yourself. Your restaurant doesn’t farm its own beef, or grow its own lettuce and tomatoes. It assembles the right ingredients, in the right order, and delivers a personalized customer experience. Sadly, there are many players in our industry still trying to make customers squeeze into their antiquated processes. How many times have you heard: “But our procedures require this form to be completed”? A rethink is needed, and it’s needed now. It’s time to embrace technological advances in social media, mobile applications, analytics and cloud storage, and become part of the revolution. Combining these key components, in a unique way to suit your customers’ needs, might be the difference between future success and future redundancy. On that note, I’m off to pick up a copy of the Trading Post. Oops. Hang on. Another one bites the dust.
Your restaurant doesn’t farm its own beef, or grow its own lettuce and tomatoes
Darren Trott is executive general manager of Claim Central
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FEATURE / BUSINESS STRATEGY
THE (R)EV
OF MANAG If you want innovation and growth, you need to engage your people on a whole new level, argues Therese S. Kinal Management is in need of a revolution. And not just one on glossy academic paper, but one that actually changes how organizations think and act. Despite the inspirational stories we read about companies like Zappos, Innocent Drinks and Google, the truth is that most of us are using outdated management practices and failing to get the most out of our people. Not convinced? Consider this: 65% of people are unhappy at work (Right Management, Manpower Group, 2012 online survey) Only 14% understand their company’s strategy (Smither, J.W., and London, M. (2009), Performance management: putting research into action) 75% are seeking jobs as we speak (Jobvite’s Social Job Seeker Survey, 2012)
Today’s leaders face increased complexity and ambiguity, and employees and customers alike are demanding engagement, transparency and responsibility. One billion people are now on Facebook, and 500 million tweets get sent every day. Customers don’t want to be sold to. They want to connect with brands and play a role in the development, sales and marketing of products.
If we ever thought we had “control,” it’s definitely gone now. All of this presents a new challenge for how we think about and practise management and how we develop leaders that can excel in this brave new world. But before we look at the future, let’s take a look in the rear-view mirror and see how we got to where we are today:
1910S–1940S: MANAGEMENT AS SCIENCE “Management as science” was developed in the early 20th century and focused on increasing productivity and efficiency through standardization, division of labour, centralization and hierarchy. A very top down management style with strict control over people and processes dominated across industries.
1950S–1960S: FUNCTIONAL ORGANIZATIONS Due to growing and more complex organizations, the 1950s and 1960s saw the emergence of functional organizations and the human resources movement. Managers began to understand the human factor in production and productivity, and tools such as goal setting, performance reviews and job descriptions were born.
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OLUTION
G EMENT 1970S: STRATEGIC PLANNING In the 1970s we changed our focus from measuring function to resource allocation and tools such as Strategic Planning (GE), Growth, Share Matrix (BCG) and SWOT were used to formalize strategic planning processes. After several decades of “best practice” and ‘one size fits all’ solutions, academics began developing contingency theories.
1980S: COMPETITIVE ADVANTAGE As the business environment grew increasingly competitive and connected, and with a blooming management consultancy industry, competitive advantage became a priority for organizations in the 1980s. Tools such as Total Quality Management (TQM), Six Sigma and Lean were used to measure processes and improve productivity. Employees were more involved in collecting data, but decisions were still made at the top, and goals were used to manage people and maintain control.
1990S: PROCESS OPTIMIZATION Benchmarking and business process re-engineering became popular in the 1990s, and by the middle of the decade, 60 per cent of Fortune 500 companies claimed to have plans for or had already initiated such projects. TQM, Six Sigma and Lean remained
popular, and a more holistic, organization-wide approach and strategy implementation took the stage, with tools such as Strategy Maps and Balanced Scorecards.
2000S: BIG DATA Largely driven by the consulting industry under the banner of ‘Big Data’, organizations in the 2000s started to focus on using technology for growth and value creation. Meanwhile, oversaturation of existing market space led to concepts such as Blue Ocean Strategy and Value Innovation.
A WHOLE NEW LEVEL After a century of trying to control people, processes and information, we have come to a point in organizational history where we need to recognise that what worked before just simply isn’t enough anymore. Traditional management is fine if you want compliance, but if you want innovation and growth, you need to engage your people on a whole new level. In our research, we looked specifically at the evolution of the management approach and the approach to innovation/problem solving, and at how MARCH 2014 | 53
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FEATURE / BUSINESS STRATEGY
We need to recognize that what worked before just simply isn’t enough anymore
these would develop in the future (see graph, “The evolution of management”): Organizations of the future are neither consensus driven nor top down. They aren’t dictatorships, nor
workforces is not about team-building exercises or lucrative benefit packages but about creating a working environment that offers purpose, mastery, challenge and autonomy, which in turn creates more business value than the traditional approach. Recently, Steve Denning wrote about the management revolution that’s already happening at Forbes.com. In the article, he discusses organizations like Apple, Zara and Whole Foods that have successfully forged ahead despite the increasingly challenging environment: “None of these organizations has arrived at any final state or equilibrium: in each case, management practices continue to evolve. Nor are any of these organizations perfect, as they have to cope with a context that is filled with contradictions. Their virtue lies in the creative energy with which they are pioneering new ways of adding value.” Steve makes some excellent points about the need to constantly reinvent ourselves, but I’m not sure if the revolution is already happening. In fact, I think it might be more of an evolution. And herein lies the problem. We need a revolution, not an evolution. We are armed with tons of research that supports a more holistic, human way of doing business. It is up to us to stop simply following best practices and translate our know-how into how we develop leaders and organizations that are more agile, innovative and purpose-driven, and in doing so, breed the pioneers and market leaders of tomorrow.
1. Management approach: the style of top management, ranging from: a. Control (ie your boss tells you what to do and how to do it); to b. Set goals (ie your boss sets goals and expectations, but you have more freedom with regard to how you achieve them); to c. Inspire (ie your boss gives you scope and freedom to innovate on both the what and the how) 2. Approach to innovation/problem solving: how leaders solve strategic problems and develop new products and services. This ranges from: a. Top down (ie solutions are created and come from the top); to b. Top down with bottom-up data (ie the rest of the organization contributes information and experiences, but solutions are still created at the top); to c. Participatory (ie solutions are created collaboratively, and throughout the organizational levels)
are they anarchies. They’re not merely occupied with increasing shareholder value or making their people happy. Leaders of the future know that the two go together, and that having happy and productive
MANAGEMENT APPROACH
Top down w/ bottom-up Participatory data
Control
Top down
Therese S. Kinal is the CEO and co-founder of Unleash, a disruptive innovator in the management education and consulting industry. She is the co-author of Unleashing: The Future of Work, and she writes, runs workshops and works with clients on a range of management issues.
INNOVATION/PROBLEM SOLVING
THE EVOLUTION OF MANAGEMENT Set goals
Inspire
Unleashing Big data Competitive advantage
Process optimisation
Strategic planning Functional organisation Management as science
1910–1950
1960
1970
1980
1990
2000
2013 ->
Source and copyright: UNLEASH SPP LTD. For more information, go to unleashteam.com
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CONTENT
MARKETING HERE TO STAY Content marketing might be the latest marketing buzzword but what does it mean and more importantly, can it add value to your advice business? One thing for certain is that for the foreseeable future, content marketing is here to stay. Peter Bowman explains all
Content marketing involves creating and sharing content in order to promote your business, retain existing clients and attract new ones. The content you create is stored on your website, which acts as your online shopfront. You share your content by adding website links on your social media pages. So how is content marketing different from traditional marketing? Traditionally most services used a mix of television, newspaper, radio and telephone directory advertising. This provided people with the ability to find you and make an appointment. When you think about it, it’s really one-way communication – your business sending a message to the marketplace. If they were satisfied with you, they might tell their friends about you and make a referral. Content marketing, however, is more like two-way MARCH 2014 | 55
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BUSINESS STRATEGY / CONTENT MARKETING
communication. People have the opportunity to interact with you and share your content with their own connections.
WHY SHOULD YOU CARE? There are six reasons why you might consider adding content marketing to the marketing activities of your business. The shareable nature of social media makes content marketing highly believable when it is shared and liked by your followers. Prospective clients are more likely to trust a referral from a friend than they will trust an advertisement. Therefore, content marketing provides a great way to introduce your expertise to people who you don’t do business with yet. In some ways, it’s the modern version of a referral – it’s a virtual handshake. Traditional advertising is seen by many consumers as an interruption to their television viewing, radio listening or newspaper reading. Content marketing, given that it’s ‘news you can use’ or “entertainment,” is more likely to engage with consumers than interrupt and annoy them. If you’re not on social media, you are likely to be seen as old fashioned. Once upon a time a business needed a fax number and a website just to be considered credible. The same can now be said for Facebook and LinkedIn company pages. Tomorrow’s clients live with social media. Teenagers today don’t know what life is like without the Internet. And although it’s medically possible, many don’t think they can live without a Facebook update or a tweet. The point here is that the Internet has changed the way we communicate and interact, not only with each other, but with businesses too. If you don’t embrace change like this, you’re likely to be limiting your business’ longevity. Content marketing is highly measurable. With inbuilt metrics within social media tools and Google Analytics for your website, you can see how widely your content is shared and what this marketing effort and cost is bringing to your business. Accountability in marketing is always a good thing and content marketing allows you to clearly assess the cost of a new client. The more content you have, the more credibility you have with search engines like Google. Content marketing can help improve your
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TRADITIONAL MARKETING VS CONTENT MARKETING CREATE AND PLACE YOUR MESSAGES
NEWS
ACTIONS TAKEN BY POTENTIAL CLIENTS
• Contact you to make an appointment • Potential to tell their friends about you by verbal referral
• Contact you to make an appointment • Potential to tell their friends about you by verbal referral PLUS ONLINE THEY CAN
• Follow you • Like you • Comment on and ask questions about your content • Share your content with their friends
Google rating. More and more people are going online to search for assistance rather than look through the telephone directory.
SO WHAT CONTENT SHOULD YOU CREATE? Creating shareable content is the key challenge of effective content marketing. Shareable is the key word here. Shareable content identifies a problem, helps solve a problem, entertains or a combination of all three. By sharing this kind of content, you have the opportunity to be seen as the ‘go to’ person for help within your community in your area of expertise. Effective content marketers avoid straight selling. Straight selling is likely to be seen as ‘spam’ by an audience and they are likely to switch off. The type of content you can create is really only limited by your imagination and your marketing
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budget. Typically though, content marketers produce things like: • • • • • • • • •
Fact sheets ‘Did you know’ blog articles White papers Case studies How-to guides and e-books Interviews Podcasts YouTube videos Video-recorded seminars
WHICH SOCIAL MEDIA CHANNELS SHOULD SHARE YOUR CONTENT? There are new social media channels popping up every day, but the most popular ones are Facebook, LinkedIn, Twitter, Instagram, Google+ and Pinterest. It makes sense from a content marketing perspective to create pages on the social media channels where your existing and ideal clients are. It also makes sense to have a personal LinkedIn profile so your professional network canconnect with you online.
WHAT DOES IT COST? In traditional advertising (radio, newspaper, television and telephone directories) there are usually two costs: the cost to create the advertisement and the cost of advertising space itself. Content marketing only has the cost of creating the content, as all of the popular social media channels are free.
HOW DO YOU MAKE THE DECISION TO EMBRACE CONTENT MARKETING? Using the principles from my book, Service 7, here are seven questions you should ask yourself before jumping head first into content marketing. Can it add value to our business?: How you define value will depend on your business. But for most, it comes down to client satisfaction, business income and profitability. If you don’t believe content marketing can add value on these measures and your own, then perhaps it is not right for you. Does it help us understand our clients better?: Understanding your clients and meeting their needs is certainly a key for success within any business. By connecting with your clients online, not
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only can they follow you, but you can keep up-to-date with what’s going on in their world in a non-intrusive manner. Does it help us tell our story better and build our reputation?: Content marketing may afford you the opportunity to tell your story better over time. Articles and fact sheets can demonstrate your expertise and opinion leadership. YouTube videos are great at helping to explain complex matters and sharing personal messages where traditional faceto-face communication would usually work better. Can it help us attract new clients?: As with assessing all business development decisions where you intend to make an investment of time and money, it’s prudent to ask yourself how effective this effort might be. If no one is using the telephone directory or reading the newspaper anymore, then ask yourself if content marketing offers a way to connect with prospects and potential clients. Will it help us deliver better customer service?: Not only might you be able to attract new clients with content marketing, you might also be able to service them better. Perhaps there are frequently asked questions or difficult issues you can share some insight on. Or perhaps you can offer tax time reminders as a part of your content marketing – so you are delivering a part of your service online too. Remember, content marketing is two-way communication. Can it help us enhance our service design?: Content marketing has the ability to change the way you deliver your services. Perhaps it’s time to create an online service capability that might include an introductory client fact page and a welcome video. Will it help us create the future, or is it just change for the sake of change?: As with all innovation it’s important that you’re confident you are making changes within your business because it makes sense to. It’s also likely that your competitors are considering content marketing too. Given the increasingly online nature of the world we live in, content marketing isn’t going to go away. As with all marketing initiatives, however, it’s important that you take some time to create your goals, plan your messages, select your channels and assess the results to ensure your content marketing strategy is working for the betterment of your business.
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Peter Bowman is a private marketing consultant for AM WEEK, and is the author of Service 7, a book that helps professional advisers market their firms more effectively.
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FEATURE / CONSTRUCTION
Clearing skies for CONSTRUCTION INSURANCE
More activity in sector as economy rebounds—but hurdles remain
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“We have to get better at what we’re in the business of doing” Craig Fundum, president of commercial markets at Zurich North America Pent-up demand appeared to overcome concern about the economy and attracted capital to US projects, according to the Marsh report. Insurers and brokers can anticipate that total US construction starts for 2014 will rise by 9% to $555.3bn, higher than the 5% increase to $508bn estimated for 2013, according to the 2014 Dodge Construction Outlook from McGraw Hill. Gains will be led by single-family housing, with multifamily housing delivering a slower yet still healthy rate of growth after four years of expansion, and commercial building ascending from low levels, according to the report. “We see 2014 as another year of measured expansion for the construction industry,” said Robert Murray, McGraw Hill Construction’s vice president of economic affairs. “Against the backdrop of elevated uncertainty and federal spending cut-backs, the construction industry should still benefit from several positive factors going into 2014. Job growth, while
CAPITAL EXPENDITURES FOR CONSTRUCTION IN CANADA
260,132
285,045
in millions of dollars
243,866
The outlook for the construction insurance market looks to be brightening as the construction industry revives to levels not seen since before the recession began in 2007, builders and insurance experts say. But the sector still faces headwinds in the guise of an uptick in work-related injuries and the overarching spectre of low interest rates. The construction insurance market saw some firming in the first half of the year, according to a report from Marsh. Construction companies paid more for insurance on average as underwriters sought price increases across their contractor portfolios, according to Marsh’s Construction Market Update—First Half 2013. Pricing for contractors’ general liability, projectspecific general liability, umbrella and excess liability, workers’ compensation, and residential construction insurance was up by between 3% and 7% on average during the first half of the year, although builders’ risk rates remained flat. At the same time, overall rates for catastrophe-exposed property risks increased by an average of 5% compared with 2012. But the continuing low interest rate environment means that, even with generally rising premium rates, carriers must stick to their knitting to succeed. “As insurers, today we’re feeling the stress of under-writing to a profit, where in the past we’ve relied so heavily on our investments,” Craig Fundum, the Omaha, Neb.-based president of commercial markets at Zurich North America, told the International Risk Management Institute’s (IRMI’s) Construction Risk Conference in November. “We have to get better at what we’re in the business of doing, which is insuring risk.” Concern about the future of the economy held back the construction industry in the first half of 2013 but, subsequently, several areas, including single-family and multifamily home construction, began showing signs of a sustainable recovery.
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FEATURE / CONSTRUCTION
PUBLIC AND PRIVATE INVESTMENT IN THE CANADIAN HOUSING SECTOR
Public and private organizations and the housing sector intend to invest $404.5 billion in construction and machinery and equipment in 2014, up 1.4% from 2013.
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$ millions
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From Statistics Canada Actual from 2004 to 2012; 2013 preliminary actual and 2014 intentions
sluggish, is still taking place. Interest rates remain very low by historical standards, and in the near term the Federal Reserve is likely to take the necessary steps to keep them low. The bank lending environment is showing improvement in terms of both lending standards and the volume of loans. And, the improving fiscal posture of states and localities will help to offset some of the negative impact from decreased federal funding.’’ The speed of recovery has varied by geography; in markets where profit margins remained tight, competition for skilled labor increased and created pricing pressures for construction firms—and some strains on the workforce. And that in turn puts strain on risk transfer models. The construction industry’s 2012 fatality rate increased to 9.5 per 100,000 workers from 9.1 per 100,000 in 2011, according to the US Bureau of Labor Statistics. The 775 construction-sector deaths recorded in 2012 mark the first annual increase in work-related fatalities since 2006. The data prompted Marsh, in a report on construction safety, to call for improvements in the industry. “The increase in new construction activity is bringing an influx of new, inexperienced workers,” the report states. “In this environment, some contractors are stretching their hiring standards to meet project demands.” The report, Building Safety and Leadership in the Construction Industry, recommends a focus on training management to help build a culture of safety
throughout their organizations. “As the economy grows and the number of new construction projects picks up, now is not the time to be lax on safety,” John Moore, a construction safety specialist in Marsh Risk Consulting’s work-force strategies practice, said. Some firms are already heeding that call. “Among a lot of companies, there’s a growing awareness that for workplace safety programs to really affect behaviors, there needs to be a culture of deep concern for the well-being of employees,” Rik Kunnath, executive chairman of San Francisco, Calif.-based Pankow Management Inc, said during a keynote speech at the IRMI annual conference.
OTHER LINES Marsh reported that the market for contractors, architects and engineers to get professional liability insurance has seen a slow hardening. In the first half of 2013 most insurers sought rate increases on renewing business—but at slower rate than they sought in 2012. Marsh predicted that rate increases would average around 5% into 2014, though the insured with material losses would potentially see higher rate hikes. Capacity for these lines remained high. Pollution liability insurance rates remained flat or down in the first half of 2013, reported Marsh, citing competition as the primary reason as insurers did look for increases. Marsh also noted that the use of this type of insurance had increased.
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OFFBEAT
Goats, chickens and bras Sometimes the odd coverage request is, well, odd If you could just punch anything and everything into your online rater and—presto—get three competing quotes, life would be so much easier. And yet, so much duller. Like when Lloyd’s was first asked to insure an automobile. There were no guidelines and the underwriters had to use the expertise they had on hand. So the first auto policy listed the vehicle as a ship navigating on land.
“There’s no class code for poison ivy” Danielle Wade, Jackson Sumner & Associates
Danielle Wade
Lloyd’s is famous as a fount of odd and unique underwritings. Of course Ugly Betty’s smile ($16m) and of course the policy against the Loch Ness Monster being found ($1.6m) came from the fabled London exchange. Wine guru Ilja Gort’s nose for $8m? Lloyd’s. Football star Troy Polamalu’s hair for $1.6m? Ditto. But they are not alone. Plenty of specialty brokers gladly take on the challenges of finding a home for out-of-the-box risk. “We get it all the time—‘I’ve got a unique one for you,’” says Danielle Wade, COO of Jackson Sumner & Associates, a Boone, NC-based MGA. Most of the time, she says, the enthusiasm from the agent at the other end of the line doesn’t move the needle, but every now and then a request comes in that gets
her attention. “We had a lady who hired out her billy goat to eat poison ivy,” says Wade. “There’s no class code for poison ivy.” After a little head scratching, Wade and her team figured out a way forward and rated the goat as lawn care service. “It was a general liability cover,” says Wade. “If the goats ate the clothes off the clothes line, we’d cover it. Turns out that poison ivy is a delicacy for goats.” And then there was the poultry pageant. Wade says she got a call from one of her firm’s retailers saying there was an event organizer wanting to put on a chicken beauty contest and would Jackson Sumner help them get coverage for the event. “We were shocked a little by that one,” she says, adding that the team joked that the winner surely must have been Miss Chicken Little. Wade, whose firm helps handle risk exposure for restaurants and bars, high-risk cargo and mobilehome parks, among other specialties, is asked if any other interesting coverage requests have come across her desk. “No, not really,” she says. But what about the “Containers for Temporary Cadaver Storage” or the “Moonshine Distillery” (apparently unrelated businesses) listed on the Jackson Sumner website? Or what about the “bra fitter,” also listed on the site? “Well,” she says, “we do get a lot of comments on that one.” Perhaps from people wondering how you underwrite an underwire. MARCH 2014 | 61
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FAVOURITE THINGS / SANDRA HENKEL
Favourite things... Sandra Henkel, vice-president, strategic initiatives, Trisura Guarantee Insurance Company, Toronto, Ont.
Favourite sport or pastime: I like to stay active. I ski, play tennis, golf, run and practice yoga. If I had to pick a favourite, I would say that nothing recharges me more than a run around the lake followed by a hot yoga class.
Music: I mostly listen to rock music. I grew up a huge Springsteen fan. I also like U2, Matchbox Twenty and Coldplay, as well as... as some classic Canadian bands such as Blue Rodeo and The Tragically Hip.
Favourite Food: I love spicy food, particularly Asian. I think my favourite is probably Thai.
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Vacation spot: I grew up in Germany and spent most of my family ski vacations in Lech, Austria. It’s a quaint resort town in the Arlberg region. You can ski all day without repeating a run and it has arguably some of the best après skiing. A few years ago, I had a chance to take my son there for his first ski vacation and it’s still as good as I remember it from when I was a kid.
Movie: That’s a tough one. There are so many good movies. Some recent favourites include “The Great Gatsby,” “Silver Linings Playbook” and “The Wolf of Wall Street.” I also enjoy a good James Bond movie. I make a point of going to the theatre whenever a new Bond flick comes out and I’m rarely disappointed... and of course, it’s always fun to debate over who is the best 007.
Book: As far as fiction goes, I enjoy a good mystery such as Stieg Larsson’s “Girl with the Dragon Tattoo” trilogy and most of James Patterson and Dan Brown. One of my recent favourites is “Gone Girl” by Gillian Flynn. In non-fiction, my favourites include “Blue Ocean Strategy” by W. Chan Kim and Renée Mauborgne; Michael Watkins’ “The First 90 Days” as well as Malcolm Gladwell’s “Outliers.”
Best thing about working in insurance: I’ve been in insurance my entire career. I was fortunate to always work for small to midsize specialty insurance companies. As a result, my career has been fairly eclectic in terms of functional responsibilities. I spent the first half in underwriting and then moved into corporate support roles including compliance, HR and marketing. This has given me a great perspective on the many facets this industry has to offer. At Trisura, I have the opportunity to utilize my diverse experience in helping the senior leadership team shape and execute the strategic direction and growth of our company. It’s a very entrepreneurial and fast-paced environment and I work with an amazing team of people. Every day presents a new challenge and I’m continuously learning.
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EXPERT ADVICE
SHAKE UP YOUR APPROACH TO
EARTHQUAKE INSURANCE Your clients aren’t sold on the need for earthquake coverage. Steve Yendall, vice president, Western Canada, RSA Insurance, explains how to sell it
Steve Yendall, vice president, Western Canada, RSA Insurance
Homeowners may have a hard time believing that an earthquake can strike at any time, but all it takes is one tremor to completely change life as they know it. Though the level of risk varies from coast to coast, Canadians should understand the importance of investing in the seemingly impossible and have a firm grasp on what it could cost them if they don’t. Insurance brokers are in the best position to educate homeowners on the coverage that is most pertinent to them, but can expect the topic of earthquake insurance to be a tough sell. The reality is that high deductibles and rate changes are making customers question the true value of this product, and general misinformation is causing the overall uptake to wane. When homeowners doubt the value of essential coverage, it is the collective responsibility of the broker community to step in and clarify. This means that the overall message will have to communicate more than simply, “You need to go buy this insurance.” In fact, it will likely require brokers to take a step backward and explain how insurance coverage works in general terms, followed by where the responsibilities will lie in the event of an earthquake. As many insurance experts can attest, it can be challenging to convey what could go wrong when selling the potential for loss rather than the loss itself. However, once homeowners come to terms with the very real possibility of damage and the responsibility they have to protect their personal assets, brokers can be confident that they will be more compelled to make the investment. Part of this conversation will undoubtedly entail shedding light on how different homeowners’ properties may look after an earthquake, how long
recovery can take and the impact on property values as a result, as well as what other coverage will not apply if earthquake insurance is not part of the equation. But brokers... should resist the urge to broach these realities as scare tactics. Instead, take this lack of understanding as an opportunity to share key pointers with homeowners and to bring them up to speed about why purchasing for possibility is a good decision. Brokers should also remember to include condo owners in the conversation, as an even greater number of these homeowners are misinformed about who is accountable in the event of an earthquake. Many assume that building management is responsible for purchasing earthquake insurance when the decision actually lies in their court. When condo owners waive off this coverage, oftentimes they are underestimating how long it can take to rebuild and how costly it can be to pay for temporary accommodations. Not surprisingly, television and movies have led consumers to believe that only high-magnitude earthquakes can cause serious damage, but experts know that smaller tremors can also cause a significant amount of destruction. This fact is part of the important conversation that is currently evolving in this industry and should be central to the broker’s message. As the discussion broadens and as insurers address unavoidable changes to pricing and coverage, we will need to remember that homeowners will only respond positively to the message when it is understood from a personal and probable perspective. Discuss earthquake insurance with homeowners in specific terms and shake up the current perception.
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