Insurance Business Canada 2.04 by Key Media

WWW.INSURANCEBUSINESS.CA ISSUE 2.4 | $6.95

BROKERS Second-annual Top 30 Elite Brokers revealed

CYBER RISK ON FIRE WHY A 25-YEAR-OLD PRODUCT IS SUDDENLY HOT

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FIVE MYTHS WHAT YOU MAY NOT KNOW ABOUT AFFLUENT CLIENTS

MILLENNIALS WHAT DO THEY REALLY THINK ABOUT INSURANCE?

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CONTENTS

FEATURES 4 | Cyber risk: One size doesn’t fit all 8 | Are you missing the next gold rush in insurance? 10 | Marine insurance and generational selling 14 | Why is a 25-year old product just now taking off? 16 | Never had a client sick or injured? They should consider themselves lucky, not prepared 20 | How Millennials perceive the insurance industry 50 | Leaving the industry, without leaving your clients hanging out to dry

BROKER ADVICE 44 | Untangling Canada’s anti-spam legislation 46 | Risk and third-party advice – sometimes it is necessary 54 | 5 Myths about affluent clients 56 | Telematics: A lot of hype, or the future of auto insurance?

S R E K O R B 30 COVER FEATURE

Canada’s Top 30 Elite Brokers The best in the industry are showcased in our second annual survey

One young broker is aiming high to become one of the nation’s top brokers

58 | How to teach an old dog new tricks 60 | The time to make changes in your brokerage is now

PROFILE Q&A 40 | Kathy Bardswick, President and CEO of The Co-operators

issue

2.4

REGULARS 63 | Favourite Things 64 | Expert Advice

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CONTENTS

The elite are here COPY & FEATURES

SENIOR EDITOR Vernon Clement Jones ASSOCIATE EDITOR Donald Horne CONTRIBUTORS Richard Grant, Alex Tsetsenekos, Ron Courneya, Rick Dennen, Martin Millican, Diane S. Baker, Patricia LeBon, Sonia McDonald, Matthew Michalewicz, Alex Walker

ART & PRODUCTION GRAPHIC DESIGNER Joenel Salvador

SALES & MARKETING NATIONAL ACCOUNT MANAGER Eric Langille 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

The elite are here – but the journey hasn’t been easy. There remain considerable challenges facing the industry – especially in the P&C space – as brokers fight for clients and dollars in the face of growing online competition from the major directs and from banking institutions intent on expanding product offerings. But there are those who have not only found success but phenomenal success, placing them among the ranks of Canada’s Elite Top 30 brokers (pages 30-39). Our Insurance Business survey, which attracted the best of Canada’s insurance industry, has uncovered one salient fact: those actively involved in their communities and fundraising are also successful in garnering clients and revenue. What also became very clear during our research into Canada’s best is that being an elite broker is more than just about the almighty dollar – it is making a very real difference in people’s lives. So, congratulations to you all in the Top 30. Rich or poor, we can all agree on one thing: there is a wealth of talent in Canada’s broker network. Cheers, Donald Horne

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.

CONNECT

Contact the editorial team:

donald.horne@keymedia.com

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All Sport InSurAnce lAuncheS SpecIAl event lIAbIlIty coverAge In AlbertA, SASkAtchewAn, MAnItobA And ontArIo! customized policy terms available to meet your clients’ needs – daily, multi-day, seasonal and annual. We’ve offered this in British Columbia since 1988 and now expand our successful product to our Prairie and Eastern neighbours!

Coverage includes Commercial General Liability $2,000,000 (liquor liability available), Tenant’s Legal Liability $500,000 and facility owner as Additional Insured with $500 Deductible. Higher limits offered.

Hosts and Organizers of events held at public venues are provided with protection when lawsuits are brought against them.

Find our Special Event and Sport Activities applications at: www.allsportinsurance.com/products/forms-applications.htm

Sport and Social categories include:

Email applications to: info@allsportinsurance.com

• Adult Non-contact Recreational Hockey – Seasonal, Annual, hourly, league play, pickup and tournaments

For more information contact:

• Sports Tournaments, leagues, schools (other than hockey) • Martial Arts • Beer Gardens (when insuring a sport activity) • Runs / Walks • Parades / Demonstrations / Festivals • Meetings • Anniversaries, receptions, weddings, dances • Film Shoots • Theatre events …and much more

Gina Bennett, Vice President gina@allsportinsurance.com

Helena Kwok, Underwriter helena@allsportinsurance.com

With the years of success we have realized in B.C. it makes good business sense to offer our Special Event coverage to the prairies and Ontario. Our underwriters are highly experienced in this area and practices are already in place to provide our traditional, consistent and reliable service to brokers.” gina bennett, vice president, All Sport All Sport is a Managing General Agent; there is not a requirement for a contract or premium volume. Due to the nature of this specialty business, an administration fee is charged and is written net of commission. Events held at privately owned or residential property do not qualify.

507-1367 west broadway, vancouver, bc v6h 4A7

phone: (604) 737-3018 Fax: (604) 737-3076 toll Free: 1 877 992-2288

www.allsportinsurance.com

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CYBER RISK

Evolving cyber marketplace demands better education, risk management Just as the cyber threat landscape continues to mature, so do the products designed to address it. In this ever-expanding environment, one size definitely does not fit all. Richard Grant and Alex Tsetsenekos explain It’s a fact: The one-size-fits-all policy is gone with the typewriter, and companies shopping for cyber coverages today present a wide variety of risks and requirements. Brokers must pay close attention to the nature of each client’s business, as their needs will vary based on issues such as company size and type. They also may require specific products depending on how they conduct business (online, in person, etc.) and with whom (consumers, fellow businesses, or a mix of both). Companies that regularly collect and process consumer information or payment card data necessarily have a very different risk profile from those businesses that specialize in B2B transactions, though rarely is either completely immune to the

risk of exposure. It’s not uncommon to hear a broker state that a particular client, or sometimes a subset of clients, has little to no risk for a breach, and thus doesn’t need a cyber product. However, that is very rarely the case. While it’s true that some companies don’t need a large limit or a robust standalone cyber product, the vast majority of businesses have some level of need for this type of coverage. Large businesses carry some very obvious risks in the cyber arena. They may handle thousands of financial transactions each day or serve as a primary infrastructure provider for other companies. But these firms also typically have resources – risk managers and experienced security teams, for example – to protect against potential calamities. Robust coverage for website liability, virus

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transfer, and similar scenarios often fit well with businesses that engage in widespread online and data transfer activities. Small businesses, on the other hand, have garnered an undeserved reputation as a low-risk market. These modestly-sized companies may appear to have a lower potential for lawsuits and the type of expenses a large organization would see, but the risk for damage from a security lapse or other cyber problem is just as real. Small and mid-sized businesses are typically less likely to have experienced IT personnel on staff. They often have a lower understanding of the risks surrounding payment card and personal data. Additionally, they often encounter issues when recovering from cyber events. A small business may suffer irreparable financial and reputational harm, and perhaps even go out of business as a result of a breach or business interruption. Organizations like these may benefit from a lower-limit, lower-cost product, but with access to support in case of a breach or other event. Cyber policies may encompass services from restoration of electronic data to public relations support designed to mitigate reputational damage in any cyber event. And while many companies think of data breaches when considering cyber policies, products don’t always include breach coverage.

TRUSTED ADVISORS MUST UNDERSTAND COVERAGE NUANCES AND CLIENT RISKS There are major differences between products, some of which brokers may not be aware of. At a recent PLUS conference in Atlanta that focused on cyber issues, one of the most successful cyber brokers in the U.S. made the comment that crisis management coverage is usually the first coverage that is completely exhausted after a breach. This is because both the customer and the claims rep often need a significant amount of assistance in dealing with a breach, since it’s such a new exposure. With crisis management being one of the fastest coverages to max out the limit, it may be reasonable

“This is a result of the relationship the carrier forms with a service partner” Cost of cybercrime worldwide:

$484 BILLION Global cost of cybercrime to business:

$435 BILLION Global losses connected to personal information breaches:

$174 BILLION Internet economy generates almost

$3 TRILLION;

cybercrime extracts between 15-20 per cent of that value Source: Center for Strategic and International Studies report

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CYBER RISK

“Data protection, however, shouldn’t be solely focused on one area. Digital and paper assets alike have the potential for exposure. Establishing procedures that safeguard electronic data is just as important as crafting policies that address paper records” with a service partner. Though most products do offer some form of crisis management coverage, brokers should note whether the carrier also has included a service that would provide crisis management support in a way that will not actually reduce the amount the customer may be able to access when they need it.

RISK MANAGEMENT RESOURCES FUNDAMENTAL TO MITIGATING LIABILITIES

Richard Grant is senior vice president of corporate risk at Trisura Guarantee Insurance Company.

Alex Tsetsenekos is chief strategy officer of research and development at IDT911.

Managing risk is crucial when it comes to cyber events and coverages. Just like any other kind of insurable risk, the majority of losses can be prevented with basic knowledge and education. Building awareness throughout the client organization is a first line of defense against potential issues, and providing a risk management resource to customers is tremendously important. Whether it’s a bringyour-own-device policy that’s doesn’t address potential problem areas or lack of understanding about how encryption tools work, companies overlook risk factors every day. Data protection, however, shouldn’t be solely focused on one area. Digital and paper assets alike have the potential for exposure. Establishing procedures that safeguard electronic data is just as important as crafting policies that address paper records. And any data protection plan must extend through the entire chain, from suppliers and clients with access to sensitive information to employees

who are routinely responsible for protecting dataladen laptops and other mobile devices. Risk management tools can be as sophisticated as bringing in a third party to conduct a vulnerability assessment or carry out network penetration tests, or as simple as establishing password requirements for smartphones.

EVOLUTIONS IN PRODUCT FOCUS In insurance as in nearly everything, all that is old will eventually be new again. The cyber and privacy product space is no exception. Many of the seemingly innovative coverages in this market aren’t actually new at all, as they’re addressing the same type of loss. However, a fairly recent development is the shift carriers are making to move beyond cyber products offered to business customers and actually offering a proactive service to address fraud and similar risks directly to the employees of that business that is not triggered by a data breach. Whether the business experiences any kind of data loss or not, their employees have the ability to utilize a service should they experience financial, criminal, or online fraud. This kind of offering ties in well with the solution because it provides the business with much more value than just protection related to the employer’s data safeguarding efforts. It shows their employees that no matter where an exposure occurs, the employer wants to provide assistance in getting through the headache, time commitment and stress of dealing with fraud.

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BROKER ADVICE

THE RUSH IS ON

There has been a 70 per cent increase in membership at the Receivables Insurance Association of Canada. Are you missing out on the next gold rush? If an explosion in membership is any indicator, there may very well be a stampede of brokers looking to mine the rich gold fields that are receivables insurance. Since its formal launch in June 2013, the Receivables Insurance Association of Canada is walking and talking well ahead of its formative stage. Launched in June of last year, it has have experienced a 70 per cent increase in our membership with the addition of insurance brokers, lawyers and banks to our ranks. The Associationâ&#x20AC;&#x2122;s overriding objective is to expand the receivables insurance (also known as trade credit insurance) industry in Canada with the stated goal of growing the industry to $350 million by 2018. The increased market penetration potential continues to represent a tremendous opportunity for forward thinking and energetic Commercial Insurance Brokers. Canada continues to lag well behind its European peers in receivables insurance with market penetration in Canada still in its infancy and below 10 per cent compared to some European countries in the 25 to 30 per cent range. While premium growth has been steady in 2013 at $200 million, policy count has increased in excess of 3 per cent. The receivables insurance market is very well served by seven insurers all licensed in the Canadian market and focused on underwriting receivables insurance. Capacity is plentiful and underwriters are coming off of a couple of very profitable years. What this means is that it is a buyerâ&#x20AC;&#x2122;s market for prospective buyers of credit insurance and brokers. The timing couldnâ&#x20AC;&#x2122;t be better to consider receivables insurance as part of a cost-effective risk transfer strategy for the biggest asset on most Canadian businesses

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balance sheets. Of note is the fact that fully 30 per cent of gross written premium is for receivables insurance on domestic trade, belying the myth that this type of insurance is for exporters only. Brokers should also be aware that receivables insurance provides an ongoing strategic service opportunity that is highly valued by CEOs, CFOs, credit managers and enterprise risk managers. It is the biggest unidentified and uninsured exposure facing Canadian businesses today and brokers have yet to fully seize this opportutnity. Board members of the Receivables Insurance Association of Canada have been busy in the last year. Brad Hébert, the newly-appointed chairman of RIAC stated in a recent press release that he “believes the association’s first year of operations laid a successful foundation. Now the association intends to expand membership, increase brand recognition, continue liaison with the Office of the Superintendent of Financial Institutions, and introduce more valueadded member networking and professional development opportunities.” In keeping with this vision, the association continues to seek opportunities to reach out to brokers, bankers and the business community across Canada. Our ongoing marketing and public relations outreach using social media and other online tools has been effective in raising the profile of RIAC and thus the receivables insurance product. The industry’s most significant challenge is product distribution. Many of the underwriters have direct sales forces simply because P&C brokers are not selling the product, doing themselves and their corporate clients a disservice. A robust, brokerfocused marketing plan is a key imperative for the group going forward. The association publishes a monthy newsletter providing topical information about the receivables insurance world and new readers can subscribe at news.receivablesinsurancecanada.com And speaking of that wider world, this year we assisted our Swedish counterparts in the establishment of a similar association in their country, and continue to an ideasharing dialogue. It also delivers education including a very wellreceived and critiqued session for the BC Insurance Brokers Association in April of this year, as part of a continuing education program.

RECEIVABLES WORLDWIDE

Canadian receivables continue to lag behind their European counterparts in terms of market penetration

European countries:

25-30%

Canada:

< 10%

Ian Miller, Chief Agent and Country Coordinator for Canada with Atradius Credit Insurance N.V. and founding Chair of Receivables Insurance Canada, also presented at an information session of the Alberta Trade Contractors Coalition in July, focusing on the challenges of credit in the construction industry and potential receivables insurance solutions. Our Banking Committee continues to liase with Canadian banks and the Canadian Bankers Association to seek joint opportunities to dialogue on receivables insurance. Since commercial bank lending can be greatly enhanced by receivables insurance, bank awareness is critical to the success and the growth of our industry. On September 26, RIAC will present its first ‘Duelling Economists’ panel presentation in Toronto with esteemed economists from Euler Hermes, Export Development Canada and HSBC Bank Canada. Dan North, Peter Hall and David Watt will debate whether or not Canada is out of the economic woods following the Great Recession that started in 2008. All in all, it has been a gratifying start to an organization unique in the insurance world that is blowing the horn of a product most brokers know nothing about. The march to $350 million continues.

Mark Attley is the founding President of the Receivables Insurance Association of Canada. More information is available at www.receivablesinsurancecanada.com.

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FEATURE / MARINE

It’s a pleasure…

boat

Brokers are always looking for long relationships with clients, and generational selling can extend business from father to daughter to grandson. Marine insurance is uniquely suited to just that sort of consumer loyalty

Ask anyone about their boat or their last time out on the water, and you will see a smile and a faraway look that comes from the heart. For Andrew Robertson, who is at the helm of a third-generation brokerage that got its start in his grandfather’s driveway all those years ago, selling personal pleasure craft insurance is a very personal, very rewarding business. “People love their boats. It is more than just an

object to insure. It is a passion and a lifestyle that they have,” says Robertson. “They take a much greater interest in the insurance on their boat than they would in any other type of insurance that they are purchasing.” As vice president of the marine department of CG&B Group, which is now a part of the Arthur J. Gallagher company, Robertson has seen firsthand over his 22 years in this niche business how developing a strong client relationship can provide the foundation for a greater product offer. “We find a client where we will just insure their boat, and if they are happy with the service and the way they have been treated, then the other business just follows,” he says. “The client will tell us, ‘If you took care of my boat, then you can have my auto, you can my home and you can have the business.’”

WHO IS BUYING MARINE INSURANCE? The obvious answer is anyone standing on a boat; but for Robertson, whose brokerage was selected by the Canadian Yachting Association to be the exclusive provider for its insurance services

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in 2011, the client list is built on a generational basis. “Baby boomers are the demographic that we are working in, but we do have a number of clients who are in their teens and early 20s, and that is in the racing sailboat side,” he says. “That has always been a class of business that we’ve insured.” Robertson points out the “thousands of youngsters and young adults” who are involved in sail training through camps and sailing clubs, and Skippers’ Plan appears to be the one of the only markets that provides coverage for them. “These are going to be future boat owners. They start off with small boats that are in the $5,000 range, but if they stay with the sport, they will eventually move into larger yachts,” he says. “And there are the parents. Most of these kids aren’t into sailing by accident; their parents did it in their youth, or they already have a boat.”

BOOMERS AND SNOWBIRDS Surprise, surprise: baby boomers are fuelling the market for larger pleasure craft that are sailing internationally. “More and more every year we are seeing couples retiring and buying larger boats and taking these boats down the East Coast to Florida or The Bahamas,” says Robertson. “Some get more adventurous and travel to the Caribbean. A small percentage travel to South and Central America, or go transatlantic to the Mediterranean.” And with any ocean trip, even near coastal waters, it presents a greater risk exposure, and a reluctance by many to cover that risk, which demands a solid knowledge of marine underwriting. Aluminum pontoon outboard retail sales increased 12% and accounted for 27% of total metal outboard boats sold in 2013.

An estimated 15 million Canadian adults, about 44% of the population, went boating last year.

Source: The National Marine Manufacturers Association

“It is really important, given the navigation area (and) the exposure to hurricane season,” says Robertson. “That is going to dictate which markets are going to have an appetite for that kind of coverage. You want to structure the policies that are going to give the boat owner the maximum amount of freedom and coverage.”

WHAT IS A TYPICAL COVERAGE? When opening a discussion with a client, Robertson can provide some ballpark figures – or perhaps to provide a more adept analogy, some marina figures. “The liability coverage is pretty standard for the yacht at $2 million. If they want higher than that, then we recommend they go to umbrella or excess liability coverage,” he says. “In terms of the specialty coverage or add-ons, it is not that much different than what we offer for the Great Lakes to our customers who are travelling afar. It is an all-risk, agreed value policy.” What demands greater attention is what the client starts doing to their boat, be it through improvements or additions. “Sometimes you’ll start seeing larger tenders – the inflatable boats – and additional equipment that gets added on to boats that are cruising south,” says Robertson. “So you want to make sure that any upgrades or improvements to the boat have been taken into considerable before they depart, as you will want to reassess the value.”

WHAT HAS CHANGED IN THE LAST 10 YEARS? “It has been a very competitive market over the last 10 to 15 years,” says Robertson. “When I look in the Canadian market, Ontario specifically, we were four brokers servicing this segment of the industry. There are now well over 15.” What has changed dramatically in the last decade is the explosion of managing general agents and agencies in the marine space capitalizing on their expertise as a niche provider. And that MGA presence should only grow, predicts Robertson. “With the addition of a large number of MGAs that have come to play, we will see more competition SEPTEMBER 2014 | 11

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FEATURE / MARINE

The future of marine insurance

Will MGAs dominate? Are the big banks prepared to take the plunge and underwrite marine cover?

Many elite brokers attribute their success to exploiting niche markets that are underserved. Marine insurance definitely fits the niche bill, but is there a future for brokers? “The insurance companies are still very competitive in this segment, although the overall gross written premium is not significant, if properly underwritten, it can be a profitable portfolio,” says Andrew Robertson. “There will still be lots of demand over the next 10 years from the insurance markets, and perhaps increasing capacity.” As the grandson of the man who started Skippers’ Plan more than 60 years ago, Robertson has seen during his 22 years in the business where it has been, and what is likely to come. “What we are going to see is more of the same, but more consolidation through acquisition, through market share being controlled by MGAs,” he says. “There will still be lots of demand over the next 10 years from the insurance markets, and perhaps increasing capacity.” With opportunities available, will it mean competition from the directs and the big banks? “I’m surprised the banks haven’t got involved at this point; I know they’ve looked at it,” says Robertson. “They probably recognize that if you don’t have an in-house underwriter or someone experienced to handle the market, you can get yourself into some pretty significant claims if you aren’t underwriting it properly.” Looking beyond Canada, one trend that seems to be catching on is simplifying and streamlining the application process. “When I look at other markets and see innovations that are going on, such as the in U.K., a lot of it is just geared towards making it an easier purchase for the consumer,” says Robertson. “There are companies that are writing policies with no application forms. Basically you call in, answer 18 questions, and they will write a policy for you on the spot. “That might be a trend that we pick up in Canada.” But is it a trend that he would embrace? “Ultimately I’m not a big fan of going to a straight online sales model,” says Robertson. “It may work for a small percentage of the market; but we find in conversations it is still best to have direct contact with the client to see what their plans are for the boat.”

from non-traditional marine markets,” he says. “Smaller brokerages in cottage country now have access to better policies than they ever did in the past. That has probably been the biggest change.” Ten years ago, few insurance companies wanted to underwrite marine. With the growth of MGAs, brokers will turn to them for underwriting. “Companies will now come into this market, rather than build on their broker base for business,” says Robertson. “If they open up the doors through an MGA and start writing to a broader audience, they are going to grow their book of business faster. And a lot of the companies don’t have that experience in yacht insurance to be able to take that on themselves. So utilizing an MGA ensures the business will have better underwriting.”

WHAT MAKES MARINE INSURANCE ATTRACTIVE? “It is largely because brokers are losing market share to the directs and to the big banks. That has been slowly eroding their business over the same time frame,” says Robertson, who adds that brokers are now turning to other classes of business to make up for that shortfall. “Brokers are now looking at all of their clients’ needs, rather than just focusing on home and auto,” he says. “So the broker who never used to handle the boat policy can now utilize an MGA to write the home, auto, business and so on.” But Robertson isn’t too concerned about an avalanche of brokers coming into marine insurance. “There are still a large number of brokers out there who don’t really understand the boat insurance market, and we get referrals from a lot of those brokers who just send their clients directly to us,” he says. “It is a unique product, and has separate lines and a different insurance act that governs it; so it is unique in the Canadian marketplace.”

WHERE ARE THE UPSELLS, THE OVERLOOKED COVERAGE? One of the overlooked coverages has been Guaranteed Replacement Cost coverage, which has become

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very important since American boat prices have stopped their freefall and the Canadian loonie has dropped below the U.S. greenback. “Over the last decade we’ve seen a relatively strong Canadian dollar and a depressed market in the U.S., boat prices have actually been going down over the last 10 years. It has never been a better time to buy a boat,” says Robertson. “That trend is starting to change, so we’re alerting our clients about replacement costs in the event there is a total loss in the first few years of ownership. The coverage ensures the owner is going to be able to replace the boat with the same vessel brand new, even if it exceeds the insured value on the policy.” That extra can usually be bought up for anywhere from $25 to $100, depending on the size and value of the vessel – a very small percentage of the overall

premium, Robertson points out. “You never know where the loonie will be in a year or two,” he says. “You can add that additional coverage and have that peace of mind.”

BECOMING A TRUSTED ADVISOR Making a go of marine insurance demands not just product knowledge, but how you can help out the client who needs to know which repair shop is reputable, or where to call for a hard-to-find part. “I have clients that to this day will not buy a boat until they call up and speak to me and want to know if I have any experience with claims or getting repair work done on these boats, or if there are any problems, and we like that,” says Robertson. “We like that they use us as a concierge service, if you will, for the boating industry.”

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FEATURE / CYBER INSURANCE

Little-known facts about

cyber insurance Why is a product that has been around for 25 years only now taking off?

While the concept of cyber liability insurance has been in existence for more than two decades, it has only been within the last 10 years that insurers and their consumers have sought to find specialized wording in order to address the risk. Why is this? The fact of the matter is that many companies and unions with membership databases have been left unprotected, assuming they were covered under pre-existing wording, until claims started to force the industry to take notice. Two decades ago, the assumption was that â&#x20AC;&#x2DC;a

crime is a crimeâ&#x20AC;&#x2122; and that any claim arising from a breach in security, information or otherwise, would have risk transference stemming from an insurance product. In other words, coverage was simply assumed. But because of the increasing rate of new claims and incidents and in recognition of the fact that cyber security is becoming an area in need of protection, companies are now seeking specific wording to address vulnerability against hackers, cyber terrorists, internal breaches and protection

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for their database membership private data.

COVERAGE IS NOT AUTOMATIC IN EXISTING POLICIES The number one least known fact is that coverage already exists. When the policy was first designed, it most likely contained protection against criminal activities such as theft and vandalism. Twenty years ago, these crimes were tangible and viewed as overt acts against the security of a company. Nothing has changed, in actuality. The crime still exists; only the tools and the property that has been stolen have changed. What was once called simply ‘theft’ has shifted meaning. Cyber theft is now a separate and individually regarded crime within cyber liability insurance policies. Businesses are no longer protected under their old policies and so this leaves them tragically exposed to damages and the growing cost of repairing those damages. Security professionals can help discover what risk potentially exists for a business. But bear in mind that even the professionals may require reeducation when it comes to cyber crime.

THE COST OF REMUNERATION IS ASSUMED BY YOU It isn’t a highly publicized fact but the average cost of a data breach in 2010 was $7.2 million. It is for this reason that the client should be made aware of the areas in which they will assume costs. Expenses can mount even higher due to third party injury. For example, in a case where a data breach leads to an individual’s identity being compromised, the client is suddenly dealing with the possibility of a class action suit brought about by those affected by the ‘theft;’ or in contemporary words, security breach.

CYBER LIABILITY INSURANCE REQUIRES A SPECIALIZED BROKER Clients need to understand that employing the services of a specialized broker in the area of cyber

“What was once called simply ‘theft’ has shifted meaning. Cyber theft is now a separate and individually regarded crime within cyber liability insurance policies” Without specific protection under a cyber liability insurance cover, the client will have to pay for expenses arising from, but not restricted to: • The management of an incident • The investigation and remediation of an incident • Credit checking for data subjects • Legal costs • Regulatory fines • Third-part damages such as intellectual property rights infringement • Costs associated with mandatory notification to affected members or clients

liability insurance will help to address the unique needs of their security concerns. Not all coverage is necessary and there’s little need to pay for more than what they require. That being said, a client who isn’t dealing with a broker who specializes in this new field may be paying too little for coverage that simply won’t be effective against a cyber incident. A major assumption made by small to mid-sized businesses and unions is that the existing broker and insurer have the experience necessary to address this new area of protection. This is simply not the case. It is an opportunity for the broker to open a discussion on these issues with to discover where the client’s company stands in terms of database and security breach protection.

Ron Courneya is the account director at Hallmark Insurance Group. He holds a Fellowship designation through the Insurance Institute of Canada, and a diploma in Risk Management through the Risk and Insurance Management Society Inc. Ron is a second-generation insurance broker who started his career in his father’s business.

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FEATURE / LIFE AND BENEFITS

DISABILITY: DISABILITY: Do your clients DISABILIT Y: feel lucky? ANADIAN ANADIANREALITY REALITY

Never had a client too sick or injured to work? They should consider themselves one of the lucky ones, as odds are one in three will need ASSET disability insurance MOST VALUABLE — YOUR ABILITY TO TO EARN AN AN INCOME R MOST VALUABLE ASSET — YOUR ABILITY EARN INCOME There are a lot of excuses. ‘It will never happen to me; my work coverage will cover it.’ And the chestnut heard by every broker, ‘I can’t afford it.’ But the numbers tell a different story; and especially for those who are self-employed, disability insurance is an absolute must. 1 seven 1 people in Canada “If we look today, one in are disabled in one form or another,” says Mark Hardy, senior manager of life & living benefits with RBC Insurance. “And for working-age Canadians, one in three will become disabled for at least 90 days before they turn 65.” Staggering numbers, says Hardy, who encourages brokers to share the statistics with clients who feel that disability coverage is a needless luxury. “We’re working with brokers to develop their knowledge base so they can better position it,” says Hardy. “But we’re also working with them to better understand the market opportunities that sit in front of them. From an individual disability insurance perspective, less than 6 per cent of working Canadians in the marketplace owns individual disability insurance.” It is an underserved market, says Hardy, a market with billions in premium2 potential. 2 “Basically the market today sits just under a billion dollars in premium,” he says. “Looking at the market opportunity over the next 10 years or so with rising wages, the increasing number of people who are employed, and the stagnating group benefits, we

ERECOMMON COMMON OU THINK YOU THINK

S HAVE A DISABILITY ANS HAVE A DISABILITY

ST DISABLED PEOPLE AREARE MOST DISABLED PEOPLE ORN WITH THEIR DISABILITY OT BORN WITH THEIR DISABILITY

11ININ33

KING-AGE CANADIANS WILL ORKING-AGE CANADIANS WILL E DISABLED ANDAND UNABLE TO TO OME DISABLED UNABLE RK BEFORE THEY TURN 65 65 WORK BEFORE THEY TURN

THETHE MOST COMMON FORMS MOST COMMON FORMS 3 3 MAY SURPRISE YOUYOU MAY SURPRISE Cancers Cancers

Mental disorders Mental disorders

(depressive disorders, substance (depressive disorders, substance abuse,abuse, Alzheimer’s disease and and Alzheimer’s disease other dementia) other dementia)

(lung, (lung, colon,colon, breast,breast, etc.) etc.)

31%31%

Other Other

16%16%

28%28%

% 8 5% 58

12%12%

Cardiovascular Cardiovascular Musculoskeletal Musculoskeletal diseases diseases diseases diseases Injuries Injuries (arthritis) (arthritis)

(diseases of the heart) (traffic(traffic accidents, accidents, (diseases of the heart) falls, etc.) falls, etc.)

LessLess thanthan 10% are caused 10of%disabilities of disabilities are caused by accidents, suchsuch as workplace injuries by accidents, as workplace injuries or vehicular accidents or vehicular accidents

16 | SEPTEMBER 2014

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IF YOU'RE DISABLED YOUYOU AREARE IF YOU'RE DISABLED 6 6 LIKELY TO NEED IN-HOME HELP LIKELY TO NEED IN-HOME HELP

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INSURANCEBUSINESS.CA

DISABILITY: DISABILITY: AACANADIAN REALIT CANADIAN REALI DISABILIT Y: A CANADIAN REALITY

PROTECT YOUR MOST VALUABLE ASSET — YOUR ABILITY TOTO EARN PROTECT YOUR MOST VALUABLE ASSET — YOUR ABILITY EA would say that opportunity is well north of five times the current value. There is opportunity to gain access to a broad market.” The market that has the biggest potential is in the executive segment, Hardy points out. “The penetration of disability insurance is exceptionally low,” he says. “You look at the executive marketplace, and these are people with substantial earnings and the way that group insurance is structured they have ‘max outs.’ And a lot of them end up hitting that maximum and have very low replacement ratios for their income.”

IT’S IT’SMORE MORECOMMON COMMON THAN YOU THAN YOUTHINK THINK 7 CANADIANS 1 IN HAVE A DISABILITY 7 CANADIANS 1 IN HAVE A DISABILITY IT’S MORE COMMON THAN YOU THINK

THE MOST

THE MO PROTECT YOUR MOST VALUABLE ASSET — YOUR ABILITY TO EARN AN MAY SURPR 1

MAY SU

Mental disor Mental di

disorder (depressive disd THE(depressive MOST CO abuse, Alzheimer’s Alzheim otherabuse, dementia) other dementia MAY SURPRIS

Other

1 MOST DISABLED PEOPLE ARE MOST DISABLED PEOPLE ARE 1 IN 7 CANADIANS HAVE A DISABILITY NOT BORN WITH THEIR DISABILITY

MentalOther disorder

NOT BORN WITH THEIR DISABILITY

11ININ33 1 IN 3

MOST DISABLED PEOPLE ARE NOTWORKING-AGE BORN WITH THEIR DISABILITY CANADIANS WILL WORKING-AGE CANADIANS WILL BECOME DISABLED AND UNABLE TO TO BECOME DISABLED AND UNABLE 2 WORK BEFORE THEY TURN 65 WORK BEFORE THEY TURN 652

FREEDOM 65?

(depressive disorders, su % abuse, Alzheimer’s disea other dementia)

2828

Other Musculoskelet Musculosk diseases diseases %

(arthritis) 28 But there are options today for those who are looking (arthritis) 5 to work beyond age 65. “The current broad portfolio allows for coverage LessLess than 10 than Musculoskeletal to age 65, and there are pockets of the marketplace by accident diseases by accid now that will allow a benefit period to age 70. So or (arthritis) WORKING-AGE CANADIANS WILL you’ve got five years of working time,” says Hardy. BECOME DISABLED AND UNABLE TO “I think we’ll see age 70 evolve to become more WORK BEFORE THEY TURN 652 Less than 10% prevalent. Definitely there is an evolving need as by accidents, s IF YOU'RE DISABLED people continue to work longer.” COSTS ADD UPUP OVER TIME IF YOU'RE DISABL or veh COSTS ADD OVER TIME LIKELY TO NEED IN-H It is the clients with substantial incomes who LIKELY TO NEED IN should be tapped first for disability insurance, as When a disability lasts longer than 90 90 days , the, the length When a disability lasts longer than days length they are the ones who are on average more exposed 4 4 of that disability averages between 2.1 and 3.2 years of that disability averages between 2.1 and 3.2 years than those earning an average wage. IF YOU'RE DISABLED YO COSTS ADD UP OVER TIME “When you look at the number of people in Canada LIKELY TO NEED IN-HOM 9090 3 3 3535 YEARS who work, with substantial incomes, who are likely YEARS DAYS YEARS DAYS disability YEARS lasts longer than 90 days, the length not fully covered, either through their work plan or inWhen place,ato protect the whole $ 3 $ business against that 4 MILLION 3 MILLION of that disability averages between 2.1 and 3.2 years through workers’ comp, or who are self-employed, loss as well.” of disab of di it is significantly lower than that 5 or 6 per cent of An average 30-year-old Canadian hashas overover daily ac An average 30-year-old Canadian 3 9 daily 0 5 35 YEARS average earners who have disability insurance,” says THEthree EVOLUTION OF DISABILITY COVERAGE million dollars of income at risk duedue to disability 5 cooking three million dollars of income at risk to disability DAYS YEARS cook Hardy. “So there is a big opportunity for brokers out What has changed in $ 3the last few decades are the MILLIONare claiming, and there.” types of disabilities that Canadians of disabled For investment planners, there is a risk to the that has An been mostly attributedCanadian to a change in what average 30-year-old has over daily activi Speak to portfolio if a client becomes disabled, says Hardy, isthree now socially acceptable. million dollars of income at risk due to disability 5 Spea cooking, cl IT’S MORE AFFORDABLE to learn because one of the first places they draw down is “The big change for us has been mental health. IT’S MORE AFFORDABLE to leam impact THAN YOU THINK their savings. You’ve workplace injuries or illnesses impad THANgone YOUfrom THINK 7 7 yo “You can do it as a risk management strategy for generally, like cancer or heart disease, to a prevalence retirement planning,” he says. “There are a variety of stress and anxiety, and related disorders,” says Speak to yo MORE“Things AFFORDABLE of solutions. There is the self-employed person;IT’S Hardy. that wouldn’tCompany have been spoken about to learn mor Underwritten by RBC Life Insurance Underwritten by RBC Life Insurance Company ® / 20 ™ Trademark(s) of Royal Bank of Canada.presented Used under licence. impact disa there is the small partnerships where making sureTHAN or 30THINK years ago might aslicence. a different ® /YOU ™ Trademark(s) of Royal Bankhave of Canada. Used under 1 Canada 2 Now 1985 Disabilityabout Table A 3having World Health Organization — Disease 7 and injury country estimates you (Na 1condition. 2 Commissioners that when you have a key partner, if they become Statistics people areIndividual comfortable Statistics Canada 1985 Commissioners Individual Disability Table A 3 World Health Organization — Disease and injury country estimate Individual Disability Table A 5 RBC5 Insurance assumes average age of Canadian = 30 average individual income = $50k and annual increases o age of Canadian = 30 average individual income = $50k and annual increa Individual Disability Table A RBC Insurance assumes average 7 disabled, that you have the right risk managementCanada open discussions about mental health.” — Participation and Activity Limitation Survey 2006 Based on the purchase of the maximum benefit amount available for individuals Canada — Participation and Activity Limitation Survey 2006 7 Based on the purchase of the maximum benefit amount available for individ

“The average disability that is 90 days or longer is two to three years on average”

%% 60 60 % 60 1%%TOTO3%%

1 3 OFOF ANNUAL INCOME ANNUAL INCOME 1% TO 3%

OF ANNUAL INCOME

Underwritten by RBC Life Insurance Company ® / ™ Trademark(s) of Royal Bank of Canada. Used under licence.

| 17 estimates (Novem SEPTEMBER 2014 Statistics Canada 2 1985 Commissioners Individual Disability Table A 3 World Health Organization — Disease and injury country Individual Disability Table A 5 RBC Insurance assumes average age of Canadian = 30 average individual income = $50k and annual increases of 3% Canada — Participation and Activity Limitation Survey 2006 7 Based on the purchase of the maximum benefit amount available for individuals age

16-19-RBC_2.indd 17

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11ININ33 IN 3 1 DISABILITY: DISABILIT Y:

MOST DISABLED PEOPLE ARE NOT BORN WITH THEIR DISABILITY WORKING-AGE CANADIANS WILL WORKING-AGE CANADIANS WILL BECOME DISABLED AND UNABLE TO TO BECOME DISABLED AND UNABLE 2 WORK BEFORE THEY TURN 65 652 WORK BEFORE THEY TURN

FEATURE / LIFE AND BENEFITS

AA CANADIAN CANADIAN REALITY REALITY DISABILIT Y: A CANADIAN REALITY

WORKING-AGE CANADIANS WILL BECOME DISABLED AND UNABLE TO WORK BEFORE THEY TURN 652

PROTECT PROTECT YOUR YOUR MOSTMOST VALUABLE VALUABLE ASSETASSET — YOUR — YOUR ABILITY ABILITY TO EARN TO AN EARN INCOME AN INCOME

IF YOU'R IF YOU LIKELY T LIKEL

COSTS ADD UPUP OVER TIME COSTS ADD OVER TIME PROTECT YOUR MOST VALUABLE ASSET — YOUR ABILITY TO EARN AN INCOME

THE MOST THE COMMON MOST COMMON FORMSFORMS IT’SIT’S MORE MORE COMMON COMMON MAY SURPRISE MAY SURPRISE YOU YOU When a disability lasts longer than 90 days , the length THAN THAN YOU YOU THINK THINK When a disability lasts longer than 90 days, the length of that disability averages between 2.1 andand 3.2MOST years THE COMMON FORMS Mental disorders Mental disorders Cancers 7 CANADIANS of that disability averages between 2.1 3.2 years MORE COMMON IFCancers YOU'RE 1 IN 71CANADIANS INIT’S HAVE HAVE A DISABILITY A DISABILITY COSTS ADD UP OVER TIME MAY SURPRISE YOU LIKELY TO THAN 3 3 THINK 9090 YOU 31 31 35disorders YEARS Mental Cancers 35 YEARS 1 IN 7 CANADIANS HAVE A DISABILITY DAYS YEARS When DAYS a disability YEARS lasts longer than 90 days, the length 3

(depressive disorders, (depressive substance disorders, substance abuse, Alzheimer’s abuse, disease Alzheimer’s and disease and other dementia) other dementia)

Other

(lung, colon,(lung, colon, breast, etc.) breast, etc.)

Other disorders, substance (depressive

% colon, 16% 16(lung, MOST DISABLED MOST DISABLED PEOPLEPEOPLE ARE ARE abuse, Alzheimer’s disease and breast, etc.) 4 $ other dementia) of BORN that averages NOT NOTdisability WITH BORNTHEIR WITH DISABILITY THEIR DISABILITY $ between 2.1 and 3.2 % % 12% 28% years 28% % 1231 5% 8 5% 8%

3 MILLION 3 MILLION

1 13 3 3 MILLION IN 1 3 “It is a focus of ours;

DISABLED PEOPLE ARE Canadian has over AnIN average 30-year-old 3MOST IN AnWITH average 35over YEARS NOT BORN THEIR 30-year-old DISABILITY Canadian has Other

60 60 % %%60 16%

Cardiovascular Cardiovascular

Musculoskeletal Musculoskeletal 5 2Injuries 8% 12%diseases million dollars of income at risk duedue to disability diseases DAYS three YEARS 5 diseases diseases Injuries % three million dollars of income at risk to disability % 8 5 (diseases the heart) of the heart) (arthritis) (arthritis) (traffic accidents, (traffic accidents, of (diseases WORKING-AGE WORKING-AGE CANADIANS CANADIANS $ WILL WILL falls, etc.) falls, etc.)

BECOME BECOME DISABLED DISABLED AND UNABLE AND UNABLE TO TO 2 Cardiovascular Musculoskeletal WORK BEFORE WORK BEFORE THEY TURN THEY65 TURN 652 Less than Less 10than % of10 disabilities %Injuries of disabilities are caused are caused diseases diseases (diseases of the heart) (arthritis) HOW THEhas PRODUCT HAS (trafficas accidents, WORKING-AGE WILL by accidents, by accidents, suchCHANGED as such workplace workplace injuries injuries An averageCANADIANS 30-year-old Canadian over falls, etc.) As types of claims have too has the product or evolved, vehicular or so vehicular accidents 5accidents BECOME DISABLED AND three million dollars of UNABLE incomeTO at risk due to disability to the client. WORK BEFORE THEY TURN 652 and how it is presented Less than 10% of disabilities are caused

11 33 OFOF ANNUAL INCOME ANNUAL INCOME % TO % 1 3

simplifying the

IT’SIT’S MORE AFFORDABLE MORE AFFORDABLE product, and the THAN YOU THINK THAN YOU THINK

%%TO TO

“The area that has already started is more on the bymoving accidents, as workplace guaranteed issue side, moresuch towards simplified injuries or vehicular accidents product on the front end that has very limited IF YOU'RE IF YOU'RE DISABLED DISABLED YOU ARE YOU ARE evolve 7 COSTSCOSTS ADD UPADD OVER UPTIME OVER TIME underwriting,” says Hardy. “And we’ve6 seen that 7 6 LIKELY LIKELY TO NEEDThe IN-HOME HELP HELP even in theNEED last TO fewIN-HOME years. bind at point of sale solution is evolving into the disability market as well.” When a When disability a disability lasts longer laststhan longer 90than days90 , the days length , the length message that has been driven 4 4 IFaYOU'RE DISABLED YOU home ARE to brokers ADDdisability UP OVER TIME between ofCOSTS that disability of that averages averages between 2.1RBC and2.1 3.2 and years 3.2 years CompanyIt is Underwritten by Life Insurance 6 and insurers in not just the life market, but the P&C Underwritten by RBC Life Insurance Company LIKELY TO NEED IN-HOME HELP ® / ™ Trademark(s) of Royal Bank of Canada. Used under licence. segment too: keep it simple. ® / ™ Trademark(s) of Royal Bank of Canada. Used under licence. 7 1 3 ours; simplifying the product, and “It isTable a focus When a disability lasts longer2 1985 than 90 daysYEARS , the length YEARS Statistics Canada Disability A of World Health Organization — Disease and injury 1 2 Commissioners Individual DAYS YEARS DAYS YEARS 4 Individual Disability Table A 3 World Health Organization — Disease and in Statistics Canada 1985 Commissioners the language,” he says. “But you also want to provide of that disability averages between 2.15 RBC andInsurance 3.2 yearsassumes average Individual Disability Table A age of Canadian = 30 average individual income = $50k an $3 $ 3 Disability Table A 5 RBC Insurance assumes Individual average agebenefits. of Canadian = 30 average individual income = $50 comprehensive You don’t want to lose the value 7 MILLION CanadaMILLION — Participation and Activity Limitation Survey 2006 Based on the purchase of the maximum benefit amount ava 7 Canada — Participation and Activity Limitation Survey 2006 Based on the purchase of the maximum benefit of the productof in disabled the process of simplifying it.need of disabled people need people help with help with amoun Underwritten by RBC Life Insurance Company “We are looking the process at theas front end: An average An average 30-year-old 30-year-old Canadian Canadian has over has over YEARS dailyatactivities, daily activities, such such walking, as how walking, DAYS YEARS 5 5 ® / ™ Trademark(s) of Royal Bank of Canada. under do licence. we make thecooking, processcooking, simpler? You don’t want to lose hygiene three million three million dollars dollars of income at risk due at risk to disability due to disabilityUsed cleaning, cleaning, personal personal hygiene $ 3of income MILLION the client 1 3 lengthy underwriting process.” Statistics Canada 2 1985 Commissioners Individual Disability TableinAthe World Health Organization — Disease and injury cou

90 930 90

language, but you also want to provide IT’Scomprehensive MORE AFFORDABLE THAN YOU THINK benefits. You don’t 3 want to lose35 the 35 value of the product in the 3 35 process of simplifying it”

OF ANNUAL INCOME

6060 % 60 % % %

of disabled people need help with

Individual Table A 5 RBChas Insurance 30 average individual income = $50k and An averageDisability 30-year-old Canadian over assumes average age of Canadian = daily activities, such as walking, 7 5 Canada — Participation and Activity Limitation Survey 2006 Based on the purchase of the maximum benefit amount availa three million dollars of income at risk due to disability

IT’S MORE IT’S MORE AFFORDABLE AFFORDABLE THAN YOU THAN THINK YOU THINK

% TO% 1%1TO 33 OF ANNUAL OF ANNUAL INCOME % INCOME 1 TO 3% 7

IT’S MORE AFFORDABLE THAN YOU Underwritten Underwritten by RBC Life byTHINK RBC Insurance Life Insurance CompanyCompany

OF ANNUAL INCOME 7

® / ™ Trademark(s) ® / ™ Trademark(s) of Royal Bank of Royal of Canada. Bank of Used Canada. underUsed licence. under licence. 18 | SEPTEMBER 2014

cooking, cleaning, personal hygiene Speak to Speak your to insurance your insurance advisoradvisor to learntomore learnabout morethe about potential the potential impact impact disability disability could have could onhave on you andyou your and family. your family. Speak to your insurance advisor to learn more about the potential impact disability could have on you and your family.

2 2 4 Statistics 1Canada Statistics 1985 Canada Commissioners 1985 Commissioners Individual Disability IndividualTable Disability A 3 World TableHealth A 3 World Organization Health Organization — Disease — and Disease injury country and injury estimates country(November estimates (November 2013) 4 1985 2013) Commissioners 1985 Commissioners Individual Disability IndividualTable Disability A 5 RBC Table Insurance A 5 RBCassumes Insuranceaverage assumes ageaverage of Canadian age of=Canadian 30 average = 30 individual average income individual = $50k income and=annual $50k and increases annualofincreases 3% and retirement of 3% and retirement at age 65 6at Statistics age 65 6 Statistics 7 Canada — Participation Canada — Participation and Activityand Limitation Activity Survey Limitation 2006 Survey Based 2006 on 7the Based purchase on theofpurchase the maximum of the benefit maximum amount benefit available amountfor available individuals for individuals aged 35-45aged with35-45 incomes with ofincomes $60-100k ofa$60-100k year. a year.

Underwritten by RBC Life Insurance Company

® / ™ Trademark(s) of Royal Bank of Canada. Used under licence. 16-19-RBC_2.indd 18 Canada 1 Statistics

107246 (06/2014) 107246 (06/2014)

15/08/2014 12:16:52 AM 1985 Commissioners Individual Disability Table A 3 World Health Organization — Disease and injury country estimates (November 2013) 4 1985 Commissioners

11 33 in in

Working-age Working-ageCanadians Canadians will willbecome becomedisabled disabled and andunable unabletotowork work 1 1 before beforethey theyturn turn6565

Help Helpprotect protectyour yourclients’ clients’most mostvaluable valuableasset asset – –their theirability abilitytotoearn earnananincome. income. Offer Offer disability disability income income protection protection from from a market a market leader. leader. ® ® ForFor more more information, information, contact contact your your RBC RBC Insurance Insurance Sales Sales Consultant Consultant at at 1-866-235-4332 1-866-235-4332 or or visit visit www.rbcinsurance.com/salesresourcecentre www.rbcinsurance.com/salesresourcecentre

® /™® Trademark(s) /™ Trademark(s) of Royal of Royal Bank Bank of Canada. of Canada. Used Used underunder licence. licence. 1 198511985 Commissioners Commissioners Individual Individual Disability Disability Table Table A A 1 in 31refers in 3 refers to working to working individuals individuals and their and chance their chance of becoming of becoming disabled disabled duringduring their working their working careers. careers. Disability Disability is defined is defined as a period as a period lasting lasting 90 days 90 or days more. or more. VPS88509 VPS88509

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FEATURE / LIFE AND BENEFITS

Stagnant

Complicate Sleazy

Borin People Pushy

Good

Cut-thr

Mediocre Dull Mon Sales

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ated

ng ople

-throat

oney

Millennial perceptions of the insurance industry can be summed up in one-word sound bites. But are those young people unfairly judging an industry that desperately needs them for future growth? And what can we do to attract them? Hiring millennials as producers requires a different approach during the interview process and one important quality that needs to be there is patience. Proper vetting is particularly important when hiring producers, says MarshBerry’s Vice President Art Betancourt. “At a certain point in the interview process, we tell the candidate why they’re not going to be a good fit for the agency. We’re trying to put them in a sales environment and see how they handle rejection,” he explains. “A blank stare means there is a red flag.” Wrapping up the interview process with a long lunch or dinner is also a winning strategy, according to Christine Peterson, head of human resources at The Hanover. With more than 15 years’ experience in talent acquisition, Peterson has found that taking that extra step allows her to decide whether a candidate will jive with Hanover culture. “Really assessing talent on how they will fit into the culture of the organization is very important,” Peterson says. “I usually like to have lunch with someone and try to understand who they are as a person and what’s really important to them. “At the end of the day, you want to create a win-win environment where it’s a good opportunity both for that person and for the company.”

TRAINING AND WORKING WITH MILLENNIALS Perhaps the most difficult aspect of closing the industry talent gap is training and working with younger employees. Thanks to their tech-fueled, highly rewarded upbringing, millennials have a different outlook on work, life and career trajectory than older generations. Already, that’s causing some friction in the industry. A full 25 per cent of survey respondents blamed a lack of work ethic among young people for their hiring woes, frequently using words like

“entitled,” “lazy” and “irresponsible” to describe new employees. Before insurance professionals can even begin to facilitate the knowledge transfer between these two disparate groups, they must first overcome those generational prejudices, says Dan Epstein, CEO of ResourcePro. “I don’t for one second doubt that there’s a strong work ethic among young people,” says Epstein, who has helped bring 1,500 millennial employees to ResourcePro. “At the same time, I think the way they go about that may be a bit different, so we need to be more flexible about what time they arrive, what time they leave and how they’re dressed.” Growing up alongside technology, millennials may require more access to cell phones and social media. This doesn’t make them disengaged employees, however. Millennial attitudes toward work and personal life have started to bleed together, facilitated by constant access to both friends and coworkers through email and smartphones. In other words, the producer down the hall surfing Facebook is also likely to be developing a new sales strategy at home during dinnertime. Working with millennials also means providing greater guidance and more frequent feedback than baby boomers themselves received when first entering the industry. Epstein believes “flat management systems” that highlight transparency and open communication will be the most effective in attracting, training and retaining young hires for that reason. “Having forums for established agency employees and younger employees and managers to talk about the business will make them feel valued, listened to and an important member of the team,” says Epstein. That’s something Peterson says has made The Hanover’s young employees particularly successful

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FEATURE / LIFE AND BENEFITS

YOUNG PRODUCERS BRING VALUE TO INDEPENDENT AGENCIES In 2009, Reagan Consulting followed 91 young producers under the age of 30. In the following years, the company tracked their progress through median total book size. 2009

$520,259

2010

$597, 597

2011

$662,193

2012

$750,000

PROJECTED IN 5 YEARS

$1,150,000 0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

Source: The Young Producer Study, Reagan Consulting 2009

and satisfied. After being hired with The Hanover, new employees enter a two-week orientation program with their peers during which they learn about company culture and receive individual assignments. However, unlike similar industry orientations, Frederick Eppinger—CEO of The Hanover—makes a point to speak to the young hires and engage them in meaningful dialogue. “The first comment out of their mouths is, ‘Wow,’” Peterson says. “He really opens up the floor to questions and dialogue, and talks about all kinds of things with them. They love the fact that not only is he so open on their first day, but they also see him all around the building and know he is open to new ideas—and that those ideas will be implemented quickly.” The Hanover has also found success partnering new hires with more seasoned employees who can show them the ropes, answer any questions about the company and generally serve as a mentor during the first years of their employ. That setup facilitates a natural, two-way knowledge transfer, says Peterson.

“Our new talent is really eager to learn from these individuals who have been around for 20 or 30 years, and by working together they actually strengthen each other and the organization as a whole,” she says. “They’re both getting a very different view on how to do business, and we’ve seen some great, creative solutions on both sides.” The best mentorships evolve naturally, says Peterson. As long as mentors and mentees meet regularly and maintain an open flow of dialogue, a partnership can be successful. That kind of high-level engagement and opportunity to contribute may also satisfy millennials’ famed yearning for quick promotion. Sometimes negatively described as “wanting something for nothing,” today’s young workers do expect to contribute meaningful work and be recognized for it. While Gamma Iota Sigma’s Codispoti believes companies should be more open to promoting young people in general, she also suggests there are other ways to recognize good work from millennials. “We’ve been telling people within the industry to have patience and wait your turn,” Codispoti

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DID YOU KNOW…?

says. “If that mindset is continued through boomers and Gen Xers, our millennials well get fed up before we even have the opportunity to keep them. “I’m not suggesting we promote those who are not ready, but I don’t think anyone has ever broken the bank by giving a young person an extra $500 or throwing them a new title.”

GENERATION X, GENERATION NEXT While millennials represent the newest generation of insurance professionals, insurance companies should not overlook the promise of Generation X. Both Xers currently employed (who will soon be taking over management roles) and those outside the industry represent a prime resource for agencies. Ann Fishman has been studying generational differences for decades. As founder of her own consulting firm, Generational Targeted Marketing. She describes this group, now aged 33-53, as entrepreneurial, open-minded, honest, tech-savvy, and creative. “This is a generation of individuals,” says Fishman. “They had to become individuals in order to survive – family units were broken, religious units were broken, public schools were broken - so they had to focus on themselves in order to survive and get through childhood.” Rather than falling prey to victim status, though, Fishman notes that Generation X used these setbacks to become stronger and more resilient. This is precisely why the insurance industry needs them now more than ever. Through the Andrew Beazley Broker Academy, Lloyd’s hosts 40 producers during a two-week trip to the Lloyd’s market in London. They are taught by Lloyd’s underwriters and brokers about specific classes of business such as marine, energy, professional liability and management liability. Watkins emphasized this means of outreach will help Lloyd’s not only prepare its own market for the future, but assist the industry as a whole. “We have a need to make sure the next generation in starts off with the right quality,” says Watkins.

“If that [wait your turn] mindset is continued, our millennials will get fed up before we even have the opportunity to keep them.” Noelle Codispoti, Gamma Iota Sigma “We have MGA offices that represent us here, and those are the folks bringing business back to us in London. So, we’re heavily invested in training them up. Anything Lloyd’s can do to help the industry in training is very much in our interest.” But it’s not just promoting educational opportunities insurance companies need to be thinking about. Retaining their current Gen X employees is just as important. Fortunately, there are several undertakings that companies can pursue to bring the best and brightest of this age group into their agencies to stay. The Jacobson Group, along with Property Casualty Insurers Association of America (PCI), Valen Analytics, and The Institutes, has outlined a plan entitled “Tomorrow’s Talent Challenge,” designed to recruit and retain much-needed midlevel professionals to the field of insurance. “The industry has to recognize that it doesn’t put a lot of focus on bringing people even with a couple of years of business experience into the industry to learn about insurance. Generally, our industry is focused very much on experience, sometimes over skills,” said Greg Jacobson. Jacobson says seeking Gen X talent outside the industry is one way to overcome this prejudice and prosper. “Organizations are saying, ‘We want somebody with experience doing exactly what we’re doing,’

According to an Insurance Business survey of independent agencies:

The average age of an insurance agency employee

The average number of employees under age 35 in an agency of 100

16%

of respondents had no employees under age 35

The age of most producers when they entered the industry

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FEATURE / LIFE AND BENEFITS

THE ATTRACTIONS OF THE INSURANCE INDUSTRY BY GENERATION and that limits the opportunities and focus to bring in people from outside the industry,” he says. “Our competition has changed it used to be the The–Greatest Generation (ages 70-81) competition for insurance was“Ialways high finance. love helping people. I love being able to have my own That’s still true, financial services is still a competitor office and build my own business in my own town.” – however, I think based on the changing way –Patrick Freeman, business is being run and how business has to adaptpresident, Freeman Insurance Services to changes in how people want to be serviced, there is a need for people with certain backgrounds that’s putting us in strong competition with the technology industry.” Ann Fishman also has several suggestions on howBaby to cater to this unique Boomers (agesgeneration’s 49-69) characteristics, given their background and the “It’s never the same day twice. You can learn so socio-historical context of their upbringing. much about so many different types of businesses, “They value a sense of belonging, a sense of family and figure out just what makes a business which was missing from their childhood,” says Fishman.

successful.”

–Deb Lauerson, president, York Insurance Agency

Generation X (ages 34-48)

“What I like about our industry is that you have control of your life. I feel like I can make the money I want to make and learn interesting things. I have control over my own income.” –Kip Ulmer, commercial broker, Burns and Wilcox

Millennials (ages 33 and younger)

“What really intrigued me about the risk management and insurance industry is its strategic importance to overall continuity, not just business. If not for risk transfer methods such as insurance, no bridges or skyscrapers would be built and no new medicines would be concocted. Our industry is dynamic and touches all aspects of any organization.” –Cathleen Gabriel, underwriting analyst, Financial Lines group, AIG

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“This generation is looking for companies with benefits: repayment of student loans, health benefits, dental insurance, pet insurance – what I like to call peace of mind benefits,” said Fishman. “If two companies want the same person, the one that gives them better peace of mind benefits is the one that will get them.”

LOOKING TO THE FUTURE The challenges of an aging workforce are trying all segments of the insurance industry, but the most innovative individuals see the talent gap not as a crisis but as an opportunity. Harnessing the power of millennials and reinvesting in the development of Gen X will only make the industry stronger.

“I’ve seen young people change the culture of an agency all the time,” Betancourt says. “People that haven’t produced for a long time have all the excuses in the world for it, but then they bring in a 28-yearold who is closing 10 deals a month and that really supercharges the culture in an agency. Suddenly, everyone is excited and profitable again. “You can’t just give up after you hire one person that doesn’t work out. Bringing on new talent and having a system in place for investing in top performers has got to be a part of an agency’s culture, and that’s going to be the difference between those who make it through the talent gap and those that don’t.”

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ELITE BROKERS

AIMING HIGH Jane Barrett will make you forget everything that you thought you knew about millennials

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Insurance is a boring profession, right? Wrong, says Jane Barrett, a personal lines broker with Buntain Insurance in Vancouver; and a millennial. “People don’t really look at the industry in a good light; it has a bad reputation,” says Barrett, who had originally set her sights on the hotel management sector before deciding on a career in insurance. “Insurance wasn’t something I was ready to pursue, and I really wasn’t familiar with the industry at all. But learning the nature of the business and wanting to be in sales and marketing, and working with people and building relationships, what better industry is there to be in?” Barrett got her start at Buntain Insurance in June 2013, armed with a background in sales and marketing. And like many agents just coming into the industry, she found the work daunting. “The learning curve was quite steep. Just in general terms, getting your head around how everything works,” says Barrett. “Breaking down the coverages, and how each (one) helps people, and examples of how the claims process works from start to finish and how it all works; it took me a while to get my head around things.” As mentoring plays an integral part in transforming agents into brokers, Barrett can always count on her future father-in-law to provide guidance in the industry.

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“I am newly engaged to Gord Buntain’s son, Robin,” she says, “but Robin isn’t in insurance. Every week I learn a little bit more, and I’ve found that you really are an advisor to people. If you are a good communicator, you will succeed. And that is one of the areas I really enjoy, and didn’t realize was so important.” Strong communication skills have been identified by several brokers who are on this year’s Top 30 Elite list as a quality to succeed – that, and a desire to continue learning and improving – qualities Barrett has already embraced. “It is a never-ending component, the ongoing education,” she says. “I describe myself as a life-learner. I feel like I’m learning more and more, and I want to dive into more continuing education as time progresses. I see this as more of a career than just a job.”

YOUTH MOVEMENT At the age of 27, Barrett fits right into the young demographic that makes up the Buntain brokerage. “We have people in the office from age 23 to their early 30s,” she says. “It is a very young office, and we want to continue to grow this and it is an opportunity to get involved in the community and build relationships. Working in the community and being able to give back is the attraction for me.” This youth movement at the brokerage is something that is needed to help grow the industry, Barrett says, not only to replace those baby boomers who will be retiring within the next decade, but to spread the word that insurance is an exciting, vibrant and rewarding industry to work in. “That is what attracts me to the industry, but we want to get that message out to attract people,” she says. “Insurance has such a boring stigma, and it is definitely unattractive for young people who are hungry and eager to make a career for themselves; insurance as a career choice definitely needs to be brought to the universities.” Like many who fall into the ‘millennial’ age group category (age 18 to early 30s), Barrett has embraced

“I describe myself as a life-learner. I feel like I’m learning more and more, and I want to dive into more continuing education as time progresses. I see this as more of a career than just a job” SEPTEMBER 2014 | 27

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ELITE BROKERS

social media and uses it to promote the brokerage and encourage those working there to extend their network of contacts and clients. “Social media is more branding for us, telling people who we are and what we’re all about,” she says, as part of her duties include managing the brokerage’s social media accounts. “I’m a big advocate of LinkedIn to develop a professional network, and I promote it in the office, along with Twitter and Instagram.”

“Perhaps down the line it would be managing people, and developing the best brokerage, at least in Vancouver” WHERE WOMEN CAN REACH THE TOP Insurance is an industry where the glass ceiling has either disappeared or been shattered, says Barrett, as she can point to a handful of women in positions of power at several major Canadian companies. “I definitely see a big career path here, especially when you look at all of the women in top jobs in the industry,” she says, although it does concern her that from what she has seen in Vancouver, women aren’t seizing the opportunity to join the industry in numbers. “I know there are a lot of young men who are getting into the commercial side of things. Our office is different,” she points out, “but I don’t see many females in the Vancouver insurance scene getting into the industry.” But what about dreams of becoming an elite broker? “I’m not there yet, but it is something that I am aspiring to,” she says confidently. “Reading the profiles of those who are CEOs, seeing how they got there, that is what inspires me. It is great to see their stories, and show how we can get there too.” For her immediate future, the current expansion of Buntain Insurance provides Barrett with a

WHO ARE THE MILLENNIALS? Ages 18-33 According to a PriceWaterhouseCoopers Canada millennials survey:

72%

made compromises to get into work

37%

felt they sacrificed salary taking a job

Flexible working hours

56%

expect mainly regular hours with some flexibility

expect flexible hours

Shared values

58%

deliberately seek out employers whose corporate responsibility is shared by their own values

glimpse as to what hard work and passion may hold for her future. “I’m not sure where I will be 10 years from now. The crystal ball has changed so much since I’ve been in this industry,” she says. “Obviously there is a lot of opportunity. We are at three, expanding to four, potentially five broker offices in Vancouver right now. My future could be managing an office, or going to venture off and manage my own area of business. “Perhaps down the line it would be managing people, and developing the best brokerage, at least in Vancouver,” she says. “Right now I’m in the sales and marketing side, and I’m really enjoying that.”

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Highly specialized knowledge

Professionally adjusting complex losses nationally and internationally

claimspro.ca/special-risk-division

The largest national team of Executive General Adjusters and Senior General Adjusters To learn more about Claimsproâ&#x20AC;&#x2122;s Special Risk Division contact: Michael J. Buzzeo, FCIP, FRM

Vice President-Special Risk Division Executive General Adjuster

michael.buzzeo@scm.ca 403.669.2572

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COVER FEATURE / CANADA’S TOP 30 BROKERS

E K O R B 30 | SEPTEMBER 2014

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S R E

BROKE E T LI

INSURANCEBUSINESS.CA

2014

e r u t a e f 0 3 p o T l a u n n a e r d n o f o e c b e n a h t The s r e t t e b d n a r e g g i b is SEPTEMBER 2014 | 31

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COVER FEATURE / CANADA’S TOP 30 BROKERS

What does it take to become an

ELITE BROKER? The nation’s top insurance players are getting their due in the second-annual Elite Brokers ranking by Insurance Business, grading the top 30 leading brokers in the Canadian insurance market

This is our second time around searching for Canada’s top brokers, and our summer survey attracted entries from all corners of the country. As expected, those with the big numbers rose to the top of the list. But there are many other qualities that make for an Elite Broker.

METHODOLOGY

In order to rank performance, we were not simply inviting applications from the most advanced brokers and senior executives working at highprofile, well-resourced brokerages. We were also aiming to reward brokers from smaller firms and niche industries who were punching above their weight and achieving big things. Our yardstick for success included: - premium income; - revenue per client; - industry awards and recognition; - mentoring; - community involvement and fundraising activities; - number and value of policies written; and

What does it take to make an Elite Broker? When interviewing our top 30 brokers, several common strategies for success became clear: CUSTOMER SERVICE An unwavering commitment to customer service is essential, from first point of contact with a potential client, through to follow-up after a claim has been processed. RELATIONSHIPS If you want longevity and success with clients, colleagues, insurers, other brokers and your brokerage career, you need to nurture your relationships across the board. PERSONAL CONNECTIONS It’s no longer acceptable to sit behind a desk and correspond via email. If you want to be a cut above the rest in today’s market, you need to hit the phones, visit clients in person and make a genuine connection. INTERNAL TEAMWORK Every broker agrees that continued success is impossible without a qualified and supportive team behind you.

- book of clients. A place in the Insurance Business Elite Brokers ranking is clear recognition of each broker’s professional standing as one of the leading brokers in the Canadian insurance market. However, in interviews with our Top 30, the consistent message received was that they couldn’t have achieved such successful results without a strong network of support staff and stakeholders.

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THE TOP 30 Rank

Name

Company

Revenue

Location

Danny Sgro

Jones DesLauriers Insurance

$3.7 million

Toronto, Ont.

Kevin Stedman

Jones DesLauriers Insurance

$2.30 million

Toronto, Ont.

Sam J. Feldman

Renfrew Insurance

$2.27 million

Calgary, Alta.

Jeff Rodin

Nacora Insurance Brokers Ltd.

$2.2 million

Markham, Ont.

Glenn Murray

Jones DesLauriers Insurance

$1.6 million

Toronto, Ont.

Over $1 million

Location

John Hubbard

Hubbard Insurance Group

Toronto, Ont.

Chris Sikorski

Renfrew Insurance

Calgary, Alta.

TOP 5 BY THE NUMBERS Total Policies: 5,541

Chris Haag

Wilson M. Beck Insurance Services Inc.

Burnaby, B.C.

Total Clients: 2,671

Joe Palmer

Palmer Atlantic Insurance

Hartland, N.B.

Total years of experience: 114 Average revenue: $2.42 million

$500K - $1 million in Revenue 10

Norm McIntyre

Jardine Lloyd Thompson Canada

Toronto, Ont.

Mike O’Grady

O’Grady & Associates Insurance Services Inc.

Tilsonburg, Ont.

Brock Longworth

Cornerstone Insurance Services

Woodbridge, Ont.

Total Top 5 Revenue: $12.08 million

$250K - $499K in Revenue 13

Don Hatton

Hatton Insurance Agency Ltd.

Duncan, B.C.

Neil Bryson

Bryson and Associates Insurance Brokers Ltd.

Ajax, Ont.

Mark Jackson

The Insurance Market Brokers Limited

Toronto, Ont.

Marsha Jones Dooley

Jones-Dooley Insurance Brokers

Ajax, Ont.

Michael King

Capri Insurance Services Ltd.

Aurora, Ont.

Mani Sharma

Axis Insurance Managers.

Vancouver, B.C.

Tricia LaLonde

Stratus Insurance Services

Beaumont, Alta.

Don Normandeau

Le Bon Ami Insurance Brokers

La Broquerie, Man.

Vincent Boulanger

Assurancia Groupe Confiance

Farnham, Que.

Tereen Mowrey

Henderson Insurance

Moose Jaw, Sask.

Jonathan Hines

Wilson Insurance

Moncton, N.B.

Under $250K in Revenue 24

Adam Mitchell

Mitchell & Whale Insurance Brokers Limited

Whitby, Ont.

Michael Abraham

Paisley Manor Insurance Group

Toronto, Ont.

Judy Bois

BrokerLink

Slave Lake, Alta.

Cole Leitch

MIG Insurance Group Ltd.

Winnipeg, Man.

Bryce W. Elliott

Hubbard Insurance Group

Mississauga, Ont.

Prince Manickam

iBMG Canada Inc.

Toronto, Ont.

Leigh-Anne Minaker

Gamble Insurance

London, Ont.

TOP 30 TOTALS $22.434 million in revenue Average of $681,202 TOP 10 TOTALS Total revenue of $18.34 million combined

BROKERS BY PROVINCE: Ontario Alberta British Columbia New Brunswick Manitoba Saskatchewan Quebec

17 4 3 2 2 1 1

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COVER FEATURE / CANADA’S TOP 30 BROKERS

With more than 15 years of experience in the insurance industry, six of that heading up one of JDIMI’s largest divisions, Glenn Murray has positioned himself quite nicely to be among Canada’s elite brokers. “I have ranked among the top five producers at JDIMI for the past five years, and have received an Award of Excellence based on my sales performance and contributions to the firm,” says Murray. A strong 2013 saw Murray bring in $1.619 million in revenue, on the strength of 452 policies and 193 clients. And if you think his competitive streak doesn’t go beyond being a top earner in the industry, think again. “At an insurance industry ski and snowboard day, I outperformed over 100 other brokers and took home the gold medal,” he says. “I was also a runnerup in a Heli-Skiing photo contest in British Columbia.” Providing guidance is a particular passion for Murray, who considers it to be an integral aspect of his job at JDIMI, and an opportunity to learn from those fresh faces that are entering the industry. “Part of my job is to mentor young brokers who are new to the business,” he says. “It is extremely rewarding to see a young broker’s passion for the industry and to be a part of that enthusiasm and help them to achieve their sales results. It’s a give-and-take relationship, as I learn from them as well.”

Glenn Murray,

Partner, Chief Sales Officer, Transportation Advisor, Jones DesLauriers Insurance, Toronto, Ont.

Jeff Rodin,

Vice President, Nacora Insurance Brokers Ltd., Markham, Ont.

If there was ever a case of a one-man show, you could make it when talking about our number four broker, Jeff Rodin. “That is my biggest problem; I’m a bit of a control freak. I’m signing on every policy that comes through here,” says Rodin, vice president of Nacora Insurance Brokers Ltd. in Markham, Ont., whose pen graced 2,280 policies for 1,241 clients in 2013. “I’ve got to know every little thing of every commercial file, and almost every personal lines file that is related to commercial account. So I’m pretty much hands-on everything.” As Rodin looks back on last year, he describes it as a one of growth, but also a year of premium bumps following the natural catastrophes that hit Ontario. “A very solid year in growth, but we’re also seeing rate increases as a result of the July 8 flood that hit Toronto and the December ice storm,” says Rodin. “Now in 2014, they are going up quite a bit. We’re seeing 10 to 15 per cent increases, which is a result of what happened last year.” Four major catastrophic claims have all contributed to the need to ratchet up rates, says Rodin. They began in June in Calgary, then in Toronto in July, followed by the trail derailment in Quebec and the ice storms in December. “As a result of these big four cat claims, the insurance companies are digging in,” he tells Insurance Business, “and we’re looking at rate increases; especially in property schedules, in which we’re heavily involved. They are going up.”

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Placing third in the Top 30 list shouldn’t come as a surprise to 13-year veteran Sam J. Feldman, as he has been a perennial top producer at his firm over the last five years. “I have been a top producer of the month for new business 35 out of 60 months and in the top three for most valuable producer based on new business, retention, and growth for four out of the past five years,” says Feldman. “My mentor taught me years ago that to be successful, you must come into the office at 4:30 or 5 a.m. to get all your paperwork done for the day. Then, when 8:30 came around, you were ready to be on the road.” That mentor, Norman Cochrane, left quite the first impression on a young Sam Feldman. “He took me aside when I first started at Renfrew and said, ‘Sit down, shut up and listen;’” says Feldman, “and I did just that for the first three years.” But like many brokers who have risen to the top of the industry, Feldman tips his hat to those who form what he likes to call ‘my partners’ at the company. “To be an elite broker, you must have a great support team, and my success is because of them,” he says. “Bev, Jarrod, Geordie, Caterina and my marketing team, Cheryl, Robin, Katherine and Alanna; all these people are key contributors and why we have had such success in gaining key new clients and handling the great group of dedicated clients that we have been so fortunate to have had for many years.”

Sam J. Feldman, Senior Vice President, Renfrew Insurance Ltd., Calgary, Alta.

Kevin Stedman,

Partner, Producer, Chief Sales Officer, Jones DesLauriers Insurance, Toronto, Ont.

If James Brown was the hardest-working man in show business, the 1,643 written policies and 838 clients claimed by Kevin Stedman place him among those working hardest in the Canadian insurance biz. “I’m dedicated to providing the best service for my client’s and it’s rewarding to be recognized,” says Stedman. “Having my clients and insurance partners see me in the Top 30, among my industry peers, reassures them that they are working with someone who is dedicated to providing superior service and ensuring the success of their business.” Returning once again to the second spot in this year’s Elite Broker Top 30, Stedman has a very large book of transportation clients who require auto and fleet coverage, and was recognized for his efforts, receiving an Award of Excellence based on his sales performance and contributions to the firm throughout the year. “What does it take to be a top broker? It’s about the client and supporting their business needs,” Stedman, who reported a revenue of $2.30 million tells Insurance Business. “You have to be a hard worker, listen to what the client needs, and work towards their goals.” Ranked as one of the top five producers at JDIMI, Stedman also has a long list of charitable organizations that he and his family support. “Last year, my volunteer experiences were very hands-on,” says Stedman. “I was involved in a build for Habitat for Humanity in Peterborough. I also volunteered at the Festival of Trees, in support of Peterborough health care, where I not only helped with the set-up and tear down of the event, but I also assisted in building a hockey rink for the sporting events and decorating the community in Christmas lights.” Stedman and his family also help prepare and serve meals at their local food bank. “I also coach my son’s minor hockey team, where I am responsible for directing and motivating the team during games and practices,” adds Stedman, an active participant in Jones DesLauriers’ involvement with the United Way.

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Danny Sgro,

Partner, Producer, Chief Sales Officer, Jones DesLauriers Insurance, Toronto, Ont. To quote the late Yogi Berra, it’s like déjà vu all over again. Once again, Danny Sgro and Kevin Stedman of Jones DesLauriers have placed one and two among the Top 30 Elite Brokers in Canada. But this year they have a bit of company in the top five. Glenn Murray, also from Jones DesLauriers, edged out John Hubbard to secure fifth spot, for a total of three representing the Toronto, Ont. firm. But it was chief sales officer Danny Sgro who took top honours a full $1 million clear of the field, racking up an impressive $3.7 million in revenue. “Repeating as number one is a great honour. This award is very motivating and encourages me to continue to outperform by exceeding my clients’ expectations,” says Sgro. “The Top 30 award has provided the firm with high-profile recognition within the insurance industry, as well as with our clients.

Being in the Top 30 affirms our position in the marketplace and ultimately attracts new customers.” But it is more than just the numbers that placed Sgro atop the Elite Brokers in our survey. His strong commitment to several charitable organizations also factored into the selection. “Personally, my family and I have been advocates of Free the Children for many years,” says Sgro. “As a family, we have participated in a number international builds and mission trips, most recently to the Masai Mara in Kenya. My children are currently on a youth build trip in Ecuador. My experience supporting Free the Children has been so engaging and rewarding, that in 2013, I encouraged Jones DesLauriers to support this cause.” Indicative of the support Jones DesLauriers has shown in the past, the company hosted an inspiring, fun and energetic client appreciation event, featuring the Kenyan Boys Choir and motivational speakers, that also helped raise over $24,000 for Free the Children. On the corporate level, Sgro was involved in supporting United Way, the firm’s charity of choice, and continues to encourage staff to give back. “I also support a variety of my clients’ charities through corporate sponsorships and donations,” he says. “I also support a number of hospitals and healthrelated causes through monthly gift-giving programs.” But Sgro’s zeal to improve the lives of others doesn’t stop there. “I also fully fund four children in two different countries in Africa to provide them education, food, water and shelter,” he says. “Last year we funded a trip for a young boy from Slovakia to come live with us for eight months, so he could obtain a Canadian education and play competitive hockey.” Another key trait among the best brokers in Canada is their commitment to mentoring others – passing along their knowledge and expertise to keep their respective firms strong and vibrant. “Our young brokers are a very important asset to the firm as we continue to grow,” he says. “Mentorship is an area that I strongly believe in, as I have had the opportunity to be mentored by various individuals throughout my career, which has helped guide me.” As chief sales officer and a partner at the firm, Sgro currently mentors five young producers. “Mentoring requires commitment,” he stresses, “and as such I have developed a very detailed five-year mentoring process that includes training, activities, ongoing support and evaluation.”

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GIVING BACK

Being an elite broker is about more than just the numbers; it’s also about caring for others Tereen Mowrey, Henderson Insurance Inc.

Making an impact within the community is how Tereen Mowrey sees her role as an insurance broker. “At He n d e r s o n Insurance Inc. we have a group within our organization, the Community Impact Team,” she says. “I have been co-chair of this group for the past 18 months. The mandate is to bring employees together to raise funds for various charities and community organizations. Our goal is to double the funds that the company gives annually through our work. I also volunteer with little league and minor hockey in our community.”

Cole Leitch,

MIG Insurance Whether it is helping to make sure a family has a roof over their heads, or making a child’s dream come true, Cole Leitch is there to lend a hand. “I helped to build a Habitat for Humanity house in 2013, and I involve myself with Children’s Wish Foundation events, as well as supporting various artistic companies in Manitoba,” says Leitch.

Joe Palmer,

Palmer Atlantic Insurance Ltd. Some brokers keep many irons in the fundraising fire, and Joe Palmer is one such broker, helping lead the MSA 60 campaign (Miramichi Salmon Association 60th anniversary) to raise $2 million for Atlantic salmon conservation. “I donated my time on the fundraising committee as well as donated personally and corporately as a lifetime member,” he says. “I also serve as the president for the Woodstock Minor Basketball Association as well as coach a grade 2/3/4 team. I also donated to the Grow Carleton campaign which was a major fundraiser in the Woodstock, N.B., area around expansions and upgrades to the Woodstock Public Library, High School Theatre and Civic Centre field house.”

Sam J. Feldman,

Renfrew Insurance Ltd. This elite broker used his talents in the role of campaign chair to raise a record amount of money for his local charity. “From September 1 to December 31, I was the campaign chair of Calgary’s largest annual fundraising campaign for the local Jewish Federation,” says Feldman. “We reached a record high of $3.1 M.”

Honourable mentions… Leigh-Anne Minaker, Gamble Insurance: Big Brothers & Sisters Curling Tournament 2013 & 2014, World Vision Child Sponsor. Marsha Jones Dooley, JonesDooley Insurance Brokers: Pickering Village BIA Board Member since 2009, Chair 20102013; Active/board member of Ajax Rotary Club, Ajax/ Pickering Hospital Who’s Your Caddy? Fundraiser Board Member, Ajax Home Week Waterfront Chair 2010, Auction Chair 2012 and 2013, Sponsor yearly of Ajax Soccer Club as well as many other groups. Jonathan Hines, Wilson Insurance: Rotary Club Downtown Moncton club, Crossroads 360 - relay for funds for a local women’s shelter.

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COVER FEATURE / CANADA’S TOP 30 BROKERS

By the Numbers

Raw numbers can sometimes be deceiving but not with these impressive figures

$500K – $1 Million Norm McIntyre, Senior Vice-President at Jardine Lloyd Thompson Canada, Toronto, Ont. With more than 35 years in the business, Norm McIntyre has returned to the ranks of the Top 30 Elite brokers, heading up the $500,000 to $1 million category. “What does it take to be an elite broker? They should be knowledgeable and be able to think outside the box,” says McIntyre, who placed 10th overall. “The key to success is you try to become an asset to the management of the business of your customer. 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. McIntyre, who primarily sells automobile fleet insurance, counts MGAs as an integral part of his underwriting. “They make up about 10 per cent of my business,” he tells Insurance Business. “But they must have staff that are easy to work with.”

A BIG BOOK

Anyone would be envious of these books of clients Name

Company

Clients

Mike O’Grady

O’Grady & Associates

2,300

Tracy Rogoza

Knight Archer Insurance

1,953*

Vincent Boulanger

Assurancia

1,525

Brock Longworth

Cornerstone Insurance

1,442

Jeff Rodin

Nacora Insurance Brokers

1,241

Marsha Jones Dooley

Jones-Dooley Insurance

1,038

*Tracy Rogoza of Knight Archer Insurance in Regina, Sask. just missed out on making the Top 30, but her book of 1,953 clients certainly is deserving of recognition.

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THE WRITE STUFF

Brokers who worked hardest to generate the most policies Name

Company

Policies

Mike O’Grady

O’Grady & Associates

5,172

Brock Longworth

Cornerstone Insurance

2,665

Jeff Rodin

Nacora Insurance Brokers

2,280

Vincent Boulanger

Assurancia

2,155

Kevin Stedman

Jones DesLauriers

1,643

Marsha Jones Dooley

Jones-Dooley Insurance

1,547

$250K – $499K Don Hatton, Hatton Insurance Agency Ltd., Duncan, B.C. Heading up the $250K – $499K category, Don Hatton secured 13th spot by practicing what he preaches. “I taught insurance fundamentals at the local university,” says Hatton. “We have a continuing education program that I teach within our office.” As for what it takes to become an elite broker in Canada, Hatton tells Insurance Business that it really boils down to focusing on a few things. “Not everyone qualifies to be our customer; for those that do, we wow them with service. And we keep on top of industry issues in order to better advise our customers,” he says.”We treat each other within the office the same as we would treat our customers, and never make a promise we cannot deliver on.” And beyond the obvious of stressing the importance of service, Hatton likes to make a distinction about his book. “We call them customers, not clients,” he emphasizes. “In my opinion, this creates the mental picture for staff that we need to earn the customer’s business.” Speaking of business, Hatton directs a lot of it to MGAs. “We use them about 70 per cent of the time,” he says. “MGAs are motivated to write business and are usually well-versed in their product lines. This makes it much easier to place business.”

Under $250K Adam Mitchell, Broker-Owner of Mitchell & Whale Insurance Brokers Ltd., Whitby, Ont. He made this year’s Young Gun list and now Adam Mitchell has grown the family brokerage to place him in the 24th spot overall, and at the top of those who earned $250,000 and under. “We are doing it by staying relevant and ambitious and curious,” says Mitchell. “Our top product is home and auto, and it has proven so popular, as we’ve figured out how to market it online and are writing business efficiently. Mitchell, the third-generation Mitchell to have run the brokerage since 2008, has tailored the company to accommodate today’s modern businessperson’s lifestyle by holding hours 8-6 weekdays and 10-5 on Saturdays. He is also a strong proponent of Internet sales, and has had great success with Chat Box. “The Chat Boxes work great,” he tells Insurance Business. “I believe they are driving much of the business, as they are interactive and can accommodate today’s consumer.” Although very much aware of where today’s consumer is looking for and where they will be looking for insurance in the future, Mitchell does tip his cap to predecessors. “I am proud to be following in the footsteps of my grandfather, father and uncle,” he says.

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PROFILE / KATHY BARDSWICK

Staying the

COURSE Kathy Bardswick has steered the venerable Co-operators ship through some turbulent waters during her 12-year tenure as president and CEO. She speaks plainly about Ontario’s dysfunctional auto insurance system Insurance Business: It has been a tough year for auto insurers and brokers in Ontario. What words of encouragement can you offer? Kathy Bardswick: Keep our heads up. When we talk about it internally, we keep reminding ourselves that the consumer in this province needs an automobile insurance product as much as anyone else, and we’re doing our best to try and influence a product that is as affordable and accessible and understandable.

That drives us; that keeps us trying.

But I think the Ontario auto product is broken. We need to step back and ask, ‘Why is the consumer in Quebec always so much more satisfied when these surveys come out?’ Look at the J.D. Power surveys; Quebecers are always so much happier with their insurance companies. Why is that? What’s the difference? Albertans and Nova Scotians are any harder done by, and they’ve got a simpler product structure. What is it about Ontario that creates or needs such complexity? I wish we had the courage – and I say this to government – I wish you had the courage to step back and really rethink this product. I don’t know why we’re so reluctant to learn from other jurisdictions. I don’t think other Canadians

living outside of Ontario are being ill-served by those other structures. At least be prepared to open up and learn from them, and accept that there could be a better way.

IB: Has the mandated 15 per cent premium cut exacerbated the problem? KB: Talk about putting the cart before the horse. You don’t put a price up on the wall and then say, ‘How are we going to structure around that?’ Step back and say, ‘What kind of structure do we need here? What kind of approach do we need?’ The current one isn’t it. All they do is keep patching on, and keep putting band aids on this thing that is Ontario auto insurance.

IB: The Co-operators were dropping premiums for two years prior to the mandated cuts, but those cuts were not taken into consideration by the government. Is there still a dialogue on this topic with Queen’s Park? KB: We always are. It is an ongoing conversation. I think the amount of pressure that exists to reach the initial 8 per cent and then the total of 15 (per cent) is really casting a very murky eye on what is actuarially sound. I shake my head. Are we heading down another path where, you might be able to get affordability, but you are challenging accessibility? You are going to be driving players to start hiding in the weeds because they don’t want to grow any more, and that’s not a healthy situation. You need all of those working in conjunction; you just can’t focus on one. So far, we’re still growing, we’re still writing business, we still think we’re close enough to a fundamental that we’re still prepared to live with; but it can’t go any further than that. We’re up against the wall here. We’re at the tipping point. If they think they are going to get more reduction, then they better substantially revamp this product, because it just is not there. There is no waste left, if you want to call it that. Our actuaries are now saying there is no more room; the cupboard is bare. So unless you are prepared to restructure, there is nothing left to give. And I’m talking right now, with the cuts we’ve already made. I don’t think we’re going to get to that 15 per cent unless we step forward and say we need to restructure the product dramatically.

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“So far, we’re still growing, we’re still writing business, we still think we’re close enough to a fundamental that we’re still prepared to live with; but it can’t go any further than that. We’re up against the wall here” IB: Catastrophe claims are hammering the insurance industry. What needs to be done to mitigate those claims, and those costs? KB: We’ve been on this file for years, because we knew in part through our work from the Institute for Catastrophic Loss Reduction, and in part because of our own experiences, we knew that climate was playing out more significantly years ago. Three years ago, we starting talking to CEOs in the industry about water, about flood, and this is before Calgary happened, and we started asking the questions, ‘what has to be true if we’re going to manage what’s happening for the communities in the country?’ Just as that report was coming out, Calgary hit. High River hit; so it was very timely. Since then, we’ve been trying to get our heads around this, and work hard to figure out what happened before the most recent events. While it is about water, it does apply to the other cats that are out there, and the challenges they are creating for our communities. We’ve categorized it in three ways: The first is a body of work that has to truly understand the risk itself. For example, when it comes to flood, have we got effective flood maps? When it comes to wildfires, do we inherently understand the science behind how to respond to and adapt to what is happening from a wildfire

standpoint? We need to have better data. The second is, now use that understanding to figure out and make better adaptation decisions. Now when I’m talking about these three areas, I’m talking about the entire country, whether it is governments, or the industry, being accountable and responsible to having this type of conversation. Around infrastructure, how we build and where we build, so that gets into the building code, that a number of people from around the globe have been doing. Finally, when the first two are done, is having a means to transfer the residual risk. And that speaks to the role of the insurance industry. When all this is done, what is our responsibility in our role as insurers and risk managers to provide

THE COMPANY The Co-operators is one of Canada’s largest financial co-operatives, whose members include co-operatives and credit union centrals from across the country. It is listed among the 50 Best Employers in Canada by Aon Hewitt, Corporate Knights’ Best 50 Corporate Citizens in Canada, and the Top 50 Socially Responsible Corporations in Canada by Sustainalytics and Maclean’s magazine.

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PROFILE / KATHY BARDSWICK

CAREER PATH Began her career with The Cooperators in 1978 Served as Chief Operating Officer of The Sovereign General and L’Union Canadienne from 1998-2002, in charge of operations for these companies and their subsidiaries under the umbrella of The Cooperators Group Limited Appointed President and Chief Executive Officer of The Cooperators Group on March 1, 2002 A member of the Canadian Council of Chief Executives Chairperson of the Institute for Catastrophic Loss Reduction Served as Chair of the International Cooperative and Mutual Insurance Federation Currently a member of the ICMIF Executive Board member of the International Cooperative Alliance (ICA) Board member of Addenda Capital Inc. A member of The Conference Board of Canada Vice-Chair of the University of Guelph’s Board of Governors

the vehicles so that the residual risk can be transferred? For flood in Canada, that would be putting a flood product into the market.

IB: Is it a government problem, or an industry problem? KB: Look at what’s happening south of the border. You have some people in the insurance industry suing municipalities because the municipality ought to have known, given their poor infrastructure that a disaster was going to happen. It is very complex, but it is a critical area of work that needs everyone to come to the table. We have partners for action initiatives, where we’ve been able to get agreement by a very diverse by relevant stakeholder group (provincial and municipal levels of government, banking and building industries) and we just had a roundtable in June, saying getting to these three conditions, what are the priorities? If these are the three conditions, what do we have to turn our attention to? The group is starting to coalesce; and these are the right people to decide what are the priorities, and how do we execute on them. The answers aren’t easy, but we are finally getting some movement.

IB: Some of the country’s major insurers have been making moves to expand. Can we expect the same from the Co-operators? KB: Like most, we are much more interested in seeing year-over-year organic growth where we are able to see some gain in market share, we are able to see that now. That doesn’t preclude our interest and in keeping our ear to the ground. This conversation is P&C-oriented, and the P&C marketplace has been going through a fair amount of transformation and change, and I think that is going to heat up. The direct distribution outreach to customers, their expectations of a more expansive and a more robust offering is starting to play out. If you look at what the consumers are getting from the other industries, and the increasing expectations that they should be able to do the same things within the insurance context, that is going to drive more and more investment in mobility and electronic applications. You are going to see that speed up. How does that relate to M&A? Quite frankly, the interest we have in acquisition is rally to further those

kinds of opportunities and capacities. At this point, there is still is opportunity, but it is quite limited.

IB: What was your first summer job? What is your best memory from that? KB: I worked underground in Inco in Thompson, Man., and that was my first real summer job. I had part-time jobs before that, but I was saving up money for university. I was on the first female crew to be hired on in Thompson. It paid well, but did it ever teach me why I wanted an education, and why I wanted choices. I wasn’t thinking insurance at the time, but I was thinking, ‘I want some choices here; I want something I am passionate about, and this isn’t it.’ It was such hard work. I have a lot of respect for people who do that kind of work day after day after day. We were the ‘Joe’ girls and boys, so we were sent anywhere work was needed to be done. I did a lot of digging and hosing down and shovelling, you name it. Those guys who go underground, they deserve all kinds of respect for being prepared to do that. Both grandfathers were coal miners in Cape Breton, and they both died of lung disorders in their 60s, and I think, wow, that is honourable work.

IIB: Co-operators has been behind the expansion of telematics, how is that proceeding? What are you doing to spread telematics across Canada? KB: If you ask the majority of Canadians, if you know about telematics or are comfortable with it, the majority would say no. But it is gaining momentum, it has legs. Certainly, the conversations we’re having within our organization with our client base and our distribution system, we (are) having many more conversations, we’re getting picked up now. More people are getting comfortable putting the devices into their cars.

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THE CO-OPERATORS, YESTERDAY & TODAY Yesterday

In 1945, the Saskatchewan Wheat Pool contributed $25,000 to the development of Co-operative Life Insurance Company, based in Regina. In those first years, many Wheat Pool field workers carried out the business of the Wheat Pool while selling life insurance for the new company. In the 1960s, Manitoba sales manager Lloyd Hammond was paid with a 100-pound sack of wheat and an apple to renew insurance on a farmer’s truck.

Today OVER TWO MILLION

clients in Canada

$35.1 BILLION in assets

Now I’m starting to get pulled into conversations. I just communicated with a customer of mine, who said that he had a conversation with his teenage son after he got a report that was scary. And I thought, ‘That is the right stuff. That is exactly what this stuff needs to be doing.’ It is getting these conversations about driving behaviour out on the table and happening more often. I am really encouraged by what we are seeing so far. It can save lives. I think one of the most significant opportunities here is to have a parent talking to a kid, and having some sort of mechanism where the conversation is real, and it is ongoing, and it has implications. In this situation, he realized the kid was speeding, and it was one in the morning, and he said, ‘This is serious stuff, buddy. If you want the keys, this has got to change.’ Those are really important conversations.

IB: Where is telematics succeeding? Where is there still resistance? KB: Quebec went first of course, and Ontario has a

A tough sell Insurance as a career? Even the CEO of a major insurer needed 20 years to change the way her own son viewed working in the industry When asked how the insurance industry could better promote itself and improve its image, The Co-operators’ CEO Kathy Bardswick had only to look to her own family to provide an example. “What can we do to better promote ourselves? We’ve been trying to deal with the question for all the years that I’ve been in this industry,” says Bardswick, “And I’ve sat around tables asking what kind of PR we should be doing, and how do we get our message out. “It is just a very challenging and puzzling question. If you’ve got the answer, I’d love to hear it, because I know what we’re doing is not working as well as it should be.” But for Bardswick, it was a message that she was trying to bring home to her four sons, about the rewards that were out there working in the insurance industry. “Once you can get people engaged in it and working in the industry, they see the benefits,” she told Insurance Business. “My own kids kind of yawned initially; but now, I’ve got a kid in a math program, he’s taking an actuarial course, and he says, ‘Wow, mom, this is a really interesting industry!’ and I say, ‘Yeah, I’ve been telling you that for the past 20 years!’” Bardswick’s four sons are Eric, 27, Ryan, 23, Graham, 20, and Justin, 16. As for whether her son Graham who is taking computer science which includes the math requirement for actuarial study follows in his mother’s footsteps, that remains to be seen. “Time will tell,” is the sage observation from his mother. “I don’t know where he’ll end up.” But she does hold out hope, given the wide range of career choices that are available in the insurance industry. “We offer such a broad range of interests,” says Bardswick. “If you want to be in IT, we’ve got IT; if you want sales, if you want marketing, it’s got everything. If you love math, if you love stats, (you can) come to us too.” fair amount of activity; we will certainly see it growing in Alberta. I think the resistance will disappear if we can provide the type of confidence and comfort to the client that this isn’t some kind of ‘Big Brother.’ That is still the most difficult challenge with our clients, to let them know that they are in control of this thing. If you want to provide the data to us you can; if you don’t, you don’t. But there is still that suspicion that it is one more step towards Big Brother. But I think we’re getting over that. The more customers are talking to each other; (the more) I think it will be good. SEPTEMBER 2014 | 43

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FEATURE / BROKER ADVICE

HOW TO BE KING OF THE

CASL

Martin Millican helps to untangle Canada’s anti-spam legislation and explains how brokers can implement an email consent strategy In the weeks and days leading up to the implementation of the Canadian Anti-Spam Legislation (CASL) on July 1, companies of all shapes and sizes were caught up in a panic, sending millions of emails to Canadians, seeking ‘Express Consent’ to continue sending ‘commercial electronic messages,’ including emails, texts and social media messages. Unfortunately, with the vast majority of these consent-request emails having been ignored by their recipients, many companies are left wondering if – and how – they can communicate with their own customers without being in contravention of the new law.

First off, if you didn’t send your marketing contacts a request for CASL consent prior to July 1, relax! That might have been the best move you didn’t make. The fact is, the real teeth of CASL – the right for individuals to sue – will not come into effect until July 1, 2017. So, unless your firm is a nasty serial spammer deserving of being handed a major fine by the CRTC, you actually have three years to get your sales and marketing databases up to CASL standards.

UNDERSTANDING CASL Upon coming into effect July 1, CASL requires companies to have the consent of individuals to send commercial electronic messages, either through express or implied consent. It is the two distinct processes of getting and documenting these types of consent that form the crux of the challenge in developing a CASL compliant email marketing strategy.

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What is Express Consent? Very simply, Express Consent status under CASL can be thought of as a single documented “agreement to communicate electronically” between your organization and the contacts in your database. What is Implied Consent? The CASL legislation defines three broad scenarios in which Implied Consent can apply in a commercial context: Transaction or Inquiry If someone bought something from your company or made an inquiry, you have two years and six months, respectively, from the date of the transaction or inquiry in which you can continue to send the individual commercial emails on the presumption that their transaction or inquiry denotes Implied Consent. Conspicuously published email address According to CASL, if someone published their email address online or elsewhere, it’s okay to send them commercial email messages if the content of the message is relevant to their position or role (assuming there isn’t a notice saying not to). Existing business relationship The contact has an existing business relationship with your company and has provided their email address without any express notice that they don’t want to receive CEMs from you. This is the Implied Consent designation that most companies are likely to rely on to continue with most email marketing activities during the three-year CASL transition period. How to manage CASL consent Regardless of what you may or may not have done prior to July 1 to prepare for CASL, if your company is doing any email marketing at all, you would be well

“The request for Express Consent cannot be presented as an opt-out mechanism” advised to start capturing Express Consent from your Implied Consent contacts from this point forward. Here are some tips to get you started: Add a checkbox, pop-up or confirmation mechanism to all new email signup forms. Whether you do it yourself or through an email service provider, you will need to capture a number of key details that you likely aren’t now, such as the date and time the consent was received, and possibly even the IP address of the subscriber’s computer. There needs to be a description of the type of email communication the recipient is agreeing to accept, which can be written as broadly as you want. This element can easily be enhanced through subscription preference settings that allow your contacts to see the types of communication available to them and to select only the ones they want to receive. The request for Express Consent must be explicit and cannot be combined with anything else. For example, you can’t say, ‘By downloading this case study you agree to receive messages from XYZ Inc.’ The request for Express Consent cannot be presented as an opt-out mechanism. There needs to be clear language letting the contact know they can withdraw their Express Consent at any time, and there must be a simple and immediate mechanism for them to do so. For many companies, developing a CASL consent strategy can be daunting because the law extends beyond email. However, it is vital not to panic and know that there are existing email marketing and online engagement processes available to make CASL compliance as automatic and as painless as possible for all involved.

Martin Millican is president of Envoke. com, a Torontobased service provider and developer of permission-based automated marketing solutions.

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RISK

Always be PREPARED? That may be the boy scout motto, but it’s also age-old broker advice to clients. Still, sometimes it takes a third party to wake them up to the need for additional risk management products or services

After the financial collapse of 2001, Sarbanes Oxley was implemented by the U.S. Congress to protect the public from mismanagement of their invested funds by public companies and their accounting firms – for example, Enron, WorldCom, and Tyco. Canada adopted its own version of this compliance measure and the benefits of this have filtered down to private companies in a softened version for the good of all. ORSA 2014 was developed in the U.S. and presented to insurers with the aim of embedding Risk Management as a formal process and filing of a detailed report in 2015, summarizing all Risk

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Control and Risk Transfer measures. One of the key drivers for this new compliance measure is to ensure the continuity of the insurance company in its normal operating procedures. As a guest at the first ORSA conference in New York on July 17 of this year, I sat for two full days of sessions led by the chief risk officers of AIG, Chubb, Met Life, New York Life, Genworth, Assured Guarantee, Gen Re, Kemper, and other notables. Of the 60 attendees, each had their own version of their preparedness and it was all over the map. What everyone could agree on is that there is more compliance coming as regulators strive to understand the insurance industry. How will this affect you and your key customers? Risk management is a process with a centralization

“Canada adopted its own version of this ‘compliance’ measure and the benefits of this have filtered down to private companies in a softened version ‘for the good of all’ “ of analytics on all operations for owners, partners, shareholders, directors & and officers and all third parties who have a vested interest. The chief financial officers are not risk managers, but too often they are

Because employee #658 forgot the bolts.

Open minds. Better casualty. SovereignGeneral.com

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RISK

THE 411 ON GRC Governance, Risk management and Compliance (GRC) is practically an industry unto itself. The non-profit think tank OCEG has a survey that reveals just how scattered Governance Risk management and Compliance duties are across organizations, making it hard for IT to create a tech roadmap that serves all departments. Consider the roles and departments of survey respondents: • Risk management: 25% • Audit: 22% • Corporate compliance/ethics: 21% • Other GRC roles: 32%. This category alone includes IT (9%); centralized GRC group/architecture (5%); security (5%); business management/executive (5%); business operations/logistics (2%); finance/accounting (2%); and vendor/supplier management, research, corporate social responsibility, and legal (4%). Slightly less than half the respondents (46%) said their GRC technology is well utilized;

51% 3%

said it’s underutilized; and

were unsure.

The vast majority (81%) of GRC applications used by survey respondents are either focused on a single department’s needs or designed to resolve a specific GRC issue. As such, they’re generally not integrated with other GRC applications. The OCEG offered a choice of 27 categories of GRC technologies and asked respondents to identify their priorities (multiple responses were allowed). The following categories topped the final list: Top Tech Spending Priorities GRC category

Percent respondents

Risk management

33%

Compliance management

30%

Audit management

23%

Automated controls

21%

IT risk and security

21%

Policy and training management

19%

Business continuity

12%

Reporting and disclosure

12%

Third-party management

10%

Fraud and corruption

10%

Source: 2014 OCEG GRC Technology Strategy Survey

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the ones having to assume another role a version of this role for management. As the chief financial officer, this person can certainly report on income and expenses and on revenues but what then? Is there a need to address the ‘business” risk and how the various departments can withstand future bumps in the road? What about demographics of staff? Is a good portion of the production crew about to retire? Is there an action plan to address the possibility of gaps within the ranks? Will the CFO bring issues of cyber and privacy legislation to the board’s attention? How dependant is the business upon technology? To what degree are they protected and how will they withstand a third-party attack? Is there a backup plan in place and ready to launch should the need arise? Insurance is a key risk transfer tool, one that is extremely important for the insured and one that requires considerable efforts of a group of people to arrange. It is a full time job for the broker and the CFO who are doing their best negotiating with insurers. Insurance brokers cannot be chief risk officers for the insured. How could the duties of a CRO be added to the already full bucket of services the insurance broker is being compensated. Where is the transparency and the objectivity outside of what insurance is intended? Insurers are under more pressure to declare their Risk Management practices to their boards of directors and to regulators. This is a time consuming, onerous task and one that must be adhered to so the chief risk officer uses their team to assist them. In the past year, we have seen events develop at General Motors and at the Veterans Association in the U.S. Where was the board of directors in each case? It was reported that the board at GM was not aware of the necessary but unfulfilled product recall in 2007. After the initial investigation into the facts of the case, 15 individuals were fired but other problems remained. Mary Bara, the new CEO, has the support of the board and of the shareholders, and the share price has not fallen in any significant fashion. More revelations are coming. At the Veterans Administration, returning veterans from wars in Iraq and Afghanistan were flooding the hospitals already overcrowded by veterans from prior

“Brokers can outsource the risk management value-added services to a third-party consultant who will work with their client to focus on their ERM strategy, while backing them as their trusted insurance advisor” wars. How did the board of directors not see that the reports provided to them were only partial statements? The number of patients and treatments could not be as reported given the volume of new patients. And yet bonuses were being paid to hospital administrators. Who was tracking the volume of patents and the budget? Who was verifying the numbers? Where were the checks and balances within the organization? When clients ask you for assistance on their enterprise risk management program, what do you tell them? Do you risk losing the long-standing relationship and allow the client to seek guidance from one of the international brokers who provide risk management services through their specialty departments? This results in a huge gap in your financials while forcing you to seek a new client. Eventually, this new customer will be asking for assistance on their ERM program. Brokers can outsource the risk management valueadded services to a third-party consultant who will work with their client to focus on their ERM strategy, while backing them as their trusted insurance advisor. Not only is there a guaranteed return on investment, but it goes a long way to helping to retain your at-risk clients. And there aren’t that many guarantees in life anymore, are there?

Diane S. Baker, BA FRM FIIC, is the president of RiskAssist Consulting Inc. www.riskassistconsulting.ca.

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FEATURE / SUCCESSION PLANNING

PREPARING FOR THE

RIGHT EXIT Your book of business won’t disappear the day you walk out of the office, so make sure your legacy doesn’t either, writes Rick Dennen

You may greet every new work day with a smile, a spring in your step, and the satisfaction that you’re doing exactly what you want in life. Or you may look at that first cup of coffee as the fuel that gives you just enough energy to drag yourself into the office in the morning. Either way, you’ve probably given some thought to what comes next. There will be a day when unlocking the agency’s doors isn’t going to be part of your daily routine. When that happens, what will you do? There’s no right or wrong answer. Some insurance agency owners envision a relaxing life with a daily stroll on well-manicured fairways, or taking time to find the biggest bass in a favorite lake. Others may see the next step as a second chance to do something they’ve always wanted to do, or envision a gentle transition, with a family member or employee gradually picking up a bigger share of the responsibility. For most agencies, the best type of exit plan is a succession plan. After all, your book of business won’t disappear the day you walk out of the office for the last time. You may transition the business to a family member or a trusted employee, or you may sell it to another agency. To ensure that those actions achieve your objectives, you need a succession plan that addresses who the owner will be and how they will be chosen, how you will prepare them and transfer control, and how you’ll transfer the agency’s assets—all while ensuring you get what you need financially. Many agency owners create succession plans as a way of continuing their dreams for the business. They can enjoy the reward of passing the agency to the right people who can keep the culture and values intact. They can also be sure that their customers, who oftentimes are their friends as well, will continue to be treated well.

WHEN SHOULD YOU START PLANNING? Remember when you were in elementary school and the teacher kept imploring you to take your time and be careful so you’d make fewer errors? That advice also holds true when it comes to succession planning. Giving yourself enough time to plan means that you’ll be able to think through all of the aspects carefully. It also reduces the risk that you’ll be backed into a corner by external events, such as a serious illness in the family. Once you develop your plan, a gradual transition will protect the health of the business and reduce the stress of 50 | SEPTEMBER 2014

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everyone involved, including your employees. When people know what is going to happen—and when— they tend to worry less, so they’re more productive and better focused on the objectives you’ve established. According to a study by NFP Advisor Services Group, merger and acquisition consultants say the ideal amount of time for transitioning ownership of a financial advisory practice can be as long as 10 years—although in practice owners assume that five or fewer years is sufficient. It takes a minimum of two to three years to properly prepare an insurance agency for a transition. There are a variety of concerns to consider, including the tax consequences of various methods for transferring the business. Should you use an ESOP or a restricted stock plan, a leveraged buyout, an earn-out, or a seller-assisted plan? In each case, there are tax consequences that should be reviewed by a team of advisers with experience in the agency business, including tax consultants, attorneys and CPAs. No matter how long your timetable may be, review it periodically to make sure that you’re accomplishing all of the goals in a timely fashion. You may need to adjust your activities as a result of changes in the business or your life.

WHO WILL SUCCEED YOU? People may tell you that you can never be replaced, but it’s a fact that someone can succeed you. That brings up two other advantages of a succession plan: you can have some say in who that successor will be, and you can build in time to prepare that person for the eventual transition. According to an American Family Business Survey (conducted by Mass Mutual Financial Group, Kennesaw State University, and the Family Firm Institute), just over 45% of the owners of closely held businesses who planned to retire within five years had chosen a successor. That number dropped to 29% among those who expected to retire in the next six to 11 years. No two agencies are exactly the same. That’s why it’s important to take the time to envision the future you want for your agency. Should it stay in the family? Should you sell to employees? Your situation will help you narrow your options.

FAMILY MEMBER? It’s common to look at a child or other family member

as the logical successor, but as some agency owners have discovered, children may have plans of their own. Or, it may be that your child’s personality or skills may not be well suited to the tasks associated with running an agency. (And trying to force the development of those skills by throwing an unprepared individual into the proverbial fire rarely ends successfully or pleasantly.) So it’s important to be sure that the family member is both qualified and eager. A caution: only about 30% of familyowned businesses survive in the second generation’s hands, and less than 15% make it to a third generation.

PARTNER? If your business is already a partnership, one of your partners may be interested in acquiring your share. In fact, your partnership agreement may already include language that facilitates a transition.

No matter how long your timetable may be, review it periodically to make sure that you’re accomplishing all of the goals in a timely fashion! EMPLOYEE? Perhaps there are one or more employees who have served you and your clients well. Giving them the opportunity to become owners is a way to reward them for their commitment and a way to ensure your clients will continue to be served by familiar faces. As with family members, it’s important to ensure that employees are both qualified and interested.

OUTSIDER? Another local agent may have an interest in expanding his or her business. Or you may find a complete stranger who wants to buy you out. Some agents contract with qualified business brokers.

WHAT’S YOUR ROLE IN THE PLAN? The fact that you’ve been able to sustain (and maybe even grow) your business in a tough economy says a lot about the leadership you’ve provided. As you implement your succession plan, that leadership will continue to be important, whether that’s in SEPTEMBER 2014 | 51

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FEATURE / SUCCESSION PLANNING

terms of making sure your successor develops the knowledge he or she needs to succeed, helping employees through the inevitable changes, or making sure that current clients continue to be comfortable. But be careful about how much value you attach to yourself and your professional reputation. Your business should be able to survive and thrive without you. That’s why part of your succession plan involves increasing the value of your company while simultaneously reducing its dependence upon you. For example, you may want to diversify your customer base, sustain cash flow, and develop your team’s management skills—all steps most businesses should already be taking.

ASSEMBLE YOUR EXPERT TEAM Successful business people usually become that way because they know how to tap into knowledge and advice from a variety of experts. That’s especially important when it comes to creating and implementing a succession plan. Build a team of experts you trust, including your CPA and attorney, and keep them involved throughout the entire process. They will provide additional viewpoints and identify issues you may not have considered on your own. Your CPA is a particularly valuable member of that team, because the income tax-related implications of a business transition can vary widely. A good CPA can offer guidance on the best way to structure the transition and ensure you get the greatest benefit from the proceeds.

CREATE A TRANSITION STRATEGY Once your succession plan is in place and you know your timing, it’s time to start moving towards making that transition a reality. The first step is to do an honest assessment of your agency’s strengths and weaknesses. For example, do you have state-of-theart technology? Strong producers under contract? Great carrier relationships? Exceptional customer service? An excellent reputation? Look for ways to enhance what you already do well, and develop strategies for resolving other issues. Next, develop a clear understanding of your agency’s fair market value—not what you might want to sell it for but what it’s actually worth in today’s marketplace. Even if you’re planning to transition ownership to family members or

employees, you need to know the underlying value. Today, most agencies are sold at a price that’s driven by projected earnings, risk and availability of financing, according to Michael Mensch of Agency Brokerage Consultants. EARNINGS. The common benchmark for earnings is EBITDA, which refers to earnings before interest, taxes, depreciation and amortization. To reach this important number, add your net profit, interest on debt, income tax paid, depreciation and amortization, non-recurring expenses and your salary and benefits. Next, subtract projected expenses such as rent, employee compensation and any costs associated with your departure. Mensch reports that the average small agency may sell for up to four to five times its adjusted EBITDA. RISK. As an insurance agent, you have a better- than-normal appreciation of the role of risk. To a prospective buyer, understanding the inherent risk in a purchase is critical. Among the risk factors that today’s buyers may consider are the following:

• Declining revenue or earnings • Revenue concentrated in a few carriers, producers, or accounts • Revenue concentrated in non-rated carriers or substandard markets • Low account retention or renewal commission base • Employee issues • High loss ratios • Poor recordkeeping

FINANCING. Few potential buyers (including employees) will have the full purchase price close at hand. If you can help the buyer access third-party financing, you stand a better chance of receiving the full value for your agency. Financing also opens up the sale to a larger pool of prospective buyers, which is essential for competitive bidding. Typically, the more money that can be borrowed to finance an acquisition, the more likely it is that you will obtain the best price and terms for your agency. PROFITABILITY. Another important factor in assessing the value of your agency to a buyer is how your profitability and performance compares to that of your peers. Joseph Totah, a former agency principal who now heads AgencyEquity.com, recommends developing a confidential summary

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that includes information such as: • Reports by client and carrier on the book of business • Average policy count per household • Average premium per policy • Breakdown by line of business • Location of accounts • Accounts by premium size and by revenue size • Largest clients • Supporting documentation from carriers, such as loss ratio reports, commission state ments and schedules You’ll also need to provide pro forma financials, which project future revenue and profitability. Be sure that these numbers don’t include one-time (non-recurring) transactions.

STRUCTURING THE TRANSITION Before you negotiate a price and terms, it’s time to work with your attorney and CPA to identify and develop the sale/transition structure that best fits your objectives and tax situation. Three common approaches are: LEVERAGED BUYOUT/RECAPITALIZATION. A recapitalization strategy is the change of company ownership, value or stock from an owner to relatives, employees, management, key producers or others. It provides the seller with cash needed to exit for retirement or other reasons while leaving the business in the hands of people who see that it continues operations. In a leveraged recapitalization, the buyer or buyers borrow funds from a lender in order to purchase ownership, utilizing the assets of the agency as collateral. A leveraged recapitalization as part of a succession plan can provide many benefits to both buyers and sellers. Some companies have added succession loans that are structured to handle a recapitalization. EARN-OUT. The buyer typically pays 60% to 80% of the purchase price up front, with the remaining 20% to 40% paid over time as the agency achieves certain levels of revenue or profitability. SELLER-ASSISTED. The buyer makes a sizeable initial payment and gives you a note to cover the rest. You can choose to receive the buyer’s regular payments on the note, or resell it at a discount to a company that specializes in note purchases. The buyer may need assistance in locating

funding for the transaction, and your business expertise may make the process easier (which ultimately benefits you). While many prospective owners look to local banks as their first potential funding sources, most banks are hesitant to lend money to insurance agencies. Banks normally base their lending on balance sheet financials and collateral, such as real estate and inventory. An insurance agency’s primary asset is the future cash flow that’s embedded in its book of business.

MAKING THE ACTUAL TRANSITION The work doesn’t end once the papers have been signed. The transition between owners is full of make-or-break moments involving carriers, customers, and employees. Employees who aren’t buyers will want to know that their jobs are secure and that they’re not facing significant changes in the work environment. The more time you devote to sharing your plans throughout the succession process, the less uncertainty they’ll face. That’s important, because their moods and statements will have a significant effect upon what your loyal clients think of the new owner. Overall, clients want to be assured that their protection will not suffer any disruptions, and that the acquisition won’t create any hassles for them. If the employees are well liked, customers will also want to be reassured that they’ll continue to deal with the same friendly faces. In addition, be aware that successful transitions often take less time than anticipated. Before you know it, your former agency may be a well-running machine that doesn’t need much of your time or advice. While it’s a common reaction to feel unwanted and depressed, don’t. It simply means you did a great job of planning for the succession, your plan succeeded, and you can now focus on your dreams!

The materials in this paper are for informational purposes only. They are not offered as and do not constitute an offer for a loan, professional or legal advice or legal opinion and should not be used as a substitute for obtaining professional or legal advice. The use of this paper, including sending an email, voicemail or any other communication to Oak Street, does not create a relationship of any kind between you and Oak Street.

Rick Dennen is president and CEO of Oak Street Funding, which provides commission-based lending for insurance agents that need capital to buy, build or sell their agencies. Dennen is a licensed agent in the state of Indiana for life, accident and health products and a licensed Certified Public Accountant in the state of Indiana. In addition, he is an instructor in venture capital and entrepreneurial finance at the Indiana University Kelly School of Business. He can be reached at rick.dennen@ oakstreetfunding.com

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FEATURE

MYTHS

about affluent clients

Patricia LeBon is a personal lines manager for Burns & Wilcox, the nation’s largest independent wholesale broker and underwriting manager. A wealth management adviser who has consulted with many of the Forbes 400, she is an expert in managing risk for multigenerational, multistate clientele. For more information visit www.burnsandwilcox.com

A volatile economy, coupled with technology advancements and the sustained success of e-commerce and social media, has caused a dramatic shift in the landscape of wealth in the US. Within this new landscape, affluent clients are no longer a niche group of people with a net worth of more than $50m. This shift has a tremendous impact for our business and forces us to ask: In the current climate, what makes a client ‘affluent’? I define today’s affluent client as someone whose net worth makes them a possible target for liability lawsuits, and it’s likely that many of your existing clients fall into this category. We often fail to identify affluent clients because we haven’t asked the right questions. Affluent clients require a careful review of their assets and lifestyle so that a personalized insurance program can be constructed to adequately protect their family and long-term financial well-being. Initiating this process means we need to throw out our preconceived notions of ‘who’ an affluent client is and instead take a complete risk management approach in evaluating the type of coverage those clients need.

MYTH: NET WORTH IS REFLECTED IN PHYSICAL ASSETS It may seem obvious, but don’t judge a book by its cover. While high net worth clients are easily recognizable by their homes, cars and accessories, today’s affluent client may only be identifiable by what you can’t see, such as a substantial investment portfolio. Asking the right questions is critical in gaining a clear picture of all assets, from properties and investments to jewelry, art and expensive toys.

MYTH: RISK EXPOSURE IS DETERMINED BY A CLIENT’S PROFESSION Clients don’t need to be a celebrity, professional athlete or CEO of a Fortune 500 company to become the

victim of a superfluous liability lawsuit. A client’s lifestyle and public presence can also contribute to their risk profile. Remember to consider social circles, volunteer work, board memberships and the risks associated with these responsibilities when evaluating the coverage required.

MYTH: SPECIAL RISK ASSESSMENTS ARE ONLY REQUIRED FOR HIGH NET WORTH CLIENTS When working with an affluent client, agents must go beyond the act of quoting policies and become a true risk management adviser. In doing so, we can uncover risks, quantify their impact on the insured and ultimately provide solutions to protect the client.

MYTH: YOU ONLY NEED TO WORRY ABOUT THE CLIENT AND THEIR EXTENDED FAMILY Liability risks don’t end with family members. Many affluent clients consider their household staff an extension of their family—and you should too. Housekeepers, landscapers and nannies all have risks associated with their employment, which must be taken into account when building an insurance package.

MYTH: IT’S DIFFICULT TO MAINTAIN A LONG-TERM RELATIONSHIP WITH AN AFFLUENT CLIENT In my experience, agents who can provide comprehensive risk management services in addition to cost-effective policies become a highly valuable and important long-term resource. Offering to sign a confidentiality agreement can be a great first start in building trust with the client. As the relationship develops, the agent will gain an unparalleled understanding of the spectrum of risks the client faces. In addition, a trusted adviser benefits from an intimate knowledge and confidence that helps to lock out future competition.

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IBca_Jobs

JOBS Check out Insurance Business Jobs - Canada’s newest online job board where you can find the most qualified professionals and the best careers in the industry! • Broadcast your company’s job openings to over 20,000 high caliber insurance professionals • Discover and apply for the latest employment opportunities from various insurance companies across Canada • Upload your resumes and expose your expertise to the Canadian insurance industry

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FEATURE / TELEMATICS

HYPE, OR THE FUTURE OF

AUTO INSURANCE?

The media buzz about telematics lives on. But is there steak to go along with the sizzle? David Gallagher takes an insider’s look at what telematics really means to Canada’s auto insurance industry

In the past year there has been a tremendous surge in Canadian media coverage surrounding the introduction of telematics and usage-based insurance. Insurers announcing the launch of new products, vendors announcing new technology, experts speaking about benefits, and industry conferences are putting this topic front and centre. Is it all just hype, or is telematics really changing the face of Canadian insurance? Is it words and announcements, or is there substance to the claims? Is the market ready to erupt, or just fizzle? In the next 18 – 24 months we will know for certain. For those who cannot wait that long, this article provides some answers. It will offer insight on why telematics is not just hype, but rather the real deal. If the European and U.S. markets are any indication, Canada is on the tipping point of wide spread telematics adoption and we are all about to experience the benefits of cheaper insurance, safer roads and proactive vehicle maintenance. While Europe has been the market leader in telematics with over two million telematics’ users and continuing strong growth, faster growth in the U.S. has led many to predict that in 2014 the U.S. will become the leader in policies written. A few large users are driving much of this change. For example Progressive Insurance alone has more than 1.6 million telematics clients, which accounts for over $2 billion in auto written premiums, and generates customer 56 | SEPTEMBER 2014

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satisfaction scores for users that are significantly higher than non-users. In the U.S. more than 60 per cent of auto insurers have a telematics program or pilot program underway, while globally, Ptolemus Consulting Group predict over 100 million policies will be in place by 2020.

WHAT IT MEANS FOR CANADA Such strong growth and market acceptance will transfer to Canada, and we can apply learning’s and experiences from these markets to develop winning programs that are beyond just usage-based insurance. We have the opportunity to create real value for consumers; even those who don’t qualify for the top discount tiers, and manage driver and vehicle risk in ways that are possible without telematics information. Several examples highlight what is being done, and demonstrate the art-of-the-possible. At CAA South Central Ontario (CAA SCO), the last year of hard work is just now leading to a telematics insurance product roll out. CAA SCO offers auto insurance and car club membership, and has extensive opportunities with its customers in the areas of usage based insurance, healthy car management, and vehicle safety. CAA’s mandate is safe roads and safe drivers, and they see telematics as a core enabler to meet these goals. CAA SCO, part of a Canadian-wide network of auto clubs with more than six million members, plan to use telematics to deliver services beyond auto insurance: such as vehicle maintenance, vehicle breakdown, and vehicle performance, all of which will have a significant impact on Canadian road safety. U.S. and European Consumer research, provided by Frost and Sullivan at the beginning of this year, indicated that drivers are ready to embrace telematics services to address vehicle safety and performance. They see telematics as the ideal mechanism to help them maintain their vehicle by alerting them to maintenance issues, and improve safety – something that I believe also applies to Canadian drivers, and will lead telematics into the mainstream when we look back in 18 – 24 months. Safe drivers, safe roads, and lower claims expenses

are also a prime objective for Quindell’s ingenie, a U.K.-based broker specializing in telematics for young drivers, who are poised to launch this fall in Canada in partnership with the Independent Brokers Association of Ontario (IBAO). ingenie’s solution is proven over many years, in which young drivers embrace new insurance models with a straightforward theme – drive safer, pay less. The IBAO is developing telematics solutions that involve brokers, insurers and consumers. For personal lines, the model requires distribution models to be put in place, and carrier products and regulatory approval to be finalized. After many months of behind-the-scenes effort, new products that will leverage telematics to improve risk selection and business risk management are poised for launch later this year, says the IBAO. The IBAO says that their model will serve as a guide for other broker associations who are waiting to see how the telematics programs fare in Ontario. According to the IBAO, their upcoming annual conference in October will allow brokers to experience these solutions, and give them a chance to participate in finalizing how to roll out innovative programs that create new ways of engaging with consumers. Judging by the commitment shown by the IBAO, usage-based insurance has enough momentum that it will be around for many years to come, and is anything but hype. Usage- based insurance, healthy car initiatives and road safety is resonating with everyone, including regulators. Further to this consumers are seeking healthy car initiatives, and organizations such as CAA SCO are rising to meet this need. These three companies represent a cross-section of how telematics can be used for CAA’s ‘healthy car’ initiative; young drivers and changing driving behaviour (through ingenie) and industry-backed UBI initiatives under the guiding hand of the IBAO. In each case, there was a lot of time and effort being invested as the market sat waiting; but this fall, each will be launching programs for their customer base. And beyond Ontario, other carriers are working on similar launches, and new telematics-based solutions are poised to transform the Canadian market.

2 MILLION telematics users in Europe alone

In the U.S. more than

60 PER CENT

of auto insurers have a telematics program or pilot program underway

Predictions: More than

100 million

policies will be in place by 2020 in the U.S.

One insurer’s tale • 1.6 million telematics’ clients and growing; • More than $2 billion in auto written premiums; • Customer satisfaction scores for users significantly higher than non-users. Numbers for Progressive Insurance (U.S.)

David Gallagher, SVP Quindell Solutions Quindell Solutions is a provider of one of the world’s most advanced telematics platform

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BROKER ADVICE

CHANGE

MANAGEMENT

REWIRING THE BRAIN FOR CHANGE

In business, it’s vital to change with the times. But team members often find change hard, or resist it, even when it might be good for them. Why? The answers can be found in the brain itself, and Sonia McDonald reveals that it is possible to teach an old dog new tricks As leaders, we are constantly driving and facilitating change, yet research in this area has demonstrated that 70 per cent of change initiatives fail. Why? How can we make change easier and more successful? The neuroscience of change, and understanding how the brain functions, is vital to managing and coping with change.

BRAINS ARE WIRED FOR SURVIVAL The brain functions as a survival tool by helping us avoid danger. A part of the brain called the amygdala helps monitor our responses and tells us when to run from danger or towards safety. It also tells us when to step towards a benefit or away from a threat. When change is happening around us in our society, relationships and workplaces, we can feel threatened, and that activates our amygdala. We feel outside our comfort zone, triggering fear and anxiety. While this is good for our safety, it does come at a cost. When our brain is in safety mode, protecting us from a perceived threat, it cannot function well as a problem-solver or creativity generator. In the workplace, the fear of change causes people to rely

on tried and true routines, rather than create new strategies to move forward. In effect, the brain shuts down the part that is really needed at that time. Basically, the amygdala of your brain has been hijacked, and this is not the best time to make an important decision. Now you see why 70 per cent of change initiatives fail. By understanding how the brain works, we can manage change resistance and develop strategies to maximise change potential. In addition, it gives us insights into how people learn, engage and remember, as well as manage emotions.

Change is about forming new wiring, habits and behaviours

BRAINS ARE LAZY Considering that the brain weighs about 1.5kg and absorbs about 20% of the body’s energy, the brain is not particularly energy-efficient and is actually pretty lazy. The brain prefers comfy habits, as these require a lot less energy. It doesn’t really like to learn new habits or ways of doing things, as this takes effort. The design of the brain is not always helpful. The part of the brain that is responsible for thinking and high-order processing (the prefrontal cortex) requires a lot more energy to function than the part of the

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brain that deals with emotion (the limbic system). That means it’s a lot harder for us to cope with change than to return to our tried and true habits. How can we break habits and form new ones? In his book The Brain That Changes Itself, Dr Norman Doidge tells us that the brain can be changed by our thoughts and actions. They physically alter the structure of the brain itself, which in turn changes the way it functions. This is the most important breakthrough in neuroscience in four centuries. This ability of the brain to change and make new connections, rewire itself and even grow new brain cells as a result of experience is called neuroplasticity. Change is about forming new wiring, habits and behaviours. So yes, we can teach an old dog new tricks! How can we harness neuroplasticity of change? By tapping in to the emotions…

BRAINS ARE AFFECTED BY EMOTION We know that often our behaviour is controlled by emotion rather than common sense. What that tells us is that the limbic system in the brain has some control over the information that is passed on to the cortex, which controls our decisionmaking system. In other words, our thoughts and actions are skewed by the emotion we are feeling. You’ve heard of rose-coloured glasses, the phenomenon that makes certain things look better than they really are? That’s an example of the limbic system influencing our beliefs and perceptions. When people are afraid, as they usually are at the thought of change, our limbic systems colour our perceptions with threat and fear. People only see the negative side of change because that is all their brain permits. If the change is brought about for positive reasons, people will accept it and be ready to involve themselves in making change happen.

MAKING THE BRAIN WORK FOR YOU So we know that our brains are wired for survival, that they are lazy and will take the easiest thought out of there, and that every thought is coloured by emotion. We also know that actions and thoughts can change the physical structure of the brain. How can we use that knowledge to make the brain lead us towards supporting change rather than running away from it? There are two key solutions. First, you can use

neuroplasticity to your advantage and provide opportunities for people to develop new thoughts and practise new behaviours, thereby rewiring the brain. Or you can make the limbic system work for you by creating positives around change, especially to reinforce behaviour and thought changes. We need to build organisational change systems that capture the important role of emotions in determining behaviour, particularly in the contexts of engagement, commitment, resistance and cooperation. What that means in the workplace is that every small step forward needs to be acknowledged. Change leaders are essentially helping people develop new connections within their brains. Our role should involve creating opportunities and interventions that give people the chance to trial new behaviours in a safe environment. We should allow them to take the ‘risk’ of doing something uncomfortably new and succeeding at it. The more fun we can build into the experience, the more people will become involved in it. Positive reinforcement is essential to help embed the new thoughts and behaviours and to show the limbic system that this change is nothing to fear. The more often we can encourage people to repeat the new actions, the more comfortable their brains will allow them to feel.

Sonia McDonald is the director of LeadershipHQ.

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BUSINESS STRATEGY / LIFE IN HALF A SECOND

HOW TO ACHIEVE SUCCESS BEFORE IT’S TOO LATE Still waiting for the right time to make those changes in your brokering business or create the life you want? Well, time might be running out, argues Matthew Michalewicz Planet Earth is four-and-a-half billion years old. The species you and I belong to, Homo sapiens, did not emerge until some 200,000 years ago. The oldest known fossils of modern humans are only 160,000 years old, discovered in Herto, Ethiopia. So out of the four-and-a-half billion years that this planet has been floating through the nothingness of space, we’ve been around some .0044 per cent of that time. Put another way, if our planet was exactly one year old, then modern humans would have only been around for the last 23 minutes. Measured on the same scale, if our planet was a year old, then your entire life would amount to half a second.

WHAT WOULD YOU DO IF YOU HAD ONE YEAR TO LIVE? We don’t appreciate this as kids. Time seems unlimited and goes by ever so slowly. We’re impatient to grow up, become adults, and enter the real world. We imagine all the freedom we’ll have, all the things we’ll get to do. But when adulthood finally arrives, we discover that we’ll be spending the vast majority of our “freedom” at work, paying bills, surviving, often in jobs we don’t like or don’t care about. Life is not how we imagined it and disillusionment sets in. We spend our half second doing everything except what we really want, dreaming of the future, of some distant, faraway day when life will be different, better, when we can finally do the things we want. But as we grow older, time begins moving faster and faster, and our long-awaited day never seems to come. The tragedy of life isn’t that we only have half 60 | SEPTEMBER 2014

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a second. The tragedy is that we waste it. In my travels across continents, countries, and cultures, first as a serial immigrant and later as a businessman, I met people from every walk of life imaginable. I became obsessed by a single question: What would you do if you only had one year to live? Why? Because I always received the same answer. With only a year to live, most people would quit work, spend time with family, see the world, and do everything they always dreamed of doing before it’s too late. Their answers would be thick with emotion – not sadness or regret, but enthusiasm, eagerness. I felt they were about to set sail on some journey they often fantasised about but never actually took. With heat and fervour, eyes flashing, gleeing almost, they spoke of the many things they would do before death claimed them. And after the hundredth question and hundredth answer, I finally thought, Good God! Can we only live when we’re dying? My impression of the world is that we spend life doing what we ‘have to’ rather than what we ‘want to’. This comes across in many psychology and happiness studies, especially those related to work. Harvard studies show that worker happiness is at an all-time low, with 74 per cent of employees wanting to find a new line of work. At heart, we would rather be doing something else.

SO WHAT ARE YOU WAITING FOR? If we only had one year to live, our desire to start living – to use what’s left of our half second to the fullest – would become unstoppable and we would finally, finally, take action. But is that what it takes? Must we be confronted with death to finally do the things we want? Is that what we’re waiting for? Sadly, it seems so. Death always seems a long way off, a concept almost, as remote and abstract as the dark side of the moon. We don’t appreciate our mortality or fully comprehend how little time we have, so we defer our desires for another day. It’s not until death becomes more tangible, inevitable, that we realise our time is

measured and we spring into action. We’re relaxed and laid back about the time we have left because we measure our age in “years lived”. We know that 50 is older than 40, and 40 is older than 30, but so what? What does that really tell us? Not much. It’s like knowing how many litres a car has used without knowing how many litres are left. The most important information is missing. So what would happen if we measured our age in ‘days left’ rather than ‘years lived?’ I bet we wouldn’t be as relaxed and laid back. I bet that death would become less abstract. Let’s try it. The average life expectancy of the global population in 2011 is 70 years, ranging from 80+ years in countries such as Japan, Australia and France, to less than 60 years in South Africa, Laos and Kenya. Let’s assume you live in one of the sixteen countries where life expectancy is more than 80 years, or that you’ll beat the odds and live to be 80. In either case, subtract your current age from 80 and multiply the result by 365. This is the amount of ‘days left’ you have – assuming all goes well and you don’t find yourself on the wrong end of “average”. I’m currently 37 years old, so 80 – 37 = 43, and 43 x 365 = 15,695 days. So that’s it. That’s all I have left: 15,695 days. And there’s something more meaningful about ‘15,695 days left’ than ‘37 years old.’ I feel a sense of urgency, haste. There’s a countdown on my life. I’m in a hurry to live. The world is right there, outside my window, in the blueness of the sky, over the horizon, begging to be discovered, touched, appreciated. It’s all there waiting for me – so what am I waiting for? ‘I’m here to live, man, live!’ I remind myself each morning. I want to lie in the grass, underneath the burning sun and swirling clouds, wind blowing, seasons changing, with the raw earth under my fingernails. From the largeness of the cosmos to the smallness of my little toe, I love life. And knowing that everything is ephemeral, fleeting, here one moment and gone the next, I’m not saving anything for later.

That’s all I have left: 15,695 days. And there’s something more meaningful about “15,695 days left” than “37 years old”. I feel a sense of urgency, haste. There’s a countdown on my life SEPTEMBER 2014 | 61

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BUSINESS STRATEGY / LIFE IN HALF A SECOND

What would you do if you only had one year to live? I always hear the same answer. Most people would quit work, spend time with family, see the world, and do everything they always dreamed of doing before it’s too late!

K REVIEW | EDITOR’S CHOICE

nd. But I do know one e only got half a second. ght be content to use that waiting and deferring, deferring – never quite y or what for. e. I want to close my g I made the most of ng I never waited and I ed. If I had more time, done more. But e I had, I did all I why I’m in a hurry; don’t have a moment e’s a countdown on

what – ntdown on .

h permission r Matthew Life in Half ailable on all and online. chalewicz.

THERE MIGHT NOT BE A “LATER” Like the great motivators that preach from stadiums and pulpits, I want to live full and die empty. I’ve skydived, explored the great pyramids, sat next to the Moai on Easter Island, bungee jumped, owned Ferraris, driven 300 km/h, rock climbed above Machu Picchu, sailed the Mediterranean, scuba dived on wrecks in the Caribbean, photographed the Nazca Lines from a light plane, touched the giant tortoises on Galapagos Islands, met the Pope, worked with Lech Walesa, and dined with Arnold Schwarzenegger – I’m not waiting for anything. Each morning I tell my wife and kids how much I love them, as if I’ll never see them again – each year I’m living like it’s my last, bucket list and all. Do you have a bucket list? No? Then make one and do it now, while you still can, while there’s still life and strength in your veins. If you only had one year to live, you’d do it now. Nothing would stop you. No amount of commitments, obligations or responsibilities. But because you measure time in “years lived” rather than ‘days left,’ the future seems unlimited, so you defer and wait. You do everything you “have to” and very little of what you “want to”. But what are you waiting for? When you’re old and frail? When your desire has evaporated? When your loved ones are gone?

WHY ARE YOU STILL WAITING, DEFERRING? Excerpted with permission from the author Matthew Michalewicz. Life in Half a Second is available from all good bookstores and online.

I see people doing it every day, everywhere I go, in airports, restaurants, factories, offices, classrooms – waiting and deferring. I see it on their faces, in their eyes. They believe

they’ve got all the time in the world, so they wait and defer, putting off the things they ‘want to’ for another time, for ‘later.’ And when later comes, they often feel it’s too late – that they’ve waited and deferred for too long. But why continue to wait and defer because you’re older today than you were yesterday? What sense does that make? You won’t have any more ‘days left’ tomorrow than you do today. What’s left is what’s left, and you must make the most of it. Harlan David Sanders certainly made the most of his ‘days left.’ After a colourful life that included farming, piloting steamboats and selling insurance, he founded Kentucky Fried Chicken at the age of 65, immortalizing his eleven herbs and spices and becoming a multi-millionaire in the process. Ray Kroc did the same, beginning his legendary transformation of McDonald’s into a global colossus while he was in his 50s. There are thousands of similar stories, as evidenced by entrepreneurial statistics. Consider that the “over 55” category is responsible for starting 28 per cent of all new businesses in Canada each year. The truth is that it’s only ‘too late’ when you’re dead. That’s the only time when it’s truly ‘too late.’ Any time before that, the dice are still in play, the dealer still has cards to deal, you still have time.

NO TIME TO LOSE It’s not over ‘til it’s over. But you don’t have any time to waste, nobody does. If you want more from life than the daily grind of work, routine, retirement and death, you’ve only got half a second to do it. To achieve success and turn your dreams into reality, the only time you’ll ever have is now. I don’t know who you are, where you live, or anything about your values or background. But I do know one thing: you’ve only got half a second. And you might be content to use that half second waiting and deferring, waiting and deferring – never quite knowing why or what for. But not me. I want to close my eyes knowing I made the most of life – knowing I never waited and I never deferred. If I had more time, I would have done more. But with the time I had, I did all I could. That’s why I’m in a hurry; that’s why I don’t have a moment to lose. There’s a countdown on my life. And guess what – there’s a countdown on yours as well.

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INSURANCEBUSINESS.CA

Favourite things... Jeff Burke, President and CEO, Western Financial Group

Music: I like country music. Anything from Keith Urban to Shania Twain.

My first day in insurance: I started at American Family in 1987. I remember that I didn’t know anything on my first day. They handed me a manual and told me that if I read it I’d be able to sell their products.

Book: I really enjoy motivational and business books. Good to Great: Why Some Companies Make the Leap... And Others Don’t is one I’d recommend.

Movie: I enjoy the classic underdog movies. Films like Rudy or We Are Marshall are very inspirational.

Favourite Food: Mexican – anything hot and tasty.

Best thing about working in insurance: Every day is a new challenge. Nothing is predictable. I enjoy the constant change and the numerous opportunities that always seem to come your way in insurance.

My best day in insurance: There have been so many in the last 28 years. Nowadays, the biggest thrills for me are when I get to watch others achieve personal success. Vacation spot: Anywhere sunny, warm and with a beach! My favourite spots include Maui, San Diego, Florida and the Caribbean.

My weirdest coverage ever: That would have to be a bus company that took people on a white water rafting excursion. They had old buses and equipment. You can only imagine the risks and challenges involved!

Favourite sport or pastime: I’m a big football fan, particularly college football. I root for the Oregon Ducks. Their fast-paced offence really changed the game.

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EXPERT ADVICE

CLIENTS GET CANDID ABOUT CLAIMS

Alex Walker is RSA’s first claims relations director for the Canadian market. His mandate is to bring the claims division to life for insurance brokers and clients, as well as unifying brokers with RSA’s underwriting, claims and risk control teams to ensure maximum satisfaction for all partners.

It has been a difficult year. This sentiment, shared by insurers and brokers alike, is one that Alex Walker, director of claims relations at RSA Canada and president of the Canadian Insurance Claims Managers Association (CICMA) of Ontario, can empathize with deeply. From where he sits as a key area expert on emerging claims trends, the last year of extreme weather has been one of the most challenging on record. However, there is still a common commitment to assist clients in a skilled, efficient and compassionate manner, despite the fact that adjusting teams and claims service providers have been profoundly stretched. For Walker and his colleagues, business, even in extreme conditions, must and will carry on as usual, ensuring they are ever-ready for an extreme CAT situation. Fortunately, large commercial clients understood the circumstances, but they have also made their priorities clear. For them, there are elements within the claims process that are legitimately non-negotiable, as there is no telling when they might need their partners to swing into action. By staying in close contact with his brokers and clients, Walker knows that their main priority is the ability to remain functional if something significant should impact their business. As such, the claims team needs to be very accessible in the event of a loss and equally dedicated to keeping clients informed if their services are needed. If a situation arises where coverage is not afforded, clients are most appreciative of straightforward communication that clearly outlines the reasoning and identifies the possible next steps.

Mindful of these needs, Walker shares how RSA has been able to maintain a proven track record of client service and rapid response. “We support our customers by being one of the few insurers in Canada that maintains its own inhouse 24/7/365 live claims operations in regions across the country,” says Walker. “Our core group of claims specialists deliver fine-tuned expertise, and a fair approach to every case. We also have the ability to settle large, complex claims locally and, because of this, we’re often more efficient than some of our competitors.” RSA’s highly engaged claims leaders are just as conscious of how effectively they are supporting their brokers. Walker offers three important suggestions for them to share with clients to help streamline the claims process:

Report claims and losses promptly. The sooner the claim is reported, the sooner it can be rectified.

Provide as much information up front as possible. This includes key contacts, location, circumstances and steps taken to help mitigate the loss.

Work with the insured client to set realistic timeline expectations. Claims investigations and quantification can take time depending on the nature and complexity of the loss, so be conscious of setting realistic expectations for resolution with clients.

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We stand behind the facts. We stand behind our brokers. rsabroker.ca Personal Insurance

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Commercial Insurance

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15/08/2014 12:10:48 AMAM 2014-08-08 11:09

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