Canadian Underwriter September 2017

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SE P TE M B ER 2017 PM#40063170



Making the At-Grade BY ALEXANDRE NOLET


Because we work with the ďŹ nest insurance companies.

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Participants: Lloyd’s Underwriters, Pafco, Northbridge

The 36,000 brokers represented by the Insurance Brokers Association of Canada (IBAC) work every day to serve the best interests of millionshis of Canadians. We thank the many insurance companies that we partner y. with to deliver security and peace of mind to our clients. Proud Supporter of Brokers Displaying this Symbol


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VOL. 84, NO. 10, SEPTEMBER 2017




Living Legacy Replacing legacy information technology can be a daunting and expensive task for an insurer. Opting to maintain, tweak or overhaul a legacy system all pose challenges, something carriers wanting to satisfy brokers and customers need to know.






16 N&L Auto Insurance Review Autonomous Vehicles

At-Grade Rail Crossing

As part of Newfoundland and Labrador’s auto insurance review, brokers will promote customer protection and consumer education.

Will autonomous vehicles change litigation? The answer is “yes,” but a deeper dive is needed to show what all this could mean for insurance.

With new at-grade crossing demands taking effect in 2021, private owners and their insurers must determine what to do to be fully compliant.







Hurricane Andrew

Connected Homes

Artificial Intelligence

Hurricane Andrew helped to cement the value of well-informed catastrophe modelling. Fast forward 25 years and, once again, rethinking the approach to modelling is in order.

The connected home, including smart appliances, is transforming everyone’s lives. What are the challenges, risks and risk management strategies to address this transformation?

The impact of artificial intelligence on the insurance industry will be transformative. To capitalize on the change, stakeholders must negotiate technology, industry politics, talent and culture roadblocks.




September 2017 Canadian Underwriter


VOL. 84, NO. 10, SEPTEMBER 2017

Managing Director, Insurance Media Group


Angela Stelmakowich


Ian Portsmouth (416) 510-6793 (416) 510-6800

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Scott Treasure, incoming president of the Insurance Brokers Association of Canada, understands that staying committed to core principles offers a strong foundation for moving forward. BY ANGELA STELMAKOWICH

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Canadian Underwriter September 2017


11 Editorial 12 Marketplace 40 Moves & Views 42 Gallery

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WHY CYBER COVERAGE IS MORE IMPORTANT THAN EVER “Ooops, your files have been encrypted!” Thanks to a particularly malicious cyberattack dubbed WannaCry, that unnerving message greeted tens of thousands this past spring, paralysing organizations around the globe. Such ransomware either encrypts files or locks computer screens, with hackers demanding payment to undo the damage. Instructions on how to transfer untraceable Bitcoin to the culprits — typically to the tune of hundreds of dollars — are provided. Brenda Smythe, Regional Director of Corporate Underwriting at Economical Insurance, says that’s just one of the more dramatic ways a company can suddenly find itself with compromised or completely frozen systems. Most incidents start in more mundane ways, maybe with a stolen laptop or a missorted mailer. “Data breach is often caused by employees; by accident or by malicious intent,” she notes. “Either way, finding out that your clients’ personal information has been leaked or lost altogether can be a businesschanging event for owners who aren’t prepared.” Insurers have started to respond to the growing need for this kind of coverage, including Economical, which introduced a robust new cyber offering to its commercial suite this summer. Smythe says that, in line with its company value of focusing on customers first, the national insurer was determined to make this product affordable for businesses of all sizes. “In the R&D stage, we looked at exactly what kind of services would be needed in a

variety of scenarios and we’re confident EXPERT® Cyber delivers the right support at an accessible rate,” she says. Many businesses may not even understand the kind of assistance they would require in the event of a data breach. For example, there are potential fines and stringent regulatory requirements in place if the financial or personal information of customers has been leaked, and everyone who is affected may need to be notified. Companies who don’t have a strategy or insurance in place for this kind of operational emergency can see their reputation — and their bottom line — severely, even irreparably, damaged. Smythe says when an EXPERT Cyber customer is hit by a breach, a number of financial, legal, and PR services are triggered to help them get through the crisis successfully and professionally. “Scrambling with the fallout is not something we want our commercial customers to ever have to deal with alone,” she says. “With this coverage, the business owner has everything taken care of for them, from meeting regulatory requirements and covering fees, to notifying their client base, managing business interruption, and restoring lost data.”

To find out more about how EXPERT Cyber can be a valuable add-on for your commercial clients, visit today.

We’re committed to cyber security — inside and out. Kelley Irwin, SVP & Chief Information Officer

Safeguarding against data breach is top of mind at Economical, both internally and for our business customers. We have a robust program in place to protect the personal information of customers and to ensure our tech infrastructure can withstand threats. Now, we’ve extended this commitment to our commercial product suite with EXPERT® Cyber, an affordable and innovative insurance solution to protect your business clients after a breach and keep them running without interruption, too.

Get ready for the future, with us. PROPERTY





Economical Insurance includes the following companies: Economical Mutual Insurance Company, The Missisquoi Insurance Company, Perth Insurance Company, Waterloo Insurance Company, Family Insurance Solutions Inc., Sonnet Insurance Company, Petline Insurance Company. ©2017 Economical Insurance. All rights reserved. All Economical intellectual property, including but not limited to Economical® and related trademarks, names and logos are the property of Economical Mutual Insurance Company and/or its subsidiaries and/or affiliates and are registered and/or used in Canada. All other intellectual property is the property of their respective owners.



COLIN CLAHANE Director, Business Finance BMO Bank of Montreal

FAB DOLAN Head of Marketing Google Canada

DAVID MARSHALL Ontario Ministry of Finance Adviser Auto Insurance



Wind and Rain Consider US$70 billion to US$90 billion. US$15 billion. US$25 billion to US$37 billion. These are just some of the many loss estimates — insured, economic and other — meant to pin down the spiralling, drenched mess that Harvey has created in Texas and Louisiana. RMS reports its modelling, in part based on anonymized data on National Flood Insurance Program (NFIP) exposures, indicates Harveyrelated losses to the program could reach US$7 billion to US$10 billion. This assumes a US$65,000 mean average claim (in line with Superstorm Sandy) and that NFIP gets 100,000 to 150,000 claims. The combined wind, surge and inland flood losses from Harvey could be 10 times that, ranging from US$70 billion to US$90 billion, RMS notes. Then there are the economic losses, which the catastrophe modeller anticipates will “outstrip insured losses by a considerable margin” as a result of the low uptake of private flood insurance. CoreLogic points out that more than 98% of residential flood insurance in the United States is provided through the NFIP. The company estimates the residential insured and uninsured flood loss for a 70-county area in Texas and Louisiana at US$25 billion to US$37 billion, with 70% of the total uninsured.

As for Karen Clark & Company (KCC), its storm surge, inland flooding and wind models — NFIP loss is not included — estimate total industry insured loss at approximately US$15 billion. The hurricane turned tropical storm dumped in excess of 50 inches of rain on parts of Texas, causing catastrophic inland flooding made worse by Harvey’s slow storm motion and duration. “Such rainfall was made possible by the storm’s continued presence over the Gulf of Mexico, which provided Harvey with a sustained source of water,” KCC explains. “Significant damage to residential and commercial properties is expected from Harvey’s inland flooding,” it adds. Broking and risk management solutions provider Marsh would surely agree. Harvey will likely result in complex claims for many businesses, industries and organizations, it suggests. Beyond the hardship and upset caused by Harvey itself, the NFIP is up for reauthorization and reform. And if that were not enough for those affected, there is the instability the flux creates for the insurance re/industry itself. Add to all that a new law in Texas for weather-related property insurance claims, which took effect September 1. Among other things, it reduces the 18% penalty if an insurer fails to pay a covered

claim in a timely manner. “It may affect disputed claims and lawsuits arising from Harvey,” Marsh suggests. As is always the case with an event of this magnitude — one that some experts say could provide the financial hit of at least Sandy — wrapping one’s mind around the enormity of such punishing losses is a challenge. That sort of contortion, though, will be needed in light of the importance of U.S. hurricane on the re/insurance market overall and the likelihood that severe weather events could be more common in the future. A new report from S&P Global notes the expectation is “Hurricane Harvey will likely be an earnings event rather than a capital event” for the property and casualty re/insurance industry. Any impact on re/insurance pricing will likely be limited to affected regions and business lines. While that may seem something akin to a silver lining, many losses will be covered by the beleaguered NFIP. With the program struggling, that does not bode well for its future or for those who will be left without cover. New markets could develop, but to assume that all who now rely on the NFIP will more to private insurance would be ill-advised. Ultimately, costs could fall to governments of all levels. Regardless of location, that is not a sustainable option.

Then there are the economic losses, which are expected to “outstrip insured losses by a considerable margin.” Angela Stelmakowich Editor Canadian Underwriter

September 2017 Canadian Underwriter



Regulation MAKING ICBC A CO-OP ONE OPTION FOR PROVINCE: TAXPAYERS FEDERATION The British Columbia government has options at its disposal to address auto insurance problems in the province — ranging from leaving the Insurance Corporation of B.C. (ICBC) as is to shuttering the insurer — but all options should include reintroduction of competition, notes the Canadian Taxpayers Federation (CTF). CTF argues “fast and furious changes” are needed in light of a potential 30% “hike to car insurance,” a figure contained in an Ernst & Young LLP (E&Y) report recently made public. That being the case, turning ICBC into a Vancity/ Mountain Equipment Co-optype of co-operative “would be a sensible model so long as full private sector competition exists to serve consumers on price and product options,” policy analyst and author Mark Milke points out in the CTF-commissioned report. With the ICBC co-operative facing full competition from the private sector, “this option increases choice, service and price possibilities for consumers,” the report notes. The option is one of six Milke outlines if competition is accepted over monopoly.

B.C. GREEN PARTY PLANS TO RETABLE RIDE-SHARING BILL Andrew Weaver, leader of British Columbia’s Green

Party, says the party plans to reintroduce a bill to enable ride-sharing in the province. The Ridesharing Enabling Act was introduced twice before — in April 2016 and in February 2017. Weaver notes “all parties want to see B.C. be a leader in the emerging economy. To do so, government must take a proactive, responsive approach that considers the wide-ranging impacts of technological innovation.”

Canadian Market NEW DATA BREACH COVERAGE AVAILABLE FOR CANADIAN BUSINESSES Economical Insurance has released cyber coverage for Canadian businesses with commercial policies in the event of either a deliberate or inadvertent data breach. The coverage accounts for all parts of the process, “from meeting regulatory requirements and covering fees, to notifying clients, managing business interruption and restoring lost data,” says Fabian Richenberger, executive vice president of commercial insurance at Economical Insurance. The cover is for first- and third-party losses resulting from a data breach, such as a business owner’s losses from network business interruption and cyber extortion, as well as damages and expenses resulting from a violation of a privacy law, regulatory defence and penalties.

12 Canadian Underwriter September 2017

UBI PROGRAM EXPANDED INTO NOVA SCOTIA Positive results in Alberta and Ontario has prompted Allstate Insurance Company of Canada to expand its usage-based insurance (UBI) program in Nova Scotia. The program rewards those exhibiting safe driving behaviours with potential savings (of as much as 30%) on premiums. Data captured and analyzed on a small wireless telematics device installed in the vehicle includes time of day, kilometres driven, speed and braking habits. Once enrolled, participant driving will be monitored for six months and data used to determine the earned discount to be applied at renewal. So far, 70% of participants are earning some form of a discount, the insurer reports.

INSURERS SHOULD ENSURE CONSUMERS BETTER UNDERSTAND POLICIES: CCIR A position paper from the Canadian Council of Insurance Regulators (CCIR) suggests insurers must better educate consumers so they can understand the terms (including limitations, exclusions and deductibles) of property insurance contracts. There is “value and need for direct and clear communications with consumers and intermediaries regarding coverages,” states the paper, which is based on feedback received to an issues paper released in July 2016. “While insurance regulators oversee the conduct of the insurance business, this

gives insurers the latitude to be innovative in design and development of products for natural catastrophe coverage.” It is recommended insurers incorporate three principles into the development of nat-Cat coverage for homeowners: ensure products provide adequate coverage for the identified risk; ensure products are complimentary to the risk transfer function of insurance and incent the prevention and mitigation of risks consumers face from natural catastrophes; and ensure consumers are better able to understand policies.

Risk MOVING TO ADDRESS FLOOD RESILIENCE IN CALGARY Alberta reports the province has started implementing advice from a report that identifies ways to improve flood resilience in Calgary and foster better water management throughout the Bow River basin. Produced by the Bow River Working Group, it outlines short- and long-term options. Alberta is working with power company TransAlta and other stakeholders to begin implementing some of the short-term solutions. “More upstream mitigation must be done to protect Calgarians, our communities and our economy,” Calgary Mayor Naheed Nenshi says.

ACCIDENTAL DATA BREACHES A CONCERN Ransomware attacks rose 50% in the first half of 2017


over the first half of 2016, but with accidental breaches accounting for 30% of all such events, they continue to be a major concern, specialist insurer Beazley reports. Based on client data in 2017 H1, the report shows hacking and malware attacks are the leading causes of breaches, making up 32% of the 1,330 incidents the insurer’s breach response services helped clients address. This compares to 955 incidents for 2016 H1. Accidental breaches caused by employee error or data breached while controlled by third-party suppliers is an ongoing major problem, making up 30% of the breaches. “This continuing high level of accidental data breaches suggests that organizations are still failing to put in place the robust measures needed to safeguard client data and confidentiality.”

Technology PARTNERSHIP TO BRING AI TO PROPERTY INSURANCE Global software company Symbility Solutions Inc. is partnering with Toronto-based to bring artificial intelligence (AI) solutions into property insurance. “By closely collaborating with Symbility’s leadership, has completed a comprehensive assessment of current opportunities in the company for artificial intelligence applications, based on impact and viability,” reports Symbility Solutions. “Once deployed, these use

cases would rapidly provide property insurance carriers and their vendor networks a new way to lower indemnity spend, provide better business insights, and most importantly, increase revenue.” Both Symbility Solutions and report seeing “massive potential” for AI to transform the insurtech space. They have already started exploring things like AIassisted claims management, AI-assisted diagramming and claims processing, AI-automated business intelligence and personalizing the claims experience.

TORONTO “LIQUID STUDIO” TO HELP ACCELERATE DIGITAL TRANSFORMATION Accenture has opened a new “Liquid Studio” in Toronto to help its clients “turn ideas into innovative applications and solutions with speed and agility.” The studio employs rapid development approaches, including agile methodologies and a software development and delivery process, before then applying disruptive technologies such as artificial intelligence, blockchain and serverless architectures, Accenture reports. “This allows clients to reduce development time from months to days and shorten the time to business impact,” the statement notes. The studio’s capabilities will be supplemented by Accenture’s alliance ecosystem, start-ups and organizations like Toronto’s Vector Institute. Accenture

is a founding sponsor of the a non-profit enterprise; other partners include Google, Scotiabank, TD Bank, Uber, CIBC, Deloitte, Ernst & Young, KPMG, PwC and Intact Financial Corporation.

ONTARIO, MICHIGAN LAUNCH CROSS-BORDER AUTOMATED VEHICLE TEST Ontario and Michigan recently completed North America’s first cross-border automated vehicle test drive, reports Ontario’s Ministry of Transportation (MTO). The test drive began in Detroit in July and was to continue from the Ontario cities of Windsor and Sarnia before crossing back over the border, MTO reports. The drive was scheduled to conclude in Traverse City, Michigan with the signing of a new agreement between Ontario and Michigan to continue collaboration in testing, developing and marketing automated and connected vehicle technology. The demonstration vehicles used in the test have features such as traffic jam assist, lane-keeping and technology that measures driver fatigue, attention and engagement.

Reinsurance MANDATORY HURRICANE INTERPRETATION TRAINING RECOMMENDED: ICLR Provincial and local governments should consider mandating compulsory training in the Canadian Hurricane Centre’s (CHC) severe hurricane interpretation course,

recommends the Institute for Catastrophic Loss Reduction. The recommendation, one of four for government and two more for the insurance industry, are contained in a new research paper from the institute. Findings were derived from a series of interviews with emergency management professionals and a survey of those in Canada’s insurance industry. If more insurance professionals and municipal government employees were to take the course to interpret severe weather and hurricanes, “we might see more of these people rely directly on information from the CHC over the news media,” suggests institute managing director Glenn McGillivray.

PROPERTY CAT PUTTING PRESSURE ON REINSURER UNDERWRITING RESULTS Current conditions signal global reinsurers are at greater risk of having negative underwriting results and this could push them away from property catastrophe business in the near future, suggests Standard & Poor’s Financial Services LLC. “The likelihood that natural catastrophe loss activity will push underwriting results into negative territories is rising,” the recently released report from Standard & Poor’s cautions. “Exposure to catastrophe risk is an additional pressure point on profitability, and reinsurers that are overexposed might see deterioration of their competitive position over time,” it adds.

September 2017 Canadian Underwriter



A Solid Foundation Angela Stelmakowich Editor

Scott Treasure, incoming president of the Insurance Brokers Association of Canada, understands that staying committed to core principles offers a strong foundation for moving forward. Scott Treasure likely always had an inkling he would end up in the family business, but first he needed a bit of seasoning. It was his father’s spoken rule that “neither my sister nor I were getting hired into the family business straight out of anything,” reports Treasure, now chief executive officer of Edmonton’s Treasures Insurance & Risk Management Inc., a founding member of the Excel Insurance Group, which started two years ago and currently has nine offices throughout western Canada. “If we wanted to work in the family business, we had to prove ourselves outside the family business first,” the incoming president 14

of the Insurance Brokers Association of Canada (IBAC) says of his family brokerage, which first opened its doors in 1948. His sister opted for the legal route, now a lawyer in Edmonton, while Treasure gravitated toward business. “I’ve always been interested in business (a passion perhaps fanned while vice president of his elementary school in Grade 6) and a little bit of politics,” says the third-generation broker. So fresh out of university with commerce degree in hand, Treasure secured a position within major account sales at then behemoth, Nortel Networks, which in the late 1990s and into the 2000s was big, competitive and exploring new areas. Starting in 1997 in Edmonton, he moved up the ranks and was transferred in 1999 to Vancouver, where he stayed for about a year. “It was very exciting and it offered some interesting insights into big companies,” Treasure notes, including learning how best to work within large groups and how to deal with diverse opinions.

FAMILIAR OPPORTUNITY But then his father called, providing a chance Treasure could not pass up. “The opportunity to come back and work in an industry that felt like home to me was something that I definitely

Canadian Underwriter September 2017

wanted to do,” he relays. The return home was clearly welcome, but it also required a change of mindset. Treasure was going from a large company to a far smaller operation, from a software/hardware sales environment to a consumer service-oriented role, and from a top sales position to… the mailroom?

“The opportunity to come back and work in an industry that felt like home to me was something that I definitely wanted to do.” Indeed. Treasure was brought into the mailroom of the brokerage and worked his way through numerous positions before eventually becoming one of firm’s leaders. “My dad instilled in me that those relationships with other good brokers can only help you as a broker and as a person,” he relates. As for his time at Nortel, it offered a big-picture view that remains of value today. “When I came back here, (the experience) showed me there’s a lot of different ways to skin a cat when it comes to business.”

All good, but Treasure was still yearning for a bit of that big company feel. To “scratch that itch,” he got involved in his local Progressive Conservative constituency association in Edmonton, serving as its president for a number of years. The constituency association experience, coupled with his day-to-day role as a broker, made serving with the Insurance Brokers Association of Alberta (IBAA) a seamless transition. At IBAA, he held several positions, including president. “You end up putting your hand up — or not taking a step back when everybody else does,” Treasure quips, but adds that volunteering, another thing that his parents emphasized the importance of, offers much in return. “It was something I found interesting and rewarding and felt like we were doing something that was important and that parlayed into working with IBAC,” he says.

MAINTAINING CONSUMER PROTECTIONS During his year as IBAC president, Treasure does not expect to be breaking much new ground, suggesting that the goal is to continue to build on work done previously to ensure consumers remain protected. Part of broker DNA, the triumvirate of need for customer choice at point of purchase, advocacy

Photo: Darren Greenwood


at claim time and advice throughout the life of a policy will remain the focal point. As is always the case, the Bank Act warrants attention, time and resources. “It’s an ethical, moral issue for us,” Treasure emphasizes. “What can happen when a consumer is offered something for sale at the point where they are being granted credit — just the intrinsic vulnerability in that situation,” he relays. With just one Hill Day remaining before the current review of the Bank Act wraps, expected some time in 2019, IBAC needs to get its message out to politicians about the importance of not downgrading current consumer protections, Treasure contends. Brokers are not saying “banks are evil,” he points

out. The strong regulatory structure in place for financial institutions “helped us avoid bank failures in 2008,” he suggests. “That’s exactly what we’re there to support — the rigorous application of those regulations and that includes not allowing banks to sell insurance at the point of granting credit,” Treasure emphasizes. It is important for brokers to be diligent “in making sure the federal government, both the elected politicians and the bureaucrats, understand who we are and what we’re saying.” Treasure’s view is that “banks can sell insurance all they want.” As long as selling is separate from the point of granting credit, “we will compete with them as insurance brokers all day long.”

It is a belief that brokers hold with confidence. “We are promoting the broker value proposition,” Treasure emphasizes. However, ensuring that the value proposition is not only maintained, but enhanced, likely means clearing a few technology hurdles. “The challenge is to maintain that (consumer understanding of broker value) and deliver that via technology,” he says. Another continuing challenge — but one that shows promising signs of improving — is the double-entry piece. Calling the “portal dance” entirely inefficient, “the more portals you give me, the harder it is for me to prove out that value proposition to the client,” Treasure argues. “Once we eliminate having to enter into our own system

and another system, and vice versa,” he maintains, “our value proposition has no boundaries.” That clear view will be required as change continues to muddy the insurance landscape, including with regard to fintech and insurtech initiatives. Like the Bank Act, Treasure suggests this is an area where regulators will have a say in how the environment will eventually look and what this could mean for all participants. However, it appears that regulators are moving in the preferred direction with regard to insurtech. Regulators seem to be signalling it is important that technology does not outstrip regulation, technology does not get too far ahead of the rules, and regulations are in line with technology and the way products are delivered, Treasure suggests. He sees his experience on boards like IBAA — coupled with fellow members he has worked with and learned from — as helping build the skill set he currently has, one that positions him well to assist with moving IBAC forward and focusing on the future. Representing brokers across the country, “I want to make sure they’re all able to maintain their value proposition to their clients and, hopefully, their market share, but they’ve got to be able to deliver that.”

September 2017 Canadian Underwriter


Lessons of the Road


Newfoundland and Labrador is undertaking an automobile insurance review meant to chart the way forward for the province. Whatever the final destination, brokers will be along for the ride to help ensure customers are protected, regulatory changes foster a healthy and sustainable system, and consumer education is enhanced.

Kent Rowe President, Insurance Brokers Association of Newfoundland and Labrador


In Newfoundland and Labrador, automobile insurance has been a hot topic for brokers and insurers alike for quite some time now. However, over the past two months, the heat has been turned up. As part of its “Way Forward” plan, the provincial Liberal government has signed off on approval for a closed-claims study that will, ultimately, lead to a thorough review of the auto product in the province. But the million-dollar question is, Why? Or, perhaps more to the point, Why now? Why is the government choosing to review auto insurance in the province when premiums are currently similar to what they were prior to the last review and subsequent reform more than a decade ago in 2004? Before that question can be answered, a review of how auto insurance works in Newfoundland and Labrador and how the current system came to be is in order. In response to rising insurance premiums — and as a result of thorough reviews within other Atlantic provinces — the Conservative government decided in 2014 that the auto insurance system needed to be fixed. At the time, insurers were threatening to pull out of the province and consumers were growing angry over everincreasing auto rates. After the completion of a closed-claims study, the provincial government implemented a number of regulatory controls (including limiting how much profit insurers could make on auto insurance) and developed strict parameters with

Canadian Underwriter September 2017

respect to how insurers could file rates, particularly rate increases. In tandem, the claims system was revised, maintaining the ability to sue for minor injuries and damages suffered as a result of an accident or loss, but applying a $2,500 deductible to the loss. Here, Newfoundland and Labrador was decidedly out of step with other provinces in Atlantic Canada. The new claims system differed substantially from those implemented by Nova Scotia, New Brunswick and Prince Edward Island. In each of those three cases, the provincial government opted for a cap system, thereby limiting the amount a claimant could receive for a minor bodily injury.

SKYROCKETING COSTS In recent years, claims costs in Newfoundland and Labrador have increased considerably and, unfortunately, show no signs of abating. The average cost of claims per vehicle is as much as 40% higher than for the rest of Atlantic Canada and the frequency at which drivers have automobile claims is also markedly higher. Consider that in 2015, data from Insurance Bureau of Canada (IBC) and General Insurance Statistical Agency (GISA) indicted the claim cost per vehicle in Newfoundland and Labrador was $852 compared to $631 in Nova Scotia, $630 in New Brunswick and $510 in Prince Edward Island. And in 2016, claims frequency was 13.08 vehicles per 100 in Newfoundland and Labrador, while it was 10.79 per 100 vehicles for the re-

mainder of the Atlantic region, IBC and GISA figures show. As a result, it feels like insurers are filing for steady rate increases in Newfoundland and Labrador, resulting in average premiums that are noticeably higher than in the other three provinces. In addition to higher premiums, a tax on insurance services was reimplemented in the province in the spring of 2016 (a tax rate of 15% is applied to the taxable premiums for contracts of insurance relating to property, risk, peril or events). This may have been the move that brought simmer to boil and turned up the heat on the debate regarding auto insurance cost in Newfoundland and Labrador. Prior to reimplementing the tax, there seemed to be far fewer people complaining or talking about auto insurance rates in the province.

REPAIRING AUTO It is clear something needs to be done, but what? Calling for yet another closedclaims study, the provincial government expects to soon engage stakeholders and gather feedback before, ultimately, deciding which direction it will go. The terms of reference for the two reviews — one by the Board of Commissioners of the Public Utilities and one by Service NL — were announced in mid-August. As part of the reviews, factors to be considered include looking at the impact on both rates and claimants of the monetary cap on claims for noneconomic loss for minor/mild injuries; the impact on rates of continuing with the current deductible of $2,500 or increasing the deductible; and the auto insurance product being offered in the province compared to other provinces. The goal is that any changes made to the auto product would be implemented by the fall of 2018. The Insurance Brokers Association of Newfoundland and Labrador (IBAN) and its members are ready to play a significant role in the upcoming review by continuing to advocate for what is best for consumers and to work within whatever auto insurance system is implemented. With consumer protection

in mind, there are additional peripheral issues that can be addressed to enhance the auto product in the province, including the following: • mandatory Section B (accident benefits) coverage — Newfoundland and Labrador is the only province in the country with no mandatory Section B; • increase limits and improve Section B coverage — limits of coverage are lower than anywhere else in Canada; • increase minimum liability limits — currently set at $200,000, the limit should increase to $500,000; • reconsider or reduce the 15% tax on insurance premiums; and • change some of the regulatory conditions that may make it challenging to attract new markets (for example, accept a file-and-use system for potential new entrants rather than an experience-based rating platform, review the cap on return on equity that limits insurers’ ability to generate profits, improve the rate-filing process to reduce how time-consuming and expensive it is, and reconsider that brokers need to submit monthly reports regarding Facility Association (FA) population and account for any and all related business placed during the previous month.

CHARTING SOLUTIONS None of these recommendations alone will “fix” auto insurance premiums and loss costs breakdowns in the province. What it will do, though, is improve the auto product for the betterment of those unfortunate enough to experience an accident or a loss. Brokers in the province are of the mind that changes to the regulatory environment will have the greatest positive impact. With access to just four insurance markets writing personal automobile coverage in the province, easing regulatory requirements would make it easier for insurers to do business in Newfoundland and Labrador. A more welcoming environment could serve to attract new entrants and, in turn, provide more choice for customers. Specifically, brokers are in need of a grey market auto insurer. As it stands, Newfoundland and Labra-

dor has four regular markets (that do auto insurance through the broker channel) and the FA market. The lack of midmarket insurers means drivers who do not fit insurers’ risk appetites or within their underwriting guidelines get placed with FA. That being the case, the FA population is reaching pre-reform levels of 2004. This is an industry concern and is of particular concern to brokers and consumers. In 2004, the province’s automobile industry was, undoubtedly, in crisis. While the situation may not be as dire today, changes do need to be considered to prevent a potential crisis down the road.

GETTING EDUCATED Regardless of what happens in the months to come, education is key to establishing a healthy and sustainable auto product in the province. For too long now, a mentality has existed in the province that being involved in an vehicle accident equated to winning the lottery. Referred to by many in the industry as the “auto lotto,” more consumer education is needed so people understand the most rudimentary principle of insurance: the premiums of the many pay for the losses of the few. Claims that result in unwarranted or needlessly inflated costs, ultimately, drive up the cost of one’s own insurance, as well as everyone else’s. Without this fundamental shift in ideology among consumers, Newfoundland and Labrador will never reach a point where the provincial auto insurance market is strong and vibrant. The goal for all — consumers, brokers, insurers, government and other industry stakeholders — must be to develop solutions that are fair and equitable to everyone. While there will be many challenges along the way, it seems clear that both government and brokers have the best interests of customers in mind. That concerted and collaborative approach can only serve to ensure Newfoundland and Labrador’s auto insurance market improves for the better for all those who must use it. September 2017 Canadian Underwriter 17

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Andrew: Now & Then


Hurricane Andrew brought with it great devastation and loss a quarter-century ago, but also helped cement the value of well-informed catastrophe modelling. Fast forward 25 years and, once again, rethinking modelling is in order. Catastrophe models existed for several years before Hurricane Andrew, but it was this event that validated their credibility and led to their enhancement and widespread adoption. Now, 25 years after this industry-changing event, the models are again ripe for change.

The industry had severely underestimated the loss potential because in the decades prior to Andrew, there were no major landfalling hurricanes near populated areas. During this same period, coastal property values were soaring. For example, Florida’s population doubled between 1970 and 1990.


Karen Clark Co-founder, Karen Clark & Company

In the mid-1980s, computers and statistical techniques — such as Monte Carlo simulation — were becoming more accessible to scientists, engineers and other researchers. These are the tools that enabled the development of the first hurricane simulation model used to estimate the damages and insured losses from possible future storms. At the time, the first Cat model indicated that a Category 5 hurricane making a direct hit on Miami could cost the industry US$60 billion. Loss misperception Even though there were a handful of companies using the models at the time, no one could quite believe that number because the largest hurricane loss before Andrew had been US$4 billion caused by Hugo in 1989. A contemporaneous AIRAC (All Industry Research Advisory Council) study in 1986 of two US$7 billion hurricanes solidified in the minds of insurers that US$7 billion was a worst-case scenario.

Move to probabilistic techniques At about the same time, insurers in the United States had stopped tracking the locations and values of the properties they were insuring, instead using premiums to estimate how large hurricane losses could be. However, premium growth had not kept pace with exposure growth. Most U.S. insurers were using the Maximum Foreseeable Loss (MFL), which was calculated by adding up premiums by region and then multiplying by factor. For example, Florida premiums would be multiplied by two and Northeast premiums would be multiplied by 1.5. The maximum regional number was the MFL and this was the amount of reinsurance that insurers would purchase. The Cat models used actual property values to estimate the losses and introduced the concept of simulating potential future events using probabilistic techniques. For this reason, the numbers were simply more reliable.

September 2017 Canadian Underwriter 19

After Hurricane Andrew, reinsurers were the first to jump on this new technology, and the Bermuda class of 1993 was formed by investors and underwriters who embraced the models and understood how to use them to better price reinsurance treaties. In any case, the contraction of reinsurance capacity meant prices, terms and conditions were very favourable to the reinsurance market. Each shock event — 9/11 and Hurricane Katrina — led to a new class of Bermuda reinsurers, ultimately resulting in the island becoming the centre of gravity for catastrophe reinsurance. Catastrophe bonds and the insurancelinked securities (ILS) market also followed on the heels of Hurricane Andrew and supplied more capacity into the market. The Cat models were instrumental in pricing these transactions, and many would say this market could not have developed without the models.

DIFFERENCES, SIMILARITIES Today, Cat models are well-established as the global standard methodology for catastrophe risk assessment, and are now used for rate-making, underwriting and reinsurance and risk transfer decisionmaking. Because of the models, the industry is much better prepared for catastrophe losses compared to the pre-Andrew days. However, one thing that is similar to the pre-Andrew days is the tendency to focus on one number. Before Andrew, it was the MFL; today, it is the PML (Probable Maximum Loss). In general, the insurance industry has gravitated to relying on single points from the model-generated exceedance probability (EP) curves.Typically, the 1-in-100, 1-in-200, and/or 1-in-250 year PML are used, depending on the peril and region. It is important to note, though, that these numbers are highly uncertain and can swing widely between model vendors and from model update to update. More importantly, some major catastrophe events since Andrew have been surprises despite the widespread adoption of the models. For example, the models did not prepare the industry for Hurricane Katrina, the Tohoku earthquake 20

Canadian Underwriter September 2017

or the Fort McMurray wildfire. While the Cat models are based on sophisticated statistical and modelling techniques, their accuracy is limited by the data on historical events. In order to develop the underlying model assumptions, scientists use the data on past events to project future frequencies, locations and severities. The less data there is, the higher the uncertainty in the model and the model loss estimates. In light of this, insurers are starting to look more deeply into the models to better understand the model assumptions and how changing those assumptions impact the loss estimates. The new generation of open Cat models is enabling insurers to dive into the model components and even customize the models to be more accurate and reflective of actual claims experience.

VIEW OF CANADA Canada is fortunate to be vulnerable to perils with very low frequency, but this also means there is very little historical data to assess the probabilities of future events and, therefore, high uncertainty around the potential losses. For example, Canada’s highest exposure is to earthquakes generated by the Cascadia Subduction Zone (CSZ). Scientists believe the CSZ is capable of generating a magnitude 9 event, but cannot predict the exact location and return period of such a rupture. The ground motion that such an event would cause in and around Vancouver is also highly uncertain, along with the resulting damage and insured losses. A 2014 report from the U.S. Geological Survey (USGS) notes that there are many possible rupture scenarios — magnitudes and locations — with a best estimate return period of 500 years. The USGS uses a logic tree to represent the scenarios and probabilities in the CSZ. Each branch of the logic tree is a plausible scenario, but the scenarios would result in widely differing losses. Rather than collapsing all of that information into one number, insurers benefit from understanding the full range of potential scenarios and the resulting losses.

Catastrophes are like real estate — it is all about location. Insurers can see which scenarios adversely impact their books of business and can manage any exposure concentrations with which they are not comfortable. By not illustrating all potential scenarios, PMLs can give a false sense of security. Insurers are also using the new open Cat models to build their own models, such as wildfire models for Canada. In essence, a Cat model is a set of events with intensity footprints and a set of damage functions. The damage functions link the intensities with exposures to estimate the losses. For a wildfire, for example, damage functions are straightforward because most of the area impacted will experience 100% loss. Intensity footprints can be created or even obtained from outside sources. For example, the image to the left is a real-time footprint of the Fort McMurray fire from NASA’s Fire Information


for Resources Management System. This type of data can be directly downloaded into a modelling platform and used to calculate losses.

BUILDING ON EXPERIENCE Technology has significantly advanced since Hurricane Andrew and the amount of data available now was unimaginable in 1992. With the right tools, insurers can leverage what has been learned

about modelling over the past 25 years to develop more insightful information on their catastrophe exposure. Especially for the types of perils impacting Canada, the models cannot give “answers.� Rather, they provide a robust framework for better understanding the risk and potential losses. Modelling tools continue to evolve to accommodate more sophisticated model users and the trend of increasing catastrophe losses.

Editor’s Picks Looking for more recent news about hurricanes? Check out and search for the following: • U.S. P&C association calls on Congress to pass National Flood Insurance Program extension in wake of Hurricane Harvey • “Clear and direct communication lineâ€? needed between insurers and Canadian Hurricane Centre: ICLR • Modern-day Hurricane Andrew would cost an estimated US$80-100 billion in economic damage compared to 1992’s US$26.5 billion: Swiss Re • Aon Benfield’s Tropical Storm Risk slightly increases Atlantic Hurricane Season forecast

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September 2017 Canadian Underwriter 21

Yellow Light, Green Light

Peter Vlaar

Associate Lawyer, McCague Borlack LLP

Will autonomous vehicles change litigation? While the answer to that question is surely “yes,” a deeper dive is needed to fully grasp what related developments could mean for property and casualty insurance. Longer term, a simpler system overall for addressing liability in auto claims is anticipated. With the shift toward autonomous vehicles comes a shift in liability, for which property and casualty insurers in Canada will need to be well-prepared. Autonomous vehicles — self-driving vehicles that use artificial intelligence, sensors and global positioning system co-ordinates to drive themselves without human input — may not be right around the corner, but certainly are not too far down the road. Semi-autonomous vehicles are becoming widely available and serve as harbingers of the not-so-distant future of fully autonomous vehicles. Several levels of automation, however, will need to be completed first.


Canadian Underwriter September 2017

As defined by the Society of Automotive Engineers (SAE) International, there are six different levels of automation: Level 0, no automation; Level 1, driver assistance; Level 2, partial automation; Level 3, conditional automation; Level 4, high automation; and Level 5, full automation. Although a human driver is required to monitor the driving environment for Levels 0 through 2, the responsibility shifts to the automated driving system for Levels 3 through 5. Level 3 requires human input when prompted to intervene. For example, one auto maker has a production car said to be capable of Level 3 autonomous driving that can operate in bumper-to-bumper traffic, but that will alert the driver when he or she is required to quickly assume control.

LIABILITY TWISTS AND TURNS The question of liability when in Level 5 autonomous mode appears to be relatively straightforward, though that is not necessarily the case for the process of getting there. Levels 2, 3 and 4, which comprise the transition phase toward Level 5 autonomy, are proving to be quite complex for a number of reasons, including the following: • From a psychological perspective, with the development of driver aids designed to improve safety, an unintended by-product is that drivers become less attentive because they rely on

the features and incrementally relinquish their involvement in control of the vehicle. The conflict between human attentiveness and developing safety features has even attracted tension between some of the major manufacturers. One concern expressed is the amount of time and attentiveness required by human drivers to take over in both critical and non-critical situations, creating potentially significant risks. • The question of liability related to the various third-party software and components involved in autonomous vehicles is another issue during the transition phase. The failure of a component within the vehicle, such as a sensor or camera, will likely be caught up in the current regime of product liability law that will apportion an appropriate percentage of liability to the vehicle manufacturer. But what about technology outside of the vehicle? The paradox of autonomous vehicles may be that the more autonomous they become, the more dependent they become on third-party technology. This includes vehicle-to-vehicle (V2V) communication, a network allowing vehicles to send messages about what they are doing to one another, and vehicle-to-infrastructure (V2I) communication, which allows realtime communication between vehicles and infrastructure, such as traffic lights and signs. While some have suggested V2V communication will be more effective than current systems of lane departure, blindspot detection and cameras by creating awareness of all surrounding risks in real time, the expectation is V2I communication will improve traffic flow and advance safety by alerting drivers to hazardous situations up the road.

NEW SOURCES OF LIABILITY It is anticipated that as autonomous vehicle technology, V2V and V2I develop, litigants will be looking to new sources of liability, including third parties that design and maintain V2I technology, companies that provide vehicles with

live global positioning and weather data, or professionals that maintain and service the software used in autonomous vehicles. The success of such claims will largely depend on how the courts decide to address the issue of defective information — specifically defective informa-

lation, courts will be left to apportion liability among the various actors who have caused or contributed to the loss or damage in line with the current tort regime. Overall for litigation, this will mean that more parties will be involved in actions and more sophisticated methods of obtaining evidence and determining liability will be required.


It is expected that liability related to vehicle vulnerabilities will fall to the manufacturer, while liability flowing from vulnerabilities of third-party sources will fall to the municipality and/or maintenance provider. tion provided to autonomous vehicles that is later discovered to be the cause of, or contributor to, a loss. The scenario raises some questions of interest to p&c insurers. For example, is information considered a product that can fall under product liability law or will an entirely new category need to be created? More concrete information will be needed to answer the question, but what is currently known is that, absent legis-

It is hardly a secret that the future of both the automotive and the insurance industries will largely be driven by data. The interconnectivity of vehicles and infrastructure will rely on an expanding collection of information that will become increasingly useful and valuable. That, of course, raises the major issue of cyber security. The interconnectivity and proliferation of data will make personal data vulnerable to hacking and, additionally, will also make vehicles themselves vulnerable. The synchronization of phones to vehicle systems means hackers could access, for example, a driver’s banking information or personal correspondence by gaining access to the vehicle’s network, notes a report released in 2015 by Strategy&, PwC’s strategy consulting team. Hackers have also demonstrated the ability to physically lock and unlock vehicles remotely, cut the power to engines, disable brakes or engage the throttle, states the report, Connected Car Study 2015: Racing ahead with autonomous cars and digital innovation. It would appear that with each technological innovation and advancement comes a new cyber security risk. It is expected that liability related to vehicle vulnerabilities will fall to the manufacturer, while liability flowing from vulnerabilities of third-party sources, such as V2I infrastructure, will fall to the municipality and/or maintenance provider. That being the case, although the transition phase towards Level 5 automation threatens to be complex and costly, Ontario’s current tort system, for example, seems capable of responding to any related issues that may arise. September 2017 Canadian Underwriter 23

CURRENT ROAD BLOCKS Media reports note some experts predict that Level 5 production cars could be available within just a year or two. Of course, availability does not necessarily mean the vehicles will be permitted on the road. Regulations worldwide have consistently been outpaced by the autonomous technology in cars. The main road block to regulatory development revolves around the question of liability should an accident involving an autonomous vehicle occur. Beyond the likely shift of liability from the driver to the autonomous system in Level 5, the pressing question right now is where the risk lies in the transition period to that level. Under common law and current legislation in Ontario, for example, a driver can be held liable for damages for the negligent or reckless use or operation of a vehicle. There appears to be no reason why the same principles would not apply to

all levels of automation except for Level 5, which is the only level that does not require some element of human input. In Level 4, for example, a driver could be liable for negligently engaging the autonomous technology when it was not appropriate to do so given that the technology cannot handle all driving scenarios. In fully autonomous mode, there is no basis for a driver to attract liability in negligence since a driver is essentially rendered a passenger. It stands to reason, therefore, that liability would shift to the manufacturer

for producing a defective product. This appears to be an assumption being made by a number of autonomous vehicle manufacturers, some of whom have reportedly stated they will accept all liability for accidents involving their vehicles while in fully autonomous mode in a bid to hasten development of regulations around the world. While Level 5 vehicle autonomy will be subject to the development of associated regulations and legislation, it remains poised to offer a simpler system overall for dealing with liability in auto claims.

Editor’s Picks Looking for more recent news about autonomous vehicles? Check out and search for the following: • BlackBerry system geared at helping auto makers ensure safe and secure autonomous vehicles • Autonomous vehicles coming, but auto books will not disappear any time soon: CIAA event speaker • Global consumers skeptical about safety of fully autonomous vehicles: Deloitte study

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Canadian Underwriter September 2017


Protection The connected home, including smart appliances, is transforming everyone’s lives. What are the challenges, risks and risk management strategies to Derrick Hughes address this transformation? Vice President, Reinsurance, Assumed and Strategic Products, The Boiler Inspection and Insurance Company of Canada

What is the connected home? Consider that a homeowner is returning home in the middle of the winter after an exhausting day. The home’s thermostat was automatically turned down in the morning to save energy, but upon arrival, it is toasty warm, the blinds are down, lights are on, music is playing, and the oven is preheated. Later in the evening, the dishwasher and washing machine automatically start to save on energy costs. It is not science fiction — all of this has been automated through a smartphone, which remotely controls devices connected to home systems and appliances. The connected home can align every electronic piece of equipment through networks — computers, televisions, appliances, HVAC systems, door locks, thermostats, garage doors, motion sensors, cameras, water-leak sensors, light bulbs and switches, smoke and carbon monoxide detectors, plugs, outlets, power strips and music systems.

GROWING MARKET By 2018, 46% of polled Canadian consumers will either own or say they plan to purchase connected home technologies, notes Nielsen’s Connected Home Report from last November. One simply needs to step inside any retail electronics showroom to find more appliances hitting the market with connected capabilities. And P&S Market Research reported just this past June that the global connected home market is expected to grow at around 14% in the next five years, owing to advances in electronics and communication technologies. Geographically, North America has been the largest market for smart homes, whereas the market is expected to witness the fastest growth in Asia-Pacific during the forecast period. Higher purchasing power and changing lifestyles are driving the demand for smart home appliances worldwide, which include smart washers and dryers, air conditioners, smart water heaters, ovens and robotic vacuum cleaners. Demographics, energy costs driving adoption Experience to date suggests the under-40 age bracket will be the largest demographic driver of this market. Increasing purchase of connected home systems by high-net-worth homeowners for new home construction is also expected. At the same time, traditional medical care is rap-

September 2017 Canadian Underwriter 25

idly changing, driven by an aging population. That will likely result in the elderly wanting to remain in their homes for as long as possible, driving the demand for remote medical care that can be delivered in the home. A variety of technologies — including motion and temperature sensors, cameras and wearable monitors — will enable caregivers to actively monitor the activities of aging occupants, to ensure they are safe, eating properly and taking their medications. The desire to control energy consumption is another driving factor. Smart appliances and home systems interface with smart electrical meters to help manage energy use, lower costs and maximize efficiency. Homeowners are now able to optimize their bills by automatically shifting home electrical usage to periods when rates are the lowest. Driven by these trends and the desire for voice-activated devices, vast financial investments are being made in the field, especially by very large companies with infrastructures and resources to quickly access the market and drive growth.

CYBER SECURITY A CONCERN Most people do not think of home appliances as computers per se, when, in fact, the opposite is true: Manufacturers place hardware into appliances, enabling Internet connectivity within them to allow for remote control, automation and communication with other home appliances and devices. They are exposed to the same cyber concerns as are laptops, tablets and smartphones connected to the Web. A 2017 report from Symantec notes a botnet, or a “zombie army” of connected devices infected with malicious software, can be controlled without owners’ knowledge. An attacker can use the controlled devices to carry out malicious activities such as distributed denial of service (DDoS) attacks or spam campaigns. Last October, home routers, digital video recorders and mostly Internetconnected cameras were reported to have enabled the biggest DDoS attack seen to date. DDoS attacks can affect businesses and consumers alike, and malware 26

Canadian Underwriter September 2017

placed on a wireless router could conceivably lead to personal information being stolen, including user names, passwords and financial data. Home devices an attractive target Connected devices were primarily created for convenience, not security, and manufacturers are in the business of developing products at attractive prices to consumers. So, while more and more connected devices are becoming available, security is often not a priority for the manufacturer.

Most people do not think of home appliances as computers per se, when, in fact, the opposite is true. This has led to poor practices such as the use of default passwords — for example, “admin” — which are often not changed by the end-consumer. These default passwords on devices give attackers easy entry into their owners’ lives. Furthermore, devices often do not have built-in mechanisms to receive automatic firmware updates, resulting in vulnerabilities being left unpatched. Manufacturers could be doing more Many device manufacturers could be doing more to ensure security by making the issue a priority. Consumers think nothing of regularly updating software and apps on their computers, tablets and smartphones. Why would connected home devices be any different? Since connected home devices have significant computing and connected capabilities, manufacturers should become more diligent in providing regular firmware updates. Consumers also need education about security and manufacturers must include easy-to-understand directions on how they can keep their devices secure. Security regulation required In Canada, no single government agency oversees regulation of connected device

security practices. The Office of the Privacy Commissioner of Canada is calling for regulation, stating the “technological development in the context of the Internet of Things has not been matched by an equivalent evolution of overarching privacy governance models. Not much consideration has been given as of yet to the many privacy implications of having an extraordinary amount of data points that could be collected, aggregated across devices and analyzed not only by the device owners, but also by other third parties unknown to the individual.” PROTECTING THE CONNECTED HOME The first line of defence for protecting a connected home involves securing the router. It is generally advised to not use the router as configured out of the box. The following recommendations should be at the top of the security list. Change router’s default network name Home routers/firewalls often set the default SSID (service set identifier) to something that describes the specific hardware (for example, Linksys). From a hacker’s perspective, knowing the specific hardware platform that he or she is planning to attack makes the job easier. Use a random, innocuous name. Change router’s preset default password Router passwords are well-known and well-documented. Change each administrative password to a strong complex password. When setting passwords, use upper and lowercase characters, include at least one “special” character and do not use any personally identifiable information in the name. Disable guest access Though allowing guests to access a home network may seem like a nice, convenient thing to do, users should be wary about allowing any “non-authenticated” users to access a homeowner’s network. Use WPA2 to encrypt network The older WEP protocol has serious weaknesses and is easily compromised. While Wi-Fi Protected Access 2 (WPA2)

is not infallible, it does provide a higher level of security and is significantly more difficult to compromise. Once the Wi-Fi network is secured, look at each home automation device being installed. Securing specific devices will depend on their individual capabilities. At a minimum, the following is needed: • Generic email: If the device has the capability to notify the user via email, set up a generic email account. Do not use a personal email account or server. • Mobile security: Install mobile security software on the devices used to control the home automation devices (for example, smartphone). It is often easier to exploit a mobile application instead of hacking the device directly. • Patching and updating firmware: Regularly check for firmware updates and install updates as soon as possible. • Disable Internet access: If the home automation device does not need access to the Internet, disable its access within the firewall.

Editor’s Picks Looking for more information about connected homes? Check out and search for the following: • Home telematics startup Roost closes second round of funding with investments from Desjardins Insurance and Aviva Ventures • Price continues to be hurdles to adoption of smart home devices: survey • Smart home technology can be used to reduce potential claims from inclement weather, other risks: Allstate Canada

COVER FOR HOME CYBER RISKS Cyber insurance, largely the domain of commercial lines, has recently crossed over into personal lines, with reinsurers offering endorsements for homeowner and tenant property policies. Such endorsements generally include coverages for computer attack, to recover data and restore systems; connected home device attack, to restore devices connected to the Internet; cyber extortion, with professional assistance on how to respond to a ransomware attack and payment of ransom when approved; data breach, including forensic IT and legal reviews, notification and recovery services when private non-business data entrusted to an individual is lost, stolen or published; and online fraud, for losses related to identifying theft, phishing schemes, illegal bank and credit card transfers, forgery, counterfeit currency and other deceptions. As the insurance industry continues to address home cyber security concerns with coverages, services and education, homeowners will become more eager to adopt the technology to make their homes more comfortable, efficient and secure.

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Living Legacy

Living Legacy Replacing legacy information technology can be a daunting and expensive task, often representing a multi-year, multi-million-dollar project for an insurer. Opting to maintain, tweak or overhaul a legacy system all pose challenges, something carriers wanting to satisfy brokers and customers need to know.



Canadian Underwriter September 2017


Living Legacy


nformation technology (IT) systems used by insurers to rate, underwrite, process claims and bill are, in many cases, considered “legacy” and require a lot of maintenance. That could be considered the positive side of some of the legacy systems still in wide use in Canada’s property and casualty insurance industry. Less positive is the fact that some systems still being relied on are so out of date that external partners cannot gain access to them or they are incapable of processing transactions quickly enough to satisfy today’s brokers and consumers.

September 2017 Canadian Underwriter



Living Legacy REPLACEMENT PARTS Most large Canadian insurers are in the process of replacing legacy IT — one carrier reports having spent approximately $300 million to date — something that is increasingly being seen as necessary going forward. “Legacy applications form the backbone of the IT systems of most insurance companies,” says Anupam Kumari, corporate communications manager at IT services firm Kellton Tech Solutions Ltd. However, an ongoing issue with legacy IT systems is they “also require a lot of maintenance and scaling,” Kumari adds. A further issue is “these companies are facing multiple problems as the legacy applications are inflexible in creating new digital channels or user interfaces.” Continued use of legacy systems can “stop insurance companies from innovating and offering more consumerfriendly options to the broker that we can then pass on to the customers, for things like self-service portals,” suggests Scott Heaman, vice president of Advocate Insurance Group in Kitchener, Ontario. “Legacy IT, certainly in the Canadian marketplace, prevents the consumers from having the ability to have their insurance transaction fulfilled in real time,” argues Jeff Purdy, senior vice president of international operations for Applied Systems, which makes software for brokers and agents. Says Kumari, “With technology companies disrupting insurance with the help of digital platforms, machine learning and robo-advice, legacy applications are a threat” to insurers using them. New entrants to the insurance industry, “or the disruptors that everyone says will come into insurance, won’t be hampered by the legacy systems,” Heaman cautions. “So, I think the concern there is the company will be able to deploy a new system without any of the upgrades and compatibility issues that an established insurance company would have,” he points out. Sue Britton, founder and chief executive officer of Fin+Tech Growth Syndicate, echoes that concern.“You are seeing com30

Canadian Underwriter September 2017

panies create stand-alone digital platforms and launching them as separate businesses,” observes Britton, citing as a Canadian example Sonnet, the direct writer launched by Economical Insurance last year.

DOUBLE TROUBLE One consequence of a legacy IT system could be that a broker, when updating a policy, would have to enter it once into a broker management system (BMS) and then again into the carrier’s system. “We

Continued use of legacy systems can “stop insurance companies from innovating and offering more consumer-friendly options to the broker that we can then pass on to the customers, for things like self-service portals,” says Advocate Insurance Group’s Scott Heaman. have to enter it into the BMS and then go into the portal and enter it again, so that causes inefficiency on our side,” Heaman notes. “It would be highly unusual, unfortunately, in the marketplace today, for a consumer, through the broker distribution channel, to go to a broker’s website, price, have the documents and have that transaction fulfilled in real time,” Purdy reports. The situation is only made worse by the fact that different companies are updating their systems at different times,

leaving brokers to reconcile things. “Companies are at various stages of replacing their legacy systems,” Heaman says. “Every time an insurance company chooses to use a different system, it creates one more system that our BMS has to integrate with,” he adds. Consider, for example, the delays that result because many processes in p&c insurance require signatures. “Part of the need is to have automated signature capabilities online,” says Bob Smythe, a Toronto-based associate analyst for the IT market research and consulting firm, International Data Corporation (Canada) Ltd. Noting that there are a number of companies offering online signature capabilities, “if you have to rely on paper… that can delay the whole process.” In the Canadian market, “insurers are migrating towards platforms that are well-proven because they are not willing to take the risk to try and adapt or modify a platform that they might like, but that doesn’t have the track record,” suggests Ted Harman, president of Montreal brokerage Accent Insurance Solutions. A number of vendors are offering solutions. Harman, a former vice chair of the Centre for Study of Insurance Operations, reports that the majority of carriers his brokerage represents have opted for the same vendor’s policy administration system. One such insurer is Aviva Canada, which is “starting the conversion process” to install software, in this case from Guidewire, for its policy administration, claims and billing, says Dennis Dalmas, vice president of business solutions for the insurer. That conversion is the insurer’s “target state,” Dalmas notes. “We are starting that conversion process, but the ask from a broker is, ‘Give us connectivity to your systems. We don’t want to use this; we don’t want to use that.’ So, there is this demand, and our legacy systems don’t provide this functionality out of the box,” he explains. “The benefit of the investments in legacy IT that insurers are making today — and, frankly, that brokers are making


Living Legacy

today — are the upgraded IT and infrastructure will enable a broker to add digitally and to provide a digital experience to their consumer,” suggests Purdy. “We have to bridge the old and new world,” Dalmas contends. “I am extending our legacy systems until we roll into that target state, especially for our broker channel, which will be over the next two years,” he reports. For its part, Wawanesa Mutual Insurance Company replaced its claims systems in 2012 for one that “allows real-time claims processing,” Carol Jardine, chief strategy officer for Wawanesa Insurance, points out. “In time of catastrophe or great need from our customers, if we put a claim in today, it is visible to our entire network immediately,” Jardine says. Most “big-name” insurers in Canada are “replatforming,” Purdy says. “The insurers have these platforms that provide rating, underwriting, claims and billing capabilities, and when those capabilities are old, often the insurer can’t expose those systems to the outside world,” he observes. “When they put in new technology, they can expose it to the outside world through application programming interfaces,” he says. Wawanesa Insurance, which Jardine reports has invested more than $300 million in transforming its legacy systems, is among the insurers implementing major IT upgrades. In the event of a catastrophe, such as wildfire, “you are able to look at your policy-in-force count live, put in the claims that are coming through from your brokers, and deploy your claims staff to the appropriate geography faster,” she explains. In 2015, Wawanesa Insurance in the United States replaced its policy administration and billing system, Jardine says. Noting the company’s “U.S. operations have been on Guidewire doing real-time processing now for two years,” she says, “we are going to be offering similar real-time processing solutions to our brokers and our customers in Canada in 2017, starting with Alberta. Our plan is that by the end of 2020, all of our business will be on our new systems.”

TEAR DOWN, BUILD UP Should an insurer completely rip out and replace its legacy system? “That’s the $64 million question,” Harman quips. “I know people who have lost their jobs over that question.” Kumari’s view is that replacing legacy systems with “new age” systems is the best approach when an insurance provider has legacy systems that are expensive

Company in Brampton, Ontario. For mutual insurers, another stress point is that “what we are struggling with is our IT is in place, we are a smaller company and finding the resources to rip and replace is more difficult.” Changes that ready systems for future conditions and demands, however, are needed regardless of the type of insurer.


“You may not be able to store some of that third-party data because your legacy system is old and I think that becomes a business problem, frankly, because then your ability to (make decisions based on) that data is just compromised,” argues Jeff Purdy of Applied Systems. to customize. “When complete replacement is not possible due to multiple dependencies within the system, then it makes sense to integrate new functionalities in the existing legacy system,” she says, adding that new functionalities could include things like a marketing site, customer sales portal, agent portal, mobile apps or customer analytics. Some carriers will not have staff and skill resources to completely replace their legacy IT systems, suggests Bryan Bedford, manager of strategic projects and privacy officer for Peel Mutual Insurance

The ability to take advantage of the increased amounts of data “becomes much harder with legacy platforms,” Purdy suggests. “The ability to enrich data for the consumer today is significantly greater than it was a few years ago,” he reports, citing as an example some third-party data services that are designed to insert risk information, on a specific property, into an insurer’s rating software once the customer or prospective client enters his or her address. “You may not be able to store some of that third-party data because your legacy system is old and I think that becomes a business problem, frankly, because then your ability to (make decisions based on) that data is just compromised,” Purdy argues. For underwriting, Wawanesa Insurance uses several data suppliers. “Any data that is available to us externally that we use, we integrate it into the system both from an underwriting perspective and from a claims perspective whenever we can,” Jardine points out, adding that the insurer has its own data warehouse. Its new team of data scientists are “looking at our data warehouse and ensuring that the data can be used in many different ways,” she says. “So, in the past, the data would fit into a particular field. Now, we have more freedom in how we look at data and how it can be used and how it can be analyzed,” she explains. Data clearly has its benefits, but with there being so much of it, challenges arise. Some insurers, in fact, are struggling to process all of this available data quickly enough. Dalmas points out that most carriers running mainframes shut them down September 2017 Canadian Underwriter



Living Legacy

“It’s a long process to replace a legacy system, but the good news is we can face the current disruption of insurance head-on and actually find solutions that are going to work for our brokers today,” reports Carol Jardine of Wawanesa Mutual Insurance Company. daily. In addition, with some legacy systems, transaction processing is done in batches and not in real time, he says. “Batch versus real-time processing continues to be an ongoing challenge” for insurers, suggests Mike Rose, sector vice president of insurance for CGI Group Inc., a systems integrator and IT services firm based in Montreal. “Batch is a form of asynchronous messaging, but we can reduce the cycle time,” explains Elaine Basque, CGI Group’s vice president of consulting services. “So instead of it being an overnight batch, without necessarily harming your performance in production, you can write data in a batch system, to a separate table, multiple times a day instead of once a day,” Basque notes. For example, an insurer may have “a hard constraint” requiring its general ledger (GL) system gets a batch update nightly, she says. “However, that doesn’t mean I can’t write to the GL file multiple times a day and then other systems — that are interested in interrogating the data that’s flowing to the GL — could potentially get to that data in kind of a real-time way,” Basque adds. If there are multiple changes on a policy and those changes have to be done “over a series of batch overnight processes, it could take a number of days for a set of changes to get processed appropriately,” explains Jardine.

GET REAL TIME That said, work-arounds are available for some legacy systems. A company may not necessarily be able to get away from 32

Canadian Underwriter September 2017

a batch or an asynchronous integration, but it could reduce the time between updates and make data available “so it can be interrogated by other systems that maybe can’t wait” for the nightly batch update, Basque explains. “We want to start moving away from the batch processes,” Dalmas says, noting customers are demanding it. “It’s like, ‘Why can’t you guys do this in real time?’” he relays. “So, any of the services that we want to build, we would want to build in real time or near real time, knowing that there will be a real-time component very soon in the future.” Real-time transaction processing is “something that our broker channel has been asking for for a while,” says Dalmas. “I think it is a great thing to do for the channel, as well as for the industry, in terms of leveraging standards for how brokers want to communicate with us,” he maintains. Portals are another big “sticking point” for brokers because they need to use different portals for different insurance carriers, Dalmas says. The “road map” that Aviva Canada is trying to get to is to allow brokers to exchange data between their systems and the insurer’s back-end system, he points out. “Between our legacy systems and what that target state is, we are trying to create some new services,” such as new business uploads, using application programming interfaces, Dalmas says. This will allow brokers to “start interacting with us digitally, so that when we get to our target state, our target platform, it’s a seamless migration.”

GET COMPETITIVE Legacy IT “is a vexing problem that never ever goes away because you continually have new demands placed on you — new requirements for data, new requirements for service,” notes Accent Insurance Solutions’ Ted Harman. “The only way you can respond to those things is to have a system that is plastic enough, that is dynamic enough to be able to be modified and re-jigged,” Harman says. “We are always just trying to build a better product or innovate it rather than disrupt or create a whole new way that insurance is transacted,” states Scott Heaman of Advocate Insurance Group. Still, “I think that advantage could fall to somebody who doesn’t have any history in the insurance industry and they are not hampered by a legacy system,” Heaman cautions. Legacy systems are one of the biggest challenges for established insurers, suggests Sue Britton of Fin+Tech Growth Syndicate. “Ultimately, if you think about who they’re going to be competing with, they are folks who don’t have those legacy infrastructures and that don’t have those cost bases,” Britton says. “It’s a long process to replace a legacy system, but the good news is we can face the current disruption of insurance head-on and actually find solutions that are going to work for our brokers today,” Jardine notes. “The new insurtechs and the new start-ups can embrace the new technology as they invent themselves. We, as insurers, have to reinvent ourselves in order to compete and ensure our viability as we too get disrupted.”


Monday, November 6, 2017 WESTIN HARBOUR CASTLE , TORONTO

InsurTech: From Ideation to Implementation Join us on Monday November 6, 2017 as we explore the vibrant Toronto InsurTech scene. This event will bring together insurers, brokers and InsurTechs to discuss new business models and technologies. The day’s activities will include: C-Suite Panel: Implementing Innovations Insurtech: Bridging the insurance-technology gap Pitch competition: Innovations from start-ups Speed demos of new technology Great networking opportunities And more!

For leading insurers, brokers, innovation hubs and start-ups alike: Explore what’s on the leading edge in Toronto and what is around the corner.



Above the Grade

Alexandre Nolet Senior Associate, Transportation Safety Group, -30- Forensic Engineering

What was once guidance related to maintenance and safety of at-grade railway crossings has become required. With the new demands scheduled to take effect in late 2021, private owners and their insurance companies need to have a firm grasp of what they must do to be fully compliant. Come November 2021, all private at-grade railway crossings will need to comply with the design and safety standards outlined in the amended Grade Crossing Regulations and its supporting documents. The deadline provides private owners and their insurers with the time needed to ensure that a proper review of current conditions and programs is carried out and any necessary changes are made. That said, what exactly do insurers and private crossing owners need to know?

SHARED RESPONSIBILITY Maintenance of at-grade railway crossings is a


Canadian Underwriter September 2017

shared responsibility among three key stakeholders: road authorities, railway companies and private landowners. An at-grade crossing can either be public, where a railway corridor intersects a roadway open for public use, or private, where a railway corridor crosses a private roadway, often located on farmland, recreational properties or industrial properties. While the overall number of severe collisions, those resulting in injury or death, on the Canadian road network decreased by 10% from 2009 to 2014, note 2014 figures from Transport Canada, the number of collisions at at-grade crossings increased by almost 20% from 1,038 to 1,225 over that period. The risk of at-grade crossing collisions resulting in fatality is five to 10 times higher than other types of traffic collisions, Ontario’s Ministry of Transportation notes in the Ontario Road Safety 2014 Annual Report. A ministry study released in 1994 estimated the overall societal costs of collisions associated with rail incidents to be more than $125 million annually. The lack of formal standards and rules until November 2014 regarding the type of safety measures to implement at public and private crossings engendered the use of non-uniform, unconventional and, at times, ineffective safety “fixes.� The introduction of new Grade Crossing Regulations, under the Railway Safety Act, serves as Transport

owners, and potentially their insurance companies, to liability risk. Should a severe collision occur at a private crossing, where the court establishes that non-compliance with a safety measure is a contributing factor, a property owner could be held partially or fully liable. Despite the major implications of the new regulations, Transport Canada does not have a mechanism in place to directly inform private crossing owners of the new requirements to which they will soon need to comply. That being the case, insurance companies and brokers are uniquely positioned to inform private crossing owners of the new demands, as well as to provide options and advice regarding how owners can best meet the regulatory requirements now and in the future.

Supplied by -30- Forensic Engineering

Canada’s bid to ensure uniform safety treatments and conditions are provided at at-grade railway crossings across the country by 2021.

CONSISTENT DEMANDS The new standards provide specific requirements for sightlines, warning systems, traffic control devices (for example, signs and pavement markings) and road/rail approaches. Many of these requirements will have a direct impact on private crossing landowners, some of whom will need to make changes. For example, the regulations specify that if a landowner has trees or other foliage on his or her land in the vicinity of an at-grade crossing, it must be removed if it obstructs regulatory sightline requirements. The regulations also indicate that the horizontal and vertical alignment of the road approach and the crossing surface must be “smooth” and “continuous.” Poor road surface conditions at railway crossings because of a lack of periodic maintenance, which is often seen at private crossings, will require resurfacing and/ or a complete reconstruction to comply with the regulations. In some other cases, although private owners have been maintaining their crossings up to the prevailing standards, situations may arise outside of the own-

er’s control. This may require owners to make changes to the current warning system, resulting in major unexpected costs. For example, should a railway company increase the operating speed of a certain rail corridor, the private owner may be required to spend thousands of dollars to update the warning system from standard railway crossing signs to an active warning system (flashing lights and gates). Failure to comply with the new safety standards will expose private crossing

SAFE APPROACH Over the years, the process for requiring private owners and/or railway companies to periodically inspect or review the vast majority of private railway crossings has been, at best, lacking, and, at worst, non-existent. With the new regulations, private crossing owners will be responsible for reviewing the components of their crossings and ensuring they comply with the regulations and standards. The review should involve a field investigation to

Supplied by -30- Forensic Engineering September 2017 Canadian Underwriter 35

identify potential deficiencies and safety issues at the at-grade crossing, as well as an assessment of the appropriate remedial measures to address the identified deficiencies and safety issues. The main steps that are involved in a field investigation and assessment are as follows: • review the geometry and undertake a conformance check of present warning system and traffic control device applications; • conduct road user behaviour and positive guidance reviews; • observe overall driver behaviour, conflict potential and general operations to identify operational issues at the at-grade crossing; and • identify potential remedial measures to address one or more of the compliance violations or potential hazards. These safety reviews constitute a critical component of meeting regulatory demands. As such, they should be delegated to


Canadian Underwriter September 2017

Despite the major implications of the new regulations, Transport Canada does not have a mechanism in place to directly inform private crossing owners about the new requirements that will soon apply to them. those with pertinent traffic engineering and rail expertise, as well as in-depth knowledge of the regulations.

FUNDING IMPROVEMENTS Though not all improvements to private crossings will be eligible for funding, Transport Canada’s Railway Safety Improvement Program does fund several types of safety improvements for at-grade

crossings. Funding for eligible improvements could be as much as 80% of the cost of a crossing improvement project. Each year until 2021, the federal government will be allocating a certain budget for railway crossing improvements. However, given the large number of public and private crossings in Canada, the available budget will not be sufficient to fund improvements at all crossings. As such, the sooner a private crossing owner submits an application, the better the odds of obtaining a portion of those resources. The primary change with the new federal Grade Crossing Regulations is that the standards are no longer considered guidance — they have become regulatory requirements. To allow for a smooth introduction of the new obligations, insurers may need to inform private owners of their responsibilities or require those owners to review their crossings for compliance purposes sooner rather than later.


Norman Black Insurance Industry Principal Consultant, SAS

Gets Real

The impact of artificial intelligence on the insurance industry is expected to be transformative. To capitalize on all that this offers — and be able to provide customers what they want and need — stakeholders must deftly negotiate technology, industry politics, talent and culture roadblocks to ensure a successful journey. Not many years ago, artificial intelligence (AI) was the stuff of movies like I, Robot or 2001: A Space Odyssey, or of novels by Isaac Asimov or Philip K. Dick. It is now a reality: cognitive computing, machine learning, natural-language interfaces and related technologies allow computer systems to interact in a human fashion, make decisions and apply outcomes mechanically, to have the appearance of sentience. The insurance sector is waking up to the disruptive nature of this technology. Accenture’s Technology Vision for Insurance 2017,

findings of which are based on a survey of more than 550 insurance executives from 31 countries, clearly shows the insurance industry is well aware of AI’s potential. In all, 75% of respondents report they believe AI will either significantly alter or completely transform the overall insurance industry in the next three years. Two-thirds of those polled say they expect AI to significantly change or completely transform their companies.

AI, BIG DATA AND IOT Two related trends give AI meaning and context: big data and the Internet of Things (IoT). Big data Moore’s Law, which states that computer technology will double in power and halve in cost every 18 months, is not slowing down. Nowhere is this more obvious than in the field of memory. This reduction in cost — along with new database technologies — enable the processing of vast amounts of data at terrifying speeds in memory and the processing of both unstructured data (think, among other things, text records, social media postings and video) and structured data. Since various sources estimate that anywhere from 70% to 90% of organizational data is unstructured, this is a significant development.

September 2017 Canadian Underwriter 37

Internet of Things There is plenty of data for those systems to work with, thanks to the increasingly connected nature of the world. Consider the average new vehicle, with its engine sensors, body and chassis sensors, telematics, global positioning system (GPS) functions, seatbelt sensors and tire pressure sensors, perhaps amounting to as many as 200 per vehicle by 2020. It is an object lesson in the potential that the confluence of big data, IoT and AI brings to the table.

BUSINESS PRESSURES Against this background of rapidly advancing technology, insurers still face traditional business pressures, namely profitability and revenue. A KPMG survey released this year found the majority of polled industry chief executive officers predict top-line growth of less than 2%. Traditional pressures are being compounded by these newer technology trends: 46% of the polled executives say they expect major disruption in the sector over the next three years because of technological innovation, and 36% name emerging technologies as their greatest risk. It is not simply a matter of keeping up with the process and operational efficiencies that can squeeze more margin

out of the business; it is about fundamentally changing the business from process-driven to customer-centric so that the standards are not being set by competitors in the industry. Sectors such as retail and travel are setting the customer experience bar ever higher. Millennials — the first generation that was born into an always-on world — are now entering their 30s, and soon their 40s. As they become a prime target for the insurance market, they bring with them expectations of a frictionless customer experience. A 24-page insurance document surely tries the patience of someone who has grown up with oneclick shopping and recommendation engines — and the confidence that an alternative is a few clicks away. Technology also brings the risk of disintermediation — the “Uberization” of the industry by business models that have been created without the shackles of traditional industry processes and norms. Direct and aggregation models are nimble enough to capture that Millennial audience, so much so that in many insurance markets, incumbents are buying out or investing in new “insurtech” start-ups, hoping to develop complementary services.

DATA IS CURRENCY More frequent and positive engagements are the next step in the customer experience, and it is one that few insurance companies have taken. The contact between insurer and customer are few and usually negative; a renewal notice that bills for premiums, or a loss claim. But there are exceptions. Take, for example, a health company in South Africa built on the premise that it is more profitable, for the customer, the company and society as a whole, to reward healthy behaviour rather than punishing unhealthy behaviour with higher premiums. Through its business structure, the company logs 70,000 gym visits a day, has offered discounts on hundreds of millions of dollars of healthy food purchased at partner stores, and offered reward points for customers logging their workouts. For the right incentive — and given the commensurate guarantee of its safety and privacy — customers are willing to exchange the personal data that is the foundation of an AI program. Yet 43% of the executives surveyed by KPMG say that they felt a lack of quality data was hindering their insights into customers. That said, there are a growing number of channels to gather relevant customer information. Consider that clients of the noted health company carry the equivalent of a loyalty program card for use at partner organizations. Connected homes can also provide a wealth of information that has a bearing on risk and offers an opportunity to engage partner service companies. But perhaps the most compelling example of the use of data and AI in an insurance context is the automobile. Insurance is one of the costliest ongoing expenses of automobile ownership, and one that could be strongly influenced by technological advancements.


Canadian Underwriter September 2017

The current regime — sex, age, experience, driving record, number of annual miles and location — was once the best actuarial model available. Monitoring actual driving behaviour would be even more predictive of risk, and with the many vehicle sensors producing telematics that can be collected in real time, that model is now possible. Still, it is also worlds away from the current customer renewal model. Integrating readily available public safety and traffic data into a system can guide the customer through faster or safer routes from points A to B. When telematics indicates a car component is failing or in need of service, or if the vehicle is simply running out of gas, the system can guide the driver to an authorized partner service centre or gas station where he or she will receive a discount. And in the event of a minor accident, the car can be self-reporting. Soon, customers are driving more safely because they know it will be reflected in their premiums — a win for the insurance provider, the driver, the health system and society in general.

READYING FOR THE JOURNEY How does the insurance industry ready itself for the brave new world of AI? At the highest, most strategic level, companies must be prepared on three fronts. Technology roadmap It is not simply about buying new hardware and software. It is about having a technology platform that can nimbly

Industry politics Brokers tend to hold customer relationships in personal and commercial insurance; they are the ones who meet the clients and understand their business (both corporate and personal). If a company with bigger pockets can gather and analyze more information about the client and can know the client better, who should be the caretaker of the relationship? Should the insurer partner with the broker to help them gather the same intelligence?

It is not simply a matter of keeping up with the process and operational efficiencies that can squeeze more margin out of the business; it is about fundamentally changing the business from process-driven to customer-centric. accommodate changing business strategies and priorities, while ensuring control over data use, security, redundancy, replacement planning and appropriate provisioning, among other things.

Talent and culture This should almost be considered an essential part of a company’s infrastructure. Some companies are setting aside resources for a “digital garage” — a sandbox for post-graduate data scientists to be given free rein to push the boundaries of how AI can be used. A background in insurance is not necessary; in fact, it might even be a detriment to unbridled curiosity. Data science is, however, a nascent field academically, producing fewer than a couple of hundred graduates a year in Canada. Using this very scarce talent efficiently and effectively is paramount to success. Insurers need a platform that enables data scientists and analysts to collaborate and create, using the language and tools of their choice, but that also delivers the disciplines and structures needed to manage data consistently and deploy new AI solutions at scale across the organization.


Invest in your client experience From accident to claim to appointment in no time!

watch Tom’s story at

September 2017 Canadian Underwriter 39




Chris Henn [1] has taken on the role of president of Wawanesa Mutual Insurance Company’s San Diego-based operations in the United States, effective August 31. Winnipeg-based Wawanesa Insurance began writing insurance south of the border in 1975 and is currently licensed in Oregon and California. A former managing director, product for Esurance, Henn played a “key role in the significant growth” of Esurance, Nationwide Insurance and Progressive, notes Wawanesa.


Roger Dunbar [2], a former vice president of marketing for Trader Corporation and former managing director of, recently took on duties as senior vice president of Sonnet, a digital direct channel launched last year by Economical Insurance to sell auto and home coverage directly to consumers. “Dunbar will lead a multi-year strategy to establish Sonnet as the leading Canadian digital insurer,” notes a statement from Sonnet. He will be “accountable for the overall performance of Sonnet, as we continue to drive toward our business objectives,” Economical Insurance president and chief executive officer Rowan Saunders says in a separate statement. 40







Guy Carpenter & Company LLC has named Tom Hettinger to lead its capital, structured risk, growth and rating agency advisory capabilities in the United States and Canada. Hettinger “brings 26 years of experience in actuarial consulting, underwriting and reinsurance broking to Guy Carpenter,” Rob Bentley, the company’s head of Global Strategic Advisory, says in a press release. Hettinger was previously responsible for underwriting and developing capital management and predictive modelling services at Arch Reinsurance Company, and has also worked for Towers Watson & Company.


Arthur J. Gallagher & Co. (AJG) has acquired Montreal broker GPL Assurance Inc. This brings AJG’s Canadian operations to 900-plus people. GPL Assurance, with 120 workers in Montreal and Laval, specializes in commercial/small-to-medium

Canadian Underwriter September 2017

enterprises, construction and the knowledge-based economy, such as technology and health sciences. The broker will now “be in a position to increase the support offered our clients by guaranteeing additional access to industry specialties and to a network of local offices located in major markets throughout the globe,” says president and chief executive officer Louis-Thomas Labbé.


DKI Canada has announced that Tammy Nichol [5] is the company’s incoming director for Atlantic Canada. Working out of Halifax, Nichol has the Chartered Insurance Professional and Chartered Professional in

Human Resources designations and is pursuing her Canadian Risk Management designation. She recently returned from New Zealand, where she was helping with quake recovery and settlement.


Gina Bennett [6a], formerly president of Vancouver-based Allsport Insurance Marketing, is now western region leader for Markel Canada. This past April, Virginia-based Markel Corporation announced it had acquired the 50% of Allsport Insurance Marketing, a managing general agent that provides sport, leisure and recreation coverage, which it did not already own. Bennett began her insurance career in 1987. Also at Markel Canada,


adjusting experience both as an independent adjuster and senior examiner with an insurer. In Charles Taylor Adjusting’s Calgary office, Robert Paxton [10b] has joined the firm as vice president, strategy and performance.





Mike Rogers [6b] has assumed duties as senior professional liability underwriter. Rogers has a Level II broker’s licence in British Columbia, and Fellow Chartered Insurance Professional and Canadian Risk Management designations.


McDougall Insurance & Financial of Belleville, Ontario has merged with Peterborough-based Monkman Gracie Johnston Insurance. McDougall Insurance’s offerings include auto, home, life and financial, recreational and business/ commercial insurance, while Monkman Gracie Johnston provides personal, commercial, life insurance and financial services. The merged entity will have 30 brokerage of-

fices in eastern Ontario. All Monkman Gracie Johnson employees will remain with the new organization and the existing branch office will be maintained. The brokerage’s pre-merger owners, Eric Monkman [7a] and Dave Smith [7b], are also staying on.


Jason Prescott has been named senior vice president, central region and Dennis Van Luit will serve as director of operations, Ontario for FirstOnSite Restoration Limited. Prescott previously was senior vice president, Ontario. Van Luit, for his part, “began his career as an adjuster before moving to restoration,” and last year “led the opening of the company’s new Ottawa branch.”




John Tung [9], former assistant vice president of technology and professional liability for CNA Canada, has been named Totten Insurance Group’s new vice president for professional lines. Tung is expected to split his time among three Ontario offices: Oakville, Dundas and Toronto.


The adjusting services unit of London-based Charles Taylor plc has promoted Chris Lockwood [10a] to the position of assistant vice president. Based in Vancouver, Lockwood joined the company in 2012 and has more than 15 years of


Ahmer Gulzar [11] is the Centre for Study of Insurance Operations’ new senior manager of technology strategy and architecture. Gulzar previously served as senior manager of business architecture and analysis at SaskTel.


David Wilson, chair of the Economical Insurance Board of Directors’ special committee on demutualization, is retiring from the board as of September 1. The majority of Economical Insurance’s mutual policyholders voted in 2015 in favour of proceeding with demutualization. John Bowey, chairman of the board for Economical Insurance, replaces Wilson as chair of the demutualization committee. New to the insurer’s board, effective September 1, will be Jay Forbes.

September 2017 Canadian Underwriter


GALLERY See all photos from this event at

Big-box amusement arcade and sports bar Dave & Busters in Vaughan, Ont. played host to the annual Summer Social of the Insurance Brokers of Toronto Region (IBTR) on August 15th. A raffle for $4,000 in home renovations, donated by long-time IBTR sponsor Sure General Contractors, capped off the evening of fun for insurance industry peers.


Canadian Underwriter September 2017

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© 2017 Royal & Sun Alliance Insurance Company of Canada. All rights reserved. RSA, RSA & Design and related words and logos are trademarks and the property of RSA Insurance Group plc, licensed for use by Royal & Sun Alliance Insurance Company of Canada. RSA is a trade name of Royal & Sun Alliance Insurance Company of Canada. Ironclad, Ironclad & Design, and related words and logos are trademarks and are the property of Royal & Sun Alliance Insurance Company of Canada.


For the 18th consecutive summer, Chubb held its Charity Challenge golf tournaments across North America. The three-city Canadian contingent raised a combined $67,500 for various charities. Congratulations to the winning broker foursomes, who represented Lussier Dale Parizeau Inc. (Montreal), Jones Deslauriers Insurance Management Inc. (Toronto) and Lloyd Sadd Insurance (Calgary). held its 5th annual Executive Forum on August 29th at Toronto’s Sheraton Downtown hotel. Among the speakers who shed light on Canada’s biggest P&C issues were Matteo Carbone of the Connected Insurance Observatory, Trov co-founder Mark Dowds and Pat Van Bakel, president and CEO of Crawford & Co. (Canada).


Canadian Underwriter September 2017


GALLERY See all photos from this event at

Aaron T. Lewicki Claude Blouin and Jamie Dunn, Partners at Blouin, Dunn LLP, are extremely pleased to announce that Aaron T. Lewicki has joined the firm as an associate. Aaron received his Bachelor of Arts degree in Political Science and Legal Studies (Joint Honours), from the University of Waterloo in 2012, and subsequently obtained his Juris Doctor from the University of Windsor in 2015. As a student at Windsor Law, Aaron was an active member of the law school community. While completing his undergraduate degree, Aaron competed in four seasons of CIS varsity hockey split between Dalhousie University and University of Waterloo. Aaron is a four-time Academic All-Canadian. Aaron was called to the Ontario Bar in 2016. Before joining Blouin Dunn, Aaron worked for a well-known, full-service firm in Hamilton where he gained valuable experience in insurance defence litigation. Aaron practices in the areas of civil litigation and insurance defence, with a focus on motor vehicle accidents, bodily and personal injury claims, property damage, occupiers’ liability, and subrogation. Outside of work Aaron enjoys cooking at home, live music, and physical fitness activities. Aaron’s contact information is: (416) 365-7888 ext. 170 Blouin Dunn is one of Ontario’s leading insurance defence firms whose members have been providing quality legal support to the insurance community for over 30 years. We offer services in Ontario to property and casualty insurers throughout North America, at all levels of experience, at appropriate and competitive rates.

September 2017 Canadian Underwriter


GALLERY See all photos from this event at

Persistence paid off for the 288 contestants of ORIMS’ annual Golf Tournament, who enjoyed a few holes in the sunshine after a soggy start to the day’s round. Held June 20th at the Deer Creek Golf and Banquet Facility in Ajax, Ont., the event raised $2,280 for the Juvenile Diabetes Research Foundation.


Canadian Underwriter September 2017

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Community Legacy

The Aviva Community Fund is back We’re donating over $1 million this year The Aviva Community Fund is back for a ninth year and in honour of Canada’s 150th, we’re introducing a new idea category – Community Legacy! We’re inviting Canadians between the ages of 18 and 25 to submit their climate change and environment ideas for the chance to win $150,000. We care so much about creating legacy and paying it forward to future generations that this prize is above our usual $1 million payout. Visit to learn more. Submissions open September 13, voting begins October 10, finalists are revealed November 1 and winners are announced December 5. Aviva brokers can log in to to vote for ideas. Insurance – Home | Auto | Leisure & Lifestyle | Business | Surety Aviva and the Aviva logo are trademarks used under licence by the licensor.

Community Fund

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