Canadian Underwriter June 2011

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

JU NE 2 0 1 1 A Business Information Group Publication #40069240

Touching the Cloud

by CRAIG HARRIS

Canada’s Hurricane Model

By Matthew Nielsen and Clare Salustro

Construction Defects

By Stephen Blaney and John McGlone

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Terms and Conditions can be found at www.rsagroup.ca.

CANADIAN UNDERWRITER

VOL. 79, NO. 6, June 2011 Canada’s Insurance and Risk Magazine. Published by Business Information Group

www.canadianunderwriter.ca

Cover Story

Touching the Cloud

32 features

12

20

Hurricane Model

Cracks in Cat Models

RMS has released its firstever Canadian hurricane risk model. Estimates show a direct hit on Nova Scotia could cost the industry up to $6 billion in losses.

A catastrophe model may not be the best tool for all purposes, or for all users.

By Matthew Nielsen and Clare Salustro

By Karen Clark

50

44 Auto Reform and E&O Following Ontario’s auto reforms, adhering to best practices will help reduce a brokers’ exposure to liability.

By Jennifer Faircloth

Direct writers say technology favours their distribution channel over that of brokers because the Internet is empowering consumers to make their own choices.

By David Gambrill

By Craig Harris

16 Inside the Box

48 Construction Defects

Following the example of banks, insurers can develop automated, online underwriting for basic transactions.

Canada’s insurance industry faces an exposure of up to $1 billion related to repair of building construction defects.

By Vesna Spasic

By Stephen Blaney and John McGlone

24 Predictive Fraud Fighting

54 Defending Property Vendors

The key to detecting fraudulent claims is to integrate social network analysis tools and predictive analytics into a broader fraud framework.

By Wes Gill and James D. Ruotolo

28 Interconnected Insurer Eating Another’s Lunch

The property and casualty insurance industry is in the early stages of investigating cloud computing services.

Some suggest a maturing market in cloud services might generate large returns in areas such as claims processing, collaboration and customer relationships.

Today’s interconnected insurer is much better able to access new sources of information and data.

By Jamie Rodgers and clinton d’Souza

42 Straight-through Processing

An Ontario court decision has found an insurer has a duty to defend a property vendor after the sale of the insured’s home, but pointed to a new way to prevent similar situations from occurring in the future.

Bymichael s. teitelbaum

58 Good-bye Portals Streamlined upload functionality is becoming the order of the day, and company portal technology is falling by the wayside as a result.

By Karl Greenlaw

For insurers, straight-through processing is as close as it comes to a no-touch, fully automated claims-handling process.

By Mike Mahoney and Tom Zito

June 2011 Canadian Underwriter

3

VOL. 79, NO. 6, June 2011 profile

CANADIAN UNDERWRITER Art Director Pylon.ca, Sascha Hass

Editor David Gambrill david@canadianunderwriter.ca (416) 510-6796

10 Power Brokers George Hodgson, incoming CEO of the Insurance Brokers Association of Alberta (IBAA), has a strong background in government relations at a time when the insurance industry is increasingly engaging with politicians and regulators.

By Vanessa Mariga

Art Consultation Pylon.ca

Associate Editor Vanessa Mariga vanessa@canadianunderwriter.ca (416) 510-6793

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6 Editorial 8 Marketplace

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Canadian Underwriter June 2011

editorial

A

The New Class of Disab

the Court of the Queen’s Bench of Alberta Time for Talkingpparently has carved out a new category of ‘disabled’ people —

David Gambrill Editor david@canadianunderwriter.ca

EDITORIAL

When it comes to scrapping Alberta’s industry-wide adjustment, the industry now has a golden opportunity to do what’s best for everyone.

David Gambrill, Editor

david@canadianunderwriter.ca

6

nadianunderwriter.ca • March 2008

6

Canadian Underwriter June 2011

treatment of the victims who nent and catastrophic — in those who have suffered minor whiplash injuries in For this class of people wit With a provincial election anas-needed basis. This is not effective immediately upon car collisions —sometime who have good apparently been discriminated Cdn$4,000 ticipated in Alberta for consumers. regulatory approval. litigation cap do against in which marginalized groups inBut regulators One of main differen in 2012 atintheways very latest, now other Basically, more flexibility arethe under is the time tosociety talk to can provincial to set rates on an as-needed the control of their political Canadian only imagine. of auto collision victims is th MLAs about getting rid of the basis means the insurer masters — politicians.

Which Witness this passage from Court of the Queen’s Bench ‘disability’ is more often tha province’s much-maligned won’t be in a position to have brings us to our second Associate Chief Justice Neil Whittmann, who recently oblitercatastrophic cases, the injuri industry-wide rate adjustment. to ask for big increases to reason for being encouraged. ated Alberta’s Cdn$4,000 cap on damages for minor injuries nent disfigurement and/or d The message to politicians offset claims trends. As the The Canadian Council of sustained in car collisions: “The evidence before me suggests disability and (CCIR) the severity of is obvious: consumers are Insurance Bureau of Canada Insurance Regulators strongly that minor injury victims, particularly those suffering the victim makes not well-served by a system (IBC) put it in a recent has recognized in its stra-the differen allowing insurers only one shot submission to the AIRB: tegic plan the importance from a whiplash associated disorder, are subjected to stereoIt’s doubtful an ordinary a year at trying to get the rates “A more competition-based of bringing the public and typing and prejudice. In sum, they are often viewed as malin- stitutionally unjust or ‘discri right. Not only that, but the filing system would be able their elected representagerers who exaggerate their injuries or their effects in an effort these two classes of victim benefits of a free-enterprise to take into account the ditives into discussions about to gainare financially.

The fact that these injurieswith aredifoften not example, that minor injury system definitely muted versity of insurers insurance regulation. objectively verifiable may contribute to this perception.” financial compensation as c when the entire industry’s ferent business models and, “[We] have to focus on experience dictates rate by incorporating a simpli- accordeducating, building, underHow did this stereotype come to pass? Apparently, no one would argue that ca adjustments. fied filing approach, would standing and getting the ing to the court, proof by assertion is all it takes to be a minor- be subject to a Cdn$4,000 lit the Alberta permit companies to underbest information we can into ityCurrently, group suffering Charter discrimination.

“I would simply Where the Alberta Court Insurance Rate Board (AIRB) take more maintenance-type the hands of our decisionnote that the existence of a stereotype does not require that it pare thechair right groups. And n is required under Section filings and move quickly to makers,” CCIR Danielle be accepted,” wrote.inMaybe that will be raised on 656universally of the Insurance Act andWhittmann react to changes market so, but Boulet points said in an address Sectionevidence 4 of the Automobile conditions. In the end, exist than to life insurers, thoughand she politicians more of negative stereotyping should Insurers Insurance Premiums consumers could just as easily be talking merely victims declarating that it is so. stand to benpolicy reasons, the court no Regulation to conduct an anefit from more stable and about P&C insurers as well.

Regardless, Alberta’s Cdn$4,000 minor auto injury dam- keep everyone’s auto insura nual adjustment process. This affordable auto insurance, “As well, it is the regulator’s age cap is no more — swept away as unconstitutional because of the minor injury victims, uses the industry-wide experi- which is the inevitable responsibility to actively it discriminates against a new sub-category of people with Butbetween the court says this do ence to determine whether outcome of a system that bridge the gap polidisabilities. mind the encourages fact that the incorrectly discrimination against mino premiums for Never basic coverage and court strengthens cymakers and the industry, on private passenger vehicles the competitive market as regulators have a unique compared minor whiplash victims to a supposedly analogous claims costs aren’t the only fa should be adjusted. forces that have are the hallmark on the cycle industry.” group of injury victims who apparently Charter rightswindow to about management as A central knock on the of success throughout most Congratulations to the sue insurers for more money.

“Simply put,” Whittmann logic goes, minor injury vic system is that it is too slow. If of Canada’s economy.” regulators for doing their wrote, [appropriate] comparator bythe insurance the rates“the aren’t right during the There is group a goldenconsists opportu-of those part. But insurancecompanies tha accident injuryperiod victims whosenity injuries aresome notmovement within the defone adjustment — and here for industryness alsodecisions has a re- when it come insurance, predictive sponsibilityWhatever to reach out inition of being minor injury.”in on this, for two reasons. one thinks of nature, is not an exact science First, the AIRB is in the to decision-makers.

The Alas, the learned judge seems to have a better grasp of the about predictability of cost — then insurers have to wait camp on this industry plays a huge role in population of this category insurers’ than most.

Exactly who is this their claims go from pred one full year until the next issue. In fact, it has been making sure elected politigroup of people Alberta’s legislative unpredictable Cdn$21,000 a adjustment period not to trycovered again. under since at least 2008, if not regime cians clearly understand the forInminor auto injuries, but who nevertheless could have sued no real sense of how high the the meantime, insurers’ before. AIRB announced interests of the public are claims costs go through the in April 2011 it intends to alignedwithout with the ainsurance for more than Cdn$4,000? cap are heard. Th roof.It’s Thus, when the next review premium regulation industry in this matter quite possible the court decision here is conflating impossible forofthe Alberta go adjustment comes one year with a view towards recomrate-setting. injury classes. Is the court saying, for example, that the comout how high these damage a later, insurance companies mending a file-and-approve When it comes to scrapping parator class includes catastrophic injury victims? Why would might go, resulting in rate might have to ask for higher system. This essentially the industry-wide adjustment, it be appropriate tohad compareallows the treatment andforlegal province. increases than if they insurers to file rate rights the industry now has a golden afforded these two classes of auto been able to to adjust their distinctadjustments when collision they see injury opportunityThe to dointeresting what’s best thing wil rates incrementally, on an the need. The new rates are for everyone. victims? ing to trial in Atlantic Canad Indeed, the point of Alberta’s 2004 auto reforms was to and say minor injury victim differentiate the treatment of the pain and suffering of under the Charter because o “minor” auto collision victims, as defined in law, with the to make it to the Supreme C

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marketplace

Canadian Market Mutual policyholders of The Economical vote against dissident proposal to replace board Mutual policyholders of The Economical Mutual Insurance Company voted 649-192 on May 26 against a motion that would have removed its current board of directors and replaced it with directors named by VC & Company Advisory Ltd. VC & Company, a Toronto firm, represented dissident mutual policyholders that questioned the current board’s commitment to demutualize.

VC & Company urged mutual policyholders to support a motion at the company’s annual general meeting in Kitchener on May 26 calling for “the removal from office, effective immediately, of all directors of Economical whose term in office would otherwise continue following completion of the meeting.”

Before the vote, the current board gave a presentation on the work it has already done toward demutualization.

After the vote, the chair of a committee formed to demutualize confirmed there would be “no turning back” from the company’s plan.

Nine hundred and thirty mutual policyholders were eligible to vote at the company’s annual general meeting. One hundred and thirty-six showed up to vote in person, and 580 voted by 8

Canadian Underwriter June 2011

proxy, representing 77% of the eligible voters.

Market still “mushy” for Canadian P&C industry: MSA/Baron report Canadian property and casualty commercial writers and reinsurers are still in a soft market phase, according to the MSA/Baron Outlook Report for 2010 Q4.

“Commercial writers and reinsurers continued (and still continue) to compete in a mushy market,” the report notes.

The report publishes data showing Canadian commercial insurers had a combined ratio (COR) of 90.1%

Nova Scotia auto product review suggests raising coverage and offering ‘buy down’ option Nova Scotia’s auto insurance review is recommending that the province raise its standard auto insurance accident benefits package from its current level of $25,000 to $50,000, and then including a provision to allow policyholders to ‘buy down’ to a basic package equal to existing Section B benefits ($25,000).

In addition, CFN Consultants (Atlantic) Inc., which is conducting a review of the province’s auto product, is suggesting the province consider the regional customization of Alberta’s minor injury protocols for use in Nova Scotia.

CFN Consultants has also recommended the province develop and price an op-

tional tort product, which, if purchased, would mean the insured would not be subject to the province’s $7,500 cap for payments related to soft tissue injuries, and could sue for pain and suffering.

These and other recommendations are part of the Interim Report Addressing the Nova Scotia Automobile Insurance Review.

The full report can be viewed at: http://www.gov. ns.ca/autoinsurancereview/ NS_Auto_Insurance_Review_ Interim_Report.pdf

Claims Slave Lake and area wildfires destroy 433 lots, damage 84 others The Government of Alberta has posted detailed wildfire damage maps showing a total of 433 lots destroyed in the Town of Slave Lake and Municipal District of Lesser Slave River areas, with another 84 damaged.

The maps show 374 lots destroyed in the Town of Slave Lake, with another 52 damaged. In the Municipal District of Lesser Slave River, 59 lots have been destroyed and another 32 damaged.

Backflow valves 85% successful in eliminating sewer backup Backflow valves are 85% effective in eliminating sewer backup, according to Galen Heinrichs, stormwater utility manager with the City of Saskatoon.

Moreover, in the 15% of

instances in which a home experienced some sewer backup despite having a backflow valve, the backflow valve was nevertheless 96% effective in reducing damage from the event, said Heinrich.

Heinrich spoke at the Institute for Catastrophic Loss Reduction’s Basement Flooding Symposium held May 26 in Toronto.

Beginning in 2003, the City of Saskatoon implemented a bylaw requiring all new homes to have a backwater valve. Around the same time, the city implemented a flood protection program to help mitigate basement flooding and sewer-backup issues in high-risk homes.

Regulation B.C. Privacy Commissioner says credit score use must include explicit notification to consumers B.C.’s Office of the Information and Privacy Commissioner has ruled that Economical Mutual Insurance Company must stop collecting and using credit scores until it provides customers with appropriate notification as required by the Personal Information Protection Act (PIPA).

The order notes The Economical did include the following disclosure statement in its 2003 CSIO insurance application form: “The applicants agree that reports containing personal, credit, factual record, premium

marketplace

payment or claims history information may be sought or exchanged in connection with this application for insurance or renewal, extension, variation or cancellation thereof.”

But this was not adequate notice of the purposes of collection of credit information within the meaning of PIPA, the B.C. Privacy Commissioner ruled in a May 6 order.

“The consent statement on the complainant’s application form did not expressly say that credit information might be obtained for the purpose of underwriting” the order reads.

“In order to satisfy the notice requirements in ss. 7(1) and 10(1)(a) of PIPA, individuals must be informed that their credit information may be collected for the purpose of assessing future risk of loss in underwriting the policy.

“Without this information, it is not reasonable to expect that a consumer would understand how Economical actually uses this information and therefore could not meaningfully consent to its collection for this purpose.”

The full order can be read at:

The decision reverses a Financial Services Commission of Ontario (FSCO) Appeal decision.

In Aviva and Pastore, a FSCO director delegate ruled there is no inconsistency in defining an auto injury victim as “catastrophically impaired,” even though she suffered only a single Class 4 impairment, and her physical and psychological injuries individually fell

well below the 55% threshold for a person to be classified as catastrophically impaired under s.2(1.1)(f) of the province’s Statutory Accident Benefits Schedule (SABS).

The Divisional Court, in a 2-1 split, also found that the SABS, AMA Guides and the Superintendent’s Guidelines make it clear all four areas of function are to be accounted

for in an assessment of catastrophic impairment.

The Divisional Court majority set aside the decision of the FSCO director’s delegate without prejudice to the matter being re-heard by a different director’s delegate or, if appropriate, Anna Pastore could make a fresh catastrophic impairment application.

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Court reverses FSCO decision in Pastore, disallows doublecounting of psychological/physical injuries The Ontario Divisional Court ruled in Aviva v. Pastore that the determination of a Class 4 (marked) or Class 5 (extreme) psychological impairment under subsection (g) should not include consideration for pain associated with physical injuries.

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June 2011 Canadian Underwriter

9

profile

Political Power Brokers Vanessa Mariga Associate Editor

George Hodgson, incoming CEO of the Insurance Brokers Association of Alberta (IBAA), sees the importance of maintaining a strong political voice by forging relationships with the new MPPs on Parliament Hill.

George Hodgson, the incoming CEO of the Insurance Brokers Association of Alberta (IBAA), has witnessed a turning tide when it comes to Canada’s political landscape and the business environment in general. He plans to use his experience in politics and community service to help steer Alberta’s broker channel through the changes.

Hodgson was born and raised on a small farm north of Edmonton. Roughly 30 years ago, he felt the pull of Edmonton’s bright lights and has made the city his home ever since. He and his wife Irene have raised four sons: James, William, John and Joseph.

10 Canadian Underwriter June 2011

Hodgson completed a Bachelor of Commerce degree at the University of Alberta.

He also holds a Certified Fraud Examiners designation.

Hodgson started his career working for a large accounting firm, and subsequently handled the financial reporting for a medium-sized building supplies company. Prior to joining IBAA, he spent 13 years at the Canada Revenue Agency as a forensic accountant and a fraud investigator.

The Move to Insurance Looking at his résumé, moving to the IBAA doesn’t necessarily seem like an obvious transition on his career path.

Hodgson indicates his extracurricular activities helped steer him towards the independent broker channel.

“I don’t have an insurance background, but I have been very involved with a number of non-profit organizations,” he says. “I also have a passion for politics and have been a political organizer in Alberta for more than 25 years — mainly at the federal and provincial levels and, to a lesser extent, at the municipal level.

“I tell everyone I answered an ad that I almost dismissed, and the IBAA interviewed someone whose résumé they nearly tossed out,” he jokes.

Photo courtesy of Tracy Grabowski

The IBAA hired Hodgson roughly one year ago to handle the association’s government relations. At the same time, the IBAA’s then-CEO Harold Baker was working on a succession plan, since his (second) retirement loomed on the horizon.

The fit has been fantastic, Hodgson says. “I thoroughly enjoy the organization that I work for,” he says. “I enjoy all of the people. It’s a very dynamic group. I’ve learned that

insurance is a very dynamic field. Every day is a new day that brings new opportunities and new challenges.”

Hodgson has a great deal of experience and expertise working through complex tax law, in addition to honed investigation skills. Even so, he says his largest adjustment has been to grasp the overall complexity of the insurance field.

“The learning curve here was incredibly steep,” he says. “I tell everyone that I

profile

was worried about falling off of the curve for the first two months. Now I can feel that I have my feet on the ground, but there’s still a lot more to learn. I think if we did this interview 10 years from now, I would probably tell you I’m still learning new things about this industry.”

The seasoned politico also had to learn the IBAA’s grassroots approach to government relations. “A lot of organizations have a government relations or public affairs expert, and that person is the major contact person with the politicians and the government,” he says. “In this case, the lobbying effort is done by the brokers in each community, in the federal and provincial constituencies.

“This approach makes it a very powerful lobby force, both nationally and provincially. Within the IBAA, the government relations officer, which for the past year has been me, quarterbacks the lobby efforts. But this is not necessarily the person who is front-and-centre. That is somewhat unique.”

Building relationships As Hodgson prepares to take on the role of CEO, effective July 1, a new federal government is settling in as well. For the first time in five

years, Canada has a majority government. While some suggest this new status creates stability, it also allows the governing Conservative party free rein to enact its agenda at a much quicker pace than if they had a minority government standing.

“While the general population may view [this] as [a situation] of increased sta-

brokers are lobbying in each community, in the federal and provincial constituencies.

This approach makes the lobby very powerful. bility, from our point of view, it’s viewed as something new,” Hodgson says. “We have to ensure that the brokers’ issues and the brokers themselves remain at the forefront of the politicians’ minds. It’s a little different thing to manage.”

Hodgson notes the opposition party is new. In addition, a large number of new MPs will be entering the House of

Commons. This means brokers have a lot of new relationships to build.

“It’s my philosophy, and the philosophy of IBAA, that we need to build the relationship before we talk about our issues,” Hodgson says. “You do that through community involvement.”

For example, IBAA sponsored Victims Services in Alberta, an organization held in high regard by both brokers and politicians. On the basis of these types of initiatives, politicians will see brokers doing things that benefit their communities, laying a foundation of respect on which to build a relationship.

“Quite frankly if every time you go to your local politician with a problem, a complaint or an issue, then they may get tired of hearing from you,” Hodgson says. “If we establish that relationship first, then, when we do come to them with our issues, it is much easier to get them to listen to us and to consider our issues, even if they don’t agree with us.”

The Bank Act review, scheduled for completion in April 2012, heightens the need for those relationships, he adds.

Prior to the May 2, 2011 federal election, all federal parties agreed with Finance

Minister Jim Flaherty’s proposal to restrict banks’ ability to market or sell insurance from their banking Web sites, essentially equating the Web sites with branches. “We need to make sure that remains the case,” says Hodgson.

On the provincial front, the New West Partnership Trade Agreement, an agreement between the Alberta, British Columbia and Saskatchewan governments, remains a key issue. Previously the agreement was between Alberta and B.C. only, and known as the Trade, Investment and Labour Mobility Agreement (TILMA). When Saskatchewan entered the fold, it was expanded to the NWPTA. Regarding the NWPTA, the key issue for Alberta brokers is the fact that in B.C. and Saskatchewan, credit unions are able to sell insurance from their branches, whereas it’s prohibited in Alberta.

“We would like it to stay that way,” says Hodgson.

“We need to ensure that there is a level playing field and that things stay the way they are in that respect. We support free trade, as long as it is fair trade. ”We believe that credit unions retailing insurance through their branches is not in the best interest of consumers.”

June 2011 Canadian Underwriter

11

Calculating

Canada’s Matthew Nielsen

Senior Product Marketing Manager, Risk Management Solutions

Clare Salustro

Associate Product Marketing Manager, Risk Management Solutions

RMS has released its firstever Canadian hurricane risk model. Estimates show a direct hit on Nova Scotia could cost the Canadian P&C insurance industry up to $6 billion in losses.

June 1 marks the opening of the 2011 North Atlantic hurricane season. Like last year, seasonal predictions call for elevated activity, based in part on warmer-than-average sea surface temperatures. Americans criticized last year’s forecast after passing through the season unscathed.

But Canadians were busy cleaning up from Hurricanes Earl and Igor, both of which made landfall as hurricanes in the Atlantic provinces.

In February of this year, Risk Management Solutions (RMS) released its first-ever Canada Hurricane Model as a part of the Version 11 model suite, allowing stakeholders to estimate losses resulting from hurricanes and tropical cyclones in Eastern Canada. The model quantifies the

12 Canadian Underwriter June 2011

risk to property, contents and business interruption from winds associated with hurricanes and tropical storms that form in the Atlantic Basin. Users have the option of running either detailed or aggregated losses.

Of particular interest to Canada is the treatment of transitioning storms. As storms travel northward, they transition from pure tropical cyclones to extra-tropical cyclones. The Atlantic Oceanographic and Meteorological Laboratory defines an extra-tropical cyclone as a storm system that primarily gets its energy from the horizontal temperature contrasts that exist in the atmosphere. Extra-tropical cyclones are low pressure systems with associated cold fronts, warm fronts and occluded fronts.

As purely tropical storms transition to extratropical storms, many characteristics of the storm change. The storm grows in size, translational speed increases and the wind field becomes less symmetrical around the storm center, with the strongest winds shifting to the right of the storm track. Nearly all tropical cyclones affecting Canada have gone through or are in the process of transitioning.

Representing this unique behaviour of storms in the northern latitudes is critical to understanding hurricane risk in Canada. Wind risk tends to cover a larger area, but is generally less intense. Models that don’t include transitioning behavior will overestimate risk near the landfall, and underestimate risk elsewhere.

Illustration by Jillian Ditner/ www.i2iart.com

Hurricane Risk

EvEn in thE facE of advErsity, our approach EnsurEs your global supply chain rEmains in thE

If your property insurance company doesn’t fully understand your supply chain, how can they thoroughly cover your risk? An unrecognized threat to a supplier can bring business to a screeching halt. Yet, for many companies, supply chain issues continue to be a blind spot.

© 2011 FM Global. All Rights Reserved.

At FM Global, we believe that the majority of loss is preventable. That’s why we link our underwriting to loss prevention engineering. We work hard to find the blind spots in your blind spots—even in your supply chain.

It’s just one of the reasons our clients’ losses tend to be smaller and less frequent. Underwriting through loss prevention engineering. That’s insurance evolved.

To learn more, visit fmglobal.com/insuranceevolved/clear

The new hurricane model complements the existing RMS natural hazard model suite for Canada — including earthquake, severe convective storm and winter storm perils — to give companies a more complete view of natural hazard risk across the country.

Nationwide, the average annual loss for hurricanes is less than that of winter and severe convective storms. But localized loss due to hurricanes and tropical cyclones can easily dominate discussion in Atlantic Canada. Hurricanes make up more than 60% of the modelled losses for Nova Scotia and Prince Edward Island. For New Brunswick, Newfoundland and Labrador, hurricane risk is close to 40% of the overall natural catastrophe risk. The RMS Hurricane Model also covers Quebec and Ontario, areas of lower, but still quantifiable hurricane risk. For example, in 1983, Hurricane Hazel killed 81 in Ontario and caused an estimated $1.1 billion1 in economic loss, according to the Department of Public Safety and Emergency Preparedness Canada.

Historical Losses Historically, Eastern Canada has experienced damaging tropical cyclones and transitioning storms on an annual basis. More than three storms per year Figure 2

Figure 1

5

Number of Tropical Cyclones Impacting Canada

4

3

2

1

2000

2001 2002

2003 2004

2005

have affected the area since 2000, according to Canadian Hurricane Centre estimates (please see Figure 1). Major events in 2003 (Hurricane Juan) and 2010 (Hurricane Igor) resulted in $230 million and $200 million in economic losses, respectively. Risk in Halifax — as determined by loss cost, or average annual loss normalized by exposure — exceeds that of Washington D.C., Philadelphia and New York City (please see Figure 2). At the ex-

2006 2007

2008 2009

2010

2011

treme, a direct landfall of a Category 3 hurricane in Nova Scotia could cause upwards of a $6-billion industry loss across Atlantic Canada.

Hurricane risk drives global catastrophe premiums and losses. The Canada Hurricane Model offers companies guidance for pricing of both insurance and reinsurance rates. It also provides them with the tools necessary to evaluate capital adequacy and reinsurance allocation, while providing better insight into uncertainty quantification and correlation of risk among different perils.

The release of the Canada Hurricane Model, along with new models for eastern Mexico, Central America (excluding El Salvador) and Bermuda, complements RMS’ existing hurricane models covering the United States and the Caribbean. Each region’s model uses local data and expertise to customize the hazard and vulnerability components, but the regions are linked by one continuous stochastic event set for the entire North Atlantic hurricane basin.

Companies with exposure in multiple countries can run a single, consistent event set and roll up their losses over the entire North Atlantic basin.

1. All figures are in 2011 Canadian dollars, unless otherwise noted.

14 Canadian Underwriter June 2011

Legacy

le•ga•see / noun / obsolete . handed down from the past / adjective / of or pertaining to old or outdated computer hardware, software, or data that, while still functional, does not work well with up-to-date systems.

Legacy Replacement le • ga • see ri• plās• mənt

/ noun / the use of Duck Creek products and processes to take the risk out of migrating to modern technology, enabling insurance carriers to roll out new products faster and leverage their investment in existing products. see: Duck Creek Technologies

Duck Creek Policy Administration™ • Duck Creek Rating™ • Duck Creek Billing™

duckcreektech.com

Thinking Inside the Vesna Spasic

Product Manager, Palomino Systems Innovations Inc.

Box

Banks have developed a technological ‘box’ for handling customers’ low-maintenance banking transactions (ATMs and Internet banking, for example). Insurers could develop a similar ‘box’ to provide automated, online underwriting.

Despite the fact that commercial insurance companies sell a product, it is an intangible product, and brokers tend to choose their preferred carriers not only based on price and coverage, but also based on relationships and service. At a time when companies are mindful of expense reductions, premium growth and improved underwriting results, getting them to invest in technology to increase service — and in turn increase revenue and profit — is a hard sell in a soft market. But when you work in the service industry, sometimes in-house operational enhancements and increased distribution solutions are not enough. Sometimes a little investment in technology to automate underwriting service can go a long way.

16 Canadian Underwriter June 2011

Speed and Service Once upon a time, a one-month turnaround time on any given submission, regardless of size, was acceptable service. Relatively speaking, premiums were much higher than they are today. Accounts were re-marketed every three years. Submissions trickled in by fax, Internet connection sharing (ICS), or in giant padded envelops with spiral-bounded documentation — including a personalized cover letter, an executive summary, a few application forms, financial statements, contracts, claims reports, etc., all separated by colourful tabs. Quotes and binders were faxed and policies went out by mail. Thus, the total account turnaround time ranged anywhere from one to six months from the moment a submission came in, was underwritten, quoted, bound and issued manually.

That was about 10 years ago, and this was aokay at the time.

Fast forward to a few years later. Accounts were being re-marketed every two years or so.

Premiums were dropping slightly, but were still interesting. And even though submissions were not prepared with as much love and care as they used to be, applications would still make their way over to an underwriter by fax or by mail, and a two- or three-week turnaround time was average. Documentation was still manual and sent out the same way. The total

service time was a few months, which was still adequate.

Now let’s have a look at the last few years. Premiums are less interesting, yet the marketplace is even more competitive. Packaging of extensions, including the broadening of wordings, is on the rise. New capacity is available in the marketplace every year and insurers want everyone’s new and renewal business. Every submission that has been re-marketed over the last four years is still being remarketed again this year. These submissions arrive by mass generic emails, fast and furious, with as little information as possible.

Quotes, binders and policies are still prepared manually, but their delivery is expected to be instantaneous thanks to email. Expectations are high and patience low. For a submission that came in this morning, a quote is expected yesterday evening. If it binds this afternoon, the policy should be ready by the morning, right?

Underwriters feel the pressure. No matter how risky the risk, how small

the premium or how busy the underwriter, every carrier needs new business not just to grow, but to survive.

So we cut corners, sacrifice a little underwriting, maybe even verbally throw out indications over the phone or by email to save time — and hope for the best. But this new way of doing business isn’t necessarily the right way, and making sure your service to your brokers is top notch doesn’t mean your underwriting talents should go to waste. Alas, the systems in place to help underwriters underwrite, and help operations staff process, haven’t changed in the last 10 years, despite the fact that everything else has.

So here comes the challenge: how do you keep your underwriting integrity, grow your new business book while retaining your existing renewal book — all the while increasing your service to brokers — without hiring new underwriters or operations staff to handle the excessive marketing and re-marketing? Most department meetings will likely encourage their teams

to “think outside the box” to come up with solutions. But the actual solution is simple: think inside the box.

Inside The Box We can take a cue from the banking industry in the benefits of thinking inside the box. There used to be a time when everyone waited in a queue to see a teller for anything and everything from depositing a cheque, to paying a bill, to getting pre-approved for a mortgage, etc. We all had to wait in line for the same amount of time, no matter how big or how small the transaction. That is, until the banks came out with a solution to better service their customers: automated telling machines or ATMs. If the transaction you needed could be done without a teller, you were more than welcome to use the bank’s automated teller machines. But the progress did not end there.

Shortly thereafter, Internet banking further improved service. By defining a set of rules for a ‘box’ that could be

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By defining a set of rules for a ‘box’ that could be automated online, the banking industry realized that if they made certain transactions “transactional,” they could save time and money; better yet, they could keep their customers happy.

automated online, the banking industry realized that if they made certain transactions “transactional,” they could save time and money; better yet, they could keep their customers happy. The insurance industry as a whole should subscribe to the same logic. If certain accounts historically represent a lower risk at a lower premium, and an underwriter doesn’t really need to underwrite it, then make it fit into a box, automate it and put it online.

“Online” is not a 4-letter word I was once told “underwriting is an art, not a science.” In as much as this is true, some processes of underwriting can be simplified, compacted, predicted and therefore automated.

By creating a “box” of questions, complete with its own underwriting rules and premium rating matrix, and coding this box within an online quoting system, a broker can have access to your service and products with instant turnaround — as long as their accounts fit into that box. At the end of the day, this would benefit both underwriters and brokers, by making smaller, more predictable insurance coverage “transactional.”

The best part is that automation is like magic.You don’t have to stop at just an online quote. Once you create a box to handle small transactional accounts for your department, the capabilities are endless. Why not go a few steps further to sweeten the box? How about a situation in which your brokers not 18 Canadian Underwriter June 2011

only get an automatic quote, but they can also get an automatic binder and a complete policy including endorsements issued — all online.

With all of this “automation online” talk, it’s important to note people are generally afraid of technology because of its ability to make us feel obsolete.

The first time I worked on creating an

Some processes of underwriting can be simplified, compacted, predicted and therefore automated. Smaller, more predictable insurance coverage could be made “transactional.” underwriting box so that small companies could go online and make their service more efficient, I was troubled by what the use of technology in underwriting would mean in general. I had just finished running though the first test account on the pilot system with my manager. Seeing the system react exactly as I would have, by slapping on the appropriate exclusions, putting on the right enhancements and even quoting it with the exact same premiums that I would have quoted in-house, I

felt shivers. If I had hairs on the back of my neck, I’m sure they would have stood up. I remember looking at my manager and saying: “Did I just lose my underwriting job?”

The bad news is that, after that, my life as an underwriter was over. But the good news is that I was given the responsibility of automating the small business for the department. Ever since then, I see no reason why small premium accounts that usually have the highest volume shouldn’t be automated online. That gives underwriters more time to focus on more complex accounts, and gives brokers what they want and need instantly — quotes, binders and policies.

Let’s go back to the banking example. Even though ATMs are everywhere and most people do their banking online, tellers are still in every bank, in every branch and on every corner.

Tellers haven’t become obsolete. Certain transactions still require someone’s expertise, advice and service.

The same holds true of insurance.

Even though a company might decide to automate a few areas of each department, underwriters are still needed to work on the medium to large accounts — those with a little more hair, a little more premium and a little more risk. These areas tend to need more of an underwriter’s time and service. They are the exact areas in which markets should be differentiating themselves, with companies showing off their underwriting forté.

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Cracks in Cat Models

A catastrophe model may not be the best tool for all purposes, or for all users.

Karen Clark President, CEO, Karen Clark & Company

Recent industry events have highlighted a few of the limitations of catastrophe models. For example, the Magnitude 9.0 Tohoku earthquake in March 2011 was not captured by any of the models because scientists previously did not believe an earthquake of this magnitude could occur in the region due to the nature of the plate boundaries. Catastrophe models generally do not capture the clustering of earthquakes as we saw in New Zealand over the past several months.

And the most recent RMS hurricane model update, which has produced very large changes in loss estimates for many companies in the United States, illustrates the uncertainty and volatility inherent in model-generated estimates (such as PMLs), even for models that have been in use for more than 20 years.

Despite their limitations, there has been a growing tendency to rely on the models for every decision concerning catastrophe risk. There is a general belief that “catastrophe models are the best tools we have, so we have to use them.” If you had to pick just one tool to do everything for everyone, then, yes, a catastrophe model might be the best option. But a catastrophe model may not be the best tool for all purposes, or for all users.

20 Canadian Underwriter June 2011

Issues With Models Model Volatility Let’s look at model volatility. It may not be a big problem for a reinsurer, since it’s relatively easy for property reinsurers to adjust prices and to change portfolio composition.

However, for primary insurers, loss estimates that swing widely from one model update to another can cause major disruptions to underwriting and business strategies. In regions where insurance is regulated, it’s not easy to adapt to the variations, and it can take years to implement new pricing strategies.

When model loss estimates change significantly, insurance companies can end up nonrenewing large books of business — only to find out later that, with the next major model update, many of those lost policies weren’t so bad in hindsight. Obviously it’s a problem if your primary risk management tool gives conflicting information from update to update. Erratic underwriting decisions can lead to loss of agent and policyholder goodwill.

Such volatility is a deterrent to regulatory and consumer acceptance.

Illustration by Jillian Ditner/ www.i2iart.com

Opinion/Analysis

Loss estimates and financial strength Another significant problem is that rating agencies are using highly volatile 1-in-100 and 1-in-250 year loss estimates in their financial strength ratings. This puts even more weight on the model-generated output, and results in highly volatile and uncertain numbers influencing very important risk management decisions.

Model-generated numbers such as PMLs are volatile because scientists do not know the probabilities of largemagnitude events happening in different peril regions. In many regions of the world, scientists do not know the intensities of the most significant

Slight changes in the probability distributions can lead to dramatically different PML estimates, because the model loss estimates are highly sensitive to even small changes in model assumptions. historical events. This paucity of data causes the model information to be uncertain. Most model updates are based on re-analyses of limited and imprecise data rather than advances in factual knowledge. Given this uncertainty and scientific “unknowledge,” are there ways to use the scientific data we do have in a more robust and transparent fashion?

Characteristic Events One alternative is to use scientific data to define “characteristic events” for each peril region, representing the types of events that could happen with 1% and lower probabilities. These characteristic events could be used to estimate 1-in-100 and 1-in-250 year losses for insurance companies.

22 Canadian Underwriter June 2011

The catastrophe models estimate extreme event losses by first creating probability distributions for event characteristics and then using these distributions to simulate thousands of potential events. Slight changes in the probability distributions can lead to dramatically different PML estimates, because the model loss estimates are highly sensitive to even small changes in model assumptions. The simulation technique makes it virtually impossible to check the model calculations.

On the other hand, characteristic events, once defined using the scientific data, are totally transparent. They can stay constant until there is a real breakthrough in scientific knowledge. If the characteristic events do change, the impact on loss estimates can be easily understood and checked for credibility.

Characteristic events are also very useful for rating agency purposes. Currently, rating agencies use information from different models and different model versions, and have no comparable basis for evaluating the catastrophe risk impact on company financial strength ratings. Characteristic events, because they are comparatively constant, provide a consistent way to compare companies and to monitor the effectiveness of risk management strategies over time.

New tools and “out of the black box thinking” can also be more effective in capturing the “black swans” that seem to appear every few years. The catastrophe models did not anticipate the Tohoku earthquake because no scientific data suggested it could happen. Now that we know this magnitude event can occur in this region, it will likely take years for the modeling companies to release updated Japan earthquake models incorporating this new information. It will take some time because of the amount of research that will be conducted to figure out why the scientists were wrong and the likelihood of this type of event happening again. Given that scientists will not be able to determine the probability with any degree of certainty, why not create an extreme characteristic event now to capture what we know can happen?

One Size Does Not Fit All While catastrophe models are comprehensive, they are a “one size fits all” approach to catastrophe risk. The models provide a general indication of risk, but they may not provide the best view of the risk for a regional or specialized book of business. Insurance companies need additional tools that are more flexible and can be customized to specific types of property business.

The insurance industry has gone from the one extreme of ‘no models, all underwriter judgment,’ to the other extreme of ‘all models, no underwriter judgment.’ Neither extreme is optimal.

A more effective tool for many companies would be to use a scientific framework, but allow for additional accountspecific information to be factored into underwriting decisions.

Catastrophe risk is a large and growing component of property losses. Given the importance of catastrophe losses, certainly it’s appropriate to bring all credible information to bear on understanding and managing catastrophe risk. We don’t need to limit ourselves to one tool or one approach. We can use other information and additional tools more suitable for different purposes and different users.

Change is good.

Change is hard.

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© 2011 Guidewire Software, Inc. All rights reserved. Guidewire, Guidewire Software, Guidewire ClaimCenter, Guidewire PolicyCenter, Guidewire BillingCenter, Guidewire InsuranceSuite, Deliver Insurance Your Way, and the Guidewire logo are trademarks or registered trademarks of Guidewire Software, Inc. in the United States and/or other countries.

Predictive Wes Gill

Executive Lead and Head, Governance, Enterprise Risk and Compliance SAS Institute (Canada) Inc..

James D. Ruotolo

Principal, Insurance Fraud SAS

Fraud Fighting

Integrating social network analysis tools and predictive analytics into a broader fraud framework is key to an organization’s ability to detect fraudulent claims.

Earlier this year, the Insurance Bureau of Canada (IBC) issued a release entitled “They cheat, you pay — Insurance fraud on the rise in Ontario.” In it, IBC discussed the complexity of today’s insurance scams. It also indicated it focuses its efforts on investigating organized crime rings involved in, among other things, fraudulent auto accident claims.

24 Canadian Underwriter June 2011

Fraud is certainly a prevalent problem. Thirty-nine per cent of senior executives surveyed last year by SAS/Leger said customers had attempted to defraud their organization. But once organized crime rings get involved, the situation becomes far more complex and costly. Crime rings are active, persistent, methodical and quickly adjust their efforts to improve their odds of beating the system.

Historically, insurers have relied on adjusters to help identify problematic claims. Adjusters are uniquely talented at identifying claims anomalies, and this manual approach will always be an important part of any insurer anti-fraud program. However, it becomes increasingly difficult to identify ‘red flag’ situations manually when, on their own, individu-

al claims might not show any signs of being problematic. Sometimes alarm bells will be raised only when seemingly disparate cases are connected.

In addition, the sheer volume of information now available to adjusters makes detailed analysis very cumbersome and time-consuming. Insurance fraud rings work to capitalize on this situation. To fly under the radar, they submit claims that do not seem out of the ordinary.

Fighting Fraud In light of the above, many companies are looking to technology to help them identify suspicious claims.

“Suspicious” claims not only involve what is being claimed, but also who is making the claim and when and how the claim is made. The goal is to identify patterns and assess whether individual cases show signs of fraud based on their commonalities with other seemingly unrelated cases. The subtle similarities might escape even the most seasoned adjuster.

These connections are often the Achilles heel of crime-ring-based fraud: there are only so many degrees of separation existing between all the participants. This is where monitoring

Many companies are looking to technology to help them identify suspicious claims.

The goal is to identify patterns. people’s social networks can be helpful. For example, certain combinations of information may indicate a fraud attempt and require further investigation. Perhaps individuals with similarsounding names frequent certain repair garages; maybe this ties in with a small network of household addresses combined with a cell phone number that pops up several times — once as that of the driver in an accident and

the next time, under a slightly different name, as that of a witness. Social network analysis helps uncover these previously unseen links.

Integrating social network analysis tools into a broader fraud framework is key to an organization’s ability to guide adjusters and optimize efforts to detect fraudulent claims. By using a framework with a comprehensive fraud scoring engine that incorporates a combination of different analytical techniques — automated business rules, database searches, anomaly and exception reporting, predictive modeling, text mining and network link analysis — adjusters are able to determine the likelihood a claim is fraudulent and prioritize their efforts accordingly.

Even if a corporation shows a wellestablished desire to move forward with predictive analytics, the quest to find the best solution may present hurdles thwarting companies from moving forward with their plans.

Excuses, Excuses Here are the Top 5 data excuses for not using predictive analytics for insurance fraud detection — and why they’re wrong.

Excuse #1: We don’t have enough data Standard approaches to predictive modeling for insurance fraud detection involve analysis of an existing set of known suspicious claims. From this data set, it is hoped predictive indicators may be found that could be used to identify similar claims in the future. This technique is very powerful, but it relies on a large set of known suspicious claims on which to build a model and train people on how it works. If a company has limited known suspicious claim history information, it often believes that it cannot proceed with a technology-assisted fraud detection program.

Reality: A number of statistical approaches can be used to build a solid predictive analytic solution, even if very few suspicious claims have been

identified in the past. For example, a hybrid solution combining business rules, anomaly detection and social network analysis can identify suspicious claims even if no suspicious claim history is provided.

Excuse#2: We don’t have good data Overworked adjusters and claim processors have a tendency to find the path of least resistance in order to meet their objectives. Ever discover a claimant with the Social Insurance Number of 999-999-999 or an address of “Unknown” in your claim system?

Data quality issues are a reality for

Statistical approaches can be used to build a solid predictive analytic solution, even if very few suspicious claims have been identified in the past. any large organization. Many analysts and investigators have been frustrated by poor-quality data in transactional systems. They often feel data quality problems may prevent them from being able to implement a predictive analytics solution effectively.

Reality: The old adage “garbage ingarbage out” certainly holds true for many things, but data quality issues do not preclude a successful technology implementation. Simple tools like basic business rule engines may be less effective in dealing with data quality problems, but a robust insurance fraud detection solution must incorporate data preparation steps that carefully cleanse the data to remove problems. However, be careful not to clean too deeply. Improper data cleansing techniques can actually harm the data set, by erroneously categorizing anomalies due to fraud as data quality errors to be removed.

June 2011 Canadian Underwriter

25

a critical, but often overlooked benefit of a fraud technology solution is the ability to prioritize work more effectively. Business rules, reporting tools and case management systems help SiU leaders manage resources.

excuse#3: our data is too fragmented Information silos are prevalent in the insurance industry. Business units are beginning to see the value of sharing data across the enterprise, but many organizations house and manage their own data. Given the fact that most companies use a patchwork of transactional systems for ratings, customer service, policy administration, claims administration, payment processing and human resources, it’s no wonder that their data is fragmented. With all of this information located in different places, fraud detection projects are often shelved because they are perceived as too complex.

Reality: It is not necessary to revise the

it is not necessary to revise the entire corporate information technology infrastructure to build a fraud detection solution. entire corporate information technology infrastructure to build a fraud detection solution. Enterprise solution vendors can leverage data integration tools to incorporate key data elements from various internal systems. By combining information from these disparate information sources, new insights and fraud detection capabilities are immediately possible. For example, one insurer has been able to cross-reference data from multiple claim systems for different lines of business. In another example, one 26 Canadian underwriter June 2011

commercial policyholder found more employees were involved in claims on the auto policy than were covered on the workers comp policy, suggesting a possible premium fraud scenario. excuse#4: it’s all in the notes Some studies suggest that upwards of 80% of insurer data is unstructured text. Any SIU investigator will tell you that the most valuable information about a claim is not in the discrete structured data fields — it’s in the notes. It’s impractical to have a unique field for every piece of useful information; as a result, the claim notes become a rich information source. But text fields are not generally used for reporting purposes, and therefore are not often available in data warehouses. They are therefore not considered a viable data source for a predictive model.

Reality: Text analytics can be one of the most powerful components of a hybrid fraud detection approach. For the same reason, any seasoned investigator will want to read the claim notes. A predictive model should make use of unstructured text data.

Entity and variable extraction are fairly straightforward using advanced text mining tools. In some solutions, up to half of the data elements used in a predictive analytics fraud detection solution comes from unstructured data sources. excuse #5: We can’t handle any more cases SIUs often have limited budgets and have to maximize their scarce resources. Most of them already have

more work than they can handle.

When asked about a predictive analytics solution to identify suspicious claims for further investigation, some organizations protest. “No thanks, we are already swamped,” they say.

Reality: Technology can help organizations identify more cases to investigate, but that’s not the only benefit. A critical, but often overlooked benefit of a fraud technology solution is the ability to prioritize work more effectively. Most organizations operate on a first-come, first-served basis; they simply work on the cases as they come in. Business rules, reporting tools and case management systems can help SIU leaders better manage their scarce investigative resources. Even if it’s investigating the same number of cases, an SIU can dramatically improve productivity and impact rates by effectively prioritizing caseloads.

tHe BottoM LiNe You are likely to encounter naysayers in any organization who will offer the above excuses, but don’t be discouraged. These challenges are easily overcome with a robust, technology-assisted insurance fraud detection solution.

The bottom line is this: given the increase in fraudulent claims, it is imperative for insurance companies to leverage technology as a key enabler to combat crime-ring-based fraud. Organized fraud is, by its very nature, active, methodical and extremely agile. By leveraging both structured and unstructured data, firms will be able to determine the likelihood a claim is fraudulent, prioritize their efforts and reduce their claims expenses significantly.

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The

Interconnected Insurer Jamie Rodgers

Vice President, Property and Casualty Insurance Practice Lead, CGI

Clinton D’Souza

Senior Business Analyst Consultant, CGI Insurance Vertical

Today’s interconnected insurer is much better able to access new sources of information and data; collaborate virtually with suppliers and partners; share data cooperatively and allow customers to serve themselves efficiently.

been the increasing ability for organizations and individuals to interconnect. That is, to access new sources of information and data; collaborate virtually with suppliers and partners; share data cooperatively with competitors for mutual benefit and allow customers to serve themselves efficiently.

In this article, we delve into the concept of virtual or remote underwriting — a concept enabled by being able to interconnect with previously untapped sources of data.

Technology advances over the years have played an undeniable, enabling role in giving insurers new opportunities to make both large and small adjustments in their business and operating models. For example, as technology has moved from mainframe to a local area network (LAN) to wide area network (WAN), and now to the global inter-network, businesses have been able to improve their abilities to work across business units, divisions and others outside the formal walls of the company.

Now the Internet and “World 2.0” have given the insurance industry — carriers, suppliers and distributors — a whole new set of opportunities to explore for sustainable performance, albeit packaged with a universe of new expectations by customers and partners, as well as new strategic threats. Insurers taking best advantage of the opportunities can differentiate themselves and capture a greater share of the pie.

Arguably the most important impact of the information age, beginning with the mainframe computer to the Internet today, has

Underwriting and the Interconnected World One characteristic of a successful insurer is the way in which it identifies, understands and manages risk throughout the lifecycle of a policy. Obviously the underwriter plays a critical role; he or she needs the proper information and tools to assess the risk accurately and price it appropriately. For example, it’s valuable to know that a prospective packaging business applying for coverage is close to a factory that makes explosives. It’s also valuable to know the particular geographic area within which the business is located is highly susceptible to water damage based on past claims and available flood plain data.

In the fairly recent past, this information could only be collected by physically inspecting the proposed risk to be insured and by assembling ancillary paper-based information. Even then, gaps in information would make underwriting knowledge of the risk less than optimal.

28 Canadian Underwriter June 2011

Today, however, through the interconnecting power of the Internet, risk data from a range of new sources are available virtually. To an extent, the quantity of virtual data is much greater than that of data collected physically. Not only does interconnectedness reduce the cost of collecting risk data, but it also serves to improve the quality of the decisions being made during the underwriting process. No longer do underwriters have to visualize a location from a written inspection report or narrative, they now have the ability to view and evaluate risks from their desktop.

Google may be the most well known source for geographical data (and does have insurance industry-specific solutions), but more providers with solid insurance credentials are establishing themselves in this space. Offerings include data helping to validate and reconcile physical addresses, data providing insight into previous coverage and claims history, data helping to visually map surrounding buildings and the inherent risks they present, as well as geo-spatial data that graphically illustrate land features. These data can all be used and referenced in automated business rules systems. To some extent, the geographic and risk information suppliers are providing to insurers is information untapped by insurers in the past. Also, providers are tapping into new, complementary data sources to add value to their offerings.

Luckily, information technology is keeping pace with the hyper-digitization of information and can easily compile mountains of individual data points, “information pixels,” into a clear and complete picture of the risk.

The more data, the more accurate the risk picture. But as with any technology, the final solution is only as good as the framework within which it operates. Being able to capture decades of experience of professional underwriters and replicate both the art and science of underwriting within a system’s decision framework is how remote underwriting becomes a nearterm reality.

Figure 1

A Flexible, Business Intelligence Engine Data Ingestion Information sources Internal External Structured Unstructured

Business intelligence Resolution and integration ETL & Scrubbing Entity resolution Augmentation

Full context data set

Rules

Complete Accurate Timely

CREDIT INSURANCE/island size

Consumption

Anomalies

Managed workflow Consistent response

Analytics Orchestration

Profiles

6/3/11

Reports & dashboards

Networks

11:12 AM

Business process integration

Page 1

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June 2011 Canadian Underwriter

29

The flexible business intelligence engine illustrated in Figure 1 uses a variety of analytic techniques to assess the full context of the data set against the acceptable risk profile for the insurer. Broadly speaking, the engine produces a three-state decision: • The risk is clearly within the prescribed risk appetite and so can be automatically processed quickly through to closure, providing a high level of customer service.

• The risk appears too great when compared to the insurer’s appetite, and so the business needs to be declined sensitively by skilled personnel and in accordance with the insurer’s policies and procedures.

• There is some ambiguity about the level of risk, and so skilled underwriters need to review and make the final decision. The technology can help ensure a consistent decision is reached regardless of which underwriter handles the case.

Remote, virtual underwriting, when combined with the flexible business

intelligence engine noted above, is of particular value when considering the new mobile world and the selfservice, instantaneous expectations of the new consumer. Much of this new data is available on an almost instantaneous basis through Web services or other application interfaces. Data sets can also be of the right size to meet the in-memory design principles of the new smartphone and mobile applications.

Tapping into new data sources and driving the data through flexible intelligence systems can help achieve the goals of straight through processing without sacrificing underwriting quality and control. In fact, the quality of those decisions may indeed be greater when conducted virtually.

Conclusion Rapid advancements in technology and the exponential expansion of data availability are providing Canadian insurers with opportunities for

significant and sustainable financial performance improvements. To realize the benefits, a carrier has to interconnect their external business partners, their internal business processes and even consider connecting with their traditional competitors on selected initiatives. The truly ‘Interconnected Insurer’ can build a full picture of the risks they face and open the door to accurate and cost-effective remote underwriting. The potential benefits are truly inspiring: • reduced costs, by reducing the need to inspect physically and gather information about the risk.

• improved quality, by tapping into previously unreachable sources of risk data to enhance decision-making.

• improved results, through better, more accurate pricing, so that premium dollars are not left on the table.

• meeting customer expectations, through feasible technical and data solutions that allow for straight through processing at speeds required for self-service.

Clarification, Retraction and Correction • Gordon E. Thompson, executive vice president and general counsel of Zurich Canada, made the following point in correspondence with Canadian Underwriter.

“I read with interest your article in the March 2011 edition of Canadian Underwriter on the CRA’s approach to excise tax on cross-border insurance transactions. (‘Excise Tax Extends its Reach,’ Canadian Underwriter, March 2011). Unfortunately, I believe you were not correct when you stated that there would be no excise tax (or, for that matter, provincial tax) where a U.S. insurer not licensed in Canada directly insures a Canadian risk. In fact, the opposite is the case. Both the Excise Tax Act and the various provincial taxing statutes provide that the insured is responsible for the tax. As well, certain provinces (e.g.

British Columbia, Alberta and Manitoba) make it an offence for an unlicensed insurer to insure risks in their respective provinces.”

• In the article, ‘Stuck in the Middle’ (Canadian Underwriter, April 2011), one paragraph of the story states: “…Envision Financial is aiming to create the first inter-provincial credit union by merging with Alberta’s First Calgary Credit Union. It has a partnership agreement with First West, which was created from the merger with Valley First Credit Union in January 2010.” This information is incorrect, and the magazine retracts this statement, with apologies to Envision Financial.

• In the story, ‘Web Branches’ (Canadian Underwriter, April 2011), Canadian Underwriter incorrectly identified Dan Danyluk as the ‘executive director’ of the Insurance Brokers Association of Canada (IBAC). He is the chief executive officer. Also, Randy Carroll, chief executive officer of the Insurance Brokers of Ontario (IBAO), was incorrectly identified as the ‘president.’

Canadian Underwriter sincerely regrets these errors.

30 Canadian Underwriter June 2011

Touching the Cloud The property and casualty insurance industry is in the early stages of discovering and applying cloud computing services. Many say a maturing market in cloud services could generate large returns in areas such as claims processing, collaboration and customer relationships.

By CRAIG HARRIS

32 Canadian Underwriter June 2011

The

technology world loves its buzzwords and ‘cloud computing’ is the latest in a long line of trends that promise the next big thing in cost reduction, greater efficiency and productivity boost.

Burdened with myriad definitions, replete with confusion and ubiquitous thanks to a bevy of marketing hype, the ‘cloud’ is an IT phenomenon of which many have heard, yet few have actually applied — at least in the insurance industry.

June 2011 Canadian Underwriter 33

COVER STORY

Touching the Cloud Nailing a “Cloud’ to the Wall One of the elusive traits of cloud computing is a precise definition. “Ask 10 people and you will likely get 10 different definitions of the cloud,” says Doug Johnston, vice president of partner relations and product innovation at Applied Systems.

“I think there has been a lot of marketing around the whole concept of the cloud,” says Shannon Major, marketing and communications manager at Keal Technology. “But when you strip it away, does it mean a whole lot more than Web hosting?”

Other questions emerge. For example, does the cloud simply refer to remote access to a network from mobile devices? Is it software-as-a-service (SaaS) or infrastructure-as-a-service (IaaS)? Is it the use of free or nominally priced Web-based software or servers for functions like email, customer relationship management or conferencing?

Many large technology firms believe key distinctions and characteristics define cloud computing. Aldo Gallone, cloud leader for IBM Canada, acknowledges that some of the “noise” surrounding the cloud has led “to a lack of clarity in some situations.” He says his company adopts the same criteria as those of the National Institute of Standards and Technology.

The U.S.-based organization lists five essential characteristics of cloud computing: • on-demand self-service (computing capabilities provided without human interaction); • broad network access [location-independent access through thin or thick client platforms such as mobile phones, laptops or personal digital assistants (PDAs)]; • resource pooling (a ‘multi-tenant’ model that dynamically assigns resources according to consumer demand); • rapid elasticity (capabilities can be scaled up and down quickly); and • measured service (a transparent ‘metering’ capability that monitors and charges based on type and amount of service required).

“If you have only some of these, you are really getting into semantics and religion as to whether it is a full cloud computing solution,” notes Gallone.

34 Canadian Underwriter June 2011

“An ASP model [an application service provider model, which supplies computer-based services to customers over a network] may be a really good hosting service, but it is not cloud computing in that it is not truly on-demand, selfservice and pay per use.”

Consultants say the cloud computing space is slated for significant growth in the years ahead. Gartner predicts investment in cloud computing will increase from its current rate of $59 billion to

Cloud computing has at least five essential characteristics: on-demand self-service; broad network access; resource pooling; rapid elasticity (scalability); and measured service. $149 billion in 2014, adding that companies will invest more than $112 billion over the next five years. Research firm IDC suggests worldwide IT spending on cloud technology will reach $42 billion in 2013, accounting for 10% of overall investment in technology.

Technology giants such as IBM, Microsoft, Amazon and Google have all embraced this trend. They offer cloudbased services, software and infrastructure to a wide range of industries and government. Other popular cloud

providers include salesforce.com, which offers a Customer Relationship Management (CRM) and sales application, and Dropbox, a free service that lets users share files, photos and video.

In Canada, IBM invested $42 million in a cloud computing centre that went live in January.

Insurance and the Cloud The big question, of course, is what does cloud computing hold for the insurance industry? Predictably, many sources note the cloud is still in the early stages of development for insurance companies and brokers.

A report from IDC Financial Insights in December 2010, entitled, Business Strategy: Cloud Computing in the Insurance Industry, surveyed insurers in North America and observed “the importance that insurers are placing on cloud services both today and in the near future. While we are still in early days, cloud services will be a critical element of competitive success for the insurance industry going forward.”

Accenture also released a study in October 2010, How Cloud Computing Will Transform Insurance. “At a fundamental level, cloud computing can enable insurers to re-use IT resources more efficiently, whether these are purchased up-front or rented without any long-term commitment,” the consulting firm noted. “In fact, the capabilities of cloud have implications across an insurer’s business. Its scope extends upwards and outwards to cloud-based platforms, applications and business processes, opening up new vistas of opportunity in terms of how insurers create and deliver products and services, reach and interact with customers, collaborate with partners, manage their value chains, assess and manage risk and generate revenues.”

Aviva Canada is one Canadian property and casualty insurance company currently tracking the cloud. Robert Merizzi is Aviva Canada’s chief information officer and executive vice president of business systems transformation. He says his company has made investments in the cloud in human resources, us-

COVER STORY

Touching the Cloud ing a solution that offers software on demand. Aviva’s parent company in the United Kingdom has also worked with Microsoft and IBM on collaborationbased cloud technology.

“In the p&c industry, vendors have started to offer cloud applications and services for insurance carriers,” Merizzi says. “I expect to see cloud computing mature in the insurance industry in certain areas, such as claims processing, certain parts of policy administration, collaboration and document management.”

IBM’s Gallone also notes “collaboration tools, development and testing, and analytics will likely become application sets that can move to the cloud in the insurance industry. Collaboration between companies or organizations is an important point. This is a great way to get economic efficiencies and accelerate productivity, especially if you look at data-sharing over a supply chain.”

One key area meriting attention is the ability of cloud computing to relieve costs and resources dedicated to maintaining legacy IT systems, a longstanding issue in the insurance industry. “Many large companies have hundreds or even thousands of servers in their IT infrastructure,” Gallone says, citing an example. “The overall computing capacity of these servers is often very inefficient, sometimes used at only 10-20%. A cloud solution could ‘virtualize’ these servers: when users need the server, it will start up; when it is not needed, it can shut down. This can really improve return on investment from the IT infrastructure, as you only pay for the infrastructure when you use it. This is particularly true if you move into a cloud sharing infrastructure with other companies.”

ClearRisk Inc., an online provider of risk management solutions, is another example of an insurance organization reaching for the clouds. “We have gone completely on the cloud,” says Craig Rowe, the company’s president and CEO. “We expect to access our data in the cloud and we also expect our clients to access our product that way.

All of our internal files are on the cloud, and I feel completely secure about it.”

36 Canadian Underwriter June 2011

Rowe says his firm uses Amazon cloud services, as well as file-sharing through Dropbox. This is not novel in other industries, but the insurance sector tends to lag behind in the use of new technology, he says. “This industry is a little slow to keep up, but I have seen more interest in the last two years in cloud computing,” Rowe says. “For example, you have an employee of an insurance company on her lunch break who uses

I think there has been a lot of marketing around the whole concept of the cloud. But when you strip it away, does it mean a whole lot more than Web hosting? all sorts of b2c [business-to-consumer] connections to share files through Webbased software and then goes to her desk in the b2b [business-to-business] office and it is back to the old world.

That is starting to change a bit.” salesforce.com is another example of the insurance industry’s practical application of cloud services. This cloud-based model offers a Web platform for custom applications and simplified integration of client information, market data and transactional activity. Aon has rolled out Salesforce’s CRM system to its 7,000 sales, marketing and support employees worldwide using the Web platform.

Indeed, Merizzi says the cloud could represent a potential opportunity for more brokers, although little evidence exists that intermediaries in Canada are using cloud services. “For brokers, I think the cloud and social media will offer them different ways of accessing their customer base,” Merizzi says. “The question is: How can they use services and software available in the cloud to reach potential customers?”

Gallone also sees advantages for brokers in cloud technology. “Brokers may be able to band together and have access to application sets and shared infrastructure in the cloud,” he says. “They could gain huge economic benefits if they are working in a cloud within a trusted membership base.”

For broker technology providers like Keal and Applied Systems, when it comes to Web hosting services, cloud computing is like old wine in a new bottle. They say their hosted solutions resemble a “private cloud,” in that brokers can access information, data and files through a secure network from any Internet connection. Also, they contend, their broker management system (BMS) software and hardware contain much of the same marketing data and client information as cloud services like salesforce.com to conduct effective sales campaigns.

“If the cloud equates to the Internet and hosting solutions, we have been doing that with our sigXP broker management system since 2001,” says John Brezina, operations manager for Keal Technology. “The pay-as-you-go, ondemand part, however, I don’t see any direct application that is widely adaptable to our user base.”

Johnston says Applied Systems has hosted its flagship Agency Manager broker management system in online data centres for roughly 10 years. “About half” of its clients use this hosted software solution, he says. “We didn’t call it cloud computing, which is a relatively new term,” Johnston observes. “But that is really what we have been doing — moving servers, components and maintenance out of the brokerage office and into an online space.”

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COVER STORY

Touching the Cloud Benefits of Cloud Technology Cost-effective Whether the cloud solution at issue is private or public, sources say several distinct benefits accrue to these new models. A major plus is cost savings, according to Merizzi. “A key advantage of the cloud is that it can be very costeffective,” he says. “You don’t have to build your own infrastructure: you buy the service and access it on a payas-you-go basis. There is far less maintenance and fewer people to maintain IT infrastructure.”

Rowe concurs. “The benefits from our end include that it is very inexpensive,” he notes. “If you look at Amazon cloud server, it costs pennies to store large amounts of data. They charge a nominal fee. And it is not just data: you can use their servers.”

Accessibility Accessibility is another benefit of the cloud. All employees of an organization, regardless of whether the organization has 10 or 10,000 employees, can access files and data from any location. ”One great thing about cloud computing is you can get information from any computer or device in the world,” Johnston says. “You don’t have to be in a network or plug in software.

With a hosted solution in the cloud, you can get your information from home, office or anywhere you have an Internet connection.”

Scalability The ability to change the amount of computing capability you need quickly — defined as “scalability” — also represents a big advantage for the cloud, according to Merizzi. “When you need to scale up, it can sometimes take time as a large carrier,” he says. “With cloud computing, you can scale up more easily and quickly — especially if something requires multiple users.”

If a brokerage is acquiring other brokerages or growing its client base, it can easily move to ramp up its staff and resources using the cloud, echoes Brezina. “If it wants to add 20 or 50 38 Canadian Underwriter June 2011

more users, we can simply issue more licences and they are up and ready.

There is no need for more software.”

Risks of Cloud Computing Several risks come with cloud computing. People still sitting on the fence in the debate about whether or not to use cloud technology often cite security as a chief concern. “The main risk in cloud computing is data security and privacy,” Merizzi says. “We are a heavily

A key advantage of the cloud is that it can be very cost-effective. You don’t have to build your own infrastructure: you buy the service and access it on a pay-as-yougo basis. There is far less maintenance and fewer people to maintain IT infrastructure. regulated industry in terms of privacy — our primary concern is services offered in the cloud may not be ready for us in terms of full security and privacy.

As a Tier 1 company, the cloud solutions would have to be pretty mature before I would look at moving core services in the cloud.”

The security risk is real, as evidenced by the massive data breach of Sony’s PlayStation Network in April 2011. That

cyber attack compromised information on more than 100 million customer accounts, the largest security breach since online thieves stole credit and debit card numbers from Heartland Payment Systems in 2009. Press reports also note that Amazon’s Elastic Computer Cloud servers were used by hackers to attack Sony’ online entertainment system.

The issue of privacy and security on the cloud has attracted the attention of the Office of the Privacy Commissioner of Canada, which issued a report in May 2011 called Reaching for the Cloud(s): Privacy Issues related to Cloud Computing. “The nature of cloud computing appears, on the surface, to create possible tensions between data protection/privacy agencies, ISPs and customers due to the uncertainty about which organization should be responsible in the case of privacy violations and how to hold companies who are located ‘in the cloud’ responsible under Canadian legislation,” the report stated.

One key risk identified in the report is a situation in which “the Privacy Commissioner has jurisdiction over the subject matter of the complaint but the complaint deals with cloud computing infrastructure and thus is not obviously located in Canada.”

IBM’s Gallone says his firm “did sense some hesitation from clients about data hosted across the border in the United States, which could be subject to the Patriot Act. “That is one of the reasons we built the Canadian cloud computing centre, in which confidential information is protected and kept securely resident in Canada and in accordance with Canadian privacy laws,” he says. “We hope this will be a catalyst for Canadian clients looking to the cloud and we have already seen that happen.”

Data security is an important issue for Rowe as well, but he has a different take on the best way to protect information. “I don’t care how large of an organization you are, it always amazes me that people think their data is safer in-house than in the cloud, “ he says. “ The IT firms spend millions of dollars a year on security,

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COVER STORY

Touching the Cloud

The nature of cloud computing appears to create possible tensions between data protection/privacy agencies, ISPs and customers due to the uncertainty about which organization should be responsible in the case of privacy violations and how to hold companies who are located in the cloud responsible under Canadian legislation. redundancy and back-up. Do insurance companies really think their systems are better or more secure?”

Rowe says his primary concern with cloud computing revolves more around issues such as downtime and the relationship with the IT provider. “I think the real threat is one of downtime, and you have to look at a hosting firm’s online reputation and service levels,” he says. “An emerging threat is what happens to your data if the cloud provider goes out of business. I think this is more real when you start to look at what is happening with the sell-off of some sites such as Friendster and MySpace. A lot of companies can fold. What happens to your data after the engagement stops? What are your redundancies and back-ups?”

Johnston says companies going on the cloud should look carefully at the contracts and service level agreements of the IT providers. “The issue is not necessarily loss of data, but who owns the data and what is your right to the data in that environment?” he says.

40 Canadian Underwriter June 2011

“One trend we are seeing is control of the analytics associated with the data.

In other words, you might get something low-cost on the cloud, but the provider may be able to use the data or analytics for other purposes.”

Another potential concern relates to the shared technology model that invariably accompanies cloud computing services and application. “How do the solutions come together, particularly in terms of multiple vendors?” asks Merizzi. “You have little or no control over that shared technology model. As it evolves, we have to make sure that cloud model works for us as a company.”

Reaching for the Cloud Even with these concerns and risks, cloud computing is capturing the attention of chief information officers at companies around the world. According to an IBM survey of 3,000 global CIOs released in May, 60% of organizations are ready to embrace cloud computing over the next five years.

That figure is nearly double the result

of a previous IBM survey in 2009.

“Cloud computing is absolutely real in terms of the shift in the technology paradigm,” Gallone concludes. “However, individual companies need to be very methodical and pragmatic when it comes to which applications can go in the cloud. There may be some areas of data sensitivity where a cloud solution will not work. There may be a need for a private cloud that goes behind a company firewall. Clearly, companies should not throw out their technology textbooks on data security, privacy and regulation. The issue is more how to decide which applications can potentially move out to the cloud now and what the economic benefits are.”

In terms of the future of cloud computing in insurance, Accenture offers this summation from its October study: “In a few years’ time we believe that cloud will simply become the way things are done.

Those insurers who move more quickly to embrace it will gain a competitive lead that others may struggle to match.”

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The Holy Grail of Claims Processing Mike Mahoney

Senior Director, Product Marketing, Auto Casualty Solutions, Mitchell International

Tom Zito

Senior Director, Medical Service Center, Mitchell International

For insurers, straight-through processing is as close as it comes to the ‘Holy Grail’ of a no-touch, fully automated claims-handling process.

Insurers are on a constant quest to improve their business processes via technologies that will enable a fully automated, “no-touch” claimshandling environment. The goals are worthy: speed, efficiency, consistency, cost effectiveness and outstanding service. The quest also comes with potential risks: too much — or a lack of — claim control, inappropriate claims decisions and potentially less-than-appropriate loss adjustment or indemnity payment decisions.

Straight-Through Processing Straight-through processing (STP) defines the fully automated, end-to-end execution of a defined process from initiation to resolution — without any need for re-keying or manual intervention.

In the property and casualty claims handling world, this definition of STP is sometimes interpreted to imply the fully automated endto-end handling of the claim with no human touch — a difficult task for even the simplest of claims. Think of the various steps and number of potential parties to a claim involving a simple windshield loss. Such a claim requires

42 Canadian Underwriter June 2011

reporting, coverage verification, qualification for repair or replacement, scheduling, deductible assessment, payment and recovery evaluation and any pursuit.

This does not mean STP has no home in the property and casualty claims world. However, care should be taken in defining how and where STP is engaged in the handling of property casualty claims to ensure maximum cost- effective, efficient, timely and service-sensitive benefit.

Define the Journey, Choose the Right Vehicles A highly efficient and seamless journey does not need to be accomplished in a single step, or even with a single vehicle, and STP does not require this. The key is to define the journey as a series of logical segments and sub-segments that are STP-executable. This involves creating an environment that seamlessly aligns the appropriate hand-offs at the correct times, and with the information the next task requires to execute its actions.

Using our windshield example, the process starts with our insured contacting a customer service call center. The insured’s loss report is documented. Coverage is confirmed through a simple policy system interface. The answer to the question “repair or replace?” is determined by means of a question or two about location and size of the damage. This last step can also include a short series of questions to

inquire about recovery opportunities.

A hand-off is then made to the repair vendor, who schedules and completes the work and collects the insured’s deductible as appropriate.

The claim is then handed to the insurer for payment of the vendor and recovery pursuit if indicated. Depending upon the insurer’s loss-reporting structure, this may be the first and only claim-related process the insurer’s claim team actually undertakes. And it’s not incomprehensible that, assuming appropriate service level agreements and audit criteria are in place, the entire process could be undertaken without any insurer claims professionals involved. A simple policy interface to confirm coverage and a simple financial interface to enable vendor payment may be all that’s required.

Thus, efficient and highly effective STP in no way implies the entire process needs to be under the tight, real-time control of the insurer. Nor does it require insurer employees to be involved in each step of the process.

Rather, the viability of STP of a particular process is determined by how the process is defined in terms of cost and service effectiveness. This takes into account the timeliness, efficiency and accuracy of the hand-offs.

Hand-offs Require Hand Shakes, Not Hands STP implies no touch. In reality, this means no human touch. Thus, for STP to be effective in the claims handling world, all technology systems involved in the STP process must be able to communicate with each other.

Unfortunately, not all systems used in the claims chain are of the same age, written in the same language or have the same capacity for ease of integration. Within a single insurer’s claims operation, several systems may be written in non-standard proprietary formats, making their integration in to an STP workflow more difficult.

In analyzing existing processes that seem ripe for STP, examine the architecture of the involved systems with an eye

for ease and flexibility of integration.

Trying to jam together highly disparate system architectures and codes may not be worth the time, effort and money when compared to claims processes supported by more modern systems.

For future STP system selections, look for applications that offer the combination of ease of system inter-operability and extensibility within your required parameters of speed, accuracy, standardization, stability and security.

This issue of non-standard formats is highlighted when you are seeking to include external claims business partners in STP workflows. In this instance, your examinations must include the systems in use by your selected claims business partners. This is a rapidly advancing area, given insurers’ stated intentions of moving towards more business process outsourced (BPO)supported workflows and environments. In fact, analyst firm Celent’s report “Approaching the Boiling Point: BPO, SaaS in Insurance,” published on Nov. 24, 2010, indicates core systems BPO is heating up. The report notes 36% of insurers surveyed expecting their use of BPO to increase in 2011.

Remember: Claims Evolve Many insurers’ claims STP efforts have their roots in the results of their underwriting STP initiatives. In the underwriting area, dramatic improvements have been achieved in “hands-free” policy processing: lowering costs, increasing and accelerating through-put and reaching a reported 100% STP for certain types of simple policies. In some instances, the need for certain types of policy processing support roles has been completely eliminated.

These are certainly strong results. But it is important to remember claims are different. They evolve in ways that the rate, quote, bind, issue and bill processes surrounding policy issuance or renewal do not. Therefore, in claims STP, it is critical to have methods for determining whether or not an STP supported workflow is appropriate to handle an evolved claim. In certain situations, an

STP supported workflow might actually create a negative claims situation.

For example, if an automobile medical payments claim is underway, and the medical report attached with the first submitted bills reads “hurt on the job,” this claim needs to be removed from any STP flow and placed in to a “needs further investigation” flow. The medical payments coverage may not apply, and payment under the terms and conditions of that coverage would likely be in error. Similarly, if the medical-only workers’ compensation claim is reported as “strained back,” but the medical coding of the diagnosis and treatment are more fitting for a burn, this claim should be flagged for further review.

Fortunately, robust, data-driven business rules can augment the STP claims environment, by analyzing thousands of claim-handling-related transactions and plucking out claims that don’t fit the pattern.

Additionally, rapid advancements in predictive analytic technologies can enable more and better claims pattern recognition, further aiding the insurer in determining which claims belong in and might benefit from STP- enabled processes. These advancements can also help design STP processes, as well as identify claims that belong in the hands of their experienced claims professionals. Over time, this enables maximum value of both STP and adjuster-handled claims: each is handling claims appropriate to their maximum areas of strength and effectiveness.

And, of course, STP-supported claims workflows should be routinely audited for consistency and accuracy and modified as needed.

Conclusion Marvelous opportunities exist for insurers’ claims organizations to deliver real and sustainable benefit to their enterprise and their policyholders via STP-enabled claims handling workflows. Due diligence, out-of-the-box thinking, modern standards and modern tools are all required to make the journey successful.

June 2011 Canadian Underwriter

43

Auto Reforms and Broker Liability Jennifer Faircloth

Partner, Borden Ladner Gervais LLP

Ontario’s introduction of its new standard auto insurance policy in September 2010, and new statutory accidents benefits now available as a result, give consumers more options to customize their coverage. At the same time, the reforms ostensibly insulate insurers against increasing accident benefit costs, particularly related to minor injury motor vehicle claims. Other jurisdictions have implemented statutory reforms limiting general damages awardable in minor injury claims; nevertheless, most provinces are watching Ontario’s reforms with interest, to see whether those reforms achieve the intended effect of keeping auto insurance affordable while curbing the excesses of the accident benefit costs.

While there is no question the new reforms allow customers more choice and the

44 Canadian Underwriter June 2011

A Broker’s Duty of Care Fine’s Flower’s Ltd. v. General Accident Assurance Co. of Canada established in 1977 that a broker will be held to the standard of care of the “intelligent insurance agent who inspects the risks when he insures them, knows what his insurer is providing, discovers the areas that may give rise to the dispute and either arranges for the coverage or makes certain that the purchaser is aware of the exclusion.” Fletcher v. Manitoba Public Insurance Co., the leading case on broker liability in the auto insurance context, amplified on the Fine’s Flowers principles in 1990. Fletcher definitively established that brokers owe a stringent duty both to avoid and advise of gaps in coverage. The Supreme Court of Canada was clear: “…private insurance agents owe a duty to their customers to provide not only the information about available coverage, but also advice about which forms of coverage they require in order to meet their needs.” The positive onus is on the broker to understand fully the risks of each individual customer, to determine what coverage that cus-

Illustration by Jillian Ditner/ www.i2iart.com

Adhering to best practices will help to reduce a broker’s exposure to liability following the introduction of Ontario’s auto reforms.

opportunity to tailor their coverage to their unique insurance needs, the unintended effect of the reforms may be increased exposure to broker liability and the greater likelihood of professional negligence claims.

tomer needs and to provide counsel and advice. This obligation is no different when assessing and determining optional standard benefits.

Many practical means of limiting exposure amount to no more than adhering to best practices that should be followed no matter what type of insurance is being placed.

Broker Practices The advent of auto insurance reforms and the possibility of further auto insurance reforms in other jurisdictions do not change the legal definition of a broker’s standard of care. But the reforms may require changes in brokering practices to protect against the possibility of professional negligence claims.

For example, brokers will likely need to spend significantly more time information gathering at the application and renewal stage of the placement process to understand fully each customer’s auto insurance needs. They will also need to spend additional time both explaining the optional coverages available and providing advice around coverages that would be of benefit.

A broker cannot presume customers will have an understanding of the optional coverages, despite the public awareness campaign and mandatory mailings of the Financial Services Commission of Ontario (FSCO) and the Insurance Bureau of Canada (IBC), which explained the changes in the standard auto insurance. Nor can a broker rely solely on having sent the mandatory mailings to fulfill his or her obligation to explain the optional coverages and the differences in the standard auto in46 Canadian Underwriter June 2011

surance. As the court noted in Fletcher: “Subtle differences in the forms of coverage available are frequently difficult for the average person to understand.

Agents and brokers are trained to understand these differences and to provide individualized insurance advice.

It is both reasonable and appropriate to impose on them a duty not only to convey information but also to provide counsel and advice.”

Limiting Liability So what can brokers do to limit their exposure to liability and professional negligence claims? Many practical means of limiting exposure amount to no more than adhering to best practices that should be followed no matter what type of insurance is being placed. Know your customer and understand their risks and insurance needs. Know your product. Keep the customer informed at all times. Document everything. These types of best practices not only help to avoid professional negligence claims but, if performed consistently, allow defence counsel to present the strongest possible defence against a potentially unmeritorious claim.

Specific to the auto insurance reforms, legal counsel are recommending some practical tips brokers can implement to mitigate against possible professional negligence claims. They include: • Mail out the FSCO and IBC mailings on every account, but do not rely on that mailing to fulfill your duty to advise every customer about the optional benefits available. Be sure to explain the optional benefits with each customer at application or renewal. Also, have each customer confirm in writing both that the optional benefits have been explained and that the coverages placed were those the customer selected.

• Follow a detailed written process of information gathering to ensure each customer’s insurance needs and risks are fully explored and understood, so that appropriate coverage advice can be given.

• Fully inform yourself about the

optional benefits and when they might be of benefit to consumers.

• When explaining the standard optional benefits, use examples to illustrate when certain coverages might be beneficial.

• Maintain customer contact and regularly reassess the adequacy of a customer’s auto insurance coverage.

• Keep notes of every customer contact, including any telephone messages left.

Professional liability claims in general

— and those against brokers specifically — have significantly increased over the past 20 years. Based on this trend alone, we can expect the introduction of the auto insurance reforms might result in more claims being made against brokers — especially around the explanation, advice and recommendations related to the standard optional coverages.

Very few legal avenues can prevent an unmeritorious professional negligence claim from being commenced in the first place, but following best practices when brokering auto insurance within the new auto insurance reform regime is the best way of mitigating this new exposure to liability. It will also provide the best possible evidence with which to successfully defend those claims.

Repairing Construction Canada’s insurance industry faces an exposure of up to $1 billion related to repair of building construction defects. The industry can take positive steps to help in the mitigation of this exposure.

Stephen Blaney

President, Kleinfeldt Consulting Limited (KCL)

John McGlone

Principal Engineer, Kleinfeldt Consulting Limited (KCL)

Engineers and building scientists accept that the performance of modern buildings is a very technically complex topic from virtually every perspective. Even relatively small buildings contain more components than a jet aircraft.

And because they are essentially “one-off prototypes,” it should not come as a surprise that there might be defects in the finished product.

However, buildings are also extremely expensive. When they fail to function as intended, the legal and financial implications are often greatly underestimated.

We are spending well over $1 billion a year to repair defective construction in Canada. We can expect the cost of construction, operation and maintenance of buildings to increase over the next decade and beyond. Predictably, therefore, we can also expect to see an increasing trend towards seeking legal recourse related to building defects.

The issue is a serious concern for both the insurance industry and the construction sector as a whole. The loss costs required to repair defects in new and existing construction engage the interests of insurance companies, brokers, risk managers and claims adjusters alike.

Expectations of the Indoor Environment In addition to becoming more complex and intricate, buildings are also tremendously important to Canadians. As a nation, we are 80% “urbanized” and spend 90% of our time indoors. The building industry is Canada’s largest industry. Canada invests more in per capita construction than virtually any other country in the 48 Canadian Underwriter June 2011

world, with the exception of Scandinavia and Iceland. Our expectations of the indoor environment are also extremely high.

As a result, the expectations of building owners regarding the quality of construction have elevated considerably over the past 20 years.

Owners have gradually come to expect highquality, problem-free buildings that do not demonstrate any apparent defects. It is apparent that owners are much more inclined to submit claims to recover costs for perceived or actual deficiencies. And when defects are identified, lawyers will, as a matter of course, advise their clients to take action accordingly.

Typically, certain projects experiencing catastrophic failure — the Hyatt Regency Hotel walkway collapse in Kansas City, Missouri, for example, or the Concorde overpass collapse in Montreal — receive much greater forensic attention than projects experiencing what might be described as “routine” failures such as cost overruns and/or contractual claims for defective construction.

Even though we are able to learn specific lessons about how and why failures occur, and what could have been done to prevent them, the construction industry is still plagued by significant quality control problems. Currently, countries such as the United Kingdom, Norway, Australia and Canada are actively investigating ways to improve the overall performance of their construction industries on an ongoing basis.

Research shows a major factor contributing to cost and time overruns on projects is related to repair of construction defects (rework). In some situations, cost overruns or defects can be traced

to lack of communication between the client, designer and the end-user, as well as a number of other factors described in greater detail elsewhere.

Cause and Effect Research shows unintended deviations from standardized building practice have a significant impact on quality control. And they are often not identified until the project is underway — or completed. In addition, many buildings have defects that may not be immediately apparent when they are put into service.

Other problems include inadequate understanding of the building code, lack of knowledge and experience regarding good building practice(s) for both construction and design. The failure to properly commission the building is also a common omission.

Building commissioning is the process of verifying that all of the subsystems such as HVAC, plumbing, electrical, fire/life, lighting, wastewater and security systems, meet the owner’s project requirements.

In the construction sector, the doctrine “time means money” is deeply entrenched. As a result, over the past 60 years we have seen a significant compression of design and construction schedules.

This compression results in “overlap” of activities, thus increasing the likelihood of time and cost overruns.

This, in turn, magnifies the potential for the occurrence of defective or non-conforming construction.

Regarding the design and construction of the building envelope, the authors are acutely aware of certain issues that have not received adequate attention.

For example, over the past 20 years, claims for construction or operational deficiencies of the building envelope — walls, windows, roofing and foundation — have increased dramatically.

It is now to the point where these deficiencies make up about 70% of all identified defects. Most of the defects are related to moisture penetration or

accumulation within the building envelope systems.

Damage incurred within the building envelope is considered to be one of the most problematic issues in the industry. However, despite the fact we know how to prevent these moisture problems, measures to prevent moisture damage have not been widely adopted, primarily due to cost-cutting.

Also, the tendency to adopt the collective mindset of “next bid, next project” often results in a failure to undertake design reviews, mock-up testing and adequate onsite quality control.

It should be pointed out that a very large percentage of defects are either not detected or overlooked, leaving underwriters at risk for claims for repairs that become apparent at some point in the future.

Design Teams Should Include Building Scientists We would not consider constructing a building without the participation of engineers and/or architects. However, in most cases we continue to construct buildings without the input of professionals specializing in building science.

Building scientists concentrate on examining all of the building systems throughout its service life. They work to ensure maximum compatibility between sub-systems in the Canadian climate. They also possess the expertise to eliminate or substantially reduce moisture-related problems from occurring.

Lightweight Building Envelopes Unlike the robust solid masonry walls used in past construction, modern building enclosures now often consist of multiple layers of “lightweight” construction materials, each serving a very specific function. As a result, in order to resist penetration and/or absorption of moisture, careful detailing and construction is essential to ensure adequate performance.

Unfortunately most of the designs we see do not take into account the complexity of using these systems for the wide range of climate conditions in

Canada. In many cases, a lack of continuity results from using four different layers and because there are literally thousands of transitions, interruptions, penetrations and wall/window intersections. Many modern buildings use sealants around such penetrations (face seal construction) and sealants do not reliably or adequately accommodate differential movement over the required service life of the assemblies.

Reducing Exposure In a paper published in the Journal of Construction Engineering and Management, Professor Peter Love of the Edith Cowan University in Perth, Australia — a country with a construction industry and a building science background very similar to Canada — determined the total cost of “rework” or repair of defective construction was 12%.

Statistics Canada reported that capital expenditures for all construction sectors including residential housing in Canada totaled $21.1 billion in 2009.

If we apply 12% to this total construction cost, the cost of repairing defective construction in Canada covering a 12-month period would be well over $1 billion.

This total potential exposure (if claimed) could be greatly reduced by applying accepted building science principles (including adequate onsite quality control measures), enforcing existing building code regulations and demonstrating a degree of discipline with regard to issuance of building permits.

It’s worth noting that contemporary consumers insist on quality. In other sectors of our economy, if the manufacturer or service provider fails to deliver quality, they will quickly lose their market share.

In our experience, the insurance industry can guard against losses due to repairing defects in new and existing construction by anticipating the pattern of defects, adequately managing their risk and by thoroughly evaluating claims for defects to let the fault lie where it may.

June 2011 Canadian Underwriter

49

Direct writers maintain technology favours them in their competition with the broker channel.

Editor

Direct writers in Canada are holding up the banner of technology in their ongoing battle with the broker channel for market share.

“Technology does favour the direct model,” says Sylvie Paquette, president and CEO of the direct writer Desjardins General Insurance Group. “Technology makes it possible to provide a more consistent and better customer experience. And technology is empowering the customer.”

Paquette spoke to a packed house of more than 100 people attending the Insurance Institute of Ontario’s At the Forefront breakfast series in Toronto on May 12. The topic of her speech was ‘Direct Insurance: An Idea Whose Time Has Come.’

Paquette noted the results of a survey by PricewaterhouseCoopers, released in December 2010, suggesting that Canada’s independent broker channel is losing market share to the

50 Canadian Underwriter June 2011

direct channel at a rate of roughly 0.43% per year. According to PwC’s Insurance Review: A Canadian Perspective, the independent channel’s market share of 64% in 2009 will drop to about 60% by 2019. This is based on data obtained by applying linear regression to net premiums written in Canada over the last 11 years, PwC reports.

The study is insensitive to the effects of market cycles, it should be noted. Brokers have always maintained that direct writers tend to flourish in soft markets, but lose market share during hard markets, which typically feature higher premium pricing and reduced coverage.

Still, even brokers in Western Canadian provinces with public auto regimes — which have historically distributed auto insurance products and services almost exclusively through the broker channel — have seen directs make inroads into their markets. And technology has

Illustration by Jillian Ditner/ www.i2iart.com

David Gambrill

Eating Another Channel’s Lunch?

APPOINTMENTS

Jean Dubois, BBA, MBA, FCIP, CRM, TPI

Derrick Hughes, BA, FCIP, CRM

John R. Mulvihill, President and Chief Executive Officer, and the Board of Directors of The Boiler Inspection and Insurance Company (BI&I) are pleased to announce the following executive appointments.

Jean Dubois has been appointed to the position of Vice President of BI&I. Mr. Dubois manages our Quebec-based Client Company business. He is based in Montreal where he also oversees the Montreal Branch operations. He holds a BBA from Laval University, an MBA from the Université du Québec à Montreal, is a CRM and a Fellow Chartered Insurance Professional.

Derrick Hughes has been appointed Vice President of BI&I. Mr. Hughes oversees the assumed business with many of BI&I’s largest Client Companies. He is also responsible for executing BI&I’s national marketing strategy. Derrick Hughes holds a Bachelor of Arts

David Pivato, P. Eng, FCIP, CRM

David Pivato has been appointed Assistant Vice President of BI&I, responsible for BI&I’s underwriting and reinsurance risk management program. Mr. Pivato joined BI&I in 1991. He is a Professional Engineer and holds a Bachelor of Applied Science in Mechanical Engineering from the University of Toronto. He is a Fellow Chartered Insurance Professional (FCIP) and holds a Canadian Risk Management designation.

Barbara Hanley has been appointed Assistant Vice President of BI&I. Ms. Hanley joined BI&I in 2005 and oversees both the Inspection and Head Office Engineering Departments. Ms. Hanley has many years experience in the chemical industry as an engineer, manager and in the licensing of technology.

Ms. Hanley holds a Bachelor of Chemical Engineering degree from Lakehead University, an MBA from York University and is a Chartered Insurance Professional.

degree from Trent University, Chartered Insurance Professional (CIP) and Fellow Chartered Insurance Professional (FCIP) designations from the Insurance Institute of Canada, a Canadian Risk Management designation and a Management Certificate from the University of Toronto.

BI&I is Canada’s leading equipment breakdown insurer. BI&I helps insurance partners and brokers reduce policyholder risk through a unique combination of specialty insurance, engineering-based risk management and loss control services. www.biico.com

Barbara Hanley, P. Eng, MBA, CIP

had a hand in this. Internet use, 1-800 telephone services and expanded access to vehicle licensing services in two Western provinces have created opportunities for banks and direct writers to compete in provinces with public auto systems, brokers noted at the annual general meeting of the Insurance Brokers Association of Alberta (IBAA), held in Jasper, Alberta on May 16.

DireCtS aND teCHNoLoGy Paquette believes technology favours the direct channel for three main reasons: • Using technology such as predictive analytics allows direct writers to segment their data better. This in turn allows for more accurate underwriting and pricing, leading to lower loss ratios. It also allows direct writers to keep their expense ratios lower than that of brokers. By keeping loss and expense ratios low, direct writers will have more money to invest in technology and marketing.

• The direct model, in tandem with the benefits of technology, allows direct writers to manage the customer experience better, Paquette says. Since directs sell only their own product, when customers interact through the insurer via 1-800 numbers and the Internet, they receive faster quotes.

Also, since direct agents are all trained and coached on the same product, the consumer receives a more consistent experience, including information and service.

• Finally, a direct insurer’s use of technology, including phone, mobile and Internet services, more naturally fits the way consumers are buying service products. Paquette notes, for example, that consumers are much more frequently using electronic methods to make travel arrangements, do their banking and even read (i.e. using e-readers in place of printed books).

“Internet sales and services are a much more natural fit for direct insurers, as we see from offerings on the Net,” she says. “I think it’s clear that technology — and in particular, the Internet — favour the direct model.”

52 Canadian underwriter June 2011

teCHNoLoGy aiDiNG DireCtS iN pUBLiC aUto Certainly in the current market environment, brokers are working hard to capitalize on the benefits of technology. Broker associations in Ontario, New Brunswick and Nova Scotia, for example, have each launched online services that allow consumers to find a broker easily and/or obtain a quote online.

But it’s not always easy. Alberta’s broker association spent roughly two years trying to find a ‘made-in-Alberta’ online quoting solution, and ultimately abandoned the project at their annual general meeting in May 2011.

Also at the IBAA meeting, broker associations in Saskatchewan and Manitoba — provinces with public auto regimes — noted governments there have started to open vehicle licensing to directs and/or offer online services for consumers.

Barry Seabourn, vice president of the Insurance Brokers Association of Saskatchewan (IBAS), noted brokers currently handle 92% of Saskatchewan’s underwritten insurance business. But in September 2010, Saskatchewan Government Insurance (SGI) opened up vehicle license and issue appointments to insurance companies and bank-owned and direct writers. One month later, SGI launched online customer service for auto renewals.

“The extensive new changes will no doubt create renewed interest in our province from direct writers and more competition for our member brokers,” Seabourn said in his address to the IBAA. In Manitoba, the public insurer, Manitoba Public Auto Insurance (MPI), announced a five-year license and policy renewal process effective in March 2010. Manitoba drivers are now able to renew their licenses and vehicle insurance online each year.

Consumers now have to visit an Autopac [insurance] agent once every five years, instead of once each year.

This kind of access to online vehicle licensing services in Manitoba

has created an opportunity for directs, said Curtis Wyatt, vice president of the Insurance Brokers Association of Manitoba (IBAM).

“As a government-run auto province, we [brokers] often felt in some ways that we were protected by government auto versus the direct writers,” he said.

“Barry’s comments [about the situation in Saskatchewan] are very true, and that change is coming in quickly.

“The use of the Internet and 800-numbers has brought direct writers into Manitoba.”

The effect is somewhat different in Manitoba, Wyatt added, because home and auto insurance policies in the province are not as frequently

linked together as they are in other provinces. Consequently, if consumers can buy their driver’s licenses and renew their auto insurance policies online, without needing to see a broker as frequently, the consumer will have an increased opportunity to go outside the broker channel to buy their home insurance policy as well.

Brokers can compensate for this by proactively maintaining contact with those consumers, so as not to lose market share to direct writers in the home insurance line.

Regardless, it is clear that technology is now viewed as a marketing weapon to be wielded in a competition for market share.

Congratulations to our Change For Change Winners!

WICC Ontario is pleased to announce Baird MacGregor, DAS Canada and RSA as the first quarter winners of our Change For Change industry challenge.

The impressive fundraising efforts of these companies have significantly helped us reach our annual goal of $20,000 and takes us another step closer in our efforts to make cancer history.

There’s still time to join the challenge. Visit our website www.wicc.ca for details on sign up and contest rules.

Thank you for joining WICC’s Fight Against Cancer.

Design compliments of Informco

Defending

Property Vendors Michael S. Teitelbaum

Senior Partner, Hughes Amys LLP

An Ontario court decision found an insurer has a duty to defend a property vendor after the sale of the insured’s home. It also suggested new wording for an “owned property” exclusion that might prevent similar situations from occurring in the future.

In Hector v. Piazza1, Ontario Superior Court Justice Peter Annis recently found a homeowner’s insurer, Axa Insurance Canada, has a duty to defend an insured who sold his apartment building, after it had been renovated, to the plaintiff.

The plaintiff sued for damages arising from the settlement of the foundation. The allegations against the defendant insured included negligent supervision of construction work and breach of contract in respect of the sale.

The court found the allegations of negligence were not derivative of the contract for the purchase and sale of the property, and that the “owned property” exclusion in the insured’s policy did not apply.

54 Canadian Underwriter June 2011

This decision appears to be another step along the road first paved by McGrimmon v. Personal Insurance2, which found a duty to defend the vendor in a property sale claim. However, the Hector decision may also contain a solution for insurers in terms of policy language that might avoid such claims.

Background The insured, John Baptist Piazza, originally acquired the property in October 2001 for the purpose of renovating it, but played no role in the work involved in the renovations. The property was sold to the plaintiff, Daniel Hector, in January 2006. Hector sued in 2009. Piazza was insured by Citadel Insurance, Axa’s predecessor, followed by General Accident, now Aviva, and then by Dominion between October 2001 and January 2006, when the property was transferred to Hector.

In addition to the issue of whether it is obliged to defend, Axa also raised whether the other insurers were responsible for sharing in defence and indemnity. Since the other insurers were not before the court, the court was not in a position to address this point. The insured indicated a willingness to co-operate with Axa in this regard.

Hector appears to be another step along the road first paved

by McGrimmon v. Personal Insurance, which found a duty to defend the vendor in a property sale claim.

The statement of claim alleged negligent construction, negligent misrepresentation and breach of contract. But the negligent misrepresentation allegations “play[ed] no role” in the motion.

The allegations of negligence were directed at the negligent renovation work on the building and, in particular, negligent supervision, lack of inspection and failure to deal with deficiencies. The insured based his claim for a duty to defend on these pleas.

The breach of contract claim alleged representations that the plaintiff characterizes as warranties and “presumably some contract terms of the agreement for purchase and sale which are not specified.”

The coverage grant in Axa’s policy afforded coverage for “compensatory damages because of property damage caused by an accident.” The policy included an exclusion for “property damage to…property owned or occupied by or rented to the insured.”

Justice Annis addressed the following two issues: • whether the plaintiff’s claim in negligence was derivative of the contract for purchase and sale of the property; and • whether the insured’s claim for coverage was excluded by the terms of the policy.

A Derivative Claim?

On the issue of whether this was a derivative claim, Axa argued that without the contract for purchase and sale of the property, there could be no action commenced by the plaintiff. The court noted that for a claim to be derivative, “both claims must arise from the same actions and cause the same harm. If the underlying elements are sufficiently disparate the two claims are considered to be unrelated.”

Justice Annis rejected the insurer’s argument, concluding that a “negligence claim is not derivative of one in contract merely because the conditions necessary for the negligence claim to be brought, i.e. ownership of the property, arise from the effects of the contract.”

The court held that for one claim to be derivative of another, “significant constituent elements and circumstances of the derivative claim must be subsumed by the dominant

The insurer argued the plaintiff’s negligence claim could not proceed in the absence of a contract for purchase and sale of the property.

But the court found the negligence claim was not derivative of the contract for purchase and sale of the property. one such that its pith and substance can be said to be incorporated in the other.” It further noted it would be a challenge to convince a court that a negligence claim is subsumed in a contract claim, “unless the contractual duties are generally the same as alleged to arise in the duties of care in negligence.”

“That is not the case here,” Justice Annis concluded. “In the plaintiff’s pleadings, very disparate causes of action are raised with different constituent elements with different stipulations as to the conduct giving

rise to liability and providing for reparation. This was not a contract for the construction or renovation of the building. It was one for the purchase of the property where the warranties and representations are the essence of the contract. There is no basis, therefore to conclude that the claim of negligence pleaded in the statement of claim in this matter arises from the same actions and causes the same harm as the claim in contract.”

“Owned Property” Exclusion On the issue of the “owned property” exclusion, Axa relied upon the McGrimmon v. Personal decision. In it, the Court of Appeal affirmed the motion judge’s decision that the exclusion in that case — which read “damage to property you own” — was ambiguous and therefore did not apply. Justice Annis found comments made by the motion judge in McGrimmon — who wrote that if the “past tense had been employed in the exclusionary words,” then no coverage would be available — were obiter dicta and not binding upon him.

Thus the issue was whether, having used the past tense “owned” in its exclusion, Axa was entitled to rely upon the “owned property” exclusion, whereas the insurer in McGrimmon — which had used the present tense “own” — could not.

Piazza argued the exclusion was also ambiguous in this instance, because it may be interpreted to refer both to the present and past tenses of ownership. For example, if a claim had been made while the property belonged to the insured, an exclusion for damage to “property owned by the insured” would be caught by the wording, as would the situation after

June 2011 Canadian Underwriter

55

The court said: “...an unambiguous exclusion clause would refer to property that the insured ‘owns or owned.’ This would deny coverage for damage to the property both when the insured owns the property...and after the property had been transferred.”

the property had been transferred to a new insured. Piazza submitted the subject exclusion should be interpreted to refer only to present ownership. This is because the “obvious intent of the liability provision is to insure against claims by third parties for damage to their property…[and not] to insure for damage against the insured’s own property when he was the owner.” The risk of damage to the insured’s own property when he was the owner would be covered by property insurance.

The court agreed with the insured’s submissions, noting that there would otherwise be an “unforeseen coverage gap not contemplated by the parties at the time they entered into the agreement” if third party liability claims such as the claims made by the plaintiff in this instance were denied.

Justice Annis also agreed with the insured’s submission that it is “difficult to reconcile the language of the exclusion with the two different scenarios of preventing claims arising from damage to the property when owned by the insured and when owned by a subsequent transferee.”

In the words of Justice Annis: “In my view, an unambiguous exclusion clause would refer to property that the insured ‘owns or owned.’ This would deny coverage for damage to the property both when the insured owns the property, which appears to be the time frame historically contemplated by the purpose of the clause, and after the property has been transferred.”

Justice Annis also rejected Axa’s submission that the exclusion could 56 Canadian underwriter June 2011

CoMMeNt As indicated, this case takes the McGrimmon decision one step further.

The court found the exclusion in Hector was insufficient to eliminate coverage, including coverage for property sale-related claims. Given the nature of the allegations made in the statement of claim, the court essentially found that since certain of the claims had to be defended, all of them did — including those made against the vendor with respect to the sale of his property. The negligence allegations relating to the repair of the property were enough to attract a defence obligation, even though this means the insured is also being defended with respect to the breach of contract claim relating to the sale itself. There was no The court found the as to whether these claims exclusion in Hector [for analysis could be considered separate enough ‘owned’ property] was to warrant defence costs allocation.

That said, the court also suggested a insufficient to eliminate possible solution for insurers in terms coverage for property of policy language that might avoid sale-related claims. such claims. Instead of using in the “owned property” exclusion — employing the present tense “own,” as context and its relationship to first- was done in McGrimmon, or the past party property coverage, the exclusion tense “owned,” as was done in Hector does not appear to have been intended — Justice Annis suggested that if both to apply to situations where the prop- words are used, then the exclusion erty was transferred to a third party.” would be unambiguous and would That said, Justice Annis stated he was exclude the claim. In the future, in“not required to rule on the point,” surers may wish to consider using the because it was sufficient for him to wording proposed by Justice Annis in find the insurer had not demonstrated their policies. that the exclusion clearly and unam1 Hector v. Piazza, 2011 ONSC 1302 biguously excludes coverage.

2 McGrimmon v. Personal Insurance, [2010] O.J., No. 33 In the result, the court found Axa (Sup. Ct.), aff’d [2010] O.J. No. 2423 (C.A.) 3 was obliged to defend the insured.

Progressive Homes v. Lombard, 2010 S.C.J. 33 only apply to situations after the property was sold, since the coverage is by definition available only in respect of third party claims. He noted that Supreme Court of Canada Justice Marshall Rothstein in Progressive Homes v. Lombard3 concluded that the term “property damage” contains “no limitation to third-party property.”

Therefore, the purpose of the ‘owns or owned’ clause would be to “head off possibly turning third-party coverage into first-party insurance.”

“If forced to interpret the provision, I would likely adopt the insured’s submissions,” Justice Annis wrote of the insurer’s exclusion. “In its historical

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Bye, Bye Portals

Streamlined upload functionality is becoming the order of the day, and company portal technology is falling by the wayside.

Karl Greenlaw CEO, Brovada Technologies Inc.

The property and casualty insurance industry isn’t exactly known for its groundbreaking changes, but recent technological advances have altered that stereotypical perception. Given recent advancements towards a once-and-done model, in which brokers work almost entirely within their respective broker management systems (BMS), change is rapidly affecting the way business is conducted. Industry groups such as the Organization of Real Time Brokers Implementing Technology (ORBiT) and the Insurance Brokers Association of Canada (IBAC) are providing a common voice for brokers that seek a streamlined interaction with the insurers with which they work. IBAC specifically is pushing for once-and-done technology adoption for endorsement uploads.

Portals and Their Limitations Traditional transactional portals only exaggerated the problem for brokers seeking to improve productivity in order to compete properly with low-cost direct writers. By having to use several Web portals to transact business with individual insurers, as opposed to sending faxes

58 Canadian Underwriter June 2011

or using EDI submission functionality, brokers were handicapped with excessive re-keying and training issues. That’s not to mention errors and omission vulnerabilities. Although using portals is sexier than using green-screenbased legacy systems, portals still represent a step backward in productivity. The argument has been made that by using portals as the initial input source, brokers would not suffer rekeying issues. That would be a fair assessment if the EDI downloads were reliable mechanisms for sending data back into the BMS. But as any broker will tell you, EDI download is not reliable. Add to that the cost of training employees on how to use each portal, as well as the lack of reuse when quoting to multiple, and any benefit quickly vanishes.

Many insurers have invested heavily over the years in providing portals to their distribution channels. As a sop to the broker, most insurers enabled some form of upload. This upload functionality varies across insurers with respect to the supported lines of business and transaction types. Most common is the inquiry transaction. Here, brokers are able to review information related to policy, claims, billing, etc., by way of a Web page or a pdf file.

Several insurers support new business submission to their portal through either an automated scripted approach or Web services.

The only real difference is that the scripted approach eliminates many of the training requirements for using a portal, since the navigation and workflow are driven through automation.

Putting the pieces together.

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

CIP Society Events and Seminars Moncton – Managers’and Supervisors’ Training . . . . . . . . . . . . . . . . . . . . . . . . . June 15

Edmonton – CIP Society Golf Tournament . . . . . . . . . . . . . . . . . . . . . . . . . . . . . August 22

Toronto – Advanced Business Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . June 16

Hamilton – CIP Society Beach Volleyball Tournament . . . . . . . . . . . . . . . . . September 1

Ottawa – PROedge Spring Luncheon . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . June 16

Regina – CIP Society Golf Tournament . . . . . . . . . . . . . . . . . . . . . . . . . . . . . September 7

Victoria – CIP Society Golf Tournament . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . June 22

Toronto – CIP Society Fellows’Golf Tournament . . . . . . . . . . . . . . . . . . . . . September 13

Halifax – CIP Society Golf Tournament . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . July 12

Ottawa – CIP Society Golf Tournament . . . . . . . . . . . . . . . . . . . . . . . . . . . . September 16

Moncton – CIP Society Golf Tournament . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . August 11

Ottawa – PROedge Seminar: Advanced Construction Contract . . . . . . . . . . . October 13

Keeping you at the forefront of the P&C industry.

The CIP Society. MEMBERS BENEFIT. www.insuranceinstitute.ca/cipsociety

Streamlined Approach to Uploads A handful of insurers have also used automated scripting to upload endorsements directly into their portals. Endorsements represent the most expensive form of inefficiency for a broker, since the transaction itself is an expense to the brokerage.

Thus, any cost savings generated by processing endorsements goes directly to the bottom line.

The number of transactions brokers are uploading to insurers by way of portal integration has increased exponentially over the last couple of years. Several insurers are receiving almost all of their business through the use of these upload functionalities. As pressure on the broker channel mounts as a result of the threat imposed by the direct model, brokers are becoming increasingly focused on productivity.

The upward trend in the use of upload functionalities will accelerate with the replacement of traditional portals with a streamlined approach that takes into account the desire and need of brokers to work from within their BMS as exclusively as possible.

This streamlined approach replaces the need for countless enterable pages with one page. This single page supports the capture of only companyspecific questions or a CSIO application approach in which all the information can be captured in one page. This versatility provides the brokers with ability to work either completely on one page, without extensive portal navigation, or from within their BMS with a very limited number of additional questions. This streamlined workflow saves valuable minutes over the traditional approach. Brokerages using insurers that have implemented this streamlined approach are biggest champions of driving further adoption of this method by other insurers. It has become very clear brokers prefer this approach, and the broker associations will continue to encourage the insurers to do away with traditional portals.

The Ideal World For brokers, the ideal scenario would be to eliminate the need to capture any additional data for any insurer.

No technological challenge prevents this, and perhaps one day this will be the case. But several issues present themselves. For example, who has the system of record? Also, carriers will insist on a way for insurers to differentiate themselves through the underwriting process; how might the system accommodate this?

Brokers are gravitating toward the endorsement upload using scripting technology, so it stands to reason that a streamlined portal endorsement upload will also be successful. So how is it possible to do an endorsement upload in Canada when this has not been achieved anywhere else?

The key is the use of standards in a way that facilitates a synchronization process at the same time the transactions are being uploaded. It’s also important to compare full images of the policies instead of relying on the deltas within the BMS, since the data may be out of sync or the delta is difficult to identify by the software.

Many insurers are quickly migrating to this model. And since it can run as a standalone option from the existing insurer Web site, it becomes a complete replacement for the traditional transactional portals. Brokers will increase their efficiency, and insurers will benefit from increased business because the broker associations will be calling on insurers to use this approach on behalf of their membership.

Another, larger area of growth related to this technology is within the consumer-to-broker/insurer model.

By using a streamlined workflow, consumers are more likely to complete the sale. On the other hand, with a traditional Web portal, each required field or navigational page becomes a potential hurdle preventing the policy from getting bound and sold.

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MOVES & VIEWS

upcoming events: for a complete list visit

www.canadianunderwriter.ca

and click ‘my events calendar’ on the home page

1

Alister Campbell, CEO and chief agent of Zurich Canada, has been elected chair of the Property and Casualty Insurance Compensation Corporation (PACICC).

Campbell has held his post at Zurich since October 2007. He has worked in the insurance industry for more than 25 years and has held senior executive positions in a range of capacities within the industry, including general management, marketing, brokerage distribution strategy, financial services and e-commerce.

He also sits on the board of directors of the Insurance Bureau of Canada, and is a member of the United Way of Greater Toronto Campaign Cabinet. PACICC is a nonprofit corporation with a mandate to protect eligible policyholders across Canada from undue financial loss in the event a member insurer becomes insolvent.

2

FirstOnSite Restoration has teamed up with the Bank of Montreal (BMO) to help speed up the process for homeowners in the province affected by flooding in

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Manitoba. Insurance is not available for overland flood damage, leaving homeowners to finance clean-up and rebuilding. The restoration company is working with the bank to help homeowners secure the appropriate financial resources so they can begin the rebuilding.

FirstOnSite will visit homes in the province to assess the damage and provide a cost estimate. BMO will then work with the homeowner to determine if they qualify for the type of loan needed to cover the costs so that restoration work can begin immediately.

3

The Guarantee Company of North America has announced nine appointments at the regional, national and branch levels.

The appointments include: • Richard Pouliot, vice president of Eastern Canada; • Frank Faieta, vice president of national claims; • Dean Bast, vice president of national Guarantee Gold, in addition to his current role as vice president of marketing and business development; • Ron Burns, vice president

1 of national standard personal lines; • Dick Longland, vice president of national commercial and developer surety, in addition to his responsibilities for surety within the central and Atlantic region; • Paul Hollingworth, vice president of contract surety, central and Atlantic Region; • Daniel Richard, vice president of personal lines for Quebec; and • Max Fratarcangeli, manager Woodstock surety, Woodstock.

4

Cunningham Lindsey Canada (CLC) has announced a series of appointments, including vice president of business development and two branch manager positions. Michael Butler [4a] joins CLC as vice president of national business development.

4a

6 Butler has more than 20 years of insurance marketing and sales experience in the property and casualty industry. Matthew Comiskey joins CLC as its Chatham, Ontario branch manager.

He has more than 15 years experience as an adjuster and previously worked for a family-owned business.

Robert Smith [4b] is CLC’s new branch manager for its Woodstock, Ontario location.

Smith has worked as an independent adjuster for more than 11 years, four of which he spent as a branch manager.

MOVES & VIEWS

opportunities and changes.

Pilot programs of Product Studio have shown productivity improvements that range from 40% to 80%, Duck Creek says.

4b

9

5

Duck Creek Technologies Inc. has launched a product development suite designed to improve efficiencies by allowing insurers to control all aspects of the insurance product development and maintenance process.

EXAMPLE Product Studio enables insurance product managers to model, manage, modify and monitor their products. It works in tandem with Duck Creek’s EXAMPLE Author, a product definition tool intended to reduce the time, cost and effort it takes to respond to market

6

Paul Davis Systems Canada Ltd. (PDSC) has appointed Bill Bradley as director of national business development. In his role at PDSC, Bradley will be responsible for new business initiatives in both the insurance and commercial/corporate market sectors. In addition, he will oversee marketing and national account management. He graduated from Wilfrid Laurier University in 1998. He completed his Risk Management Certification (CRM) in 2007, and has worked in the property restoration industry for the past seven years in both operational and sales capacities.

7

Consumers can now get insurance quotes online at avivacanada. com. “The new capability connects consumers to a local broker of their choosing (where available) and allows them to obtain a no-obliga-

tion insurance quote for their home or vehicle, all from the comfort of their home,” Aviva Canada says in a press release. “Offering an online quote makes insurance even more accessible for consumers,” Aviva Canada president and CEO Maurice Tulloch says in the release. “And by ensuring they purchase through a local broker of their choice, consumers will continue to benefit from all the experience, information and options a local broker provides.” Consumers who use the quote feature by July 31, 2011 have a chance to win a number of prizes, including $5,000 cash. As part of its global Street to School initiative to assist atrisk youth, Aviva will donate $1 to Free The Children for every completed quote (limit of one donation per person).

8

The Insurance Brokers Association of Ontario (IBAO) has launched a consumer Web site promoting a ban on the use of credit scoring in home and other personal property insurance. The site, www. soaringinsurancerates.ca, is an interactive site providing consumers with background

information on the issue, a press room complete with media clippings, an online petition and the ability to send a personalized letter directly to their MPP.

9

ClearRisk Inc. and the Insurance Brokers Association of Ontario (IBAO) have formed a strategic partnership aimed at bringing formalized risk management planning to IBAO members. Under the terms of the partnership, IBAO members are extended preferred pricing options for ClearRisk’s flagship product, ClearRisk Manager. The application includes functionality that allows insurance brokers to package and deliver risk management solutions easily to clients, helping them to attract and retain business.

“Many brokerages struggle with how to effectively provide these services to their clients,” said ClearRisk CEO Craig Rowe. “That’s why we built ClearRisk. We wanted insurance brokers to have an affordable way to provide their clients with risk management plans, risk maps and risk management resources — even if they have little to no risk management training.”

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GALLERY

The Property Casualty Underwriters Club (PCUC) held its Spring Thaw on Apr. 20 at the Rosewater Room in Toronto. The annual event added some sunshine to everyone’s day. Attendees warmed up to great company, cocktails, food and special entertainment.

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

June 2011 Canadian Underwriter

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GALLERY

The Ottawa Insurance Brokers Association held its OIBA Open House on Apr. 21 at the historic Aberdeen Pavillion in Ottawa. With more than 600 attendees, the event kickedoff with a ‘Free Education Seminar’ offering three free RIBO hours. The Open House included a large trade show, including a wide range of exhibitors from all segments of the industry. Organizers announced that, based on the success of the event, it was sure to become an annual addition to the calendar.

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June 2011 Canadian Underwriter

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

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

54 68 Canadian Underwriter May June 2011

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

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

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

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

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

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

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

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

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

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

INSURANCE LAW

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

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

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

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

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

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

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

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

APPOINTMENT

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

Trisura Guarantee Insurance Company celebrated their 5th Anniversary on Apr. 14 with a reception held in the lobby of their new premises at the Bay Adelaide Centre. The event was extremely well attended by their longstanding and supportive brokers.

Michael Butler

Cunningham Lindsey Canada Claims Services Ltd. Senior Vice President of National Business Development, Albert Poon, is pleased to welcome Michael Butler to Cunningham Lindsey as Vice President, Business Development.

Michael brings with him over 20 years of insurance marketing & sales experience in the property and casualty arenas.

“We are very excited to have Michael on board,” said Albert. “Michael is an extremely visible and active member of the Canadian insurance marketplace and we have always been impressed with his level of commitment to our industry. He is a true professional and we look forward to working with him as our newest member of our business development team.”

In his most recent position, Michael developed successful business relationships for a respected forensic engineering firm and states: “I am extremely pleased to be part of the Cunningham Lindsey team and look forward to the opportunities that lie ahead. As many industry members may know, Cunningham Lindsey is a leader in the claim services industry and a proud Platinum WICC National Sponsor, a charity which I am a member of the Board of Directors and one that is very dear to my heart! ” Working out of the sales and marketing office in downtown Toronto, Michael can be contacted at: 170 University Ave, Suite 903, Toronto, ON, M5H 3B3 T: 416-348-7613 C: 416-818-7708 E: mbutler@cl-na.com.

June 2011 Canadian Underwriter

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GALLERY

The Honourable Order of the Blue Goose International, Ontario Pond held its 11th Annual Scotch Nosing on Apr. 27 at the One King West Hotel & Residence in Toronto. The evening started with cocktails in The Vault, followed by dinner in the Grand Banking Hall. A record number of ganders and guests attended the event, enjoying an evening of fine dining, camaraderie and rare scotch samplings sponsored

by Glenfiddich. The evening raised close to $20,000, to be donated to Women In Insurance Cancer Crusade (WICC) and the Starlight Children’s Foundation.

The event was sponsored

by Blouin Dunn LLP, Vista Disability Management Inc., Masterclean Contracting and Cleaning, Modern Salvage Consultants, Giffin Koerth.

Thanks to the hard work of Laurel DiMaso, Jamie Dunn and Anna Galanter, along with all those who attended, the evening was a great success.

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

CAPTION CONTEST Submit your idea for the caption to Debby Matz at debbymatz@winmar.ca Winmar owners and employees are not eligible.

Prize: Gift Certificate to The Keg Steakhouse.

Winner to be announced in the next issue.

Winmar the full service restoration specialists with service locations across Canada Toll Free: 1-866-4-WINMAR (494-6627) • www.winmar.ca

June 2011 Canadian Underwriter

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

Crawford & Company (Canada) offered RIMS Vancouver delegates a little taste of Paris in the heart of downtown Vancouver. Brix Restaurant and Wine Bar set the stage for the evening.

Guests mingled on the 1912 Yaletown heritage building’s glass-covered courtyard before sitting down to a gourmet dinner.

72 Canadian Underwriter June 2011

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

FirstOnSite Restoration hosted a RIMS Vancouver luncheon at Joey Bentall One on May 3. On offer was FirstOnSite’s exclusive “Fire” martini; a luncheon buffet for invited guests; a chance to chat with members of FirstOnSite’s commercial division; and NHL hockey towels. The team from FirstOnSite wore hockey jerseys representing their branch locations across the country. Since RIMS took place during NHL playoffs, even the Toronto team towels were well received in Vancouver.

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GALLERY

Risk professionals from around the world came to Vancouver between May 1 and 5 for the 2011 Risk and Insurance Management Society (RIMS) Annual Conference and Exhibition.

The theme of this year’s conference was ‘Advantage: RIMS.’ Conference speakers included Apolo Anton Ohno, olympic gold medalist and winner of Dancing with the Stars, Stephen Dubner, author of Freakonomics and Superfreakonomics, and Ron Holton, vice president of risk management and assurance services for the Vancouver Organizing Committee 2010 Olympic and Paralympic Winter Games.

During the opening general session on May 2, RIMS presented Glen Frederick [1], the director of risk management client

services for the Government of British Columbia, with the prestigious Harry and Dorothy Goodell Award. The award is named in honour of the first RIMS president.

It recognizes an individual who has furthered the goals of the society and the risk management discipline though outstanding service and achievement.

Also during the general session, the inaugural class of the Risk Management Hall of Fame was introduced.The Hall of Fame is a joint initiative between RIMS and Chartis Inc. It recognizes people who have made outstanding contributions to the field of risk management. Two Canadians were among the 2011 inductees: Douglas Barlow, the Toronto-based creator of the first global insurance and risk management program at Massey-Ferguson; and

1

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Donald Barrett, the former manager of corporate affairs and risk management for Newfoundland and Labrador Hydro. The remaining inductees included Eldrich Carr, former manager of global risk management, Goodyear Tire and Rubber Co.; Cheri Hawkins, former assistant treasurer and director of insurance for Weyerhaeuser Co.; and John Pinner, former assistant treasurer of Mattel Inc. Accolades for Canadians continued at the RIMS Award Luncheon on May 2.

Janice McGraw [2], associate director of risk management and insurance at McGill University, and a member of RIMS’ Quebec chapter, received the Ron Judd Heart of RIMS Award.

The Heart of RIMS Award pays tribute to the legacy of Ron Judd, who served as RIMS executive director for

22 years. Individuals are nominated by chapters for outstanding performance in furthering risk management at the chapter level.

RIMS also paid tribute to its chapters that have grown their respective memberships during 2010. The Canadian ‘SuperStar’ Chapters,’ those who have achieved a growth of membership of 9% or more, included: * Northern Alberta; * Southern Alberta; and * British Columbia.

Canadian ‘Star Chapters’ that received special recognition during the Awards Luncheon for increasing their membership between 6 and 9% include: * Quebec; and * Canadian Capital.

ORIMS was presented with ‘Ontario Chapter Achivement Award - Organization Achievement - Social Events’.

1a

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

2

June 2011 Canadian Underwriter

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GALLERY

Hundreds of exhibitors filled the Exhibit Hall at the RIMS 2011 Annual Conference & Exhibition in Vancouver. Held at the Vancouver Convention Centre, the show floor bustled with thousands of delegates from throughout North America and around the globe. The booths offered unlimited opportunities for learning, networking and sharing.

76 Canadian Underwriter June 2011

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

advertisers’ index ACE INA Insurance The Boiler Inspection and Insurance Company of Canada canadianunderwriter.ca Catlin CNA Canada ClearRisk Compu-Quote, Inc. Cunningham Lindsey Canada Duck Creek Technologies FM Global Great American Insurance Group The Guarantee Company of North America Guidewire Software, Inc. Intact Insurance instouch.com Insurance Institute of Canada Keal Technology Policy Works RIMS Canada Conference - Ottawa Risk Management Services (RMS) – An SCM Company RSA – Royal & Sun Alliance Insurance Company of Canada Travelers WICC WINMAR

84 (OBC) 51 61 21 17 39 83 (IFC) 9, 61 15 13 27 29 23 7 57 5, 45, 60 31 35 47 19 2, 37 41 53, 59 71

June 2011 Canadian Underwriter

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GALLERY

Vancouver was host to the RIMS 2011 Annual Conference & Exhibition on May 1-5. The risk and insurance industry community took advantage of the exceptional beauty of the city and surroundings to hold and attend numerous receptions, special events, dinners and networking gatherings.

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

June 2011 Canadian Underwriter

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GALLERY

The 2011 RIMS Conference and Exhibition was held on ‘home turf’ in Vancouver, but that didn’t stop Canadian delegates from gathering for Canada Night, sponsored

by SCM Insurance Services and the Canadian Litigation Counsel. The event offered fellow Canadians a chance to catch up and sample appetizers with a Canuck flare, to the benefit of the William H. McGannon Foundation.

Larry Shumka, president and CEO of SCM, presented a donation of $10,000 to McGannon Foundation president and director Joe Restoule. RIMS also donated $50,000 to the foundation, bringing the total amount of donations to $60,000 for the evening.

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June 2011 Canadian Underwriter

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

proformance adjusting Solutions inc. hosted a Corporate Launch & Charity Wine tasting event on apr.

28. The evening, held at the drake Hotel in Toronto, included a silent auction, a 50/50 draw and great raffle prizes, including a weekend getaway. proceeds went to the Jennifer ashleigh Children’s Charity. wine tasting and hors d’oeuvres were available throughout the evening. Jennifer valentyne of Breakfast Television emceed the event.

82 Canadian underwriter June 2011

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