M AR CH 2018
Why Brokers Love APIs
PM#40063170
BY RICK ORR
Digital Insurance: Your First Step BY JEFF PURDY
Is Alberta Insurable? BY DAVID GAMBRILL
Connectivity is changing the business of insurance. It’s about access to information when, where and how you want it. That’s what consumers expect, your employees need and your business demands. Find out why more insurance brokers rely on Applied software to manage their business anytime, anywhere. At Applied, we are connecting the business of insurance. See how at appliedsystems.ca/connectivity appliedsystems.ca
CANADIAN UNDERWRITER
VOL. 85, NO.2, MARCH 2018 CANADA’S INSURANCE AND RISK MAGAZINE. PUBLISHED BY NEWCOM MEDIA INC.
www.canadianunderwriter.ca
COVER STORY
Exploring the Cyber Universe
24
The universe of cyber products is rapidly expanding, and the lack of standardization makes it difficult (if not impossible) to compare across products. Confused? Here’s a quick map for navigating through the frontier of cyber coverage. BY JASON CONTANT
FEATURES
17
21
33
Why Brokers Love APIs
How Tech May Change You Electronic Pink Slips
Application Programming Interfaces (APIs) are helping brokers connect to carriers through a single industry hub.
Tech’s increasing ability to push information out to your clients may turn you into a holistic risk advisor.
BY RICK ORR
BY DAVID GAMBRILL
Brokers and carriers have been collaborating with CSIO to create an industry solution for the e-Delivery of policy documents, including electronic pink slips. BY MICHAEL SPIAR
37 Alberta at Risk Severe weather is wreaking havoc in Alberta, causing reinsurers to note that Canadians’ premiums are subsidizing the province’s losses. BY DAVID GAMBRILL
31 19 Digital Transformation Want to take advantage of the latest and greatest tech offerings, but don’t know where to start? Here’s a valuable first step towards digital excellence BY JEFF PURDY
35 Afraid of Blockchain?
Loss Control for Grow-Ops
Insurance underwriters have many questions about blockchain risk. Here’s what they want to know from their clients before they agree to coverage.
After marijuana is legalized in Canada, expect to see an increase in cannabis operations. Traditional loss control techniques should apply.
BY CLIVE BIRD
BY MARC RAYMOND
March 2018 Canadian Underwriter
3
Claims (416) 442-5600 ext. 3545 (416) Paul Aquino Twitter: @InsuranceMedia Associate Editor Gail Page Gail Page Paul510-6793 Aquino Gary WhiteManager Gail Page Manual Manual Michael Wells Circulation mgarufi@bizinfogroup.ca and highly effective marketing communications opportunities. Associate Publisher sher hsingh@canadianunderwriter.ca Associate Publisher (416) 510-5187 (416) 510-5187 Manual (416) 510-5187 (416) 510-6800 Greg Meckbach Account Manager Art Director Associate Publisher nunderwriter.ca paul@canadianunderwriter.ca gpage@bizinfogroup.ca gpage@bizinfogroup.ca paul@canadianunderwriter.ca Associate Editor (416) 510-6760 gpage@bizinfogroup.ca InsuranceMarketer.com Mary Garufi ext. 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Canadian Underwriter March 2018
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14 The Rebel Who Embraced Insurance Adam Hare had no intention to make a career out of insurance. Now he is the chief operating officer of Insurance Jack, the upstart digital division of his family’s brokerage. What happened there? BY GREG MECKBACH
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EDITORIAL
Reading the tea leaves
Company leaders influence distribution strategies. When leaders change, brokers pay attention. David Gambrill
Editor-in-Chief Canadian Underwriter david@canadianunderwriter.ca
For Canada’s two largest insurance companies, the year started with a game of musical chairs at the executive level. First, at Intact Insurance, a well-known and respected executive, Jean-Francois Blais, retired from his role as president of Canada’s top insurer. Louis Gagnon, a former broker, took his place on January 1 as president of Canadian operations in a restructured executive team. About two weeks later, Aviva Canada announced that Greg Somerville would be stepping down from his role as president and CEO of Aviva Canada to join the company’s board of directors. His successor, Colm Holmes, CEO of Aviva UK General Insurance and chairman of Global Corporate and Specialty, is due to lead Aviva Canada on Mar. 1, 2018. The timing of the two leadership announcements was serendipitous. As one might expect, neither came with an explanation of why the current executives were departing from their roles. So brokers were left to read the tea leaves. These announcements come at a sensitive time for the broker channel. Back in 2011, the Insurance Brokers Association of Ontario (IBAO) reported that the province’s brokers had a 56% market share in both personal property and personal auto lines. That broker market share in personal property currently sits roughly at about 52%, while in personal auto it’s 49%, according to IBAO, citing 2017 data from MSA Research.
This gradual decline is in keeping with a 2010 PwC report, which found that Canada’s independent broker channel was losing market share to the direct channel at a rate of about 0.43% per year. Facing increasingly heated competition with directs, Canadian brokers want to know how their insurance company partners are going to help them grow their business. They are listening intently for any clues that would tip off a change in the distribution strategies of Intact and Aviva Canada, each of which sells insurance using a multi-channel approach that includes directs. Company leaders influence distribution strategies. When leaders change, brokers pay attention. After the changes at Intact and Aviva, Canadian Underwriter sought broker feedback for an online story about the impact of the changes on the broker channel. The opinions expressed on the record seemed uncharacteristically reserved. The caution is to be expected: when you place business for Canada’s two largest insurance companies, you need to be judicious in what you say about them, lest your markets disappear. But an interesting thing happened after we published the excessively diplomatic phraseology of those bold enough to venture a comment: brokers were reading the remarks with avid interest. Sensing a story yet to be told, Canadian Underwriter conducted an anonymous online survey of its
broker readers in January to see if we could further probe the reasons for the brokers’ interest in the companies’ leadership changes. Clearly, company leadership matters to brokers. Out of the 401 brokers who completed our survey, 66% either agreed somewhat or strongly with the statement: “Executive-level changes at any insurer have a noticeable impact on my broker business.” Another key takeaway of our survey is that there needs to be better communication between insurance companies and their broker partners. Slightly more than half of brokers (either 53% or 55%, depending on the company) disagreed with the statement: “I understand how this leadership change will affect my business relationship with [Intact/Aviva].” Conversely, an overwhelming majority (93% for Intact; 88% for Aviva) wanted to “know more about how the new leadership will work with the broker channel.” Communication between insurers and brokers is critical as the industry moves forward with what many are calling an “omnichannel” approach. As one broker in the survey put it: “As insurers develop their direct strategies, it is important to understand that they still fully support the broker channel.” Company leaders play a key role in articulating strategic objectives to their sales force. They have a captive audience in the broker channel. It’s time to start talking.
March 2018 Canadian Underwriter
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NEW TRAINING GROUND FOR FUTURE INSURANCE MANAGERS
There’s a new training ground in Canada for insurance professionals interested in fast-tracking themselves into entry-level management positions at insurance companies, adjusting firms and brokerages. Humber College in Toronto, Ontario is halfway through its inaugural, two-semester P&C Insurance Management Postgraduate
Program, with the first cohort of 32 students expected to graduate in June 2018. “We are building the next managers to mid-level managers,” John McNeil, part-time professor and program advisor at Humber College, said of the program’s strategic direction. “They could be managers, or specialists. They will have the leadership skills to lead a project or supervise people. They will be able to speak to executives in the room with confidence in presentations. We are setting up our students in such a way that they are in line or can situate themselves for leadership roles and succeed in them.” The postgraduate certificate program starts in September during the Fall semester. Students take a total of 14 courses over two semesters, seven courses each semester. After graduating from Humber’s program, a student will have seven out of 10 required courses towards a Chartered Insurance Professional (CIP) designation from the Insurance Institute of Canada.
WHY CYBERCRIMINALS LOVE FREE WIFI Free WiFi offered at coffee shops, hotels and airports may entice insurance professionals and their clients to work remotely for free, but the technology does not come risk-free. Normally, there is no encryption at a public hot spot such as a coffee shop, said Timothy Zimmerman, research vice president of Gartner Inc., a firm based in Stamford, Connecticut. When a public WiFi hot spot is an open network, meaning there is no special encryption, a hacker could potentially “listen to all the data that is being transmitted,” said Christian Gilby, director of product marketing for Hewlett Packard Enterprise Company’s Aruba unit. So anything an employee transmits using a public WiFi hot spot “is potentially vulnerable to somebody capturing that data.” Weak WiFi encryption is one reason why the parent company of Winners and
HomeSense fell victim in 2005 to a data breach that compromised customer records. Zimmerman recommends companies whose employees are working from public hot spots use a virtual private network (VPN), which is intended to make data look like gibberish to someone who intercepts that data.
FIRST NOTICE OF LOSS GOES DIGITAL The Toronto Insurance Conference (TIC), an association of Canadian commercial brokerages, has announced the rollout of the Data Exchange Model (Dx) Initiative, a proof of concept for real-time exchange of claims information between an insurer and broker at first notice of loss. TIC has partnered with RSA, AIG, Keal Technology and CSSI to roll out the initiative, due in Spring 2018. Real-time data exchange projects are well underway in various areas of personal lines insurance, but the Dx Initiative is unique because it seeks to extend real-time benefits into the commercial insurance arena as well. “This is the moment where we prove ourselves as an industry, when the customer has a claim,” Dx Initiative chair Brenda Rose told Canadian Underwriter, when asked why the project focuses on the exchange of claims information. “We need to get the information to the carrier from the broker immediately so that they can activate the claims process and get the adjuster assigned right away.” At this point in the claims process, the broker needs to transfer the information to the carrier quickly and accurately so when an adjuster calls the client, the adjuster already knows what’s happening. At the completion of the Dx Initiative, TIC will publish a white paper summarizing the project findings. Also, TIC members, insurers and industry partners will be invited to attend a public demonstration March 2018 Canadian Underwriter
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MARKETPLACE DO YOUR HOME POLICIES EXCLUDE DRONES? When consumers fly unmanned aerial vehicles as a hobby, will their home insurance policies cover them for any lawsuits arising from property damage or personal injury caused by the drones? For the most part, aircraft is excluded from the wording of home insurance policies, says Christina Polano, partner with Thomas Gold Pettingill. She spoke about drones at the the 51st annual joint conference of the Ontario chapters of the Canadian Insurance Claims Managers Association (CICMA) and the Canadian Independent Adjusters’ Association (CIAA). Polano said she reviewed three homeowners’ policies from unidentified carriers; all three had exclusions related to aircraft. “Perhaps a crafty coverage lawyer might argue that the exclusion was intended to make sure that if somebody goes off and flies their private plane and gets in an accident, that’s
IBC CALLS FOR END TO ICBC MONOPOLY
excluded,” Polano said during the joint conference. “But do [exclusions in home insurance] really mean to exclude a 16-year-old boy who goes and flies a small drone and he accidentally causes injury?” Transport Canada regulations stipulate that drone operators must have $100,000 in liability coverage for drones weighing more than 250 grams. Polano said $100,000 is “not very much,” given what can go wrong with drones. “If you are drafting homeowners policy, you might want to specifically put in there ‘recreational drone’ because it’s clear that it means recreational drone,” Polano said.
BUSINESS INTERRUPTION: THE NEW FRONTIER OF CYBER POLICIES: Business interruption should be the focus of cyber insurance policies, not privacy or data breach, says Lindsey Nelson, international cyber team leader with CFC Underwriting. “If you are looking at a manufacturer, for example, they’re not going to hold large amounts of data,” Nelson says. “But they are going to have huge business interruption exposure. So why are we still going to a manufacturer and talking about privacy liability when they don’t have any data?” While cyber policies typically include first- and third-party
Insurance Corporation of British Columbia’s monopoly should end, Insurance Bureau of Canada believes, but the province’s attorney general says that won’t result in lower premiums for B.C. vehicle owners. Opening up auto insurance to competition “does not guarantee lower insurance rates, as Ontario shows,” B.C. Attorney General David Eby told Canadian Underwriter. “While there are significant financial and operational challenges to be addressed, we believe that public automobile insurance offers British Columbians excellent protection and access.” ICBC has a monopoly on mandatory auto insurance in B.C. With its Basic Autoplan product, ICBC writes third- party liability, under-insured motorist protection, and accident benefits, among other coverages. Private, for-profit insurers can write optional additional auto coverage (such as collision and upset) in B.C. B.C.’s public auto system has been somewhat under siege lately, having lost $935 million during the first nine months of 2017. The average auto premium in B.C. is $1,680 per year, compared to about $1,437 in Ontario and $1,209 in Alberta, IBC says. “ICBC is on the fast track towards insolvency with rapidly rising premiums,” Aaron Sutherland, IBC’s vice president of the Pacific region, told Canadian Underwriter.
coverage, cyber conversation still revolves around thirdparty liability such as data breaches and privacy liability, Nelson believes. She thinks the ongoing focus on privacy and data breach might be a matter of insurers “really focusing on the wrong aspects of cover to sell to clients.” Nelson recommends shifting the focus to first-party exposures, which are the client’s property losses as a result of a breach. “So, if your systems go down for a certain amount of time, how much money are you going to lose as a company, and what’s your reputational harm exposure going to be if you have an outage that leads to business interruption?” March 2018 Canadian Underwriter 11
Putting the pieces together.
Events and Seminars Calendar CIP Society Events and Seminars give you the opportunity to learn, to network, to catch up on industry developments and to advance your professional and career development. CIP Society Seminars
IP Society Events
Hamilton—Cannabis: Insurance & Risk Management ................................March 7 Edmonton—Flood Analytics .......................................................................March 8 Webinar—Certificates of Insurance ...........................................................March 20 Ajax—Cannabis: Insurance & Risk Management ......................................March 22 Toronto—The Art of Persuasive Negotiation.............................................March 27 Calgary—Equipment Breakdowns ...............................................................April 11 London—Cannabis: Insurance & Risk Management .................................. April 24 Edmonton—Business Interruption.................................................................May 9
Vancouver—Battle of the Insurance Bands .................................................March 1 Toronto—Axe Throwing Tournament .........................................................March 7 Edmonton—Symposium 2018 ..................................................................March 14 Calgary—Symposium 2018 Emerging Risks .............................................March 15 Montreal—Convocation ............................................................................March 28 Vancouver—Symposium 2018 .................................................................... April 24 Toronto—Celebrate, Refresh & Relax ...........................................................May 23 Edmonton—Annual Golf Fun Day ................................................................June 18
Looking for insight and research on the latest trends in the p&c industry? Visit our free online library of Trends Papers at www.insuranceinstitute.ca/cipsociety/information-services. Looking for information to advance your career? Visit: www.insuranceinstitute.ca/mycareer.
MARKETPLACE BUYING HOMEOWNERS OUT OF FLOOD PLAINS Mississauga Mayor Bonnie Crombie gave a novel illustration of how municipal governments can help homeowners move out of high-risk flood zone areas — expropriation.
“Along Cooksville Creek in Mississauga, time after time with rainstorms, [the homeowners] are repeatedly flooded,” Crombie told delegates attending the C4 2018 conference in Ottawa, organized by catastrophe index firm CatIQ. “They have built on flood plain [and] none of those residents qualify for flood insurance any longer. We have taken
HOME INSPECTOR TO PAY $13,000 FOR LEAKY ADVICE A home inspector was successfully sued for more than $13,000 in British Columbia for not advising buyers of a leaking Chilliwack home to fix foundation cracks. In a ruling released Jan. 22, Provincial Court of British Columbia Justice Kenneth Skilnick ruled that Mr. Home Inspector Ltd., through its agent Lee Fearnley Stonegate Home Inspections Ltd., failed to meet the professional standard of care required of home inspectors.
the very bold step to actually purchase about 50 homes in the flood plain, at market value, for parkland. We needed the parkland in our downtown area.” But while the strategy may have worked in Mississauga, similar expropriation initiatives have not fared well in other Canadian flood zones, as noted by Glenn McGillivray, managing director at the Institute for Catastrophic Loss Reduction. In fact, the conference was held in Gatineau, Quebec, where some homes are still being built in high-risk flood zones, he said.. In addition, after the 2013 flood in Calgary, which cost Canadian property and casualty insurers $1.9 billion in claims payouts, “we have a failed buyout program in southern Alberta,” McGillivray said. “It was a voluntary program that by all accounts was not a success.”
GIFT CARDS: WILL THEY REDUCE YOUR CLIENT’S LIABILITY? When providing risk advice to a company accused of wrongdoing, should you advise your client to offer voluntary gift cards as a strategy to reduce liability? The question is currently before the Ontario Superior Court of Justice in David v. Loblaw. The courts have not yet passed judgment on whether gift cards constitute a valid set-off against any ultimate damage award. The judgment in the case could take years. It’s a risky strategy, says Paul-Erik Veel of Lenczner Slaght on CanLii Connects. “Instead of simply giving gift cards,” Veel writes, “companies can consider giving consumers the option to elect between receiving gift cards or funds useable elsewhere, such as a prepaid credit card. “Alternatively, if a company wanted to provide gift cards, it could discount the scope of the release: for example, it could provide a $25 gift card that could only be used at the company’s stores, in exchange for which a consumer would agree to release its claim to only the first $10 of any settlement or damages. Each of those options would entail higher costs of the program for the firm, Veel says. But it would also increase the likelihood that such voluntary restitution would be an effective release and set-off.”
$13,000 FOR LEAKY ADVICE Mehran Ziragi Moghadam and Shirin Roohijahroomi hired Mr. Home Inspector before buying their house in 2015 from Tamiko Charlton. The actual inspection was done by Lee Fearnley. Fearnley mentioned
the foundation crack in a report, but he did not consider it to be a “significant problem,” Justice Skilnick wrote in Moghadam et al v. Mr. Home Inspector et. al. Fearnley recommended that the cracked foundation
be “monitored” and noted there was a “chance of water damage” to the building and its contents. “There appears to be a glaring omission in the recommendation of Mr. Fearnley that the situation should be merely monitored, as opposed to sealing the cracks,” Justice Skilnick wrote. “The former approach suggests a course of action that the homeowner should wait for damage to occur first, while the latter suggests that the homeowner should take preemptive action to prevent the damage occurring in the first place.” March 2018 Canadian Underwriter 13
PROFILE
The Rebel Who Embraced Insurance Greg Meckbach Associate Editor
Adam Hare, chief operating officer of the digital division of a family brokerage, never planned to make a career of insurance. Now he has a passion for making P&C insurance “sexy” for customers. It may seem counterintuitive, but despite having founded an organization that provides insurance quotes online, Adam Hare advises traditional brokers not to fret too much about the latest and greatest technology. “Don’t feel that if you are not a digital lead or expert in [the information technology] field, your business is failing,” says Hare, chief operating officer of Insurance Jack, a division of property and casualty insurance brokerage Petley-Hare Limited. “Double down and focus on the things you are great at.” Working from Oshawa, Ontario, Hare founded Insurance Jack, which he 14 Canadian Underwriter March 2018
describes as a tech incubator within the family business. Petley-Hare also has offices in Pickering and Bowmanville. Insurance Jack lets consumers get auto and home insurance quotes online. “I feel like we are really running a technology company that happens to sell insurance,” Hare said this past November during a panel discussion at InsurTechTO. “It’s not an insurance brokerage that is dabbling in technology.” Hare told Canadian Underwriter recently that Insurance Jack was established as a separate division of Petley-Hare. It would have been too disruptive to “throw a lot of tech” into the existing traditional brokerage and to try new technologies — such as customer relationship management or lead management — for three to six months at a time, he added. “If you get 30 employees trained up on something and then three months later say, ‘Nah, we don’t really like this and toss it,’ it’s not something that people [in traditional brokerages] were really used to doing,” Hare notes. “We said from Day 1 that anyone being hired into [Insurance Jack] has to know that mindset.”
Petley-Hare now has a total of 50 employees, five of whom work for Insurance Jack.
KNOWING JACK The son of current president Dave Hare (a former professional musician who took over the firm in 1976) and grandson of Jim Hare (who bought the brokerage in 1963,) Adam Hare originally had no ambition to get into the family business.
“I was pretty much the kid in the corner trapped away working on renewals. I had stacks of paper and saw no value in being there.” “I always said to myself, ‘There is no way I am going to work in that industry,’” Hare says of insurance, now five years after taking a position at the family brokerage. “I was going to stay as far away from it as I could.” His original career plan was to be a creative and marketing professional in the music industry. Born and raised in Durham region, which borders Toronto to the east,
Adam Hare studied multimedia design program at Durham College, graduating in 2006. He started a clothing line while attending college, worked as an intern for an independent record label, and later worked in Toronto in marketing for Universal Music for six to seven years. Hare describes one summer working at the family insurance business. “I hated it,” he recounts. “I was pretty much the kid in the corner trapped away working on renewals. I had stacks of paper and saw no value in being there.”
SO, WHAT HAPPENED? Petley-Hare vice president Debbie Miller got in touch with Hare roughly seven or eight years ago, while he was still working for Universal Music. “She said, ‘We’d love to have your skills here. One day hopefully you will join.’” Hare said Miller ran a lot of ideas and information by him, asking for his thoughts. She asked him what he thought about websites, designs, and marketing strategies such as appearing in the Yellow Pages. Hare’s answers were brutally honest — something along the lines of, “Wow, that’s a waste of money, what are you guys doing here?’” he said.
PROFILE
While working at Universal, Hare contemplated moving along with his dog and fiancée to take up a new job in New York City. That was when he decided to speak with his father to get a sense of his father’s goals for Petley-Hare. That “led to us talking about what an internal director of marketing role would look like,” Hare reports. “I think even five to six years ago, those roles in brokerages really didn’t exist.” Though he joined PetleyHare in 2013, the original plan was not to make a permanent career of it. He plan was to work at the brokerage for about a year and “do some sort of digital audit on the business.”
About 18 months later, he came up with a business plan for Insurance Jack “and what a modernized brokerage would look like in an online world.” It took another year after that to get Insurance Jack up and running. “I started to get a liking for the industry, the challenges of trying to make what we do in the insurance space kind of sexy for the consumer,” reports Hare. One bugbear for brokers is a lack of regular contact with clients outside of the policy renewal process. So, one goal for Insurance Jack was to build a customer journey; to “have everything in place to make them feel at home.” For example, the firm tracks “wow” moments, such
as a couple expecting their first child. The company has a budget for situations like this - such as buying a book on first-time parenting and shipping it, for example.
USING TECH TO IMPROVE PROCESSES Launched in 2015, Insurance Jack experiments with several types of business software, including lead management. Petley-Hare executives want to know within a given period of time how many leads they got and, of those, how many closed. If they did not close, they want to know why. If the leads did close, they want to know who closed the deal and what the insurance product was.
“All of those are very important metrics,” Hare says. “There is not a brokerage owner I talk to nowadays that doesn’t understand how important digital is and is trying their best to spend the money in the right way.” Hare cautions that many technology vendors market themselves as experts in search engine optimization (SEO), but do not “have the depth of knowledge that should be acceptable if they are taking money from a business owner.” A broker who does SEO inhouse “has a ton more control over it,” he says. “You need to have someone in the office who understands what a good [web traffic analytics] report looks like and what a bad report looks like,” Hare says. “A brokerage owner with 40 years of commercial insurance knowledge who has zero marketing knowledge is probably not the best person to do that.” A perceived need to go digital could be interpreted as “a scare tactic” by any company that does not consider itself digital savvy, Hare says. But he does not believe the broker channel is going to die tomorrow. “I do not think that the traditional trusted advisor broker model is dead by any means.” March 2018 Canadian Underwriter
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T e c h n o l o g y
Given this challenging but very solvable mandate, it will be a year full of exciting positive industry evolution, driven by the IBAO’s Roadmap for Broker Digital Enablement. The road map supports an API (Application Programming Interface) tech model.
HOW APIs WORK APIs are standardized tools for software to communicate with o ther software. How do they work? Here’s a simple analogy: Imagine ordering from a menu in a sit-down restaurant. The menu lists all of the dishes offered by the restaurant. After reviewing the menu, you select the dish you want, and then you place your order. Hidden in the background, the restaurant kitchen executes a number of steps to prepare your dish. When you receive the dish you selected from the menu, you are oblivious to the work behind the scenes to make it happen. APIs do the same work as the kitchen. They receive an order APIs liberate the broker channel from (the request), perform a numthe inefficiencies caused by individual ber of unseen, defined actions, and then they present your ‘dish’ market solutions for data exchange. (typically data) to you. Whatever happens in the kitchen, however the kitchen may change, the folWe have reached a rare moment in our industry lowing two processes remain fixed: 1) you order when consumers, brokers, technology vendors your dish, and 2) you receive your dish. and carriers can all agree on one thing. We are fallUsing APIs leads to faster development, and the ing behind in delivering the modern exchange of increased flexibility provides greater opportunity data needed to satisfy today’s changing consumer for innovation. digital experience. The insurance market is facing some hard facts LEAVING BEHIND INDIVIDUAL MARKET these days. We all know profit margins are thin. SOLUTIONS Customer expectations are changing in terms of We are now at a tipping point in our distribuservicing needs, prompting a move to omni-chan- tion model. As an industry, we need to recognize nel engagement. Also, getting anything done as an that the only way we can truly succeed is to work industry to date has taken too much time and too together to improve the flow of data between our various systems. If we as an industry can create a much money. But to be successful, and to ensure that the bro- rich flow of data, we can deliver customers and ker channel distribution model continues to be brokers the service levels and technology integraviable and even thrive, brokers need all of their tions towards which we have been working for markets to be involved in raising the bar for data more than a decade. But we need to do it differently. integration up to the next level. On top of this Historically, individual market solutions have daunting task, it needs to be done quickly, inexpensively, and inclusively so that brokers are truly brought limited benefits to brokers. We need solutions that will allow brokers to integrate with enabled digitally.
Tipping Point Opinion/Analysis
Rick Orr
Owner, Account Executive Orr Insurance Brokers Inc.
March 2018 Canadian Underwriter 17
Under IBAO’s proposed model, cara significant number of carriers. This will enable brokers to service their client base riers would create only one set of APIs that are able to handle requests from all consistently and effectively. Critical to brokers is the transition authorized consumers of these APIs (See away from carrier portals. Brokers have Figure 2). Similarly, each broker techneeded — and continue to need — nology vendor would interface with the transactions to start and stop in their world using a single set of APIs. This apbroker management systems (BMS). proach enables a larger number of carWe haven’t been able to get there as an riers to make data available to a larger industry because we were focused on number of brokers over a shorter period point-to-point integrations with indi- — precisely what our industry needs. The IBAO Roadmap for Broker Digital vidual carrier systems (See Figure 1). After more than a decade of this approach, Enablement is based on the input of more with no significant uptake, we recognize than 15 broker channel carriers, representing more than 50 per cent of the that the model needs to change. Therefore, the Insurance Brokers Asso- national insurance market. The quarterly ciation of Ontario (IBAO) worked with target deliverables are based on carrier brokers, carriers and broker technology roadmap dates and aligned with key providers in 2017 to lay the groundwork broker needs. A Technology Vendor Symposium for a collective solution. Led and managed by an industry body, the inclusive solution held by IBAO in 2017 brought together would facilitate a more open exchange of all incumbent broker technology soludata and eliminate the monetization of necessary data Figure 1 Point-to-Point: Point-to-Point: Consuming & Unachievable interchange. With an API soTimeTime Consuming & Unachievable lution, we can finally get all 3 Illustrative Carriers markets brought into the fold.
ROADMAP TO APIs With this goal in mind, IBAO surveyed a significant sampling of carriers to confirm a market readiness and appetite for an industry data exchange hub; this solution would use carrier and vendor APIs to simplify data interchange. Figure 2
Incumbent BMS
BMS Add Ons + 3rd Party Suppliers
New Comers & Innovators
Industry Hub:Hub: Simple && Achievable Industry Simple Achievable
3 Illustrative Carriers
Incumbent BMS
Industry Hub Single API Set From Each Participant
BMS Add Ons + 3rd Party Suppliers
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Canadian Underwriter March 2018
New Comers & Innovators
tion providers. We heard from vendors the very same issues that the carriers expressed from their point of view: it is impossible to get broker solutions in place that have enough critical mass to be useful to brokers. This is largely due to the sheer volume of individual point-to-point integrations that would be required for brokers to connect to the markets they need. The industry thus realized the need to move away from making integrations a competitive differentiator. With the support of carriers, we held an in-depth symposium with broker technology vendors in late January 2017 to review our proposed API plan and survey results with them. We asked for input on our approach, and we received unanimous support.
INDUSTRY SUPPORT FOR APIs Once the industry fully embraces this API model, and we have widespread data exchange from carriers to brokers, technology vendors will finally be able to focus on delivering innovative tools and features for brokers and consumers that have been impossible up to now. We still want to get to a place where we have things like real time policy change, but we know we need to start with a defined, achievable roadmap that will move us there. The groundwork laid thus far, combined with careful due diligence, will ensure success. IBAO and several industry partners will participate in a feasibility study through April to prove the model. The group will focus on initial transactions most readily available from carriers (those most aligned with high broker need, as determined by broker survey results). We will share our progress as we move forward. Working together to allow each carrier and vendor to expose only a single set of API’s will allow quicker innovation and development of tools that will help brokers satisfy the needs and desires of consumers. The planned IBAO Feasibility study is the next key step on this path to success.
D i g i t a l
T r a n s f o r m a t i o n
Digital Direction Brokers must be where their clients are, and their clients are plugged into the virtual world. Here’s how you provide digital service to your clients. Jeff Purdy
Senior Vice President, International Operations Applied Systems
Technology is the Number 1 external force affecting today’s insurance market, Ernst & Young tells us. It is affecting the Canadian property and casualty insurance industry in two significant ways. Not only is it changing what consumers expect from the industry, but InsurTechs are transforming the very way insurance is done. To succeed in this environment, brokers and insurers alike must embrace these changes by offering a more connected experience for everyone—from consumers to industry partners.
OUR WIRED WORLD Social media, telematics and analytics are all redefining our market, raising the expectations of consumers and industry employees alike. All of us are
experiencing a more connected life in a more connected world. Those experiences are changing what insurance consumers want from the insurance industry. In this environment, the technology startup community has taken an interest in the insurance business, creating the InsurTech wave. Since 2010, more than $4.6 billion has been invested in InsurTech companies, with 75% invested in the North American market. These new firms are here to disrupt the way insurance is bought, sold and serviced, using technology to change the way customers interact with their providers. What do these changing dynamics mean for our industry?
DIGITAL OR BUST Historically, existing industries have either ignored digital transformation, most often at their peril, or they have embraced it, most often to great success. Think of Blockbuster, a company that once had revenue of more than $6 billion and employed 84,000 people around the world. The company’s business did not react or evolve its operating model when digital transformation took place, exploited by companies like Netflix. Three things helped Netflix drive Blockbuster out of business: • A streamlined experience for ordering video content (no more drives to the store to pick up or drop off DVDs), • A more customer friendly pricing model (a subscription model with no late fees), • And a new technology (streaming) for the delivery of content Brokerages and insurers alike must embrace the digital transformation of the business of insurance. And they need to adapt quickly to the current digital expectations of customers before their competitors do.
March 2018 Canadian Underwriter 19
systems into the BMS to ensure the most accurate information is available for servicing.
To meet these expectations, our industry must deliver a connected experience between all participants in the insurance ecosystem. This means greater connectivity within a brokerage’s business; greater connectivity with insurer partners; greater connectivity to the policyholder; and greater connectivity and simultaneous exchange of information between all key stakeholders across the insurance lifecycle. When the business of insurance is digitally connected, we all benefit from superior experiences across the entire insurance lifecycle.
DIGITAL TRANSFORMATION IN ACTION
CONNECTED BROKERAGE Using multiple systems to manage different processes like customer relationships management (CRM) and various lines of insurance business inhibits a brokerage’s ability to have a single view of the customer. This makes it more difficult to cross-sell insurance products, which is the main reason why brokerages diversified into multiple lines in the first place. Switching to a market-leading, integrated brokerage management system (BMS) is undoubtedly the first step to creating a connected business. Using such a platform enables all employees to have the right information and products available anytime, anywhere to serve clients better via a single, integrated system. With brokerages expanding their business, having the ability to access and act upon a complete view of the customer efficiently is imperative. It will help you identify potential new opportunities to sell new lines of business into current accounts. A connected brokerage also requires the ability to provide this complete view of the customer to any of your employees anytime, anywhere. Insurance professionals should be able to access customer information while they are at home, on the road, on a plane, using whatever mobile platform they choose (a smartphone, tablet app, etc.).
CONNECTED CUSTOMER Today’s consumer expects an omnichannel delivery model. A study by Bain & Co. found that, over time, insureds will 20
Canadian Underwriter March 2018
increase their use of online, self-service transactions. They expect real-time access to information via multiple digital channels like self-service areas and mobile applications. They demand convenient, digital services such as online bill payments. Brokerages catering to these demands experience the most growth. In fact, according to research from analyst firm Celent, when consumers were asked why they chose a particular provider when looking for financial services, 52% indicated that their selection was based on convenience or ease of service.
CONNECTED INSURER Insurer connectivity is critical to offering brokerages a single solution to manage customer data across all lines of business. A single view of the customer and access to a wide range of insurer products for both personal and commercial lines enables brokerages to develop stronger relationships with customers and prospects. Connecting with insurers enables brokerages to access new markets and quickly quote insurer products to submit new and renewal business, enabling staff to provide product range and insurer choice. Brokerages also require the ability to automate the exchange of policy-related information from insurer
Various brokerages are already well on the way to digital transformation. Let’s turn to the example of one Canadian personal and commercial lines brokerage that recognized the need for an enhanced digital strategy to align itself with the external demands of the market. The brokerage implemented various new technologies to reinvent the methods it used to interact with its customers. Leveraging an open and integrated BMS, the brokerage now manages its entire business on a single platform. All prospect, customer policy and financial data across all lines of business is stored in the system, serving as a single source of truth for the organization. A client self-service portal and automated quoting offer staff the technology to enable digital interactions with clients throughout the insurance lifecycle, from quote to purchase to service. “Our portal has allowed our staff to spend more time reviewing files for renewals rather than being reactionary to the phone,” said one staff member. “It enables us to take a more consultative role with clients.” To date, the broker has more than 9,000 clients leveraging the self-service portal. Automated quoting enables the broker to elevate its client experience by delivering real-time auto and property quotes. “We can write insurance for our customers in less than five minutes,” said the employee. “When a customer comes over after buying a car, they can access the comparative rater through their smartphone or tablet, get a quote and we process it. It’s that simple.” Since leveraging automated quoting, the broker has increased its leads by 300 per cent. In today’s connected world, it is critical to adapt to the changing landscape of the industry. Those who fall behind will become less competitive and less profitable. Those who adapt and digitally transform their business will thrive in this new digital age.
T e c h
C h a n g e s vice president of customer experience and innovation at Northbridge Financial. “That said, the question isn’t about technology as much as it is about the cultural shift required by insurers. Organizations will need to evolve their mindset, purpose and value proposition to be prevention-focused rather than claims-focused—a challenging task for many insurers that will take some time.” Driven by the increasing Internet of Things (IoT), technology has opened the field for the property and casualty insurance industry to be proactive about preventing risk, rather than being reactive and simply paying out claims after they happen.
RISK PREVENTION MODEL AT WORK People in the industry can see the following examples of risk-prevention measures that insurance professional might be able to undertake in home, auto and commercial lines over the next five to 10 years. In homeowner lines, imagine an insurer’s catastrophe modelling shows a Category 3 hurriImproved data technologies will cane bearing down on the Canada’s east coast. You have about five soon transform the insurance model, days before the storm arrives to changing you from an insurance wreak its havoc. Based on data system inteprofessional who underwrites and gration with your brokers, you sells policies into a holistic risk advisor. quickly run a report on all the postal codes of the insured properties in the path of the storm. As technology progresses to the point when the With the flip of a button or two, you send text insurance industry can push out relevant informa- messages and emails to your clients, informing tion to Internet-connected Canadian policyhold- them how to protect their property and stay out ers, look for insurance professionals to transform of harm’s way. into holistic risk advisors. Another example, this time in auto insur“Technology is rapidly providing our industry ance lines. Your real-time monitoring of claims the opportunity to focus on prevention rather than patterns shows a series of auto thefts occurring just reacting to a claim,” says Ilda Dinis, senior in the parking lot of a local shopping mall; the
How tech will change what you do David Gambrill Editor-in-Chief
March 2018 Canadian Underwriter 21
thieves are targeting a specific model of luxury sports car. You quickly look up which of your policyholders have that model of luxury sports car in postal code areas neighbouring the mall. You send an alert notification by text to your clients, warning them about the elevated risk of theft in the mall and what precautions they might take. In commercial lines, you have a startup restaurateur as an insured business client. Looking at data patterns of the life-cycle of restaurants, you see that your client will soon be at the six-month period; that’s when restaurants typically expand their business and hire new employees. So, you call the client and ask if they might need advanced coverage options based on where their business is projected to go. If these scenarios don’t seem all that far-fetched, it’s because the power, speed and relatively low cost of machines and data storage are allowing the collection of massive amounts of data – about 2.5 billion gigabytes (GB) of data were generated in 2012, according to IBM. Machine learning and artificial intelligence is expected to allow insurance professionals to quickly pull up data and make projections. Increased data integration will allow insurance professionals to 22
Canadian Underwriter March 2018
better use the data to connect with their consumers before an event occurs, based on sophisticated data modelling. “Where is it going in the future?” asks Norman Black, a London, U.K.-based EMEA insurance industry principal at SAS, a business analytics and data management software provider. “I think it’s a reinvention of business models. What excites me about that is not so much that companies are using IoT, because other companies are doing that in motor and homeowner lines. But they have fundamentally reinvented the model. “The new model is very much prevention rather than pay. The whole model is going from, ‘We really don’t want to pay up front for floods’, to ‘Let’s prevent it by putting a pressure detector on your pipe, which will give you a warning on your mobile phone that there may be a flood.’ So now the client can send a neighbour or someone out to inspect.”
HOW CLOSE ARE WE? The technology in Canada’s P&C industry is not widely being used for the purpose of prevention yet, although the capability is not in question. “There may be a little bit of that going on,” said Bill Redford, vice president of product development at Keal Tech-
nology. “If the broker was big enough, they could certainly use their own data to make sure they had some information to pass along. I don’t know how much of that is actually happening.” One regulatory issue that may prevent such direct communications with insureds is Canada’s anti-spam legislation, CASL. Direct communications with clients may be thwarted by clients who simply do not want to receive such communications. Steve Pieroway, vice president of marketing and sales at Policy Works Inc., thinks CASL isn’t a deal-breaker, so long as the industry maintains good relationships with its customers. For him, the bigger hurdle is the entire existing network infrastructure. “It goes back to whether insurers have systems that can capture the data; that can mine the data in away that’s meaningful; and that other players, vendors and providers in the industry, can hook into and provide more value on that,” he says. When that day does come, insurance executives see the role of insurance professionals morphing into the expanded role of risk professionals. In a forthcoming industry trends paper for the Insurance Institute of Canada, Michael George, president and CEO of Trisura Guarantee Company, says he sees the day coming when commercial insurance brokers will do more than just sell insurance to their clients. “I see that move from simply selling product to an end consumer, to a more holistic view of providing that commercial customer with advice and guidance, and really from an overall enterprise risk management standpoint,” says George. He added the focus of the broker’s new role would be to help a company prevent risk as well as to insure it. “A broker has to become a trusted advisor for that commercial company, have their best interests at heart, and you are trying to help them manage all aspects of their risk,” George said. “You become indispensable, you are basically on their board of directors almost.”
2 S
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COVER STORY
The Chaotic Universe of Cyber
The Chaotic Universe of Cyber
Cyber insurance has undergone its own version of ‘The Big Bang’ recently, with carriers now offering a bewildering array of options, definitions, endorsements, and exclusions–most of which defy standardization. BY JASON CONTANT
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Canadian Underwriter March 2018
COVER STORY
The Chaotic Universe of Cyber
Need help navigating through it all? Here’s a quick tour through the areas of cyber you won’t find on a map. Still white-hot, the cyber galaxy is expanding outwards,
with the product evolving from simple data breach protection into the area of business interruption--with more changes likely in store. For many brokers, the cyber universe appears chaotic. Carriers’ policy definitions, terms and conditions continue to radiate outwards in a constant state of flux. Brokers hearing common cyber terms like ‘first-party’ and ‘third-party’ bandied about may think they know what they mean, only to find out that companies haven’t defined the terms. One company’s exclusion feels like another company’s endorsement. As for pricing, well, let’s just say that there’s a lot of mystery in the cyber universe.
CONFUSED? YOU’RE NOT ALONE. Robin Shufelt, assistant vice president of technology and cyber with The Sovereign General Insurance Company, agrees there is a lack of understanding around what is covered and what is not, as well as how products are priced. “The products lack standardization across carriers, which makes it very difficult for clients to compare coverages,” she said. “Each carrier has its own terminology and definitions, and its own way of addressing coverage. There are many endorsement-type products on the market that offer some coverage, but the lack of clarity around what they cover could lead clients to feel that they have more protection that they actually do.”
But Lindsey Nelson, international cyber team leader with CFC Underwriting, says it’s dangerous for the property and casualty industry to keep referring to cyber as confusing. “It almost does a disservice in a way, because we keep talking about how confusing it is, and telling clients that it is confusing, and that the market isn’t standardized,” she said. “Then we see clients that turn around and say, ‘Well, if it’s confusing and not standardized, why should I purchase it?’”
CYBER COVERAGE DEFINED The universe of cyber insurance is certainly vast and broad. And the industry jargon contained in policy language may be unintelligble to many policyholders. A complicating factor is that there is even a lack of consensus about the fundamental terms used in insurance policies, such as what constitutes ‘first-party’ and ‘third-party’ coverage. Several companies do not offer definitions of the terms, while others offer different descriptions for the same word. For the sake of argument, we’ll say that a lot of the cyber policy language loosely coalesces around the following principles defined by Sovereign General: “Third-party cover is liability cover. It will defend and indemnify the insured for sums they are legally obligated to pay by a claim from a third party. In the cyber world, it could be similar to a class action suit from people alleging the insured was negligent in protecting their personal information and resulted in a breach.
March 2018 Canadian Underwriter 25
COVER STORY
The Chaotic Universe of Cyber “First-party cover is similar to property cover. It reimburses the insured for a loss to their own property. For example: A hack or something along the lines that destroys the insured’s digital assets. The policy would pay to restore them.” Keep in mind, however, that policy language can vary. For example, here is how Wawanesa Mutual Insurance Company defines ‘first-party’ and ‘third-party’ coverage: First-party coverage is “loss or expense incurred by an insured,” while third-party coverage is “loss incurred by someone other than the insured due to an insured’s negligence.” Same terms, different definitions, but same meaning?
CYBER OPTIONS There is a broad spectrum of cyber insurance products. Take, for example, data or privacy breach products. Some provide services in which a third party will help a company respond to a breach. Others offer these services in addition to some coverage for expenses incurred in the event of a data breach. Still others offer complete coverage, including services, expenses and third-party liability. “The challenge for the client is understanding which coverages various products provide,” Shufelt said. “The industry needs to do a better job of educat-
ing on risks on subsequent coverages.” Jimaan Sané, cyber underwriter at Beazley, said most cyber products in the market are “fairly similar” from a coverage perspective, since they were driven by privacy and data breaches. “Most of the products you find today are essentially privacy liability products with some first-party crisis management.” The real difference, he said, is going to be between carriers. Some will be good at handling data breaches, some will be strong in North America, and others will be better at some of the first-party coverages and business interruption coverages. Catherine Evans, vice president of
Mapping the Cyber Universe
We reached out to Canada’s Top 10 markets (by 2016 net premiums written) to provide us with information about their cyber products. We’ve condensed the information to create this simplified map representing only a small section of the cyber cosmos. The map is not exhaustive, nor does it purport to compare or assess the products. Rather, it illustrates that cyber is a very large, complex area right now. As discussed in our feature article, cyber products change all the time, and there aren’t necessarily common elements between the listed coverages, so a direct comparison between products and markets isn’t feasible. Individual markets should be contacted for more information.
Intact Insurance Cyber Expense Endorsement
Basic Coverage: 1st party coverage, up to $100,000 in the event of a privacy breach. Coverage includes a customer’s expenses incurred to deal with a privacy breach that involves unauthorized access to the personal and confidential information of individuals; business interruption arising from a breach; and legal expenses that may be incurred. Offered as an add-on to an Intact commercial property policy. Exclusions: Failure to take reasonable IT security precautions for protection of electronic data is not covered. Cost Structure: Customers pay one simple price.
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Canadian Underwriter March 2018
Aviva Canada Privacy Breach Expense Coverage
Basic Coverage: 1st party coverage for loss, theft or accidental release of private information and/or personal health information involving one or more data subjects.
Privacy Breach Liability Coverage
Basic Coverage: Loss, theft or accidental release of private information and/or personal health information involving one or more data subjects. Third party coverage is optional. Exclusions (both): No coverage is provided for malicious code; intentional breaches; criminal acts, criminal investigations or the reckless or knowing violation of law; reckless disregard for the handling of personal information; investigation or remediation of deficiencies in the insured’s management or systems that contribute to a privacy breach; penalties or fines imposed by financial institutions, courts, government authorities or other entities. Cost Structure (both): The product is exposure-rated based on limits purchased.
COVER STORY
The Chaotic Universe of Cyber Marsh Canada, said when cyber products first came out, they were mostly designed for privacy liability coverage. However, they have since evolved to cover things like business interruption, cyber extortion and incident response costs. Nelson urges a shift away from what she sees as a “massive focus” still revolving around third-party liability (commonly associated with data breaches and privacy liability). “We need to actually shift the focus and be talking about what people’s first-party exposures are,” she says. “Business interruption should be the focus of a cyber policy nowadays.” Speaking of coverage shifts, there
is a change in attitude towards social engineering, also known as “human hacking.” This is when cybercriminals trick company employees into gaining access to the company computer system. A typical example would be getting an employee to click on a link, or give out sensitive password or other information, so that the cybercriminal can download malicious code onto the company’s computers. “It used to be a pretty hard line that social engineering was not a cyber risk — cyber insurers were adamant that this was a crime loss, not a cyber loss,” Evans says. “But the market is kind of pressur-
The Co-operators Group Sovereign General Insurance Company Cyber Liability
Comprehensive Coverage: Comprehensive cyber liability coverage including 1st party and 3rd party coverages.
Sovereign Privacy Breach Endorsement
ing some [insurers] that have traditionally thought that way to start including that.” Retroactivity is another hot-button issue. This means that a client bought a policy, but malware, for example, existed in a company’s computer systems before the policy was bought, so coverage was denied. Some, but not many, insurers may offer retroactive coverage. “If it’s a bigger policy, you can have them make a nonstandard change, but in terms of just being offered by default, retroactivity is the biggest thing that’s missing,” said Kevvie Fowler, partner of cyber risk with Deloitte Canada.
Desjardins General Insurance Group Does not offer cyber insurance.
Coverage: Coverage for privacy and data breach, including privacy breach liability and expenses.
Premier Cyber Liability
Comprehensive Coverage: Comprehensive cyber liability coverage including 1st party and 3rd party coverages —catered for small- to mid-sized business.
Co-operators General Insurance Company Privacy Breach Liability
Coverage: Coverage for privacy and data breach including privacy breach liability and expenses attached onto Co-operators General Insurance Company commercial business. Exclusions: Exclusions included for bodily injury and property damage; funds transfer fraud; failure to maintain security. Cost Structure: Pricing is rate-based on company size and a completed application. Sovereign models for cyber annually and incorporates these results into its rates.
Security National Insurance Company (TD Insurance) Does not offer cyber insurance
Lloyd’s Underwriters
Basic Coverage: Lloyd’s Underwriters is an insurance market providing cyber coverage that varies by syndicate. Lloyd’s offers tailor-made cyber insurance solutions including: 1) Protecting against business interruption and lost revenue; 2) Covering the costs of meeting legal obligations, along with regulatory penalties or damages; 3) Offering technical expertise and crisis support to help manage any fall-out and minimize the impact to operations; 4) Covering businesses against the effects of malicious or accidental damage to digital or physical networks; and 5) Supporting repair to brand reputation. March 2018 Canadian Underwriter 27
COVER STORY
The Chaotic Universe of Cyber HOW CYBER IS OFFERED Whatever the coverage may be, clients and brokers will need to pay attention to the fine print, Fowler said. He uses the example of a policy that says a client can use any cyber response firm or cyber expert to help respond to an incident. But when the client tries to submit a claim, coverage is reduced to $500,000 from $5 million because a specific cyber panel member was not used. “You have to be very careful on all the clauses,” Fowler said. If there is an asterisk or footnote, the client should take a closer look. “Just because some-
RSA Canada
thing is allowed, doesn’t mean you have full coverage,” he cautions. “If it’s allowed, how much of it is allowed within specific scenarios?” The industry offers options not only for what is covered, but also for how the product is offered. Cyber coverage can be offered bundled with other policies, or as a standalone product. Generally speaking, bundled offerings have restrictions on the amount and scope of coverage. For example, a bundled policy might not cover social engineering, for example, or a client might have to add on terrorism coverage. Does that mean that standalone policies always cover certain things? “It’s a very difficult question to an-
swer,” Fowler said. “In general terms, standalone coverage typically includes a lot — if not all — first-party expenses and a good chunk of third-party expenses, meaning some of the litigation that stems from having an incident or breach. Bundled, you’re going to have a lot of restrictions around even firstparty coverage, and not even getting the third-party coverage. That makes it even more confusing.” What about an all-in-one cyber product that covers everything available in the market? Fowler says it’s a good idea from the standpoint of the consumer and industry, but it would be difficult for underwriters to assess the risk associated
RSA Cyber Risk
Basic Coverage: 1st party and 3rd party coverage tailored for small- and medium-sized businesses (with up to $50 million in revenue) that also insure their property or liability with RSA. The product offers up to $2-million aggregate limit and provides expert services to help manage a cyberattack, including: 24/7 incident manager IT forensics and public relations; legal advice and defence costs; compensatory damages; credit and identity monitoring, notification and data restoration costs; cyber business interruption. Exclusions: Bodily injury/property damage, with carveback for mental anguish/injury resulting from data liability event or network security event; unencrypted portable devices; CRTC violations; pollution; Acts of God. Cost Structure: Price is variable and dependent on controls, revenue, limit and industry class.
Travelers Canada Travelers Cyber+
(for technology companies)
Travelers CyberRisk
(for companies outside of the technology segment) Basic Coverage: Policy comprised of 1st party and 3rd party insuring agreements. For technology companies, there is an added agreement for E&O liability coverage. Optional 3rd party insuring agreements include: network and information security liability; communications and media liability; regulatory expense defence. Optional 1st-party insuring agreements: crisis management expense; security breach remediation and notification expense; computer program and electronic data restoration expense; computer fraud; funds transfer fraud; ecommerce extortion; business interruption and additional expense. Coverage enhancements can be added (for example, infringement of copyrighted software and social engineering). Exclusions: Standard liability exclusions exist on the policy, including bodily injury/property damage. Other exclusions may apply depending on the insuring agreements purchased. Cost Structure: Premium is based on a number of factors, including revenue, assets, industry and total number of personally identifiable information records held. Cybersecurity and governance also play a role in pricing – for example, credits may be applied for companies having a written and tested incident response plan.
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COVER STORY
The Chaotic Universe of Cyber with it. Evans says the risk would be particularly challenging to determine for those who don’t have a background in underwriting all the different coverages. An all-in-one product would also be challenging from a pricing standpoint. Endorsements that focus on one risk in particular would feature more attractive pricing. “Cyber should eventually be considered as a peril on every policy, so you may see the industry adapt and eventually have it included more broadly in more traditional lines of insurance, rather than as a separate policy,” Shufelt said. Product pricing generally breeds a lot of discussion. Nelson reports that pricing has become more consistent in the
market over time, because the industry has now built up a historical claims perspective. Evans disagrees, saying pricing is not consistent, even among industries. “It’s just that I think insurers are still struggling with how to price things,” Evans says. “I will routinely send a submission out to eight different markets and I will sometimes, without exaggeration, get markets coming in at half the price or one-quarter the price of others.”
BROKER EDUCATION Although the myriad of pricing and coverage options may appear confusing to brokers who must sell the product, Sané said viewing it this way is the
wrong approach. “Maybe the confusion is in the mind of the broker,” he said. “What do clients want? Do clients want everything covered under one policy, or do they want different things covered under different policies? There’s no right or wrong answer.” Nelson said brokers are starting to become more educated on the topic. Also, they are assigning cyber specialists within their office to be a technical resource for the company. While companies still refer to certain types of coverage in multiple different ways, brokers have taken on the responsibility to become experts in the field and understand what the exposure means for their clients.
Economical Mutual Insurance Company EXPERT Cyber
Basic Coverage: The policy can be combined with property or CGL policies. It covers: fees, notifying affected individuals, business interruption and restoring lost data; 1st party losses suffered by the business owner for network business interruption, cyber extortion and data protection; 3rd party damages and expenses resulting from a violation of a privacy law, regulatory defence and Personal - Personal Cyber Protection Portfolio penalties or payment card fines; expenses for professional services (such as forensic investigation, legal support, public relations, Basic Coverage: 1) Cyberattack: recovery of data and restoration of systems; and crisis management); breach support and specialized claims 2) Cyber extortion: professional advice on how to respond services from a team of breach response professionals. and reasonable costs; Exclusions: Property damage or personal injury; unlawful 3) Online fraud: activities that result in direct financial loss; collection of information; prior and intentional acts; intellectual 4) Data breach: payment for services if 3rd party private property. personal data entrusted to a household resident is breached Cost Structure: Multiple limit options are available starting at $50; increases depending on Exclusions: Subject to an aggregate limit of $25,000 or exposure and limit option requested. $50,000,dependent on purchase; covers direct financial loss
Wawanesa Mutual Insurance Company
for a fraud event.
Data Compromise Coverage Form
Basic Coverage: 1st party coverage pays the insured’s costs to provide notification of individuals affected by personal data compromise. 3rd party coverage pays for insured’s data compromise defence and liability costs arising from a covered 1st party loss.
CyberOne Coverage Form
Basic Coverage: 1st party coverage pays the insured’s data and system restoration costs due to a computer attack. 3rd party coverage pays the insured’s defence and liability costs arising from a negligent security 29 March 2018 Canadian Underwriter failure or weakness involving owned/leased computer equipment.
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Who’s afraid of blockchain?
Skeptical underwriters, that’s who. Here’s what they want to know from their clients before agreeing to coverage. Clive Bird
Account Executive Axis Insurance Group
As blockchain-related businesses flourish, they are finding a lukewarm reception in the insurance market. Regardless of the company’s coverage needs, most traditional insurers are reluctant to release capacity and often decline to offer any level of coverage. Let’s look at current challenges facing blockchain-related businesses in procuring insurance, providing a guideline to improve the chance of securing necessary commercial insurance coverage. Blockchain technology is still in a relatively early stage of development. Simply defined, it is a digital, decentralized ledger that keeps a record of all transactions that take place across a peer-to-peer network. The following perceived risks are attached to it: • Lack of mature infrastructure • Lack of scalability • The potential for fraud through collusion, especially at the doorways to the blockchain
• Unanswered questions around regulation and legality The insurance industry’s reluctance to engage with companies pushing into new frontiers of cryptocurrencies and blockchain technology can be attributed to both a misconception of these business models and a lack of understanding of the technology. These technical challenges are compounded by the fact that the industry typically relies on long established methods of using historic data to determine appropriate rating models commensurate with the probable risk. In this way, the two industries are somewhat at odds. At the same time blockchain companies are pushing boundaries and creating new opportunities, insurers are relying on actuarial data, historic loss statistics, understanding of legal precedents, and damage awards to sustain profitable risk assessments. Insurers are therefore reluctant to use their capacity to take on these uncertain risks. Underwriting capacity refers to the insurer’s ability to retain risk. • Regulators prevent insurers from underwriting an unlimited number of policies to ensure that policyholders are protected. • An insurer’s capacity to earn premiums is underpinned by its capital. Factors determining the use of capacity include pricing strategy, adequacy of reserves, assets, and the volatility of the risk pool. • Insurers treat underwriting capacity as a finite resource that is drawn against as new policies are underwritten (similar to a line of credit). Several other factors influence an insurer’s reluctance to release their unused capacity for blockchain risks. To transfer their risks to insurance, businesses offering products and services based on blockchain technology need to demonstrate their commitment to risk mitigation, regulatory compliance, and the highest standards in procedures and protocols related to their business mode.
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Insurers have raised several concerns about underwiting blockchain technology, reproduced below. Blockchain companies will need to initiate a dialogue with insurers about how to address and mitigate these concerns. SYSTEMIC RISK
CYBER RISK AND HACKING
Insurers attempt to avoid underwriting risks where a single event can give rise to claims under multiple policies. For example, in the event of natural disasters such as earthquakes and windstorms, insurers have a big premium pool, catastrophe reinsurance protection and a spread of geographic risk to withstand the shock. This is not the case with companies that are developing blockchain technology. Insurers fear a single event could affect many policies around the world simultaneously and they simply don’t have the spread of risk or premium pool to support a potential systemic loss.
Insurers are concerned about areas unique to crypto assets, such as permission and non-permission based blockchain technologies, as well as security risks related to private keys, exchanges, or wallets. Cold and hot storage protocols, and protection and back-up of private keys are important considerations. This will particularly be the case for crime insurers, but increasingly D&O, E&O and cyber insurers are also considering these risks, since the potential for significant loss or theft of coins and tokens can impact these policies
REGULATORY UNCERTAINTY Depending on the blockchain business model, regulations around them may be unknown or uncertain — the same goes for the enforcement of regulations by government officials.
INTERNATIONAL RISKS Insurance for international risks is highly specialized; few insurers have acquired the international capabilities, knowledge of regulatory/licensing requirements, or the expertise to operate in foreign insurance markets.
PACE OF CHANGE Historical information is a key component of underwriting risk. Insurers make judgments based on past business success and reliable loss histories to determine rates and risk selection. The incredible pace of new development, technology, unique ideas and innovative business processes in the blockchain business make it difficult for insurers to maintain updated information on blockchain risks.
PRICE VOLATILITY Price volatility has been a key underwriting consideration in public company directors’ and officers’ (D&O) insurance. Large and sudden stock price drops are often the catalyst for class action law suits. Cryptocurrencies, Bitcoin in particular, have become well known for wild price fluctuations. Token pricing for some initial coin offerings (ICOs) has been volatile during the pre-ICO, the public offering stage, and finally when the token is traded on exchanges.
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UNPROVEN BUSINESS MODELS Insurers sense an elevated risk associated with raising capital through ICOs before the development of a proven and viable business platform.
RISKS OF THE CRYPTOCURRENCY MARKET Insurers often raise the following questions related to the future of the cryptocurrency market and evolution of the blockchain technology. • Is there a possibility of a significant disruption to the underlying platform? • Which coins and tokens will stand the test of time?
APPLICATION FOR INSURANCE Are you looking to insure your blockchain business? Applying for insurance is a process that should be undertaken with care. Information should be carefully prepared and submitted by a broker with experience and strong relationships with the specialty markets that are underwriting blockchain risks.
DETAILED UNDERWRITING SUBMISSION • Financial information, business plans, copies of contracts and agreements. • Legal opinions relating to the business model, company structure and the ICO • For public companies, copies of filing statements, the prospectus, or other offering documents that clearly define the use of proceeds and technical details regarding the products and/or services being offered will help secure the best terms in the market. • Insurers are also paying close attention to Know Your Customer (KYC) and anti-money laundering (AML) procedures, regulatory compliance and offshore incorporations.
“With the insurance industry under intense pressure to meet consumer expectations for a digital experience, there’s just no competitive advantage in each company developing or purchasing its own solution to do the same thing,” says John Elliott, senior vice president of IT and chief information officer at RSA Canada and CSIO board member. “In the case of digital document delivery, it made sense to collaborate on a unified solution.” My Proof of Insurance was developed with carrier and broker requirements in mind, ensuring that it meets their business needs while providing consumers with a simple, convenient digital experience.
The Proof is in the Digital Wallet
CUSTOMER EXPERIENCE
Michael Spiar Broker Relations & Communications Specialist Centre for Study of Insurance Operations (CSIO)
The P&C industry is poised to deliver policy documents to consumers electronically. Here’s how an industry solution proposes to meet consumer demand for electronic pink slips.
Early in the development process, the project team leading the My Proof of Insurance initiative examined market data from Forrester Research to find out how consumers would prefer to receive their policy documents. Canadians prefer simple processes for managing insurance documents, the data showed, with no apps on their phone, no passwords, and no logins. In fact, fewer than 4% of Canadians have downloaded an insurance app. Conversely, use of mobile digital wallets is rising dramatically. For these reasons, My Proof of Insurance uses technology that Canadian consumers already use in everyday life — policy documents arrive by email, and eSlips can be saved to mobile digital wallets on consumers’ smartphones.
COLLABORATIVE SOLUTION An industry-wide solution for electronic delivery of insurance policy documents, including proof of auto insurance insurance (eSlips), has arrived in Canada. The Centre for Study of Insurance Operations (CSIO) in February launched My Proof of Insurance, an industry solution enabling eDelivery of insurance documents for personal and commercial lines — including pr oof of auto insurance — to consumers. Developed in collaboration with carriers and brokers across Canada, the solution provides a convenient, standardized method for insurance providers to send digital insurance documents to consumers.
A key part of the success for My Proof of Insurance is ensuring that it benefits both brokers and carriers. Knowing this, the project team was inspired by CSIO’s eDocs solution, which debuted in 2012. The eDocs standard enables carriers to send electronic policy documents directly to broker BMS platforms, resulting in a paperless workflow. “eDocs have been such a win-win for our industry,” says Sheldon Wasylenko, vice chairman of CSIO and general manager of Rayner Agencies in Saskatchewan. “With eDocs, brokers and carriers both benefit from faster business processes, March 2018 Canadian Underwriter 33
“The Fasken report and CCIR’s posicost and time savings, plus brokers can authority to approve eSlips without the often provide faster customer service. need to introduce new laws or amend tion paper really convinced us we were on the right track,” says CSIO board We saw My Proof of Insurance as a natu- existing legislation. CSIO shared this report with regula- member Sean Christie, chief informaral extension of eDocs, providing tremendous value to brokers and carriers alike.” tors in every jurisdiction, as well as the tion officer and vice president of inforAs one example, My Proof of Insur- Canadian Council of Insurance Regula- mation services at Gore Mutual. “Confiance is sender-agnostic, meaning an tors (CCIR), an umbrella association dent that regulatory approval for eSlips electronic policy document — e.g., an of provincial and territorial insurance was just a matter of time, we made the eSlip — can be sent to a consumer by regulators. The timing turned out to be proactive decision to build My Proof both brokers and carriers. “If either ideal. CCIR had already started to inves- of Insurance, with eSlips functionality party can use the My Proof of Insur- tigate electronic proof of auto insur- available on Day 1.” The breakthrough came on Jan. 10, ance solution to send emails, who does ance and was in the middle of collectthat email come from?” says CSIO board ing stakeholder input. Its position paper, 2018, when Nova Scotia became the member Christopher Harness, senior released a few months later, firmly sup- first province to issue a bulletin forvice president of solutions delivery at ported permitting eSlips while seeking mally approving eSlips. There are strong Northbridge Financial. “The team opted stakeholder input for further consider- indications that other jurisdictions are for a co-branded approach. All emails ation. CSIO prepared a submission ad- poised to follow suit. are sent from the @myproofofinsur- dressing the concerns raised by CCIR. MOVING FORWARD ance.ca domain and will feaAt of the time of writing, ture both carrier and broker CSIO’s focus is to support their logos.” members in the implementaThe result is a consistent tion of My Proof of Insurance customer experience that and collect feedback for future increases the value proposi• Ability to send all policy documents, including proof enhancements. tion of brokers and carriers of auto insurance (eSlips), CSIO has provided dozens equally. “What impresses me for personal and commercial of walkthroughs for industry the most is the dual funclines stakeholders including memtionality of the software for bers, regulators, and probrokers and carriers, as well • eSlips download to digital vincial broker associations. as the cost effectiveness of wallets common to Apple, “Throughout the developadoption at the brokerage • No customer apps, Android and Windows ment process, we knew we end,” says Rose Cavaliere, portals or log-ins smartphones had to engage with members Operations Manager at Dawrequired beyond those on the project son & Keenan Insurance. team,” says Catherine Smola, “The simple design of the president and CEO of CSIO. program brings true value • Customers may lock their “These walkthroughs are an to the ease of doing business smartphone screen when indispensable way to raise and in the digital world.” • Brokers receive notifications in displaying eSlips to police or address stakeholder concerns, their BMS detailing all emails other drivers, restricting REGULATORY enabling us to build a final and documents sent to each access to personal information customer ROADBLOCK product that works for the inBefore launch, one imdustry as a whole.” portant issue had to be ad“I was truly excited for my dressed: eSlips did not yet members when CSIO did their • A consumer website www. myproofofinsurance.ca provides have regulatory approval. walkthrough with us,” says education, frequently asked A simple bulletin was all George Hodgson, president of questions, and a guide to that was required, accordthe Insurance Brokers Associascreen-lock functionality ing to a Fall 2015 report tion of Alberta (IBAA). “What • An application program commissioned by CSIO a fantastic option for brokers interface (API) has been made and prepared by law firm looking to expand their digital available to broker management Fasken. The eSlips Advisory footprint with minimal investsystem (BMS) vendors, enabling Report undertook a regulament in either time or money. them to integrate My Proof of Insurance for seamless broker tory review across Canada, It is by far the most accessible workflows concluding that provincial solution available for brokers insurance regulators had the of all sizes.”
Features of My Proof of Insurance
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Canadian Underwriter March 2018
Loss control for grow-ops
Marc Raymond Vice President, Professional Development Specialist Afirm Solutions
After marijuana is legalized in Canada, the number of cannabis operations will grow — and traditional loss control techniques should apply. As the cannabis industry transitions from underground to mainstream, licensed cannabis producers, processing facilities and dispensaries will require coverages akin to a myriad of other crop products and processing industries. From a loss control point of view, we need to focus less on the type of vegetation and more on the environments, processes, and ancillary exposures surrounding the cannabis industry.
PRODUCERS Indoor nurseries and greenhouses are places where marijuana plants are grown for use as budding stock. A variety of fertilizers, natural herbicides, and pesticides — as well as carbon dioxide — are used to control disease, insects, and to promote plant growth. These products must not only be handled properly, but stowed in a specially labeled storage cabinet, room, or separate structure due to their possible toxicity or volatility. Electricity risks arise from the fact that plants in a greenhouse operation are unable to benefit from natural sunlight and warm weather. Therefore, many grow lights, as many as one for every 16 square feet, are critical in greenhouse operations, in addition to heating and ventilation equipment. Electrical components can ignite fires if not installed or maintained by a licensed electrician
March 2018 Canadian Underwriter 35
in accordance with code requirements. Operators unfamiliar with these requirements might, to save time or money, use common electrical components unsuitable for a given environment instead of more expensive or recommended options. They may also do so without regard for acceptable installation practices. Additional fire loading, — which consists of the inventory of plants, plant containers, mulch, and combustible racking — must also be taken into consideration when designing, installing, and maintaining fire detection and suppression devices such as sprinklers and fire extinguishers. A formal education is seldom required for entry-level labourers in nursery operations. Therefore, proper on-the-job training and instruction is an important facet of loss control initiatives in this arena.
PROCESSING Transformation operations facilities take the harvested marijuana and convert it into a wide variety of smoking and edible products. Manufacturing facilities vary in size, capacity, and layout. A typical manufacturing plant will include: • one or more areas for production, • storage facilities (both for the raw materials and finished products), • laboratories, or research and development areas, • packaging and filling, and • possibly a retail store. Any newly-derived products with unknown Tetrahydrocannabinol (THC) levels must be tested for safety. THC is the chemical compound in cannabis responsible for the euphoric high. When used in food, it must be accepted as safe by regulatory bodies and comply with government regulations (including environmental laws and regulations). Butane is often used to extract THC from the marijuana plant for use in edible products. As a solvent, butane is caustic, highly flammable, difficult to work with, and not necessarily friendly to the environment. Consequently, to prevent fires and save lives, the storage and handling of butane in any given environment is critical. Due to the wide variety of possible cannabis processes and environments, 36
Canadian Underwriter March 2018
processing operations are possibly the most onerous from a risk management and mitigation perspective. Exposures range from hazardous materials to food safety and handling, as well as product liability and other common occupancy exposures.
employees about their responsibilities and obligations under the law. These programs must show how to recognize the signs of intoxication or impairment, and how to intervene effectively with aggressive customers.
DISPENSARIES
MARIJUANA GROWTH FOR PERSONAL CONSUMPTION
Marijuana retail operations sell more than just dried buds of the marijuana plant for smoking. Today, many stores sell smoking products, snack foods, candy, and drinks — all containing various levels of THC. The marijuana retail industry is unique. Products containing THC are fast becoming a commodity in public demand. An enormous amount of capital is raised in excise taxes. Because of the nature of the product, as well as the potential for large-volume cash transactions in certain jurisdictions, there may be a higher incidence of crime — both organized and random — distinguishing a cannabis operation from other retail operations. As a result, crime prevention and deterrent strategies must be properly implemented; they should include a proper handling and storage of cash, employee vetting, and state-of-the-art monitoring and alarm systems. The sale of cannabis products is closely regulated and monitored. A great duty of care is required, specifically when it comes to selling THC products to underage customers or intoxicated persons. To minimize liability exposures, cannabis operations must establish a training program designed to educate
Many jurisdictions allow legal growth of marijuana plants for personal consumption. Although it is not a direct exposure to a homeowner policy, per se, there are secondary risks to consider. From a fire and electrical hazard perspective, we must consider improper or inadequate wiring surrounding the grow area. Early indications are that a maximum of four plants per adult per household will be allowed. Therefore, it is quite plausible that a house with four residents may be home to 16 plants or more. This attracts attention to the property, which in turn could result in break-ins and property damage. In a rental situation, electrical hazards; damage to property as the result of a damp, improperly-ventilated grow area; and the inability of other tenants to enjoy a scent-free environment can all be serious issues. Whether we as individuals subscribe to the idea of legalizing marijuana, the impact on commerce and the insurance industry is undeniable. With the proper understanding, and the use of appropriate loss control/risk mitigation techniques, the stages of marijuana growth from planting to consumption can be managed as well as any other exposure.
Alberta
Canada’s poster child for climate risk
David Gambrill Editor-in-Chief
Canadian reinsurers see the spread of catastrophe risk becoming increasingly concentrated in Alberta, where a population boom has led to unparalleled storm exposure. Once considered a relatively safe place to park capital in a world beset with large-scale catastrophes, Canada is now under scrutiny by the reinsurance community as a place fraught with its own share of natural catastrophe risk. Reinsurers are particularly concerned about Alberta, where weather storms have been fiercer and less predictable than a bucking bronco. The province is quickly becoming Canada’s poster child for climate risk. Eight out of the 11 most expensive natural catastrophes to hit Canada since 1983 swept through some portion of Alberta; those eight catastrophes accounted for $9.1 billion in claims damage. They included floods, fires, hail and windstorms; excluding wildfires, a significant chunk of the storm loss activity clus-
ters in the geographic corridor between the major urban centres of Calgary and Edmonton. And those are only the biggest catastrophes. Of the approximately $9 billion that the property and casualty insurance industry paid out in catastrophe claims over the past nine years, 63% of those losses have happened in Alberta, Sean Russell, managing director of reinsurance broker Guy Carpenter, told a panel discussion held at the C4 2018 conference held in Ottawa. Reinsurers have taken note that the so-called “spread of risk” in Canada has in fact become quite concentrated in one area. “If I bring it back to the basics, the basics of insurance is that the premium of the many pay for the losses of the few,” Joseph El-Sayegh, president and CEO of SCOR Canada Reinsurance, said at the C4 conference. “So, for the time being, it’s a fact that the premium of all Canadians is paying for the losses of Albertans. That’s what’s happening on the reinsurance front.” Insurance premiums are priced based on loss exposure. The gigantic losses in Alberta go along way to explaining why Alberta home owners have seen their home insurance rates increase by an average of $1,000 over the past 10 years — from $500 on average to $1,500. March 2018 Canadian Underwriter 37
Some in the industry are wondering if the province is even insurable anymore. “Is Alberta viable as a place to do business of insurance?” Joel Baker, president and CEO of MSA Research, asked the C4 panel. “Are the rates adequate? Is it possible to get the rates adequate? Is it sustainable?” “It has to be,” replied panelist Keith Hartry, senior vice president and chief operating officer of Wawanesa Mutual Insurance Company. “People need insurance, so we have to find a way of making it viable. it’s likely going to mean people
will have to accept more exposure themselves than they are used to.” That could mean homeowners accepting higher policy deductibles, government taking on more of the risk themselves, or risk mitigation measures. Hartry said two things in Alberta are conspiring to increase loss exposure in the province. One is more severe weather due to climate change. The other is a massive population growth in Alberta over the past decade. Alan Frith, senior manager of consulting and client services for cat modeler AIR Worldwide, said the local impact of climate change is difficult to know. He noted that thunderstorms tend to lead to catastrophic losses, but it is difficult to say precisely whether there will be more or fewer storms in the future due to climate variability. “For climate change, you would expect increased instability in the atmosphere and that would lead to more thunderstorms,” he said. “At the same time, you would expect a decrease in the 38
Canadian Underwriter March 2018
vertical windshear which would result in less thunderstorm activity. So which one of those is going to win out and produce more of a lasting impact? The answer is that we would expect there to be more extremes, so more extreme events and more year where there is potentially less loss.” From a ground-level view, the reason for the weather-related losses in the province seem obvious, says Hartry. “I moved to Edmonton, Sherwood Park in June 2010,” said Hartry. “Before that, I was in the underwriting pricing area in the executive office of Wawanesa in Winnipeg. We were dealing with Alberta and how we were going to address this. When I moved to Alberta, it seemed like there was a thunderstorm every day at about 4 o’clock. I’m thinking, ‘No wonder we have a problem here, it storms every day.’”
Since 1983, EIGHT out of the 11 most expensive natural catastrophes to hit Canada swept through Alberta. Not only that, but Alberta has become a mecca for those coming to the province to cash in on the booming economy in recent history, fuelled in part by the lure of jobs in the oil patch. Over the past 10 years, Calgary’s population has grown from 934,300 to 1.56 million people — a 67 per cent increase. In Red Deer, the city’s population of 65,701 expanded to 99,832 people in just six years. And in Airdrie, Alta., home to one of Canada’s 10 largest disasters due to weather, the population has jumped from 5,897 to more than 64,000 — an increase of 101 per cent.
“This is in the exact area where most of the storm activity is,” Hartry said. “It’s a combination of climate change, changing weather patterns, and more people in harm’s way.” Hartry’s observation is reflected on a grander scale in the catastrophe models of RMS. “We see a bigger impact on the rapid growth in catastrophe losses, as a result of the exposure growth and the increased urbanization,” said Frith. “That exposure is concentrated around urban centres. The greater the concentration, the more potential for there to be extreme financial losses.” If more people are moving into areas where storms are becoming more intense, what does that mean for insuring people in the province? “Is Alberta viable as a place to do business of insurance?” MSA Research president and CEO Joel Baker wonders. “Are the rates adequate? Is it possible to get the rates adequate? Is it sustainable?” Hartry bristles at the suggestion that insurers would start pulling out of the area because of the mounting loss exposures. “People need insurance, so we have to find a way of making it viable,” he says. “It’s likely going to mean people will have to accept more exposure themselves than they are used to. It may mean that government will have more exposure than what they have had in the past. To me, it’s not acceptable to even go down that road of whether it’s viable or not. We have to find a way to make it work.” El-Sayegh said Baker’s question should not be underestimated. He figures the reinsurance industry, which collects about $2 billion per year in Canada, paid about half of that each year for the past five years to cover off catastrophe losses. “So, let’s say $5 billion has been paid over the past five years by the reinsurance industry, only for the top nine cat losses in Canada,” he said. Would the resinsurance industry be able to sustain this kind of risk without inviting a potential system collapse? “It has to be viable,” El-Sayegh echoed Hartry. “How? We have to look at other means besides letting the rest of the Canadian market subsidize that area [of Alberta] itself.”
March 2018 Canadian Underwriter 39
MOVES & VIEWS
UPCOMING EVENTS: FOR A COMPLETE LIST VISIT
www.canadianunderwriter.ca
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Greg Somerville steps down from his role as president and CEO of Aviva Canada, effective Mar. 1, 2018, to become a non-executive director for the company. “After more than twenty-five years in Aviva, the right time has come to step back from the day-to-day running of Aviva Canada,” Somerville said in a news release. “My focus, the priority of all of us in Aviva Canada, remains on supporting our customers, brokers and our distribution partners. Business continues as usual.” Somerville has been president and CEO of Aviva Canada for the past four years. He will be succeeded by Colm Holmes, currently CEO of Aviva UK General Insurance and chairman of Global Corporate and Specialty.
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Quebec broker association Regroupement des cabinets de courtage d’assurance du Quebec (RCCAQ) has appointed Louise Mathieu, vice president at brokerage Lussier Dale Parizeau, to its board of directors. Mathieu returns after having been a board member for several years, including a term as board chairwoman in 200910. “Drawing on her extensive experience, Ms. Mathieu 40 Canadian Underwriter March 2018
is sure to make a significant contribution to the RCCAQ,” association chairman and board member Christopher Johnson said in a press release. “We are very happy to have her back!”
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Totten Insurance Group, a managing general agency with several Canadian offices, has acquired Belyer Insurance Limited of Windsor, Ont. The potential to expedite policy issuance to brokers online was a major factor in the decision, says Totten CEO Susan Murphy. Belyer does business as EasyInsure, which has a system for quoting, binding and issuing policies online. “Insurtech in the [property and casualty insurance] space is critical,” Murphy says. “Everyone has to be investing in it if we are not we are going to be left behind.”
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Angela Veri has been appointed to the position of executive vice president of strategic partnerships at First General. Her role will be to enhance and execute sales strategies, as well as to strengthen customer relations in all lines of business. Her primary focus will be to strengthen and expand First General’s
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existing service lines for insurance-based businesses, broker-driven and corporate client programs across North America. First General has also appointed Dave Johnson as director of education and field support, as well as Sheila Corbett as manager of vendor program resources.
mutual insurer, the company said in a statement. In addition, Stephen Imrie 5[b] is joining Gore Mutual as vice president of underwriting. Overseeing the organization’s personal and commercial insurance operations, Imrie has more than 35 years of underwriting and risk management expertise.
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Paul Jackson [5a] is now chief marketing and distribution officer for Gore Mutual Insurance Company. He played a key role in Gore Mutual’s transformation since joining the organization in 2014, helping the company reposition itself as a mid-sized modern
Diversification into oil and gas partially fueled Hub International‘s recent acquisition of Kindersley Insurance. Keith Jordan, president and CEO of Hub Manitoba, says acquiring the shares of Kindersley Insurance was beneficial for both companies. “Hub sought more representa-
MOVES & VIEWS
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7 9 tion in Saskatchewan and wanted to diversify our offerings in the province to include Kindersley’s specialization in oil and gas,” he said. The entire Kindersley staff, including principals Mark Stockford and Barry Andrew, will join Hub Manitoba and report to Doug Trapp, vice president of Hub’s Saskatchewan Region. Headquartered in Kindersley, Sask., with an office in Dodsland, Kindersley Insurance is a full-service, independent personal and commercial insurance brokerage that specializes in insurance solutions for the agriculture, oil field and trucking industries.
Kernaghan Adjusters has tapped Michael Gauthier to lead the operations of its re-opened office in Saskatoon, Sask. Gauthier, who has a CIP (Adv) designation, joins the adjusting firm with more than 14 years of experience. He is recognized in the industry as a major loss adjuster, having handled many multi-milliondollar losses. His expertise includes commercial and personal property, transportation, liability and catastrophe claims.
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Duliban Insurance Brokers Ltd., a third-generation, family-owned insurance brokerage, has acquired Fisher Stevenson Boehm Insurance Inc. (FSB). Established in 1979, FSB is known to customers throughout West Niagara for offering auto, home, business, farm and travel insurance. All FSB employees will be retained with
the Duliban team and FSB president Jaff Stevenson will transition to the group division of Duliban Insurance Brokers as a consultant. Since its inception in 1976, Duliban Insurance Brokers, a leading independent broker in Southern Ontario, has grown to include five offices throughout the Niagara and Haldimand regions, and has recently extended services across Ontario and Eastern Canada.
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FirstOnSite Restoration, Canada’s leading independent disaster restoration services provider, has bolstered its Quebec offering with the opening of a new branch in Ste-Agathe, Que. Senior project manager and acting branch manager Olivier Bertrand heads up the new branch. A resident of the Laurentians, Bertrand originally joined FirstOnSite in 2010 and has more than 10 years of experience in disaster recovery and restoration.
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Grant S. Dunlop, Q.C., a partner at Ogilvie LLP, has been appointed as a justice of the Court of Queen’s Bench of Alberta in Edmonton. Before his appointment, he had spent his entire legal career at Ogilvie LLP in Edmonton,
where he was an articling student, an associate, and, since 1999, a partner. Dunlop maintained a litigation practice that focused on directors’ and officers’ liability, employment, construction, banking regulation, professional liability, estates, patents, public utilities, schools, elections, and airports. In addition, he drafted agreements for insurance reciprocals and engaged on his clients’ behalf with provincial insurance regulators across Canada.
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Regina-based brokerage Harvard Western Insurance has acquired Saskatchewan brokerage Hoff Insurance. Harvard Western president and CEO Dave Pettigrew says Hoff Insurance approached his firm because they wanted to be part of a larger brokerage. “Their market is really adjacent to the market that we serve, so it was a nice fit where we already do business,” Pettigrew said. Both offer personal, commercial and farm policies. Harvard Western currently has 75 staff, with 10 more coming in from Hoff Insurance. There will be no downsizing as a result of the merger, Pettigrew said.
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GALLERY See all photos from this event at www.canadianunderwriter.ca/gallery
The Insurance Institute of Ontario’s GTA chapter graduated more than 350 students from the CIP, GIE and other programs at its annual Convocation on January 25. Among those presenting the honours were Insurance Institute of Canada chair Lynn Oldfield and Insurance Institute of Ontario president Bob Fellows (both pictured). Attendees also learned some success secrets from former Dragons’ Den star Bruce Croxon.
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GALLERY See all photos from this event at www.canadianunderwriter.ca/gallery
Congratulations to the CIP and FCIP graduates honoured at the Quebec City Convocation of the Insurance Institute of Quebec on January 13. Jean-Franรงois Blais, president of the board of governors of the Insurance Institute of Canada, and Simon Charbonneau, president of the board of directors of the Insurance Institute of Quebec, presented the certificates.
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The Ontario Insurance Adjusters Association (OIAA) continued its tradition of delivering timely and informative insights and guidance at its 26th annual Professional Development and Claims Conference, held January 30 in Toronto. Through an adjuster’s lens, subject-matter specialists covered such topics as the sharing economy, electronic data recorders and covert surveillance technology. When the hundreds of conference delegates weren’t engaged in learning all the latest, they walked the aisles of a bustling tradeshow in which more than 100 exhibitors represented a diverse array of claims-related fields.
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GALLERY See all photos from this event at www.canadianunderwriter.ca/gallery
March 2018 Canadian Underwriter
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GALLERY See all photos from this event at www.canadianunderwriter.ca/gallery
It’s not easy to maintain a solid grasp on duty of care when so many new risks are evolving so quickly. So, kudos to the planning committee of the 51st annual Joint Ontario Conference of the Canadian Insurance Claims Managers Association (CICMA) and Canadian Independent Adjusters’ Association (CIAA) for dedicating their 2018 event to that dynamic topic. An audience of about 140 gathered in Toronto to learn from legal experts in three emerging areas: Sandra Corbett of Edmonton’s Field Law (autonomous vehicles); Waterloo, Ont.-based Patricia Forte of Miller Thomson (cyberbullying); and Christina Polano of Toronto’s Thomas Gold Pettingill (drones). The day wrapped with a luncheon and laugh-out-loud take on life from comedian Susan Stewart.
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The driver of change isn’t the technology — it’s the customer. Alice Keung, SVP & Chief Transformation Officer
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