Canadian Underwriter June 2008

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June 2008

AUTOMATING POLICY CHANGES:

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Cover Story Some believe ‘automated change’ is an oxymoron — if not a technological impossibility — but it’s the pinnacle of achievement for brokers wanting to perform real-time, Web-enabled insurance policy changes with carriers.

VOL. 75, NO.6, JUNE 2008

www.canadianunderwriter.ca

PUBLISHED BY BUSINESS INFORMATION GROUP

BY CRAIG HARRIS

Contents

12 Bringing Life to Change

22 Profile: AXIOMATIC TRUTH — After

48 FULL FINANCIAL SERVICE – Cross-selling life and

12 years of imparting wisdom to the insurance industry in the form of fiction, the man behind Canadian Underwriter’s Axiom column, Gordon Findlay, has decided to retire the column.

investment services requires more than just new technology — it requires key personnel and a change in business culture at a property and casualty brokerage/insurance company.

BY VANESSA MARIGA

24 Insight: CLAIMS TECH INTEGRATION — The future of claims technology involves the seamless, transparent processing of claims from end-to-end, allowing policyholders to track the status of their claim online.

BY PAT DUREPOS

52

GO WITH THE FLOW – The principal means to mitigate risk of water damage due to sewer back-up is to make sure homes are connected to updated municipal trunk mains.

BY LARRY WATSON

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BY DAVID GAMBRILL

NEWS FEATURES

28 RECRUITING ONLINE — If the insurance industry wants to recruit younger members, it will have to adjust its tactics to appeal to the FaceBook Generation, delegates at a May 2008 Insurance Brokers Association of B.C. conference are told.

BY DAVID GAMBRILL

32 NOBLE CONCEPT — Insurers and brokers are engaged in a dialogue about the importance of ‘insurance to value,’ but if it’s such an important concept, why isn’t it happening in practice?

AUTO REFORM – Ontario’s mandatory five-year review of the auto insurance product doesn’t officially start until later this year, but insurers are already deadlocked with members of the court system over the province’s verbal threshold and Cdn$30,000 deductible.

BY DONNA FORD

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KILLING TIME – What are employees up to at insurance companies and brokerages? On average, workers in the insurance industry are spending more than an hour a day doing non-workrelated surfing online.

BY CHRIS BORCHERT

BY ROBERT HARDER

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CALCULATING REPLACEMENT COSTS — New technology is available that more accurately quantifies replacement costs for the construction of larger and more complex modern homes, thereby improving the possibility of insuring to value.

BY EDMUND WEBECKE AND JOEL DAGENAIS

42 DAMAGE TO REPUTATION – A scarcity of coverage is available for insuring risks to a corporation’s reputation, so companies must prepare in advance to handle a crisis situation, delegates heard at the 2008 RIMS conference in San Diego.

SPECIAL FOCUS

4 6 58 72

Editorial Market Watch Axiom Moves & Views

BY VANESSA MARIGA

MEMBER AUDIT BUREAU OF CIRCULATION

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Applying the Brakes henever Canadian insurance company claims departments and legal vendors seek signs of The Apocalypse when it comes to claims litigation, they often look in the direction of United States courtrooms. And it’s a common psychological tendency that when we look for something, we are bound to find it.

Take, for example, the U.S. case in which a man supposedly sued Michael Jordan and Nike co-founder Phil Knight for US$862 million for defamation and permanent injury because he found it distressing to look like and be confused with the basketball star. The story may well be apocryphal, but it certainly illustrates the reason why many people in the claims industry believe there are far too many legal cases in which damages awarded or claimed no longer seem to have any rational connection to the personal injury actually suffered.

With this in mind, many Canadian insurance industry seminars have looked at the massive jury awards in insurance cases southward and hoped the same thing can’t happen here. So it’s with some gratification they can look at two particular judgments emanating from the Supreme Court of Canada over the past nine months.

The first example is the court’s well-known twin ruling in Citadel General Assurance Co. v. Vytlingham and Lumbermens Mutual Casualty Company v. Herbison. The court’s decisions in these two cases last October effectively put the brakes on what had become an extravagently expansive interpretation of a personal injury arising from the “indirect use of an automobile.” Much has been written about this already, and so we will leave this example alone.

The most recent example of Canadian judicial restraint is the Supreme Court of Canada’s May 22, 2008 ruling in Mustapha v. Culligan of Canada Ltd. The facts of the case are straightforward enough. In the course of replacing an empty bottle of drinking water with a full one, Waddah (Martin) Mustapha saw a dead fly and part of another dead fly in the unopened replacement bottle. Obsessed with the event and its “revolting implications” for the health of his family, he developed a major depressive disorder, phobia and anxiety. He sued Culligan, the water supplier, for damages related to his psychiatric injury.

An Ontario trial judge awarded Mustapha more than Cdn$341,000 in damages (including loss of business after

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EDITORIAL

David Gambrill Editor david@canadianunderwriter.ca

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Mustapha developed the psychiatric disorder). But the Ontario Court of Appeal quashed the award and the Supreme Court upheld the Appeal Court’s decision.

The mere fact that the Supreme Court agreed to hear the case — it usually elects to hear cases perceived to be of national consequence — might have triggered alarm bells for some people in the claims industry. After all, once a case gets refracted through the lens of the court system, it’s anyone’s guess what the final outcome will be.

But, as it turned out, the Supreme Court dispensed with the matter in as few as 20 paragraphs, quibbling marginally with the Ontario Court of Appeal’s reasoning (but not its final decision).

The end result is that while Culligan owed Mustapha a duty of care to provide him with uncontaminated water, and Mustapha’s psychiatric injuries were severe and found to be connected to the presence of flies in the water, Culligan could not have reasonably foreseen that Mustapha’s psychiatric injury as a result of the company’s negligence would be so severe. “In order to show that the damage suffered is not too remote to be viewed as legally caused by Culligan’s negligence, Mr. Mustapha must show that it was foreseeable that a person of ordinary fortitude would suffer serious injury from seeing the flies in the bottle of water he was about to install,” Supreme Court of Canada Chief Justice Beverley McLachlin wrote for the court. “This he failed to do.”

The court made it clear the legal standard is based on what a person of ordinary fortitude would believe; not what a person with relatively more delicate sensibilities might believe.

And thus, the Supreme Court of Canada in at least two instances now has proved to be a mitigating factor in the supposed trend towards the Americanization of Canada’s legal culture — at least when it comes to extreme awards and/or legal interpretations in personal injury cases.

Whether the same restraint holds out in the court’s consideration of a proliferating number of class action cases remains to be seen. (Class actions are most often cited as the cause of the trend towards Americanization.)

But certainly in the area of personal injury, while there have been some odd cases in the lower courts, it’s clear that the truly out-of-line damage awards are not necessarily — indeed not likely — going to last to the end of the line within Canada’s legal system.

STEVE WILSON

PAUL AQUINO

GERALD HEYDENS

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Canadian Market B.C.’s much-awaited, revised Insurance Act falls to the backburner .C.'s revised Insurance Act might not be passed until 2010 — roughly seven years after the Supreme Court of Canada found B.C.'s Insurance Act was antiquated and needed a re-write, B.C. political affairs columnist Vaughn Palmer told a convention of the Insurance Brokers Association of B.C. (IBABC) With much fanfare on Apr. 30, 2008, the B.C. government introduced Bill 40, its much-anticipated proposed re-write of its Insurance Act, Palmer noted in an address to IBABC convention delegates on May 9.

Within a week, on May 6, 2008, the B.C. legislature deferred discussion of Bill 40 until an unspecified future session of the legislature.

Palmer, a columnist for the Vancouver Sun, described Bill 40 as the victim of typical political “horse-trading.”

“Every year, when we get toward the end of a session, a round of horse-trading arises over what is business we can possibly get done [by May 29, when the Spring 2008 session ends],” Palmer said.

M A R K E T WAT C H

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He noted the B.C. government introduced 10 new pieces of legislation in the same week as the Insurance Act, including highly controversial legislation such as the Carbon Tax Act and proposed new legislation to restrict third-party campaign advertising.

Thus the question became what the government and opposition parties agreed they would have time to discuss, Palmer said.

“And so the Insurance Act was traded away,” he said. “Officially, the bill is deferred to a future session of the legislature.”

The thing is, Palmer added, there might not be a fall session in 2008. It has been cancelled in the past, he noted, although he guessed it could be revived in the event of an effective treaty negotiation with the province's First Nations.

If it isn't discussed in a Fall 2008 sitting, Palmer added, the bill won't be reviewed for at least another year, since there is a provincial election scheduled for 2009, meaning it could take until 2010 to see the revised act debated and passed.

IBABC CEO Chuck Byrne said he was very disappointed in the decision of both the government and opposition politicians to defer the bill. ■

Canadian tort awards increase 20-fold over eight-year period anadian tort awards in catastrophic cases over the past eight years have increased from between Cdn$600,000 and Cdn$7000,000 to between Cdn$10 million and Cdn$15 million, Jess Bush, partner with Blaney McMurtry LLP, told delegates at the Insurance Law: Spring Update 2008 in Toronto on May 15.

Health care costs are “going through the roof,” he noted, by way of explana-

C

tion. Further to that, discounts for future awards have decreased generally and on future care costs specifically. The discount rate is the rate applied to the value of a future stream of payments to reflect the fact that it is going to be paid now in a lump sum. It is assumed the lump sum will be invested and will earn income at a rate higher than inflation.

Future health care costs are often the largest component of a damage award.

A reduction in the discount rate thus creates a significant increase in the award, Bush noted.

Guardianship and legal fees have also become a prominent component of these damage awards, he added.

In addition, due to no-fault auto insurance, the plaintiff’s bar is better and more organized, Bush noted. Therefore, the onus is very much on the defense to marshal resources and strategies. ■

Alberta ruling could lead to underpricing of auto product: OSFI lberta’s court ruling that eliminated the province’s Cdn$4,000 cap on minor auto injury claims has led some experts to estimate that mandatory coverages in that province are under-priced by 25%, said Julie Dickson, superintendent of OSFI. Dickson made the remark during a recent speech at the Langdon Hall Property and Casualty Insurance Industry Forum in Cambridge, Ont. Offering her view of industry developments in 2008, Dickson stressed the dire situation of the auto market. “In

A

Ontario, the flat premium environment is being overtaken by the inexorable rise in claims costs — quarter over quarter — with absolutely no sign of abatement,” she said.

“Overall, the Ontario industry crossed the breakeven threshold into negative territory last year.”

Also of concern, she continued, is that the Alberta ruling was based on the premise that regulations limiting damages by virtue of the degree of disability is contrary to the provisions of the Charter. “Ramifications to other tort provinces cannot be ignored,” she said. ■

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EGI Financial sees signs in 2008 of hardening market GI Financial Holdings Inc. (TSX:EFH) says it is poised to take advantage of the hardening market conditions now developing in 2008.

“With competitive conditions persisting within the non-standard auto line of business, we have remained focused on continued diversification efforts and profitably growing our niche products division,” EGI

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Financial CEO Douglas McIntyre said in a press release announcing the company’s 2008 Q1 results. “The erosion of underwriting margins in the property and casualty industry in 2007 and continuing in 2008 will likely cause the standard insurers to reverse their earlier actions taken to gain market share.

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a hard market phase, we have begun to see early signs that a shift in marketplace dynamics is occurring.”

Overall, the company reported a 2.3% increase in its 2008 Q1 profits, which went from Cdn$2.5 million in 2007 Q1 to Cdn$2.6 million for the three months ended Mar. 31, 2008.

The company’s 2008 Q1 combined ratio stood at 100.8%, compared to 94.7% for the same period last year. ■

Canadian storms wreak havoc on ING’s 2008 Q1 profits ecord snowfalls and severe winter storms in central Canada caused ING Canada’s 2008 Q1 profit to shrink from Cdn$126.2 million down to Cdn$23 million.

ING Canada also cited lower operating income and declines in equity markets as factors in its 2008 Q1 results.

“The harsh winter conditions during the first three months of the year adversely impacted an otherwise solid operating performance,” ING Canada president and CEO Charles Brindamour said in a press release.

“Our commercial insurance profitability improved significantly and our current year automobile insurance results remained stable despite the difficult driving conditions resulting from the weather conditions in Quebec and Ontario.

“However, numerous storms and near-record snow falls in central Canada resulted in a loss on our home insurance activities. While the industry’s loss ratios are usually higher during the first quarter, this year’s weather conditions had a more severe impact than usual.”

Overall, the company’s combined ratio increased by 3.9 percentage points during the quarter to reach 99.9%. Its return on equity over the past 12 months was 13.0%. ■

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Cover Story

AUTOMATING POLICY CHANGES:

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It might seem a paradoxical enterprise to “automate change.� But this is exactly the kind of circle that brokers, insurers and tech vendors are attempting to square when they ponder how to give brokers the electronic means to submit real-time policy changes to insurers.

By Craig Harris

olicy change is arguably the most complex insurance transaction and represents a weak link in the efficiency of the traditional broker distribution channel. Automation challenges associated with policy change/endorsement for both broker workflow and insurer technology are real and numerous. Future efforts will likely involve a much tighter integration between broker management system (BMS) vendors and insurance companies.

Might there be an industry-wide solution? Many are not putting much weight on it.

One curious irony in the technology arena is the transactions that brokers conduct most frequently in their daily business are also the least automated.

Policy change/endorsement has been a consistent stumbling block on the path to single-entry, multiple-company interface (SEMCI), leading to frustrating

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Cover Story “If you look at all the tasks that brokers do, and how much money and time it would take to solve this policy change problem, would [brokers] be willing to trade that off against all the other easy places we could streamline their workflow — the so-called ‘low-hanging fruit?’ This could include things like policy inquiry, binding a policy, downloading renewals 60 days prior and downloading a book of business.”

– Kevin Campbell, Policy Works

data re-entry, delays and callbacks. The difficulty in synchronizing policy change requests between varied broker management systems (BMS) and insurance company systems (front- or backend) has derailed attempts to gain an industry-wide solution.

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POLICY CHANGES On the face of it, policy change doesn’t sound that complicated. A client calls a broker and asks to add a driver to an auto policy or to note a change of address for a home policy. The broker makes the change in the BMS and sends a policy change request to the insurance company. However, depending on the nature of the changes, a policy may need to be re-underwritten and rerated. Given the level of automation of underwriting and rating processes at the insurance company, that process can take days, even weeks. Then, the change has to be incorporated into the BMS. Meanwhile, the client wants to know from the broker how much his or her new policy is going to cost.

It is hard to overstate the importance of policy change and endorsement in the typical broker workflow and communication to insurance carriers. For brokers, it is a crucial part of the service offered to clients — a service for which, at least in part, they are paid commission. For insurers, it increasingly represents a strategic point of differentiation for those keen to bill themselves to brokers as “easy to do business with.”

“While insurance companies have traditionally handled this function, we want to educate brokers on the benefit of doing their own policy change to improve service turnaround time,” says Colin Simpson, president and CEO of York Fire & Casualty. “I think brokers in general struggle with how they can compete effectively with direct writers. But everyone focuses just on price, not the other element of service. If we can get the back-end systems to communicate effectively, brokers can operate just as efficiently as a direct writer, with the huge added value of person-toperson contact.”

Brenda Rose, vice president of Toronto-based brokerage Firstbrook Cassie & Anderson, says brokers “really need policy change because it has to be done in order to service the client properly.”

Rose has been pressing this point home as a ‘technology

champion’ with the Insurance Brokers Association of Canada. “It is an intensely costly transaction from the broker point of view, yet it is revenue neutral for both brokers and insurers,” she says.

Sheldon Wasylenko, assistant general manager with Saskatoon-based Rayner Insurance Agencies, is another technology champion at IBAC. “Policy change/endorsement does represent the majority of work that is done in a typical brokerage,” he observes. “There is new business, for sure, but looking after existing business, whether renewals, changes, endorsements, that represents a good chunk of our day-to-day work. So because of that, historically, it has always been seen as the difficult one to tackle from a technology perspective.”

Technology vendors are keenly aware of this desire to automate policy changes. “Endorsement is really the Holy Grail of where we need to get to, because that is where so much of the cost comes in the life cycle of the insurance policy,” notes Doug Johnston, vice president of partner relations and production innovation at Applied Systems.

Some studies point to how much of the work in a typical brokerage office is dedicated to policy change. In one report, Keal Technology estimated policy changes alone account for more than 40% of an average brokerage’s transactions. Glen Piller, president and CEO of iter8, says his company’s “research with brokers shows that policy change and billing make up more than 80% of their transactions with carriers, yet the ease of doing these transactions is the least.”

FROM CONCEPT TO PRACTICE Unfortunately, policy change is also the most complicated transaction, with a history of workarounds and some confusion.

“The technology to get it done is more complicated than simply pushing new business or policy inquiry,” notes Pat Durepos, president of Keal Technology. “Technology is certainly an issue.

Nobody has been able to crack it just yet in the true XML realtime transaction.”

One reason for the complexity is that data transfer has to be coordinated between two distinctly different systems — the broker’s BMS and the company’s front- or back-end system. “Policy change is a complex area that people tend to oversimplify,” says

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Cover Story Kevin Campbell, president of Policy Works. “There is a spectrum of problems that go from just plain difficult at the low end to practically unsolvable at the top end. The issue is that you are trying to synchronize data on two different systems, which in itself is a difficult problem.”

Other issues also make policy change a challenge, particularly “out-of-sequence” events. Jack Ott, chief information officer for ING Canada, says this is a special concern for insurance companies — especially if it involves brokers first reporting changes to branch offices. Client changes, especially for larger commercial policies, may not come in chronological order to the broker, creating a potential patchwork of changed policy documents that need constant revising.

“The issue of ‘out-of-sequence’ is a big one,” says Ott, whose company is actively working with vendors on enabling broker technology. “Many companies have gone to great lengths to ensure changes are kept in sequence. When it comes to policy change, we offer a very rich, fully functional product with multiple features — really, anything can happen with that policy when it comes to changes.”

For Johnston, the root of the policy change conundrum lies in the fact that broker and company systems were built for fundamentally different purposes. “It comes down to the different architectures of a broker system and carrier system, in

that a carrier system was based upon a transaction model, whereas a broker system was based on a submission model,” he notes.

What that means specifically is that insurance carriers and brokers have a different “view” of the data in a policy. A company has a quite detailed view of a particular policy and can see what changes have been made to a policy over time. The broker, on the other hand, has a relatively static view of policy data. He or she can send a policy change request but that is what Johnston calls “just a piece of paper.” He adds: “to open a version of a policy and turn it into an editable document is not something that most broker systems were designed to do. We need to change that. In my mind, that is the big deal.”

Broker management systems were designed primarily as a “push” of information, says Piller. “When a policy change is required, you have to pull information, make the change, and then push it back. From a technology point of view, given the different BMS and different company technology systems, that makes the process very difficult.”

SEEKING THE SAME PAGE Understanding the complexity of policy change is fundamental to any technology solution that tries to bring brokers and companies on the same page. Should the policy change be driven

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by the BMS, the brokers’ primary business tool, or the insurance company’s back-end system (traditionally the repository of ‘official’ policy documentation)? Is the technological challenge associated with policy change the result of inadequacies in the BMS or the company system? The answers to these questions, and the solutions that are emerging, depend on your perspective.

“From a broker’s perspective, it would be incredible to have SEMCI policy change,” notes Steven Kaukinen, president of the Centre for the Study of Insurance Operations (CSIO).“The BMS can handle it, but the issue really resides with the insurance companies and their legacy systems. It is incredibly expensive for an insurance company to allow this to happen.”

Steve Zylak is the president and owner of Zycomp Systems, which offers the Power Broker BMS. “From what I can determine,” he says, “there has never really been the will at the insurance company level to entertain receiving CSIO standard policy change transactions from BMS systems.”

The ideal scenario for brokers is the so-called “round-trip” transaction that begins in the BMS, is carried out seamlessly via the carrier through an XML transaction and then returns to the BMS with no company portal connectivity, sign-on or involvement.

“The solution has to be management system-neutral, and it has to work for all the systems and for all the insurers, up to a

minimum standard,” says Rose. “It has to conform to CSIO standards and it has to meet certain principles. For example, the workflow has to start in the broker management system, and end up there, in order to avoid double entry, and to avoid brokers entering information only into an insurer system and not their own system.”

That is not necessarily a pipe dream, but it is not a near-term solution either, according to several sources. “I think it is actually a quite difficult process to get that kind of integration between a BMS and the carrier in a uniform manner,” says Katherine Evans, the chief financial officer of York Fire & Casualty. “The problem being that brokers do not use their BMS in a consistent way from broker to broker, or even from user to user. It is not clear necessarily when they have fields in the BMS what that is going to translate into with the carrier.”

Instead, in the short term, technologically inclined insurance companies have invested in their own Web portals to process the bulk of policy changes.

“I think we have made progress on our Web portals, but we realize this is not necessarily the ultimate solution,” Ott says. “It is disruptive to the broker workflow, especially if they have to sign-on, key in URLs and look up the policy numbers again.

Brokers have said to us: ‘We want a solution that works with our primary BMS and we can make changes from there. Is that ask-

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Cover Story ing a lot?’ Well, in terms of where our systems are, it is not easy to do that.”

Brokers don’t want to train their staff to deal with 10 different company Web sites and portals, says Wasylenko. “Brokers across the country have paid huge sums of money to invest in their BMS, and they want to access information there,” he says.

“I think the good news is that BMS vendors have already experimented with the kind of technology that could easily adapt to the broker’s workflow or model. They can all feed policy change data. It is a question of whether what we are feeding is what the other side can handle.”

Indeed, what seems to be emerging is a series of individual vendor-driven solutions that involve a close working relationship with insurance companies, data-testing and validation. These include solutions such as Brovada’s nexisys, Applied Systems’ WARP solution and Customer Software Solutions Inc.’s I-Biz (efforts to contact the latter were unsuccessful).

“For nexisys, we work closely with the insurers to provide this functionality to the brokers,” says Michael Wright, vice president of business development at Brovada. “It is unique in the sense that we sit in the middle between the broker and insurer. We work with the broker to understand their workflow but, at the same time, we are working closely with the insurer to get that information into their back-end system or Web portal.”

www.canadianunderwriter.ca • June 2008

18

CHANGES IN THE INTERIM Although currently no vendors offer a real-time, round-trip XML transaction for policy change, sources say there is significant progress made in facilitating data transfer between broker and carrier.

Whether this involves such technical marvels as scripting, screen scraping or data bridges between BMS and insurer portal, there are real-life examples of “once-anddone” policy changes that provide fast upload, give brokers quick access to information and eliminate data re-entry into the BMS on the download.

“With the Web portals, the broker can push their data through to the portal using solutions like nexisys, do the policy

change on the portal and get it back through regular CSIO standards,” notes Zylak, whose Power Broker users can now access nexisys through a working agreement. “It is better than we have had before, but it is not a real-time XML transaction.”

Wright says brokers who have access to nexisys perform a single sign-on and inquiry transaction in the particular carrier’s portal, but can take it a step further.

“We place the user in amend mode in that portal, allowing them to manually make the change. It brings it right to the doorstep and the user is able to make the change. We are offloading that effort on the front half of the transaction, but we also offer the capability of doing the fullblown endorsement on the insurance company side as well.”

So far, Applied Systems has used its WARP technology to achieve real-time XML policy inquiry for York Fire & Casualty. Applied’s Johnston says there is not as much of a leap between inquiry and endorsement as people think when it comes to the data elements.

“Today, within our broker system, we can do an endorsement by clicking on the (WARP) button and in six or seven seconds be transported into the carrier’s Web site,” Johnston notes. “That policy is opened for endorsement; whether you want to call it a data bridge or deep link, or whatever, it is an official workflow. If the broker has a customer on the phone and he or she can get an answer, that is critical.

It may not be the paradigm we are after, but it is sure is a nice development.”

Johnston says both York Fire and ING Canada are experimenting with ‘pop-up windows’ in the BMS to streamline access to company Web portals for policy change. “If brokers could open up the window, come out to us, automatically sign on, find the policy and open the correct screen for them, access time could be a minute or so,” says Evans of York Fire.

“We are looking for incremental time to shorten the turnaround; that is where we are in Canada right now.”

In the longer-term, Applied Systems is embarking on an ambitious re-architecting of its BMS, which is scheduled to

Applied Systems, Inc. All rights reserved.

a

Sc tr he ip d fo ule r 2 a to FR La EE nc T e AM Bu d rt em on o :M f as or te a r ch M a ag nc ic e ia a n t in w La inn s in Ve g ga s.

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Cover Story launch in 2009. That effort will include “versioning control and a data audit trail,” according to Johnston. “It is a major overhaul, but at that point we will have the real-time transaction in the BMS that we can send to the carrier. So [carriers] will get the full policy image, stating: ‘This is what the policy should look like as of this date,’ plus flagging what has actually changed. We are trying to meet what the carrier actually uses for data to process an endorsement.”

Others aren’t so sure there will be much in the way of broad longer-term solutions for policy change transactions. Some sources worry the emphasis on ‘real-time’ transactions might take away from the importance of ensuring policy changes are ‘onceand-done,’ which includes the tangible benefits of no data reentry and fewer errors. In other words, these sources say, “don’t let the perfect be the enemy of the good.”

REAL TIME OR ONCE-AND-DONE? “We should look at what works on the automation side of policy change,” says Durepos,“Brokers who have been able to change their workflow start with the idea that when you touch a transaction it is done once and right. The upload in real time from the BMS to carriers that have committed to it is quite possible today, whether inquiry, new business or policy change. At Keal, our systems support download from the carrier back to the BMS in

batch mode through CSIOnet. It works well. It is efficient. The advantage gained by having the return trip in real time will cause other problems. In fact, it does not bring a lot of added value to the relationship.”

Campbell questions the value of advocating automated policy changes to the detriment of other tech projects that could make brokers’ lives easier. “If you look at all the tasks that brokers do, and how much money and time it would take to solve this policy change problem, would [brokers] be willing to trade that off against all the other easy places we could streamline their workflow — the so-called 'low-hanging fruit?’” he says. “This could include things like policy inquiry, binding a policy, downloading renewals 60 days prior and downloading a book of business. We can either do all of those things over the next two years or we can focus on policy change. It is a good question to ask: is that focus a good use of everyone’s time?”

One thing for certain is the prominent and necessary role of XML standards in facilitating any policy change data transfer between insurance companies, brokers and vendors.

“This is really where the CSIO comes in,” says Kaukinen. “We call policy change/endorsement ‘change status’ here, which means we do have the standards in place for this to happen. But the insurance companies have to come to some agreement that they want to allow this. I wouldn’t want to step out there and say:

When the Problem is Ease of Doing Business the Smart Answer is

8

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‘You have to do this now.’ But we know many companies are renewing their legacy systems, and they are using the standards. For the brokers it would have such a huge benefit.”

Wasylenko, who is also a member of CSIO’s board of directors, says he wants to make sure the industry’s investment in those standards through CSIO continues.

“It is very important — not to take away from the individual investments vendors have made in their own technologies — that at some point when the transaction is defined and sent to the company, it is up to the company to say: ‘I can accept that transaction.’”

Zylak notes the CSIO standards exist to break down any barriers in these kinds of communications. “We are all supposed to subscribe to the exact same data transaction,” he says. “If we all do, there is not as much of an issue with respect to data interchange.”

For Rose, the CSIO standards may lead

Page 21

to the kind of broad solutions all brokers and insurers need for policy change. “I would like to think that our industry still has the capacity to work together, because that is what this would require,” she says.

“Just because the CSIO portal was not successful doesn’t mean that the urgent need for that SEMCI solution has disappeared. If anything, the need is becoming more and more urgent now [because] both company and broker expense factors are under pressure. Certainly, there should be motivation for all of us to put aside our differences and come to the table.”

Others disagree with the ‘industry solution’ notion. They believe the time is right for finding individual approaches that work. “This industry tends to look for the silver bullet, but we need to spend more time rolling up our sleeves and working more closely with individual vendors on real solutions,” notes Ott. “We need to work on getting a tighter connection between the broker systems out there

and our Web portals.”

“It is really interesting that carriers are now thinking of the strategic importance of policy and billing change,” says Piller.

“What is amazing is how powerful the voice of the broker is becoming. Once you get some differentiation in the types of systems carriers offer, brokers will vote with their feet. For years, there has not been a remarkable difference in the technology offerings of carriers to brokers. Now, you are starting to see some big differences.”

Insurers may not be technology companies, but they can nevertheless create a competitive edge through the use of their own technology, concludes Simpson.

“Very few people are going to willingly give that up just so that you can seamlessly transact somebody’s address,” he says.

“The same is true for vendors. If one or two mainstream BMS systems can create a market edge by being able to offer more functionality to more markets, the other systems would have to follow or get out of the way.”

Doing business in a fiercely competitive environment, the smart Insurer looks to make an opportunity out of a problem. Broker Connectivity becomes an asset, Underwriting Automation an advantage. And the resultant Ease of Doing Business increases both competitiveness and profitability.

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PROFILE

Photo: Simon Cheung

www.canadianunderwriter.ca • June 2008

22

THE TRUTH BEHIND

AXIOM

Gordon Findlay, the man behind Axiom, is hanging up his pen after 12 years of offering wisdom to the industry in the form of fiction

By Vanessa Mariga

or more than a decade, ‘Axiom’ has provided realistic insight into the Canadian insurance community using the literary vehicle of fiction. The column’s casual, tell-it-like-it-is tone has often served to discuss real-world issues brokers and insurers face in their day-today business. What’s more, through the voice of the column’s regularly featured characters such as Fred Wilson, the manager of a large, downtown insurance company, and Bob Davies, who runs a prosperous midtown brokerage, AXIOM has provided some wisdom in aid of resolving some of these issues. Now, how-

F

ever, after 12 years of writing — including 53 columns and nearly 100,000 words — the man behind Axiom’s pen has decided to retire the column.

Gordon Findlay, aka ‘Axiom,’ has served as a voice of the insurance industry for far longer than when his first Axiom column graced the pages of the February 1996 issue of Canadian Underwriter. He has been in the insurance communications business for 53 years. When he retired from his full-time position in 1995, he held the title of manager of communications and public affairs at Royal Insurance Company of

Canada (now Royal & SunAlliance).

Prior to that, his career snaked through various industry trade publications and national advertising and public relations companies, all of which dealt with the insurance industry in one form or another. Royal finally poached him to run its communications department in 1978.

This is where he spent the bulk of his career; upon retirement from Royal, he kept his ear to the ground and decided to pen a column for Canadian Underwriter.

Launching Axiom represented a type of homecoming of sorts for Findlay. He recalls landing as a young Scottish immi-

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grant in Toronto in 1955, having moved from a journalism career in Dundee, Scotland. He landed his first job in Canada at Canadian Underwriter that same year. “I had been in the newspaper business in Scotland, but none of the Toronto dailies would hire me back in 1955, since, as a brand-new immigrant, I was unfamiliar with Canadian geography, history, culture or terminology,” Findlay recalls over a cup of coffee in his Etobicoke, Ontario home.

Canadian Underwriter was looking for an associate editor. The magazine’s editor at the time, Ken MacLeod, a Cape Breton native, admitted to feeling a sense of kinship with the young Scotsman — fresh off the boat, as it were — and hired him.

Findlay speaks of MacLeod as a mentor as he recalls learning the landscape of the Canadian property and casualty insurance industry. “The production of the annual statistical issue was a long and tedious business,” he remembers. Lacking today’s fax machines, emails and computer technologies, MacLeod and Findlay resorted to sending out forms and begging the firms to complete and return them as soon as possible. “Most did, but there were always the laggards, or those whose results were so horrific they were in no great hurry to announce them to the world,” Findlay says. “Ken and I would have to trudge up to the Ontario government’s statistics office, then on Queen Street in Toronto, and plead to be allowed to see the results which all licensed insurers were required to report to government.”

To calculate loss ratios, MacLeod and Findlay hired a “nice Lithuanian lady, a Mrs. Kalpokas, who lugged her hefty, fingerpowered, 100-key computer into the office on weekends and, using all her fingers criss-crossed over the keys, crunched them down again and again until the correct percentage showed up in the machine’s window.”

OLD HABITS DIE HARD Another recurring theme persisting over the decades is the insurance cycle — “boom and bust,” as Findlay says. If nothing else, the insurance cycle proves the old maxim that those who can’t remember the past are doomed to repeat it. People are always preaching underwriting discipline, he notes, but then as soon as the money starts flowing in from investment income, discipline becomes an inconvenience.

“Fifty years ago, I was writing the same terminology using phrases like ‘underwriting discipline,’ he says. “But then we would get a new breed that came along and said: ‘Hey, we’re getting 12 points on investments.’

“Investment income is the crack cocaine of the insurance industry, I think. It’s always been that way. It blows away all restraint and there will be no tomorrow. But as we know in the insurance industry, there always is a tomorrow — and it’s often an unpleasant one.”

Throughout the history of Canada’s insurance industry, the investment tail has wagged the insurance premium dog, Findlay maintains.

Findlay has given a lot of thought to the broader issues facing the insurance industry. But through his Axiom column, he hopes also to tackle issues at the day-to-day grind level. Findlay says the stories of frustration that he heard from both sides of the fence, from both the broker and insurer camps, motivated him to launch Axiom. He noted industry publications already tackled the broad issues of the day, but he wanted to speak directly to the people working on the ground about their realities.

“One of the things I always tried to emphasize was that the company-broker relationship is the foundation of the business, and it’s an interdependent relationship,” Findlay said. “Brokers don’t operate in isolation, nor do companies. Anything we can do to smooth and improve the process is to the benefit of the industry as a whole.

“No problem is insoluble. There is always a solution somewhere. It might be impalpable in the short term to both sides, but it’s something that can be solved with both sides going halfway to a solution.”

23 www.canadianunderwriter.ca • June 2008

OPENING COMMUNICATION CHANNELS Since those days in 1950s, regulators have required insurers to be much more open and comprehensive in the reporting of financial results. Even so, Findlay says, communications between insurers and the public have always been — and will likely continue to be — a major hurdle the industry needs to clear.

When he joined Royal in the late ’70s, the age of consumerism had dawned, Findlay says. The public demanded better service and explanations of the products they purchased. This broad social trend coincided with the appointment of a dynamic British executive, Alan Horsford, as Royal’s general manager for Canada.

“Canadian consumers were generally wary and suspicious of general insurers — particularly when they had to make a home or auto claim,” he says. “But the 1970s was also a decade when Canadian customers of every kind began to find their voice. Class action law suits were filed against auto manufacturers, against drug companies and against banks.”

Horsford read the signs, Findlay recalls, “and almost singlehandedly dragged Canada’s tradition-bound general insurance industry into this new age of consumerism.” Royal launched programs allowing consumers to appoint an arbitrator of their choice, guaranteed satisfaction repair services, a tri-lingual consumer information call service and plain-language policies. These offerings pushed the company to the front of the tide, Findlay says. “I remember sitting there and cutting away through the dense and arcane language of a policy and trying to translate it

into a ‘Reader’s Digest’ level so that anyone could read their policy and understand the terms.”

Although these measures helped, Findlay admits a major disconnect still exists between the insurance industry and consumers. “For example, many Canadians get mad when they read that insurance companies have turned a profit,” he says. “For many people, profit occupies the same position in their minds as sex. They think there is much more of it around than there really is, and they’re convinced that someone else is getting it all.”

Profit remains the primary yardstick of success, but Findlay believes more insurance companies need to take a leading role in supporting and enriching the communities in which they operate. Such initiatives may also be used as a gauge of success. “The fact is, no company operates in a vacuum,” he says. “Companies are a part of society, and while insurers may complain about being unloved by Canadian consumers, they have many opportunities to change that image by supporting activities that are at the core of any thriving community — social services, youth activities, education and medical care.”

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Ideal World of CLAIMS INSIGHT

HANDLING

www.canadianunderwriter.ca • June 2008

24

Asked not what they can do for claims-handling technology, but rather what claims-handling technology can do for them, people in the insurance industry speak of a future that includes an integrated, publicly accessible, Web-enabled exchange of claims information

By David Gambrill

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Page 25

The Future of Claims Technology Disaster strikes, and a consumer needs to report a claim. He or she contacts a broker and/or insurance agent using a company’s online Web-based portal.

During this process, the consumer is given a password to track the status of his or her claim.

Once entered online, the claim is patched through to the centralized claims system of an insurance company (possibly through the broker’s management system). The insurer verifies the claim with a phone call and an offer of support to the policyholder. Meanwhile, the insurance company sends one of its own adjusters to the scene, or immediately and electronically notifies an independent adjuster to go to the scene.

Let’s say the insurance company contracts an independent adjuster to do the job. Using a wireless laptop, digital camera, a camera phone or any other portable, handheld mobile electronic device that may be available in the future, the adjuster records the details at the scene and electronically transmits photos of the damage, notes and reports directly to the insurance company’s centralized claims handling system. All the adjuster has to do is swipe a card, and the information goes to the correct carrier for resolution, no matter what the insurance company happens to be.

The insurance company’s claims supervisors access the adjuster’s images and notes. The supervisor can now approve or deny the claim within a day of the event occurring (10 years ago, this time lag was up to a week).

Assuming the claim is approved, the policyholder could log into a common inquiry-style computer database and track the status of his or her claim.

[Alternatively, notices might come in the form of e-mail or a phone call, depending on what the policyholder preferred.] Policyholders would then have immediate electronic access to the claim amount, as well as an itemized, detailed description of what is covered or not covered under the approved claim. Alternatively, the policyholder would know instantly that the claim had been denied.

The insurer’s system, being fully integrated with vendors’ systems, would be able to provide electronic status updates on all the processes related to claims resolution (i.e. not just whether or not the insurer had approved the claim and/or mailed the cheque.) In an auto insurance claim, for example, consumers would have online access to daily pictures of his or her car throughout the various stages of repair [i.e. see the new paint job had been completed, for example]. In the example of a homeowners’ claim after a catastrophe event, a common inquiry system might include a summary of the coordinated schedule of repair contractors, so the consumer would know at the touch of a button what contractors would arrive to do what work and when [i.e. when the new carpet would show up, for example].

And if the claim had been refused, and a legal action started, lawyers assigned to the claim would be able to update insureds and carriers online about the status of the legal claim — including access to reports and upcoming court dates.

T

“In an ideal world, we could have a customer portal,” Bianchi says. “If customers did have a claim, they could go [online] and check on the status of a claim. They could see for themselves what’s going on and they could do it at their convenience, [and not just] when we have somebody on the phone [available to] speak to them.

“UPS or Purolator has that tracking technology allowing you to track your package. Well, this way you could track your claim, track your policy, your payments, that kind of thing.”

Certainly elements of a more holistic technology are already available, notes Larry Lythgoe, the vice president of claims at ING Insurance Company of Canada. “A lot of the things we are talking about, we are already doing at some level and/or we are currently working on delivering,” he says. “I think in a five-year window, it wouldn’t surprise me that a lot of this functionality would be installed and up and running.”

Some claims handling systems are already offering a variety of new bells and whistles. For example, Aviva Canada in 2007 received recognition in a Celent survey for use of technology in helping to streamline the claims handling process. “A core element of its solution is a sophisticated first notice of loss process with dynamic questioning that improved the quantity and quality of information gathered by customer service representatives in the first call, while also enhancing claims routing and tracking,” the Celent report notes.

In the Aviva model, claims data is stored in a central repository immediately accessible to adjusters in multiple locations throughout the process, allowing the claim to be processed with fewer touch points. “Adjusters also have access to online mapping tools that let them route no-injury claims to the nearest repair partner location,” Celent notes.

In the United States, AIG Companies is providing technology to streamline the process for handling commercial claims. To this end, the company introduced “c-Claim” (centralized—Customer Link And Information Management) to process financial lines claims more quickly and efficiently. “c-Claim” provides a single point of entry for all financial lines claims, including directors and officers

25 www.canadianunderwriter.ca • June 2008

echnology permitting, five to 10 years from now, insurance company claims departments and claims adjusting firms will be using fully-integrated, publicly-accessible, end-to-end claims management systems perfectly tailored to the needs of the online generation.

Such systems, fully-developed, would resolve consumers’ claims with a level of ease enjoyed by science fiction characters who seemingly have instantaneous access to everything at the touch of a computer button.

Canadian Underwriter asked a number of claims professionals what they want technology to do for them over the next five to 10 years (regardless of whether or not such technology has been developed, or is already in a state of development). The question evoked a surprisingly common, overarching vision of where claims technology should be taking the industry in the future. An amalgamated, abstracted version of people’s descriptions of ideal claims-handling technology is presented in the example above, ‘The Future of Claims Technology.’

One common element of the various scenarios is a much more holistic integration of the claims-handling technology used by insurance companies and the independent adjusting firms that work with them.

“Our goal is the end-to-end integration of the claims process,” Mark Thaiss, IT manager for McLarens Canada, says. “The idea being to provide the customer with visibility into the process, into the status, for example. But from our perspective, being mostly on the back end, we’d like to be able to provide our customers — the insurance companies, for example, or the individual claimants — some kind of standards-based integration with the various claims management systems that we [adjusters] use.”

For insurance companies, ideal technology would simplify the claims process so that insurers receive the information they need quicker, so that they can resolve claims faster, says Irene Bianchi, the vice president of claims for Royal & SunAlliance Canada. And policyholder access to the process would be paramount.

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INSIGHT

(D&O), errors and omissions (E&O), financial institutions (FI) and fidelity. “The streamlined workflow will promptly direct each new notice or claim to the most appropriate claim professional, facilitating client contact and efficient resolution,” AIG notes, by way of description, in a press release. “cClaim” staff is committed to taking ownership of all inquiries and will stay actively involved through their resolution.”

www.canadianunderwriter.ca • June 2008

26

CONNECTING WITH VENDORS But although most carriers can point to individual examples of integrated claims technology innovations, no company has yet to achieve the same broad level of technological integration claims people envision for the future (as summarized on Page 25). Ideally, claims-handling technology should connect all of the main players in the claims process, sources say, including policyholders, brokers, carriers and claims vendors.

“Right now, from a technology standpoint, there’s a whole bunch of tools out there,” Rocco Neglia, vice president, claims, Economical Mutual Insurance Company, says. “Some of them work, some of them don’t. Some of them work partially. What’s missing is a holistic approach in the claims handling. The last thing we need is another tool that just adds to the complexity of it all. What we need is an integrated approach to different facets of claims.”

Neglia believes one of the first orders of business is to develop technology whereby carriers can connect directly with vendors.

A lot of time in claims handling is spent dealing with vendors, he observes.

“Whether you are dealing with lawyers, whether you’re dealing with health care

Page 26

herein lies an obstacle to developing the ideal claims-handling technology: the privacy implications of storing large amounts of personal data.

“We do have a little bit of a wrinkle, and that’s PIPEDA [the Personal Information Protection and Electronic Documents Act], the privacy legislation,” Bianchi notes, adding that insurers are in the process of figuring out just how PIPEDA’s restrictions on personal data collection square with the kind of open access an ideal, integrated claims handling process might imply.

“There’s some information that we simply do not record electronically,” says Thaiss. “Some of our agreements prohibit us from maintaining any records of individual data, and we adhere to that very carefully to ensure we are in compliance.

Specifically, we would need to ensure that any interchange of data between organizations is done in a secure fashion, both encryption and authentication being required to exchange that data.”

Lythgoe notes there are ways to comply with the privacy rules while at the same time allowing users to access a common inquiry system. “I think the approach is that for the customer, for the named insured, to log into the claim, he or she would require passwords, or a policy number or claims number, to be able to access the system,” he says. Following along the same lines, if a third-party vendor accesses the system, “there needs to be controls [in place] so they’re only able to see the exact information that they are required to see in order for them to do their jobs — nothing more and nothing less,” says Lythgoe. “But you can build securities into the system to deal with that.”

“We do have a little bit of a wrinkle, and that’s PIPEDA [the Personal Information Protection and Electronic Documents Act], the privacy legislation.”

– Irene Bianchi, Royal & SunAlliance providers, whether you’re dealing with contractors, [or] with automobile [repair centres], you need to be able to communicate, to share documents and information with them in a much more efficient, paperless fashion,” Neglia says.

It might be assumed that some sort of centralized repository of information — a Web-enabled database or a common inquiry system, for example — would be a core component of future technology. But

However, even with the privacy issue taken care of, the obstacle remains of how much such an ideal integrated system might cost, Bianchi notes. “People are going to have to be convinced that this is the kind of thing customers want, because there will probably be a fairly hefty price tag attached to it,” she says. “You’ve got to understand your customers and know that’s what they want before you make that kind of investment.”

Lythgoe notes integration efforts in the future are likely to be the result of proprietary technology solutions introduced by individual insurance companies in consultation with outside vendors.

This raises the issue of developing a common language across systems, or standards, Thaiss says, noting the work of the Centre for Studies in Insurance Operations (CSIO) in the area of developing XML standards. Thaiss notes individual adjusting firms and companies each have their own claims handling systems, and standards would have to be developed to connect them. “There are preliminary standards based on individual products, but nothing across platform or integrating between products,” he says. “As far as I know, there is no company or organization that’s attempting to unify any of these products in particular. There are initiatives to unify the market, though.”

THE HUMAN SIDE In all of this, it should be noted, the point is not to completely automate the claims handling process. “There’s another piece that we can’t forget, and that’s the caring piece, particularly with claims,” Bianchi says. “You also want to be able to offer people on that initial claim reassurance that they will be able to talk to a person that understands what they’re going through. We invest a lot in customer service and empathy training, and that is to get people comfortable and to get them processes. Once they’re fine with that, then to build something at the back end that could let them check on their claim, I think is probably fairly realistic in the near future.” Bianchi says in her perfect world, a personal phone call would still be an entry point into the online claims handling system, just to make sure the consumer was comfortable using it.

The point, Lythgoe adds, is to offer choice — particularly to members of the so-called ‘FaceBook Generation,’ who frequently conduct their personal and business affairs online.“As the demographics change, the folks coming up through system now are much more comfortable on the Web and technologically savvy, so they would be more inclined to just check [their claims status] online than perhaps another demographic that would be much more comfortable talking over the phone. Just give them that flexibility.”

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60th Annual IBABC Conference & Trade Show, Kelowna, B.C.

How to Make a

DIFFERENCE

Insurers and brokers wishing to recruit members of the FaceBook generation will need to appeal to the generation’s sense of creativity, uniqueness and a desire to find meaning in their work, delegates at the IBABC’s 60th annual trade show and conference were told. Also, CEO panelists wrestled with the increasingly thorny issue of Guaranteed Replacement Cost (GRC).

By David Gambrill

www.canadianunderwriter.ca • June 2008

28

f Canada’s insurance industry aims to recruit members of the FaceBook generation, the industry needs to appeal to the generation’s desire to find meaning in their work, a technology analyst for CBC told a convention of the Insurance Brokers Association of British Columbia (IBABC).

“That’s why Apple is so powerful: they don’t sell their products, they sell the spirit of their products” to the FaceBook generation, Tod Maffin told his audience. “In your company, you may indeed be doing things that are helping the community.

You may be doing things that are meaningful in personal and very worthwhile ways. The problem is, you need to articulate that, and do it in a way that doesn’t say, ‘We’re doing really nice things for the community…’

I

“You have to be able to articulate meaning much more than you’ve ever had to before. Your recruitment efforts must demonstrate in real terms the difference that you are making in your customers’ lives and in your employees’ lives.”

THE FACEBOOK GENERATION Strictly speaking, Maffin told delegates at the IBABC meeting, members of the FaceBook generation are comprised of anyone who uses the computer-based social utility — which includes applications allowing picture-posting, e-mailing and instant messaging, to name a few. But typically, the generation refers to people between the ages of 17 and 33.

Maffin cited figures showing the ubiquity of FaceBook: 20% of people in Vancouver have a FaceBook account, as do

19% of Torontonians.

The FaceBook generation is well-connected, Maffin observed, spending almost six hours a day on electronic devices supporting personal communications. “They are absolutely connected to each other,” he said. “They are informed all of the time about what their friends are doing. Text messaging is everywhere.”

To the extent that the generation can be characterized, its members are highly creative and are keenly aware of their own sense of uniqueness, Maffin noted. Unlike past generations, which were guided by personal ethics such as job security, money, individual egotism or a healthy work-life balance, the FaceBook generation is more likely to gravitate to work that is meaningful to them and their communities, Maffin noted.

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company strives to be “the best at delivering products and services,” Maffin quipped.

Much more effective, call-to-action mission statements examples include MacIntosh’s “Think Different” television ad campaign a few years ago, said Maffin.

The ad splices together video clips of visionaries such as Martin Luthor King, Amelia Ehrhardt, Mahatma Ghandi, Muhammed Ali and includes narrative that salutes creative, “crazy,” misunderstood geniuses. This type of campaign

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“They want to change the world,” he said. “They want their time working for their employer to mean more than just helping you pay your mortgage. It has to be relevant not just to the employer, but to them, to their community, to their environment, to the world, and so forth. They want to align their time with their personal values.”

And so they are more likely to respond to creative recruitment methods that clearly indicate what the industry does for the communities in which people live, he added. And the creativity must be apparent, without necessarily being articulated.

Pointing to an example of a successful promotional campaign, Maffin noted Google recently launched an online campaign in which it requested people to produce and send the company brief video clips. The only stipulations were that the clips had to show people moving the Google mail icon as creatively as possible from the left side of the screen to the right side of the screen, and it had to be done within a four-second timeframe.

Within a week, Google received 1,169 video submissions from 65 countries around the world. The clips were spliced together to look like a very long chain of people handing the Google mail icon to each other. The final video said nothing about Google, Maffin observed, nor did it include company advertising, other than the mail icon. Google posted the completed product only on YouTube. Within a week, Google received more than 7,000 job applications.

“Was this a recruitment campaign?”

Maffin asked rhetorically. “No. Nowhere in [the video] did it say, ‘We’re cool, come work for us.’ But [the video concept itself] said: ‘We’re cool, come work for us,’ if you know what I mean.” Google, he noted, had successfully tapped into the creative sensibilities of the FaceBook Generation.

Insurers and brokers wishing to tap into this creativity need to spend some time figuring out how to articulate its values in a way that might appeal to the FaceBook generation. He said this means going beyond the typical, “dreaded,” boilerplate “mission statements” that do little more than get posted on the company wall and become forgotten. Typical, ineffective mission statements almost always say the

Page 29

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The Insurance Brokers Association of B.C.’s 60th annual Conference and Trade Show included a CEO panel featuring (l-r): Ken Keenan, Canadian Northern Shield; Derek Iles, ING Insurance Company of Canada; Kevin McNeil, Gore Mutual Insurance Company; Jennie Moushos, Axa Pacific Insurance Company; Chris Luby, Wawanesa Insurance; and Bob Fitzgerald, Aviva Canada Inc.

www.canadianunderwriter.ca • June 2008

30

loss despite the limit shown on the policy. Insurers provide GRC coverage in homeowner policies, but some worry under-valuation of properties — and resultant premium inadequacies — threaten to undermine the very same consumer protection that GRC is supposed to provide in the event of a loss.

Depending on the point of view, GRC coverage is either a generous boon to the consumer, or a license for homeowners to neglect the proper valuation of their property.

AXA Pacific Insurance Company executive vice president Jennie Moushos outlined early in her presentation the argument for eliminating the GRC. Some insurers, she noted, argue that removing the GRC would provide homeowners with the incentive they need to properly value the possessions in their homes, since the GRC would not be available to cover them otherwise.

The moderator of the panel discussion, IBABC CEO Chuck Byrne, pressed the CEOs on what they thought of this argument.

During the question-and-answer session, panelist Kevin McNeil, the president and CEO of Gore Mutual Insurance Company, summarized the observations of most panelists when he said that although GRC “in theory works, practically it doesn’t.”

Chris Luby, the vice president of branch operations for Wawanesa Insurance, agreed, making the case for restricting the use of GRC coverage. “If we have limited GRC, assuming a [homeowner’s] policy in which they are selecting a limit, then

that gives [consumers] a little bit of an incentive to say: ‘You know what? I do have an upgraded kitchen,’ or ‘I do have a finished basement’ or as a matter of fact ‘I did spend $100,000 on the kitchen.’”

Panelist Ken Keenan, the president and CEO of Canadian Northern Shield, shared the other CEOs’ qualified lack of support for GRC as it stands. “When I came out here [to western Canada] in January [2008], I had never heard of GRC,” Keenan said, adding that he was a bit taken aback by its take-up in western Canada.“But we are where we are, and I don’t think removing the GRC overnight is the answer, because it would throw the market into turmoil. I’ll add a caveat that the man who invented the GRC should be taken out of the room and severely disciplined.”

Byrne questioned whether Moushos actually agreed with the critique she summarized in her presentation. She responded: “For us [at AXA], it wasn’t the removal of GRC we were suggesting.” She said GRC was good for the consumer “but what has happened over the years is how we’ve applied this concept, and that’s where the dilemma comes in, in terms of consistency. And we created that problem of inconsistency.”

After the session, Byrne made it clear homeowners do not deliberately under-value their homes for any reason (much less, reasons related to the GRC).

Rather, values are skewed because of a myriad of reasons, some of which have to do with the assumptions valuation software is making when calculating reconstruction values.

Like it or not, GRC in personal lines “is there,” ING Insurance Company of Canada president Derek Iles observed. Not only that, but ING is preparing to introduce GRC for commercial lines coverage.

“We are piloting GRC for commercial lines,” Iles said. “The reason we are doing that is because we think there is some opportunity for customers in specific segments, with the right controls and the right appraisals being done, the loss controls, the followup and execution, to get the pricing right and then you have to execute it long-term and keep it that way.”

Moushos described the timing of developing GRC for commercial lines as “very dangerous.”

“We still have to get our act in order for personal lines,” she said. “We’re all over the map. Let’s get some consistency and discipline [in the area of insurance-to-value first].”

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Opinion/Analysis

On Target If “insurance to value” is as important a concept as brokers and insurers say it is, why aren’t more people taking the concept more seriously?

By Robert Harder, Principal Consultant, Robert Harder Consulting Group Inc.

www.canadianunderwriter.ca • June 2008

32 n my past life as an insurance broker, I learned early on that property should be “insured to value.”

Insurers gave “discounts” and offered better coverage (all risk vs. named perils) if you were so protected. Back then, stated amount co-insurance either hadn’t been invented or was not in common use. Coinsurance policies require the owner of a damaged property to have another policy covering a vast majority (usually at least 80%) of the cash value of the property at the time of damage in order to collect the full amount insured. “No-co” policies were available, but with a much higher rate per unit of insured value.

And so, in my consulting practice, when I am in the identification phase of

I

the risk management process, I feel that reviewing replacement costs of real and personal property is essential.

So, what is “replacement cost?”

REPLACEMENT COST Referring to the FM Pro Vision form we see the following definition: “Basis of Valuation: Adjustment of loss amount(s) under this policy will be determined based on the cost of repairing or replacing (whichever is the lesser), at the time of loss, with materials or equipment of like kind and quality without deduction for depreciation, except as provided in this valuation section.”

I feel this policy definition provides little direction. (I will limit this discussion

to buildings.) In practice, it should include allowance for demolition of damaged and undamaged portions of the building, increased costs of bylaw compliance, debris removal, site preparation, soft costs and finally the actual cost of rebuilding.

In a recent project involving a large hospitality operation, I asked the owner what he thought it might cost per square foot to rebuild his 20-year-old hotel. He estimated $175 per square foot. But his insurance policy’s declared value, unbeknownst to him, was $145 per square foot.

In discussion with a quantity surveyor familiar with the property, the cost to rebuild was estimated to be about $250 per square foot. With allowance for the

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costs outlined above — i.e. those not contained within the definition of “valuation” — the number increases to almost $300 per square foot. In other words, the hotel was insured half to value. The building portion of the blanket property limit was promptly increased to $90 million.

During the insurance review of a large resort in an unprotected area, I determined the property insurance limit was based on a rebuilding cost of $135 per square foot. I encouraged the owner to hire a quantity surveyor to determine the current cost of replacement and take into account factors referenced above. At a cost of $10,000 for the project, the quantity surveyor reported a replacement cost of $342 per square foot. We promptly more than doubled the policy limit to $30 million.

The additional premium was significant.

You might suspect these examples are the exception. From my experience, they are not.

www.canadianunderwriter.ca • June 2008

34

CO-INSURANCE Upon questioning brokers, I am often told that since the values are blanketed under the “property of every description” (POED) policy terms, and the co-insurance clause is “stated” or “agreed” amount, there is no real concern about any element of underinsurance. In the early stages of any review engagement, I request the broker to provide a copy of the signed statement of values provided the underwriter at the last renewal. It is very common to learn that one was not submitted. For example, the broker of an educational institution for which I was consulting recently advised me that since the insurer hadn’t asked for the signed statement of values at the last renewal, it wasn’t provided.

When I looked at the stated amount co-insurance clause in the educational institution’s policy, it said: “The terms and conditions of this clause shall cease to be in effect and the terms of the substituted

Page 34

coinsurance clause shall be reinstated 60 days after the effective date of the policy if the insured fails to file a new statement of values within the time required by this clause.”

So the institution was in fact not protected by a stated amount co-insurance clause; rather, it was covered by a 90% coinsurance clause. A review of values determined that some buildings were insured for less than half the cost of replacement; the policy had been renewed “as is” the last few years.

Upon further inspection, the educational institution’s policy contained a margin clause. This kind of clause can limit payment for a loss at any location in several ways. One way is to limit the loss payable to a percentage — i.e. 115% — of the value reported on any location or structure, even though the values were blanketed. So much for POED. So, not only was this institution a coin-

by certify that the values given herein represent to the best of my/our knowledge and belief, the actual values of the property described, if to be insured on ACTUAL CASH VALUE BASIS; or cost of replacement of the property described, if to be insured on a REPLACEMENT COST basis, and…

“The attention of the signatory is drawn to Statutory Condition #1 of the Fire Policy, which reads as follows: “Misrepresentation - 1. If any person applying for insurance falsely describes the property to the prejudice of the insurer, or misrepresents or fraudulently omits to communicate any circumstance which is material to be made known to the insurer in order to enable it to judge of the risk to be undertaken, the contract shall be void as to any property in relation to which the misrepresentation or omission is material.”

The annual filing of a statement of values is essential and must be done in a timely fashion. Most insurers use a similar version of this form. Some brokers use a simplified version; to my amazement, insurers accept them.

surer of at least 50%, according to their policy, they were limited to 115% of the value declared to the insurer on each building — except that the insured had not filed a statement of values. Now what?

The broker had relied on something that didn’t exist. Fortunately, there was no loss. Had there been one, litigation would have been inevitable.

The annual filing of a statement of values is essential and must be done in a timely fashion. Most insurers use a similar version of this form. Some brokers use a simplified version; to my amazement, insurers accept them.

A standard version of a statement of values includes the following: “I/We here-

Here we have a statement that suggests the insurer will accept the applicant’s best estimate. In fact, some brokers actually insert the phrase “insured’s best estimate” in the phrase in Item (d) of the form, which states: “The values appraisal for property mentioned in Columns 2 and 3 (Buildings, Machinery, etc.) was made: (date) ____by: ______.” The problem with estimating in this fashion is that if you are guilty of a “material misrepresentation,” you have no insurance. Oops.

What does a “material misrepresentation” mean in this context? Could this mean that your “appraisal” is grossly understated, even though it is based on your best knowledge and belief? To what

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It is usually desirable to have blanket limits. However, beware when completing statements of value: if you don’t intend to insure certain buildings or include specific fixed assets, it is recommended they be specifically excluded by endorsement, so as not to be included in the determination of blanket limits post loss. degree does your estimate have to be off base in order to void your policy?

After many years of dealing with the concept of “insurance to value,” I am still amazed how rarely it happens in practice and how often the concept really is misunderstood. In the competitive world of insurance, “insurance to value” is often overlooked, placing the insured property owner in great jeopardy.

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COMPLETING FORMS Clients often advise me that their broker completed the form for them and simply requested signature because that is what the insurer requires. In a current project, the broker’s enclosure letter with the statement of values advised: “This is for the property values. Please review, sign and return to our office for head office records.” There was no explanation, only a request to review, sign and return. The client has no idea why a signature is required or the consequences of a misstatement. It is likely that if this client really understood what he was signing, and why, he may have asked a question or two.

By any stretch of the imagination, this whole process is not taken seriously enough. And yet, the downside consequences are very onerous. In a hard market, insurers are more diligent in ensuring that properties are reasonably “insured to value.” In the current soft market, this whole process isn’t receiving nearly as much scrutiny.

Last year, I was involved with a company that sustained a major fire loss of just under $10 million. The stated amount clause, which the mortgagee required to be part of the policy, was missing. The policy was written on a blanket POED basis and subject to a 90% co-insurance clause. Two of 20-plus buildings on site were destroyed by fire.

The insurer’s adjuster attended the site and noted there were footings and foundations on the property in preparation for future expansion; these were not included in the statement of values. The cost of their replacement was well over $1 million. The adjuster included this amount in his coinsurance calculation. The broker was aware that these footings and foundations were on the property. After the fire, the broker advised there was no intent to insure the footings and foundations until they were to be used in the further construction of additional buildings.

It is usually desirable to have blanket limits. However, beware when completing statements of value: if you don’t intend to insure certain buildings or include specific fixed assets, it is recommended they be specifically excluded by endorsement, so as not to be included in the determination of blanket limits post loss.

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Keeping Pace with

Construction Values New technology can help insurers keep pace with changing construction values and maintain better contact with their policyholders — two things that will help tackle the thorny question of insurance to value

By Edmund Webecke, Product Manager and General Manager, Xactware Inc.

www.canadianunderwriter.ca • June 2008

36

n today’s environment, insurers face numerous challenges in their efforts to maintain a portfolio that is accurately insured-to-value. Competitive pressures, unreliable valuation techniques and outof-date or inaccurate pricing information are all challenges insurers may need to overcome. But the most significant obstacle for insurers is the ability to keep pace with the constantly changing nature of residential construction.

According to a report by the Canadian Home Builders Association, residential remodelling has increased from less than Cdn$28 billion in 2001 to more than Cdn$42 billion in 2006. The United States is following a similar trend. U.S. residential remodeling increased from US$210 billion in 2001 to US$280 billion in 2005,

I

By Joël Dagenais, Director of Canadian Operations, Xactware Inc.

according to a study by the Joint Center for Housing Studies of Harvard University. If coverage limits have not been recalculated using the latest property information and building cost data, homeowners and insurers alike are at risk for being underinsured.

Additionally, new homes are becoming larger and more complex with custom features and finishes. Almost half of all new homes built in Canada last year were fully customized, according to a 2008 survey of members of the Canadian Home Builders Association. This trend is expected to continue. Replacement cost estimates that do not accurately account for the characteristics of larger and more complex homes may lead to issues when claims are filed.

Looking toward the future, insurers are likely to face increasingly difficult challenges as they work to keep their policyholders adequately insured. New “green” building techniques and materials designed to make properties more energyefficient are becoming increasingly prevalent in residential building construction.

Insurers’ replacement cost estimators need to be regularly updated with building cost information that accounts for these latest building trends.

All of these issues are making it more difficult for insurers to maintain an upto-date portfolio of policies in which replacement cost estimates used in underwriting are in line with the costs of claims in the event of a total loss.

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To improve insurance-to-value, insurers need localized, up-to-date and higher-quality data pertaining to the costs associated with property reconstruction and on individual properties. Insurers using high-quality reconstruction cost data and that collect better property-specific information from the insured will begin to see replacement cost estimates more in line with actual claims experience.

policies become the industry norm, underinsured properties often affect insurers more in the area of customer service than in finance. Having said that, replacement cost estimates that accurately match claims costs do have many financial benefits for insurers. Insurers can better anticipate future claims costs, greatly increase customer service levels, reduce back-end indemnity expenses and be more likely to collect the proper premium based on the actual risk through the life of the policy.

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TECHNOLOGY SOLUTIONS The best way for the insurance industry to overcome these obstacles is to gain access to better data. To improve insurance-to-value, insurers need localized, upto-date and higher-quality data pertaining to the costs associated with property reconstruction and on individual properties. Insurers using high-quality reconstruction cost data and that collect better property-specific information from the insured will begin to see replacement cost estimates more in line with actual claims experience.

To this end, in the United States, the Insurance Services Office, Inc., Xactware Solutions Inc. and AIR Worldwide Corp. have jointly developed a replacement cost estimator called 360Value. The estimator uses Xactware’s industry standard building cost data for both claims and underwriting. 360Value enables insurers to bring their policyholders into the property valuation process during underwriting or at renewal for customer approval of replacement cost estimates.

The component-based replacement cost estimator uses property-specific information to create a virtual model based on sophisticated modelling algorithms developed by AIR Worldwide.

Using this model, a stick-by-stick, brickby-brick replacement cost estimate is developed using Xactware’s detailed building cost data.

BUILDING COST DATA Xactware has been publishing building cost data for the U.S. property claims industry for more than 20 years. Today, Xactware’s claims estimation tool is used by more than 60% of insurance carriers in Canada and the United States, based on direct written premium.

Xactware has developed a system to capture and analyze active bids written by reconstruction contractors, service providers and adjusters using its claims estimating system. Thousands of estimates are returned to Xactware through this process every day, enabling “real-time” analysis of the pricing data. Every estimate is automatically audited for pricing variances. This data from the field is combined with market surveys performed regularly with other industry professionals. On average, several million unit-price data points are acquired each month using the real-time and survey data collection processes from more than 100,000 contractors, insurance carriers and independent adjusters.

Xactware also maintains an extensive independent research effort to gather the latest information on all costs associated with labour, material, equipment and other factors related to property construction. Some examples of recently added construction materials include cork floor covering, tankless water heating systems and custom timber framing (hammer beam and scissor truss systems). An average of more than 170 new unit costs is added each quarter. The research is performed daily using a database of more than 42,000 material and equipment suppliers, and more than 9,500 contractors across Canada and the United States.

A proprietary “cluster-analysis” process is used to analyze the data and provide price information for specific labor, material, equipment and other associated unit costs for a particular location. Unit cost information is published for about 470 pricing regions in the United States and Canada, and is updated quarterly in 360Value.

COLLABORATE WITH PROPERTY OWNERS Regardless of how good the underlying building cost data is, replacement cost estimates will not match claims experience if property-specific information is unreliable. Enabling property owners to apply the detailed knowledge of their homes will go a long way towards improving the quality data used to estimate replacement costs.

Since property owners are responsible for making sure the replacement value of their property is reliable, it will be advantageous from a customer-service perspective to give them the tools to do so.

360Value includes a unique capability that enables insurers to collaborate with property owners over the Internet.

Property owners can review property information compiled by the insurer and make changes if necessary. Insurers can review and approve all changes made by the property owner before the replacement cost estimate is finalized. A record is then created of the property owner’s approval of the building characteristics and the estimated replacement costs. This improves customer satisfaction and reduces the likelihood of disputes when a loss occurs.

CONCLUSION As residential properties continue to increase in size and evolve by incorporating new and more complex building materials and techniques, the use of highquality data and involvement from policyholders becomes critical. Insurers using data derived from actual claims will have more reliable replacement cost estimates at underwriting. Bringing policyholders into the process will lead to fewer surprises regarding coverage in the event of a loss. State-of-the-art technology is available today that facilitates policyholder involvement and uses high-quality building cost data to ensure insurers’ portfolios are more reliably insured-to-value.

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RIMS ‘Canada Night Reception’ – San Diego Canadian industry representatives at the Risk and Insurance Management Society’s (RIMS) 2008 Conference in San Diego gathered for the RIMS Canada Council’s ‘Canada Night Reception’ on Apr. 29 at the San Diego Marriott Hotel & Marina for cocktails and hors d’oeuvres. Sponsored by CGI and the Canadian Litigation Council, the gathering allowed Canadian conference attendees and guests to connect after a busy San Diego schedule of convention activities, seminars and exhibits.

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Risk and Insurance Management Society 2008 Conference, San Diego

Saving

FACE Risk managers believe one of the top risks facing organizations today is a lack of insurance coverage available for reputation risk.

The scarcity of coverage makes it absolutely necessary to pre-plan for handling a crisis.

By Vanessa Mariga eputation risk is cited as a top priority for risk managers in a Marsh survey taken at the 2007 Risk and Insurance Management Society (RIMS) conference, delegates of the 2008 RIMS conference in San Diego, California.

And it seems that one year later, reputation risk remained top-of-mind for many of the attendees, with it being the focus of many of the sessions. Michael Jones of Kilburn Jones & Gill LLP, James Kirtland of ING Group and Bruce Abrams of AIG VALIC, hosted one such seminar entitled ‘Reputation Risk, the Hidden Risk,’ at this year’s conference.

More than half of the 269 CEO respondents contacted for a 2005 Economist Intelligence Unit survey placed reputation risk as the top risk facing their organizations. At the same time, a 2008 Corporate Executive Board survey found that 52% of respondents have no strategy in place to address the risk, Jones said.

Although insurance covers many dif-

R www.canadianunderwriter.ca • June 2008

42

ferent types of risks, no one has developed a true risk transfer program to mitigate an adverse reputation risk, he noted.

“We all know that insurance is available for the ancillary effects of the reputation risk — for things such as extra expense, business continuity, lost income etc. — but there is nothing actually available to repair a company’s reputation,” he said.

CEOs, CFOs and risk managers in the Economist survey identified security breaches, unethical practices and regulatory non-compliance as the most serious risks to a firm’s reputation, Jones said.

With this in mind, it is imperative that corporations develop clear and comprehensive communication plans and strategies before an event occurs that may damage an organization’s reputation, Kirtland said. “If you have no strategy to manage reputation risk, then your company can only react to an adverse reputation event and that has the potential to end very badly.”

Kirtland said a more proactive approach involves senior management accepting the risk and planning for an event. In a “best-case scenario,” a company that involves all of its staff members in preparing for a crisis will be the one that responds to an actual crisis most effectively.

Panel members called on organizations to determine in advance potential sources of reputation risk, analyze the impact of such risks, organize and focus resources to mitigate these risks, pre-plan for crises and train leaders to respond appropriately.

POSSIBLE HURDLES Undoubtedly there will be obstacles facing risk managers who want to raise the issue of reputational risk with management, Kirtland warned. Three likely hurdles include: • little regulatory guidance on how to handle an event that may damage an organization’s reputation;

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Three-and-a-half months later, the fall race weekend opened as planned.

To make this happen, the people at the speedway worked in tight partnership with their FM Global client service team. And the damage was quickly repaired. So on race day, the only wind the fans were aware of came from the cars flying by at 170 mph. To read more true stories, visit fmglobal.com/insuranceevolved

Insurance Evolved

© 2008 FM Global. All Rights Reserved.

Code: BRD-08-1A Size: A Description: Page/Jr. Page June ‘08 Pubs: Harvard Business Review Treasury Risk Canadian Underwriter Risk Insurance / Jr Page

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“If you have no strategy to manage reputation risk, then your company can only react to an adverse reputation event. And that has the potential to end very badly.”

— James Kirtland, ING Group

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• the unpredictability of “the middle sec- Such questionnaires should focus on the “Recovery [time] can be short if you have tion” (for example, Kirtland noted, how terms and conditions of the deal, the pur- anticipated events,” he said. “But if you are does a risk manager identify a plan for pose of the transaction, the client profile doing it after the event, then it’s too late.” of the other organization involved in the The difference between organizations that management misbehavior?); and transaction, legal, tax and regulatory posi- recover well from a crisis and those that • value at risk.

Kirtland gave the following example of tions and the social concerns of the other don’t can be measured in terms of billions what is meant by value at risk. “If a facto- organization. “Such a review of a transac- of dollars worth of market capitalization, ry burns down, we know how much it will tion can stop a deal from progressing if Abrams warned.

Senior executives responding immeditake to replace the building and its con- certain characteristics are viewed by mantents, and we can calculate the lost profits agement as risking the company’s reputa- ately with compassion, empathy and humility may speed the recovery from the quite easily,” he said. “But how can we put tion,” Kirtland said.

Surveys examining a company’s relation- loss and could improve the organization's the number on exposure to reputation risk?”

The panel drafted some suggestions to ship to external organizations or individuals capital value in the long run. Abrams cited the example of an help overcome the airplane crash to obstacles. The first which the CEOs of suggestion is to estabeach of the two airlish a protocol to make lines involved had sure the decisions and different responses. transactions that One reaction could impact the reprevealed compasutation of the business sion, while the other go to senior managewas overly defensive. ment or the board if James Kirtland, Michael Jones, Bruce Abrams, Partly as a result of necessary.

ING Group Kilburn Jones & Gill LLP AIG VALIC these different reacThe second is a prioritized focus. “You have limited resources will help to answer the questions: How do tions to the crash, Abrams observed, the available to you, so certainly not enough others perceive your company? How do airlines experienced different levels of damto manage every possible risk to your rep- media perceive the company? Should the age done to their corporate reputations. company be seeking out its critics?

“Following the July 25, 2000 crash of utation,” Kirtland observed.

“It’s very important to understand how Air France's Concorde jet in Paris, the And lastly, “when it comes to value at risk, talk to the internal business owners,” others perceive you and your company,” CEO of that company went immediately Kirtland said. “They’re in the best position Kirtland said. “It’s the first step in devel- to the airport, where he expressed humilito understand the potential financial oping a communication plan that may ty, compassion and sympathy to the famiimpact of damage to your company’s repu- also be very useful if a crisis situation lies,” Abrams told delegates. “The CEO of develops.” By having such a communica- British Airways [which also had a fleet of tation.” tion plan, an organization is helping itself Concorde jets at the time] gave a press TECHNIQUES TO IDENTIFY RISKS to send a strong, consistent public mes- conference at the same moment [in which Before a strategy or communications sage that is aligned with the organization’s the CEO] suggested debris on the runway plan can be developed, Kirtland empha- core beliefs. was the cause of the crash and that it was sized the importance of testing the waters. not the aircraft’s fault.”

He suggested companies conduct surveys of NO TIME TO SPARE This is a perfect example of one organtheir financial transactions and their relaShortly after an event, the markets ization being overly defensive and the tionships with the public and media. Using react very quickly, panelists noted. other reacting with compassion, Abrams the information obtained in these surveys, Investors make decisions based on the way said. Since then, he added, Air France’s companies’ risk management teams can the representatives of a company act when capital value has increased 40%; British gain some insight into what might be at risk confronted with a crisis. “Your stakehold- Airways’ has decreased 20%. “A damaged and how the public, its stakeholders and its ers want to see leadership under stress,” reputation can cost an organization bilcompetition perceive them.

Abrams said. “Good leadership may be lions of dollars and there’s no insurance By taking the time to perform a “deal rewarded, poor leadership is quickly coverage for loss of reputation,” Abrams questionnaire” that analyzes large, com- punished.” warned. “Keeping that in mind, it is cruplex financial transactions before they are It is up to the risk manager, he contin- cial to pre-plan and have a communicacompleted, a company can help to identi- ued, to provide management with the tion strategy in place before an event fy potential sore spots for its reputation. tools they need to respond quickly. hits.”

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Canadian’s Drop Anchor in San Diego for RIMS All hands were on deck as Canadian delegates set sail and docked in San Diego for the Risk and Insurance Management Society’s (RIMS) 2008 Conference Apr. 26 – May 1, 2008. It was full and by as conference delegates navigated a sea of conference hospitality and host events, taking-in all the latest scuttlebutt and local grog.

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Cross-Pollination of

Financial Services Property and casualty insurers wishing to cross-sell life insurance and wealth management products should be considering new specialists, new office cultures and new technology

By Pat Durepos, President, Keal Technology o cross-sell life insurance and investment products effectively, property and casualty brokers need a compelling combination of people, culture and technology. Signs exist today that some brokers are finding success in broadening product offerings, reinforcing client relationships and driving increased revenue. They are also protecting themselves from competitors such as banks and direct writers. Will others follow?

Integrating financial services into property and casualty brokerage operations is not a new topic in Canada. Several examples exist of leading-edge intermediaries that, particularly in Quebec and Alberta, have successfully expanded their range of offerings to include life insurance, investment and even banking products. One of Canada’s largest insurance companies has worked diligently to transform some of its concentrated brokers into full financial services providers.

Nevertheless, for many brokers, there is still a lingering sense of a distinct dividing line between property and casualty insurance and life insurance and wealth accumulation products. In some cases, the per-

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ception of such a conceptual dividing line has resulted in failed experiments to crosssell, or an inability to recognize the vast potential in building better client relationships and increasing broker profitability.

Such a lack of success becomes a more prominent issue when one considers the role of banks and direct writers in providing a broader range of products to customers. Questions directly confronting brokers today include: Do brokers want to take a proactive stance on protecting their client base, or do they want to wait and see what their competitors will do in the years ahead? Would they rather be on the offensive, or defensive?

THE ART OF CROSS-SELLING The three most important areas on which a brokerage should focus when integrating financial services are people, culture/process and technology. If these are improperly planned or poorly executed, cross-selling efforts will encounter obstacles and often lead to frustration or weak performance. Good intentions don’t necessarily translate into solid financial results.

People If we first look at people, and specifically who is placed in charge of financial services integration, some brokers have made the mistake of simply encouraging customer service representatives (CSRs) or property and casualty producers to crosssell other financial products. Not only is this unrealistic, it is ineffective and potentially dangerous in terms of insufficient product knowledge. If producers or CSRs have traditionally sold only property and casualty products, most will not be familiar with life insurance and financial products and will not dedicate the necessary attention to sales.

Hiring a life insurance or investment specialist is critical to the success of any integration initiative. That person should have the proper education and accreditation to sell a broad range of insurance and wealth management products.

But simply adding another body to the brokerage doesn’t necessarily yield positive results. The life insurance and wealth management specialist has to build trust with CSRs and producers to ensure there will be a steady flow of referral business from cur-

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There is ample proof that offering other product lines — such as life insurance, investment and banking products — helps brokers build value in their businesses... To date, brokers have not created integrated financial strategies and used supporting technology to its full effect.

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rent and prospective brokerage customers.

This referral process is extremely important. Brokers have a ready-made source of prospects at their fingertips — their current clients. But they need to learn how to capitalize on the situation.

In our consulting business at Keal Technology, we have found that, although it is the job of the CSR or commercial producer to push business to the life or investment person, it does not happen until the producer or CSR trusts that person. Trust is the key ingredient to success. CSRs and producers have to be comfortable enough to buy their own life insurance from the new specialist before they entrust existing or potential customers to him or her. The concern is very real from the CSR or producer side: “Will this mess up my current relationship with clients?”

People in the property and casualty business will only give referrals to someone with whom they are quite comfortable. A life or investment specialist that comes into a property and casualty brokerage has to be savvy enough to “sell” the CSR or producer on his or her skills and knowledge.

Once that is done, that person will get all the referrals needed — to the point where the brokerage will need to add a second life or investment specialist, and so on.

Culture/Process In this sense, there needs to be a cultural, or at least attitudinal, shift in the brokerage towards sharing information about current clients, attractive customer segments and potential marketing campaigns. If trust is the first step, then incentive should be a key next move. CSRs or producers should be rewarded for providing information and referrals that lead to increased sales.

Money is an obvious motivator for some people, and so financial rewards for CSRs and producers related to referrals and sales are one way to gain momentum.

Other, non-monetary rewards — such as earned time-off or gifts — are often used

as well. However, brokers often look at money or tangible rewards as the only incentive. In some cases, there are other non-financial forms of recognitions, such as posting results throughout the brokerage, personally acknowledging the individuals involved in the referral process and sharing the “wins” in cross-selling. This is a frequently overlooked benefit of integration – improved team building and a shared culture of performance and results.

Technology If the people and culture/process side of cross-selling are in place, a brokerage still needs the right systems to support effective integration strategies. The lack of flexible technology in the past represented a clear hurdle for brokers. In some cases, traditional broker management systems had to be altered or modified to support business in other product lines. Similarly, brokers have had difficulties tracking referrals, leads and marketing campaigns in financial services products.

Technology exists today to run all of the arms of a full financial services brokerage, either independently or integrated.

For example, Keal Technology has a BMS solution that caters to the integrated financial broker. It is divided into separate product “modules” that all reside on top of the same SQL database. There is, of course, sigXP for personal property and casualty and commercial insurance, and comXP for advanced commercial integrations and policy issuance. But other modules include lifeXP for life insurance and investment and banking modules. This gives brokers the opportunity to get into other kinds of business through a step-bystep approach. They can enter life insurance, but not investments or banking.

When they are ready, they can turn on the investment or banking modules.

These modules are integrated through a client relationship management platform. This can be used to manage referrals, leads, activities and follow-ups. All

this information can be pushed efficiently to the life insurance or investment specialist. This helps brokers effectively mine their own databases and provide a unified view of client data.

For example, let’s say a broker wants to segment all clients that have a minimum of two autos and home with minimum insured limit of $400,000. That type of client profile suggests the person has money to invest and/or requires life insurance. These individuals could be targeted as part of a broader marketing effort run by a life or investment specialist. It becomes what we might call “smart marketing” — the ability of technology to create effective marketing campaigns by tapping into one source of information and using a centralized client relationship management platform.

INTEGRATED FINANCIAL SERVICES One key to integration is protecting the confidentiality of client information based on current regulatory and privacy rules, which vary from province to province.

The broker needs technology that provides proper security, access and compliance to regulatory guidelines. Systems have to be flexible in case the broker decides to be more stringent about how the information is used and how the client’s information is protected.

There is ample proof that offering other product lines — such as life insurance, investment and banking products — helps brokers build value in their businesses. In addition to boosting revenue and increasing client retention, a huge benefit is the diversification of the brokerage’s income stream. But it has to be done properly. To date, brokers have not created integrated financial strategies and used supporting technology to its full effect.

Those brokers who figure out how to do it effectively will not only survive, but also position themselves strongly against future incursions by competitors such as banks and direct writers.

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Going

with the

Flow

New trunk mains and sump pumps are two main ways to prevent sewer and storm water back-up

By Larry Watson, Director of Loss Control, ING Insurance (London, Ontario)

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once asked the owner of a large plumbing outfit in London what he would do if he were an insurer wishing to avoid flood and sewage back up claims.

His answer was instructive: “Insure properties on streets with large trunk mains.”

In fact, there are several ways to prevent water damage losses due to sewer and storm water back up, including the use of sump pumps. But certainly an upgraded system of trunk mains should be at the top or near the top of any list of methods for mitigating flood damage due to sewer back-up.

I

TRUNK MAINS Our municipalities’ streets are serviced by trunk mains located below grade.

Trunk mains are pathways used to transport waste generated by buildings

(sewage) and the environment (rainwater). Trunk mains are directly fed by underground connections extending from residential and commercial properties, as well as by storm water grates at street level. Trunk mains are configured to transport two types of effluent: sewage and storm water. Sewage is destined for municipal water treatment facilities through the sanitary system; storm water is released directly into the environment, untreated, through the storm sewer system.

In older subdivisions, it is very likely a single trunk main is used to carry effluent from both the storm and sanitary sewage systems. Where this is the case, chronic sewage back-up often arises after a heavy rainfall because the trunk main simply isn’t large enough to handle the volume of

flow. Municipalities remedy this situation by excavating roadways and installing new trunk mains beneath them. When new trunk mains are installed, it is a now a common practice to use dual trunk mains: one trunk main is exclusive to sanitary sewage and one is exclusive to storm water. This dual configuration has proven to be effective in minimizing the potential for sewer back-up occurrences. It should be noted that the first line of defence against floods and sewer back-ups is an upgraded system of trunk mains.

Trunk mains for storm water are larger than those associated with sanitary sewage. Trunk mains associated with sanitary sewage are installed deeper in the ground. Municipalities will install trunk mains according to a rating system based on years — i.e. 20-, 50- or 100-year sys-

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tems. A calculation involving the slope and diameter of the trunk main, in addition to the projected weather patterns for a given area, are used to determine the year rating of the system. For example, a trunk main deemed as being a 20-year system would likely be subjected to only one water-related event — i.e. a rainstorm — over a 20-year period that will exceed its threshold capacity. A 100-year system would be superior in that it is expected to have only one water-related event that would exceed its threshold capacity over a period of a century. Generally, municipalities will opt for the 20-year system, since it is the least expensive way to go.

Municipalities do maintain documentation pertaining to trunk main upgrades and record the year ratings. Theoretically, this statistical information might be used to project the frequency and severity of water-related events in a given area over a given time period.

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SUMP PUMPS Sump pumps are mechanical devices that collect water on the exterior of a building. They can cost between $90 and $100 for submersible types, and between $50 and $70 for the column types. They are electrically operated; as such, they are subject to malfunction and power outages.

Sump pumps are typically installed inside premises; they are used when soil or topography makes the removal of storm water on the property or adjacent to the building difficult. Sump pumps can also be used in relation to sanitary sewage systems.

Sump pumps operate by collecting water on the exterior of a building (i.e. after the water has passed through weeping tiles installed in the ground adjacent to the building). Collected water is channelled into a pit located at the basement level. A sump pump is equipped with a float that tells it when to start up; typically, this happens when five to 10 gallons of water have been collected. Collected water passes through a vertical pipe, which then directs the water to the exterior of the building and out into the storm sewer connection that feeds the trunk main in the street.

One key component of the sump pump is a check valve — a valve allowing flow in only one direction — designed to prevent storm water effluent from backflowing or backing up in the opposite direction. Theoretically, sump pumps are

Page 54

designed to move water away from a building against standing water or water that has back-flowed upstream of the check valve. Some plumbing installations are configured to allow back-flowing water to escape through an intentional gap established outside the building, where the connection to the sump pump meets the storm water connection.

Escaping water will simply settle back into the ground and be collected by the weeping tiles for a second time.

A properly installed sump pump should not operate more than twice daily under ideal conditions. If a sump pump operates more than two times per day, it is very likely a water back-up situation is imminent. It is a very bad sign indeed if a sump pump operates at all during the winter months.

Since sump pumps rely on electricity to operate, they are prone to failure in the absence of hydro-electric power. Such blackouts can occur, of course, during thunderstorms (when water back-up becomes an issue). There is no prescribed maintenance for sump pumps, and it is entirely possible they might not work at all if they have been dormant for long periods of time. It is recommended that sump

pumps be equipped with a back-up power supply — such as a marine battery, for example — that is designed to be exhausted of power and recharged with little or no consequence to performance.

A performance enhancement technique that can be applied to sump pumps is called piggybacking. Piggybacking is a concept that employs two sump pumps that operate on an alternative basis, thereby minimizing the overall level of wear and tear on either unit. A diesel generator is recommended as a back up power supply for piggybacking arrangements.

Water back-flow protection for the sanitary system can be achieved in two ways. The first is the use of gated devices.

These devices are capable of reacting to a reversal of flow by isolating the entire plumbing system inside of the building.

The gate is configured to remain open as effluent moves away from the building but will close if effluent from the sanitary system moves towards the building. Gated devices are installed in a horizontal configuration at a point where the sanitary main leaves the building. Some nonmechanical devices use a float to maintain a gate in an open position. When rising water (effluent) is noted inside of the pipe, the float reacts by closing the gate and creating a wall between the incoming and outgoing effluent. Also, mechanical devices are available that will electronically close the gate when a reversal of flow is detected. These electronic devices are seldom used because they are expensive and rely on hydro-electric power.

The fact that the gate is normally in the open position allows effluent to pass unrestricted from the premises to the exterior of the building. In contrast, some backwater preventers are designed to remain closed at all times, opening only to allow effluent to move from inside of a building to the exterior. It is against the National Plumbing Code to install devices that are designed to be in a closed configuration on a mainline inside of a building, because in such situations sewer gases cannot be properly vented to the exterior. Sewage back-up situations involving the sanitary system can be caused by tree roots, collapsed sewers and blockage from debris.

A second way to minimize the potential for sewer back-up is to install a sewage ejector. A sewage ejector is located in the basement of building and is comprised of a tank, piping and an electrically operated

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motor. The tank is used to collect the effluent generated by building occupants.

When the effluent reaches a specified level inside of the tank, the motor operates to pump the effluent away from the building through a piping arrangement. To reduce the chances of sewage back-up, the piping can be looped above the tank. If the piping arrangement proves to be an insufficient barrier to sewage moving in reverse, the incoming sewage will simply back flow into the tank. The effectiveness of the tank is of course limited if the tank’s volume capacity is less than the volume of sewage back flowing into the building.

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STEMMING THE TIDE There is no definitive way to eliminate the back-flow of sewage and storm water into a building. The strategies available will minimize the potential and consequentially the frequency and severity of these occurrences.

A properly installed sump pump can prove to be beneficial in the management of storm water. But as we know this is a mechanical device dependent on electrical power; as such, it can be subject to mechanical failure, especially after periods of inactivity.

The frequency and severity of sewage

See all of our Insurance Industry Event Photos Online within the ONLINE PHOTO GALLERY at

canadianunderwriter.ca/gallery

back-up inside of a building can be minimized through the use of a back water preventer. The only drawback here is that once the gate of this device is closed, effluent can no longer move away from the building. And so, for example, if a person flushes a toilet inside of the building after the gate is closed, there would be an overflow of effluent generated by the occupants inside of the building. Although this might sound like a bad situation, certainly it is better to have three or four gallons of your own effluent on the floor than to have 50 or 100 gallons of your neighbours’ effluent on your floor!

The real nemesis here is heavy and sudden rain impinging on trunk mains that cannot handle the onslaught. A control point here would be to determine areas where trunk mains have been upgraded versus areas where they have not been upgraded. Having said this, problems still arise in areas where upgraded dual trunk mains have been installed. For example, a sudden and heavy rain overcoming the storm sewers may settle above ground, creating a potential flooding situation from storm water. A sewage back-up situation could arise if this storm water enters a sanitary manhole, thereby entering the sanitary sewage system and overtaxing it.

FLOOD AND SEWAGE BACK-UP Flood and sewage back-up are often intertwined or married to one another. It should be noted that municipalities require building and property owners to serve as their own ‘flood plains’ and storm water managers. Many commercial buildings can be quite large and situated on properties with sprawling parking lots, thereby creating a lot of water run-off.

After a heavy rainfall, it is not uncommon to see standing water on the roof of such buildings (assuming the roof is flat of course) and in the parking lot. Water on top of the roof and in the parking lot will share a common pathway when they leave the property to enter the storm sewer system. Municipalities require storm water to leave properties at a controlled rate so as not to overwhelm the municipal system.

This means there could be accumulations of water on rooftops and above ground for extended periods of time, as this water awaits introduction into the storm sewage system. Roof structures are now designed to withstand the added weight of the water loading.

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Mr. Alister Campbell, CEO, Zurich Insurance Company in Canada, is pleased to announce the following appointments.

Dave De Kuyper is appointed to the role of Senior Vice President, Programs for Zurich Insurance Company in Canada.

Mr. De Kuyper joined Zurich in 1992, having held commercial and underwriting management roles with Chateau Insurance and Allstate Insurance. During his time at Zurich, Mr. De Kuyper has gained experience in many different marketing and distribution management areas including Broker Operations, Financing and Compensation and Distribution Development.

In his role as Senior Vice President, Programs, Mr. De Kuyper is responsible for developing and delivering growth strategies for the Programs unit in Canada.

Mr. De Kuyper studied for his Executive Management qualifications at the Kellogg School of Management, Northwestern University. In the past, he has served as President of the Toronto Insurance Marketing Representatives Association. Mr. De Kuyper is also a proud member of the Insurance Institute of Canada.

Doug Jamieson is appointed to the role of Senior Vice President, Middle Market for Zurich Insurance Company in Canada.

Mr. Jamieson began his career with Zurich in 1977 as a trainee and has since held numerous management positions including Vice-President of Data Processing, Vice-President Field Operations for Zurich’s Personal Insurance and Small Business and Managing Director of Operations for Zurich in Canada.

In his new role, Mr. Jamieson is responsible for delivering growth strategies for the Middle Market, Construction and Specialties units.

Mr. Jamieson attended the University of Toronto to pursue his Bachelor of Commerce. He also holds several Zurich accreditations including the Zurich Management Development Programme from Northwestern University and the Zurich Executive Education Programme.

Kevin Pinto is appointed to the new and expanded role of Chief Underwriting Officer for Zurich Insurance Company in Canada.

Mr. Pinto has been with Zurich since 2003. He joined as Vice President, Corporate Customer and Director of Energy. In addition to Energy, his responsibilities included managing the Construction and Consumer Products teams within Corporate Customer. In 2005, Mr. Pinto was appointed to the role of Senior Vice President of Middle Market and continued to provide leadership for Specialties & Technical Lines of Zurich, Canada.

In his new role as Chief Underwriting Officer, Mr. Pinto is accountable for leading Zurich’s underwriting strategy and operations in Canada. This includes managing Zurich Canada’s corporate underwriting, product development and reinsurance departments.

Mr. Pinto holds a Bachelor of Engineering from McGill University and an MBA from the University of Toronto. As well, Mr. Pinto has a Chartered Insurance Professional (CIP) designation.

Fabian Richenberger is appointed to the role of Senior Vice President of Sales, Marketing and Communications for Zurich Insurance Company in Canada.

Mr. Richenberger joined Zurich in 1993 in Switzerland. In 1997, he joined Zurich Canada and has since held senior management roles in Operations, Underwriting and Marketing. Between 2005 and 2007, Mr. Richenberger held the role of Director of Operational Management for Zurich in the United States.

In his new role he is responsible for Zurich’s Sales and Marketing strategy and for the development and implementation of business strategies to drive production with key brokers.

Mr. Richenberger has an Executive MBA from the University of Toronto and an Economics and Business Administration Degree from the Business School of Zurich.

Zurich Financial Services Group (Zurich) is an insurance-based financial services provider with a global network of subsidiaries and offices in North America and Europe as well as in Asia Pacific, Latin America and other markets. Founded in 1872, the Group is headquartered in Zurich, Switzerland. It employs approximately 60,000 people serving customers in more than 170 countries. In Canada, Zurich (www.zurichcanada.com) is a major commercial property and casualty insurer, covering a wide range of Canadian businesses including Construction, Transportation, Manufacturing and Energy. We also have the expertise to write a variety of specialty lines. Our access to Zurich’s global network enables us to provide insurance solutions for Canadian companies with operations in the United States and around the globe.

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THE

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P-O-W-E-R O

By Axiom red Wilson laid his laptop on the table, doffed his coat and slid into a window seat. I sat down beside him. Two of our fellow travellers, brokers Bob and Harry, occupied the seats opposite us on the VIA rail car.

“Nice change from air travel,” Fred said as he flipped open his laptop. “Easier to get some work done.

It’s a four-hour trip.”

The four of us had decided to travel by rail together to a spring meeting of the provincial brokers’ association, held in a city to the east, rather than drive over the snow and slush-covered roads. As the manager of our company’s large downtown branch, Fred was due to appear on a broker/company discussion panel. As our company’s senior marketing representative, I was going to the meeting to make contact with many of the brokers I work with. Bob Davies ran a prosperous midtown brokerage that gave us a good volume of commercial and personal business. Harry operated from a suburban office and was also one of our “A” brokers.

As we made ourselves comfortable in the railway car, Fred slipped his glasses on and started to tap away at the keyboard of his computer.

“A rallying cry to all your underperforming brokers?” Bob asked casually.

Fred looked up with a smile. “Actually, no. I’m drafting an action memo to all branch staff, and I want to get it right.”

“Hey, you should be sending a pretty positive message out to your staff, shouldn’t you?” Harry said. “You guys had a banner result last year, didn’t you? Record profits in all divisions? And this year’s looking pretty good too, isn’t it?”

Fred scratched his chin thoughtfully. “That’s all true,” he said.

“But it’s also precisely why I want to get a very pointed message across to the staff in my branch. Good times in our business often drag bad things along with them. Things like complacency, soft underwriting, bloated staff numbers and a lack of attention to detail. You and I both know all too well that the good times in our business never last. Sooner or later the market will turn—” “—And we’ve all been through that before,” I chipped in.

P E R I PAT E T I C R E P

F

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“Fresh capital is attracted by the returns our business is getting,” Bob Davies added. “New companies slash rates to suck in business. Underwriting rules go out the window. Old-line insurers are forced to defend their market share. Profits vanish like snow in summer. And brokers start to get the chop as insurance companies retrench for the tough times.”

My boss opened up his hands in front of him. “Exactly!” Fred agreed. “That’s why I want to deliver a strong statement to my people now. I want to remind them that how we act today will help determine how well we perform tomorrow, and next year.”

I leaned across the table towards our two broker friends.

“Fred only writes a couple of action memos a year, so they get our attention. They can be tough and uncompromising, but they’re always direct and to the point.”

As our train slid smoothly out from the station, broker Harry

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whistled. “Fred, I’d like to know your secret. I have trouble writing a decent business letter.”

My boss leaned back from his laptop and scratched his head.

“I’m no expert, but I’ve learned a few tricks of the trade over the years.” Fred held up one hand with his five fingers extended.

“When you’ve got a strong message to deliver, I’m a great believer in the five-point principle of P-O-W-E-R.” As he spelled out each letter, he waggled one finger on his hand. “P stands for PLAN, O stands for ORGANIZE, W stands for WRITE, E stands for EDIT and R stands for REVIEW and REVISE.” He dropped his hand and tapped it gently on the table.

“It’s not original,” he continued. “I was taught this formula many years ago. But it’s a good one for creating effective communications.”

Bob Davies nodded. “Sounds good, my friend. Tell us more.”

Fred glanced briefly at the landscape now flashing past, and continued. “Really, this formula works for virtually anything you write. First, plan what it is you want to say.

That means you have to consider who your audience is, and what you want to say to them. In other words, boil it down to the essential message you want to get across to them, whether it’s broadening your markets, tightening up underwriting, developing new brokers — whatever. Just try to keep the focus on one main issue. When you have one main issue, it’s like firing a rifle with one big bullet, rather than having several issues and firing a shotgun with a bunch of small pellets. The big bullet usually gets the job done more effectively.”

Fred drew his hands together. “Next, carefully organize all the information you have. If you’re short of facts or statistics to support the case you want to make, then get them! Any strong argument must be backed up by credible facts and figures. You usually can’t make a convincing case with words alone—” Harry grunted affirmatively. “I’m with you there,” he said. “I’ve read far too many directives heavy on dramatic words and phrases but woefully short of facts to back ‘em up. It tells me they were either too lazy to pinpoint the facts and figures, or else didn’t have ‘em and tried to bluster their way past the issue with fancy words—” “—or used information that was either inaccurate or badly out-of-date,” I added. “That can really be a credibility-killer.”

Fred nodded at us and carried on. “When you organize your material, you must also decide in which order to present it for maximum impact. Your prime reason for organizing material is to prioritize the delivery of it. And here I think the basic rule is to lead with the strongest fact or figure because that’s what most people will remember.”

An attendant arrived with a serving wagon, and we all accepted a cup of coffee.

“We’ve covered the ‘P’ and ‘O’ of our formula,” Fred said.

“Now it’s on to the ‘W’ for Write. And here I have a piece of advice: Just get your thoughts down on paper or into the computer in rough form. Don’t agonize over creating perfect sentences and superb phrases at this stage. If you try to create

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the perfect action memo or directive in one draft, you run the risk of getting what I call ‘blank sheet blackout’. I’m sure you all know what that’s like. You wind up staring at the keyboard or at that blank sheet of paper while your mind whirls over all the possible ways to express your thoughts. My first Golden Rule is: put the thoughts down. Polish ‘em later.”

Daylight suddenly vanished as our train thundered into a tunnel. When it emerged, I posed a question: “You mentioned your first Golden Rule. I take it you have some others?”

Fred gave me a quick smile. “You know me, Dave, I have a whole bunch of golden rules. But in this context, I’ll just mention a couple of other ones.”

He flicked up two fingers. “Golden Rule Number 2: keep it short. One page tops. Nobody has the time or the patience to read two and three pages of finger-wagging. So be brisk, but also be brief.” He flicked up a third finger. “Golden Rule Number 3: avoid those awful clichés we hear every day. We always hear things like ‘thinking outside the box,’ ‘accessing our potential,’ ‘prioritizing,’ ‘empowerment’ and ‘going forward.’ My eyes glaze over when I read these, and I’m sure the same is true for my staff.”

He took a long sip of his coffee and continued.“We’ve covered the ‘P,’ ‘O’ and ‘W’ of our P-O-W-E-R formula. Now we’re on to E for Edit and R for Review.”

He raised one hand and pointed a finger. “Now is when you start editing what you have already written. This is the time to make any corrections and to polish up your prose. It’s also when you can insert what I call punch words to sharpen up your presentation. For instance, rather than say ‘We need to,’ I’d say ‘We must.’ Rather than say ‘Our plans call for,’ I prefer to say ‘Our plans will achieve’.”

Fred paused for a second, thinking and then plunged on.

“Dave here knows that I hate those word-whiskers like ‘there are’ and ‘which’ and ‘would.’ Try to eliminate them if you’re aiming for a punchy presentation. Don’t say: ‘There are several departments which are not yet as effective as we would like them to be.’

It’s much stronger to say ‘Several departments are not yet as effective as they should be.’

At this point a musical chime sounded, and Harry reached into his pocket for his Blackberry. He scanned the message, quickly tapped out a text reply and put the unit down. As he did, Fred Wilson smiled at him and turned to the rest of us. “And right there, folks,” he said pointing to the Blackberry, “is something that is helping to torpedo good English.”

Harry recoiled in mock horror. “How so?”

My boss shrugged his shoulders. “Well, I grant you they’re great as instant communicators. But, because people are in a hurry, because air time is money, and because the screen is small, English is crushed and squeezed into short bites and into handy acronyms that substitute for actual words. Like BTW for ‘by the way’ and IMO for ‘in my opinion,’ JK for ‘just kidding,’ IDK for ‘I don’t know,’ BRB for ‘be right back,’ TTYL for ‘ talk to you later’ or even just L8R for ‘later’. It’s a form of lazy shorthand. Trouble is, they creep into every day emails and inter-office memos. As more people start to use them, language skills start to suffer.”

Across the table, Bob Davies raised a hand. “Okay, professor,” he said. “So now I would guess the review stage is the time you make sure all your facts and statements are accurate, eh?”

Fred Wilson gave a quick nod of his head. “Absolutely right.

You know, it’s easy to fall in love with a certain part of your written presentation, with some surprising facts or damning statistics. But the Golden Rule here is: review now, or eat crow later.”

Fred chuckled quietly to himself, then added: “The review stage is the time when you check four other components of whatever it is you’ve written: grammar, spelling, proper organization and — perhaps the most essential ingredient — the validity of your argument. You don’t want to project a simplistic point that can be easily shot down.”

Fred sat back in his seat. We watched the countryside flash past our window for a few seconds. Then Bob Davies spoke again.

“Well, my friend, you’ve given us a pretty decent primer on the steps to take in preparing and delivering a good, strong message,” Bob said. “But I’d be willing to bet you’ve still got one more Golden Rule of communication hiding there in your pocket.”

Fred grinned. “I thought you’d never ask! Okay, here it is: Always give your audience a chance to speak their mind. If you’re delivering a written message verbally, the Golden Rule when you’re finished is to say, ‘Now it’s your turn, any questions?’

“The same is true when it’s a printed piece. Somewhere on it you should include an invitation for feedback, a way in which your audience can respond to you. Who knows? You might get back some constructive ideas you can use. At the very least, it can serve to take the temperature of your audience to see if they seem to be responding positively to your ideas.”

“Well, the small audience right here is grateful to you for your words of wisdom,” Bob Davies said with a chuckle, as Fred once again bent over his keyboard. “Now let me catch a small power nap while you get back to work.”

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GLOVES are

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With Ontario’s mandatory five-year review of the province’s auto insurance product coming up later this year, the stakeholders in the debate are already embroiled in a discussion about indemnity over entitlement, as well as the province’s Cdn$15,000 deductible and verbal threshold for establishing the nature of bodily injuries

By Donna Ford

ith a mandatory five-year review of Ontario auto insurance starting later this year, and members of opposing camps wrangling about who has the public interest at heart, the gloves are already off.

Among those advocating change is Ontario’s former chief justice, the Honourable Coulter Osborne, who led Ontario’s Civil Justice Reform Project that submitted its findings and recommendations in November 2007. In his report, Osborne included recommendations concerning automobile negligence claims, which represent 21% of the cases commenced in the Ontario Superior Court of Justice. Osborne reiterated his findings in the review before 85 stakeholders at an Ontario Bar Association conference entitled “Drive to Better Auto Insurance,” held in Toronto on Apr. 29 and 30. Those invited to the conference, sponsored by the Ontario Bar Association, Ontario Trial Lawyers Association and United Senior Citizens of Ontario Inc., included insur-

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ers, the Insurance Bureau of Canada (IBC), plaintiff and defence lawyers, various victim, injury and senior citizens’ groups and government officials.

The stated purpose of the OBA conference was to “begin a constructive dialogue to address challenges and inequities under the current system, while identifying efficiencies which can be enacted to maintain affordable premiums.”

DEDUCTIBLE UNDER FIRE In both his review recommendations and in his presentation to the OBA, Osborne argued that contingent fees and class actions afford access to justice, but the deductible and verbal threshold are direct barriers to justice. He called Ontario’s Cdn$30,000 deductible from general damages (which disappears if damages awarded are Cdn$100,000 or more) a “tax on pain.” In addition, he questioned the utility of the province’s verbal threshold, which requires plaintiffs to establish — in order to have the right to

sue — that they have sustained a permanent serious impairment of an important physical, mental or psychological function.

Both the deductible and threshold are intended to lower loss costs, and thus premiums, by keeping smaller cases out of the system. But Osborne has urged Ontario’s insurance regulator, the Financial Services Commission of Ontario (FSCO), to study their impact and usefulness in the coming review.

While noting in his report that there is substantial public interest in keeping auto premiums under control, Osborne nevertheless concluded: “What automobile claims costs are, and whether automobile insurers are making or losing money, is not for me to determine.” After the release of Osborne’s 1988 Report of the Inquiry into Motor Vehicle Compensation in Ontario — which recommended a hybrid no-fault and tort system, with a substantial expansion of no-fault benefits — the cap for medical and rehabilitation nofault benefits rose from Cdn$25,000 to

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Cdn$500,000 per claim in 1990. (Prior to OMPP in 1990, auto accident compensation was provided primarily on the basis of tort, with limited no-fault benefits.)

INDEMNITY v. ENTITLEMENT Speaking at the OBA conference, George Cooke, CEO of Dominion Insurance Company of Canada, said that in order for the system to be seen as fair by consumers, the system must be capable of being understood and not be unduly complex. He criticized “unnecessary treatment and excessive assessment, combined with cumbersome processes,” which he said increase costs for lesser injuries to the benefit of those abusing the system.

Ontario has a system that works, but could work better, Cooke told the conference. He stressed the need to preserve an acceptable balance between affordability, fairness and indemnification — and to encourage competition. He offered a Top 10 list of suggestions that included reducing no-fault benefits significantly, and permitting the use of preferred provider networks if the insured elects this approach at the time of purchase.

In an email interview after his speech,

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OBA working group on auto insurance, said he believed insurers were ignoring the quality of the auto insurance product in favour of shareholders’ interests. Innocent accident victims should not be bailing insurers out of soft markets, he said in his OBA presentation.

In a subsequent interview, Halpern said the OTLA was prepared, if necessary, to challenge both the deductible and the verbal threshold. “We prefer not to go down that road, but if ultimately we decided to do that [a constitutional challenge], we would challenge both,” Halpern said.“Again, the solution lies in co-operation.”

Halpern was asked for his impressions about the province’s no-fault system. “The first-party system is very complex with lots of time limits, lots of forms to fill out and it’s in language that the ordinary member of the public can’t understand,” he said. “At the same time, insurers must create large bureaucracies to administer benefits and they make liberal use of medical assessments to determine entitlement.” By reducing these transaction costs and simplifying first-party benefits, Halpern suggested, there would be substantial cost savings that can further be

personal injury cases, and/or the establishment of a specialized court.

Speaking at the OBA conference, Ontario’s minister of finance, Dwight Duncan, confirmed a statutory review of all aspects of the auto insurance system would take place this year. He said he was interested in what all sides could come up with together because compromise is the preferable route.

65 www.canadianunderwriter.ca • June 2008

DEDUCTIBLE NOT A BARRIER TO ACCESS TO JUSTICE IBC president and CEO Mark Yakabuski attended the conference, but was not a speaker. He was asked for comments by email after the conclusion of the conference. Specifically, he was asked about Osborne’s recommendations related to the deductible and verbal threshold “IBC does not see the deductible and threshold as barriers to justice, since Ontario has by far the most generous automobile insurance system in the country,” Yakabuski said in a statement.“Any changes to the deductible and/or threshold that might be proposed by the personal injury bar can only be considered if they are accompanied by other counterweighing proposals that ensure affordability “The deductible should be set at a level to discourage frivolous and stability of the Ontario auto and low-end personal injury claims and the threshold wording insurance system.

“IBC is working hard to develshould not be changed until the courts interpret what it means.” op proposals of its own to ensure – George Cooke, Dominion of Canada General Insurance that Ontario consumers do not pay more and more of their perwhen asked to comment further on used to restore the rights of innocent acci- sonal disposable income on what is a Osborne’s proposed review of the dent victims [i.e. those that have had their mandatory financial product. Our proposals will be designed to promote stabilideductible and threshold, Cooke said: rights limited, according to Halpern].

When asked if he was advocating the ty in the system so that the claims costs “The deductible should be set at a level to discourage frivolous and low-end person- return to pure tort, Halpern replied: “It’s paid out by the Ontario auto insurance al injury claims and the threshold wording never going to happen. We need benefits system are more predictable to everyone should not be changed until the courts in the acute phase to get people back to over a long period of time.

“If personal injury lawyers want to join interpret what it means. The original function and back to work. The current intent of the combination of deductible level of first-party benefits in Ontario is us in this pursuit rather than merely purand threshold was to exclude pain and more generous than needed to achieve suing their self-interest, they are welcome to join us in a real dialogue.” suffering awards for minor injury. This that goal.”

The OBA conference featured numerCooke believes the pure tort system, was a public policy decision balancing affordability, fairness and other considera- which he views as excessively adversarial, ous references to rights and fairness, tions. Remember all economic loss is cov- was not working in the period immediate- but few discussed what consumers really ered and the deductible for pain and suf- ly prior to the introduction of the first no- want and can afford to pay. Cooke noted: fering is eliminated if the award is in fault product. Any increased reliance on a “If we collectively are ever going to excess of [Cdn]$100,000.” Cooke added tort regime in the future would, he said, have a productive dialogue around the that seriously injured people are not com- “require judgments to be timely, informa- reform of the Ontario Auto insurance tion to be disclosed and a level of com- product, there needs to be a lot more promised by the deductible. pensation earned by the legal community time spent by all of us addressing real CHALLENGING THE DEDUCTIBLE to be fair to lawyers and accident victims.” consumer concerns based on a factual and Richard Halpern, president of Ontario Cooke also advocates additional training objective understanding of our collective Trial Lawyers Association and chair of an of judges, so that they can handle complex circumstances.”

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Killing Time Electronically

U.S. studies show insurance carriers and brokerages are paying each of their employees roughly US$6,000 a year to perform non-workrelated tasks on the Internet.

By Chris Borchert, Business Development Executive, iPrevision, Inc. o you know if your employees are planning their next vacation, paying their bills online, or chatting with their friends about plans for the weekend? In many insurance agencies and brokerages, the answer to that question is “No.” The Internet has grown to be as necessary within the work environment as a computer or a telephone; yet many insurance brokerages and carriers don’t have any tools in place to manage exactly how their employees are using the Internet. Of course, most employees are not driving to the office each morning thinking about how to waste time on the Internet. But it has grown to be an enormous distraction right at their fingertips, and time can quickly get away from them. An employee can sit down at his or her desk, check the weather forecast, look at the local news Web site, pay a few bills online, write a few e-mails to friends and, before he or she realizes it, it’s 10:00 am and no work has been done. Without having a policy in place and an Employee Internet Monitoring (EIM) solution implemented

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within the office, your organization is losing valuable productivity and putting the brokerage and insurance company at risk.

CONSEQUENCES OF KILLING TIME America Online and Salary.com recently performed a study across various industries to determine the difference between how much time employees actually wasted at work and how much time management believed those employees were wasting. The study found that employees were wasting about twice as much time as the employers suspected, with non-work-related Internet use being the Number 1 distraction by an overwhelming margin. Results also showed the insurance industry ranked first in employee Internet abuse — at 1.1 hours per day per employee! In the United States, that amounted to an average of almost US$6,000 annually in lost productivity per employee because of personal Internet usage alone. Loss of productivity is one of the issues associated with EIM, but minimizing risks and threats to the organization is a key component as well.

Surfing the net increases the organization’s risks of being infected with viruses or spam; it also carries with it the threat of potential litigation. An EIM tool is not intended to replace your virus or antispam software, but it will drastically improve the overall protection of your network because the company will have the ability to block or restrict access to areas of the Internet where these threats reside. If employees have unrestricted access to the Internet connection, your agency or brokerage might also be exposed to various liabilities. As an example, a company in Arizona was fined more than US$1 million dollars because employees illegally downloaded music on their office computers. In another example, a company in New Jersey lost a lawsuit because it did not address issues with an employee viewing pornographic Web sites on the network. These risks and threats are real and need to be taken seriously. Other areas of abuse and potential risks come from your internal e-mail system (i.e. Exchange, Lotus Notes, etc.), personal e-mails (Web-mail) such as Yahoo!,

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Lastly, software bugs and incompatibilities with agency-specific Gmail, or Hotmail and Instant Messaging use.

One main concern about personal Web-mail usage is that it is applications can pose problems with installation and management. hard to know how much an employee is using it and what is being Server software products are applications loaded on a new or communicated in those messages. Is an employee using those existing server attached and integrated into the network. This accounts to communicate with friends and family? Or could they solution scales well for most businesses and allows for centralized be using their personal Web-mail account to send out client or management of all desktop clients and reporting. This solution proprietary information? There are numerous stories of organi- might increase costs, however, due to the need for supporting zations finding out that one of their employees was getting ready hardware or software; software bugs and incompatibilities with to leave the agency or brokerage and was communicating with a competitor or sending resumes from their personAmerica Online and Salary.com recently performed al accounts while being paid by their current employer. Without an EIM a study across various industries. Results showed tool in place to monitor the quantity the insurance industry ranked first in employee and content of these messages, or Internet abuse — at 1.1 hours per day per employee. block the usage of these Web-mail tools altogether, this type of abuse can easily occur.

Instant Messaging use has also rapidly increased over the last few years, in part due to its ease of use existing agency software applications might make implementaand also because it is difficult for employers to monitor or record tion difficult. Also, this solution (as opposed to a network applithe activity. Instant Messaging protocols such as Yahoo!, AOL and ance solution) carries with it the risk of changing the performMSN carry the same risks associated with e-mail abuse, but they ance of your network because there is a requirement for an have the additional negative potential of virus propagation. More underlying operating system. than 40% of the top viruses can be received and sent through IM Network appliance products include everything in a single protocols; without an EIM solution to monitor or block IM, your unit. With a network appliance, such as iPrevision’s Panoptech brokerage may be at an elevated risk. device, there is no software to load on either a server or the individual workstations, nor is there a need for any additional hardware. This solution generally demonstrates the best performance INTERNET MONITORING SOLUTIONS Most carrier/brokerage owners or managers don’t want to be because the hardware and software combination are dedicated to viewed as “Big Brother” and shut down the Internet completely performing only those functions needed to optimally execute a from their employees. But to avoid the topic entirely is asking for unique set of tasks. Once installed, there is minimal technical trouble. The solution to this management dilemma is to imple- management required. This type of solution scales extremely well ment a flexible EIM solution that fits your organization and cre- for organizations of all sizes and provides centralized manageates the type of Internet culture you desire. One area of confusion ment and reporting. A network appliance can be so easy to use often expressed relates to the difference between an EIM solution that it pushes the reporting and management of the carrier or and the blocking capabilities that firewalls provide. Some fire- broker’s Internet use to its proper place — i.e. owners and/or walls allow for complete blocking of sites and non-browser-based managers. applications (such as instant messaging software) for the entire organization. Complete blocking at the firewall level is often SUMMARY The Internet is a necessary tool for all agencies and brokerages much too restrictive and difficult to manage in a dynamic business environment. A good EIM tool will give you the flexibility to to run effectively, but many risks are associated with employees’ allow access to certain sites, categories of sites, or non-browser- abuse of the Internet. Personal Internet usage should be a privibased applications at the individual, group or organization level, lege within an organization. In order to maximize corporate perallowing employees with various job roles to have the proper lev- formance, owners or managers need an EIM solution in place to monitor and manage exactly how the Internet is — and should be els of Internet access.

There are three main types of EIM tools: desktop software, — used.

The sensitive nature of Internet usage requires that any EIM server-based software and a network appliance.

Desktop software products are applications installed and solution implemented must provide management with the necmaintained on every workstation within the organization. This essary tools to view Internet activity, whether at a corporate, type of solution usually carries a low initial implementation cost. managerial or individual level, in real time and within a secure However, this solution will become more difficult to manage as environment.

The key question for any agency or brokerage is this: Can your the organization grows and increases the number of its workstations. Reporting is generally done from the same computer on insurance company or brokerage afford to pay each employee which the data is collected; as a result, it may be difficult to run US$6,000 per year for non-productive Internet usage, or is it time reports on a particular employee while he or she is working. to look at a solution?

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Zurich posts 3% increase in 2008 Q1 results urich Financial Services Group reported a 2008 Q1 net income of US$1.4 billion, an increase of 3% over its 2007 Q1 results.

The general insurance unit of the company saw a 10% increase in gross written premiums and policy fees — from US$10.2 billion to US$11.2 billion for the quarter — “reflecting both organic growth, as well as increased premium volumes through bolt-on acquisitions, mainly in Europe,” the company reported in a release.

Z

The unit’s combined ratio increased 1.3 points, from 93.3% to 94.6%, and its reported loss ratio remained relatively flat, moving from 69.4% in 2007 Q1 to 69.9% in 2008 Q1.

In its North American commercial operations, the combined ratio increased from 91.9% to 95.8%. The company cites “the application of enhanced segmentation techniques and the proactive targeting of profitable lines of business” for the company’s

success in managing market conditions.

“In the face of today’s market challenges, I am proud of our ability to stay focused on our strategy and drive such strong results,” remarked Zurich CEO James J. Schiro. “Going forward, I am confident we will continue to execute on our dual focus of profitable growth and operational transformation, turning these challenging times into opportunities for the creation of long-term shareholder value.” ■

Supreme Court denies Cdn$341,000 damage award in ‘fly-in-a-bottle’ case he Supreme Court of Canada has upheld the Ontario Court of Appeal’s rejection of a Cdn$341,000 damage award to Waddah (Martin) Mustapha, who suffered a major depressive disorder, phobia and anxiety after finding dead flies in his unopened bottle of drinking water.

A trial judge bestowed the award for the personal injury Mustapha suffered, but the Ontario Court of Appeal rejected the award on appeal.

The Supreme Court found Mustapha did indeed suffer a serious and prolonged psychological injury after finding the dead flies in his water bottle.

It also found the water bottle company, Culligan of

T

Canada Ltd., owed Mustapha a duty of care to supply him with uncontaminated water.

But the legal standard for determining whether to award damages is whether or not “the harm [is] too unrelated to the wrongful conduct to hold the defendant fairly liable.”

Mustapha did not meet this test, Supreme Court of Canada Chief Justice Beverley McLachlin wrote on behalf of the court. Specifically, he “failed to show that it was foreseeable that a person of ordinary fortitude would suffer serious injury from seeing the flies in the bottle of water he was about to install. Unusual or extreme reactions to events caused by negligence are imaginable but not reasonably foreseeable.” ■

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payments,” A.M. Best notes in its special report, ‘Credit Crunch Clouds Outlook of Hurricane Insurers, Cat Funds.’

A.M. Best observed the Florida Hurricane Catastrophe Fund, the state’s largest insurer, is exploring other options to manage its liquidity and capacity risk amid tightening credit markets.

At the same time, A.M. Best observes, the subprime mortgage crisis is creating the conditions for increased

losses in hurricane-prone states because of the increasing number of abandoned properties in hurricaneprone areas.

“The subprime mortgage crisis has driven the number of properties in foreclosure past 500,000 in hurricaneprone coastal areas,” the special report notes. “Unoccupied, unsecured properties may be at increased risk in a storm, and financial stress on homeowners may increase the temptation to commit fraud.”

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Credit crunch and high hurricane activity could create ‘perfect storm’ in 2008 he credit crunch related to the subprime mortgage crisis in the United States and the higherthan-average hurricane forecasts for the eastern seaboard might be converging at the worst possible time for insurers, according to A.M. Best.

“Turmoil in the credit markets could leave policyholders in limbo if a major hurricane strikes the United States this year, as investors show a limited appetite for capital-market offerings designed to raise cash for claims

M A R K E T WAT C H

Litigation

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CANADIAN STANDARDS ASSOCIATION Developing standards to enhance public safety and health for business, government and consumers. www.csa.ca

BROKER BUILDER CORP. Convert receivables into revenues with an in house premium finance program www.brokerbuilder.ca

HONOURABLE ORDER OF THE BLUE GOOSE - ONTARIO POND Our fraternal organization has been dedicated to fellowship and charity since 1908. www.bluegooseontario.org

CAMERON & ASSOCIATES INSURANCE CONSULTANTS LTD. Claims consultants to the insurance & reinsurance community. www.cameronassociates.com

PILOT INSURANCE COMPANY Over 80 years of Protection Through Local Brokers. www.pilot.ca

KEAL TECHNOLOGIES Complete technology solutions for insurance brokers. www.keal.com

ROYAL & SUN ALLIANCE INSURANCE COMPANY OF CANADA Forward thinking since 1710. www.royalsunalliance.ca

THE INSURANCE INSTITUTE OF CANADA The professional educational arm of the industry. www.insuranceinstitute.ca REGISTERED INSURANCE BROKERS OF ONTARIO (RIBO) Self-regulatory body for general insurance brokers in Ontario. www.ribo.com RISK & INSURANCE MANAGEMENT SOCIETY INC. Dedicated to advancing the practice of effective risk management. www.rims.org RISK MANAGEMENT CONSULTANTS OF ONTARIO (RMCO) Self-regulatory body for independent, fee-for-service risk management and property/casualty consultants operating in Ontario. www.rmco.ca BUILDERS RISK INSURANCE WINTONIAK & MOTARD INSURANCE Build your own Builder's Risk Insurance Quotation/Cover online - as easy as 1..2..3. www.canadabuildersrisk.com CLAIMS ADJUSTING FIRMS CGI ADJUSTERS INC. The one-stop risk shop for all your insurance needs. www.ibs.cgi.com CRAWFORD ADJUSTERS CANADA One Globe, One Company www.crawfordandcompany.com CUNNINGHAM LINDSEY International independent claims services. www.cunninghamlindsey.com KERNAGHAN ADJUSTERS Adjusting Solutions — Depend On Us! www.kernaghan.com

DIRECTORS, OFFICERS & TRUSTEES LIABILITY INSURANCE EXECUTIVE RISK SERVICES LTD Mitigating Risks for Directors, Officers and Trustees www.execurisk.com EMPLOYMENT ONLINE I-HIRE.CA Canada's Insurance Career Destination www.i-hire.ca ENGINEERING SERVICES GIFFIN KOERTH FORENSIC ENGINEERING AND SCIENCE Investigate Understand Communicate www.giffinkoerth.com ROCHON ENGINEERING INC. Forensic Consulting Engineers & Code Consultants. www.rochons.com WALTERS FORENSIC ENGINEERING INC. Uncovering the Truth www.waltersforensic.com GRAPHIC COMMUNICATIONS INFORMCO INC. Integrated Graphic Communications Specialists. www.informco.com INSURANCE BROKERS CANADA BROKERLINK INC. Ontario: CANADA BROKERLINK (ONTARIO) INC. Alberta: CBL OXFORD INSURANCE Insurance In Person www.brokerlink.ca

KINGSWAY GENERAL INSURANCE COMPANY The Specialty Insurer www.kingsway-general.com

SOVEREIGN GENERAL INSURANCE COMPANY Since 1953 www.sovereigngeneral.com SPORTS-CAN INSURANCE CONSULTANTS LTD. Specialist in Annual and Term insurances for Recreational Sports, Fitness, Leisure & Tourism activities www.sports-can.ca WAWANESA INSURANCE Earning your trust since 1896. www.wawanesa.com www.insurancepositions.ca I N S U R A N C E L AW THE ARC GROUP CANADA INC. Your Partner in Insurance Law & Risk Management www.thearcgroup.ca INSURANCE SOFTWARE APPLICATIONS KEAL TECHNOLOGIES Complete technology solutions for insurance brokers. www.keal.com TRITECH FINANCIAL SYSTEMS INC. Provider of an enterprise solution to P&C insurance companies and their agents & brokers in Canada & USA www.trifin.com PREMIUM FINANCING AIG CREDIT CORP. OF CANADA The leader in Financing Commercial Insurance Premiums by offering innovative products & services allowing our Broker Network to experience an instant payment alternative. www.aigcredit.ca

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INSURANCE INTERNET DIRECTORY online at www.canadianunderwriter.ca BROKER BUILDER CORP. Convert receivables into revenues with an in house premium finance program www.brokerbuilder.ca

TRANSATLANTIC REINSURANCE COMPANY For all your reinsurance needs. www.transre.com

THIRD EYE SOLUTIONS INC. Provides internet enabled premium financing/payment plan software solutions. www.thirdeyesolutions.com

WINMAR Property Restoration Specialists Coming Through For You! www.winmar.on.ca

REINSURANCE GUY CARPENTER & COMPANY The world’s leading reinsurance intermediary. www.guycarp.com MARINE RE OF CANADA (MRIL) MRIL are a managing general underwriter that specializes in marine reinsurance. www.mril.net MUNICH REINSURANCE COMPANY OF CANADA Complete reinsurance coverage from Canada’s largest reinsurer. www.mroc.com

RESTORATION SERVICES

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PROPERTY CLAIMS ADJUSTER

THE ARC GROUP CANADA INC. Your Partner in Insurance Law & Risk Management www.thearcgroup.ca SPECIALTY INSURANCE FIRSTBROOK CASSIE & ANDERSON LTD. Your Source For Camp Insurance www.nbrown.com WILLIAM J. SUTTON & CO. LTD. Insuring Special Risks since 1978 www.wjsutton.com WHOLESALERS THE WHOLESALE INSURANCE GROUP Canada's First Choice For Timely Wholesale Insurance Solutions www.twig.ca

SWISS REINSURANCE COMPANY CANADA The leading p&c reinsurer in Canada. www.swissre.com

To advertise your website in the Insurance Internet Directory: Steve (416) 510-6800; Paolo (416) 510-6788; Mike (416) 510-5122

ADVERTISERS’ INDEX ACE INA Insurance ....................................................5 Aon Reed Stenhouse...........................................79, 81 Applied Systems Canada..........................................19 Aviva Canada Inc..............................................2 (IFC) Best Doctors ..............................................................27 canadianunderwriter.ca Photo Gallery .....................56 CG&B Group ............................................................61 Chubb Insurance ...................................................9, 31 Compu-Quote Inc...........................................83 (IBC) Crawford & Company (Canada) ..............................45 Cunningham Lindsey..................................................8 Custom Software Solutions..........................84 (OBC) e2Value, Inc...............................................................53 FM Global .................................................................43

The Guarantee Company of North America ...........29 i-hire.ca ......................................................................35 Informco Inc..............................................................39 ING Canada.................................................................7 Insurance Brokers Association of Ontario (IBAO)..33 Insurance Institute of Canada ...................................55 iter8......................................................................20, 21 Keal Technology .................................................10, 11 Kingsway General Insurance Company...................37 Policy Works .......................................................15, 51 RIMS Canada Conference – Toronto.......................63 Simmlands Insurance Brokers Ltd...........................68 York Fire & Casualty Insurance Company........16, 17 Zurich Canada.....................................................49, 57

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Upcoming Events: for a complete list please see: www.canadianunderwriter.ca

MOVES & VIEWS

and click ‘My Events Calendar’ in the nav. bar on the homepage.

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Insurance Bureau of Canada (IBC) has appointed Don Forgeron as vice president, Ontario and Barb Sulzenko-Laurie as its new vice president of policy. Jane Voll, the IBC's immediate past vice president of policy, becomes special advisor to the president in order to complete the industry’s critical submission at this time to the Automobile Insurance Rate Board in Alberta. “She will leave IBC on the first of June, after more than 15 years of exceptional service to IBC and to the industry, in order to pursue other career opportunities,” says an IBC memo. Forgeron most recently served as the vice president of the Atlantic region. “With the Bill 198 Review of Ontario's auto insurance

Don Forgeron

Barb Sulzenko-Laurie

Mary Lou O’Reilly

Bill Adams

With family by his side, Bert Hares lost his courageous fight with cancer at St. Joseph’s Hospital in Hamilton on April 8 at the age of 69. Bert is survived and will be greatly missed by Marilyn, his loving wife of 46 years and son David. Hares had a distinguished career in the insurance industry and retired after serving more than 46 years in various management and marketing roles. He served for more than 35 years with the Dominion of Canada General Insurance Co., and also served as the president and CEO of North Waterloo Farmers Mutual Co. until 2006. He was an

legislation set to begin shortly, [Forgeron’s] considerable expertise in government relations and auto reform as vice president, Atlantic over the past 15 years will bring strong leadership in carrying out our key Ontario auto strategy at a most critical moment,” the IBC memo said of Forgeron's appointment. Mary Lou O'Reilly, in addition to being vice president of public affairs and marketing, is taking on the new role of chief of staff to the president in an effort to integrate the bureau’s initiatives across the organization. Bill Adams takes over leadership of the Atlantic office as acting vice president.

To date, he has worked as manager of government relations in the Atlantic region. ■

active member of the farm mutual’s board of directors until his passing. Hares was a longtime member of the Hamilton Golf and Country Club, the Masonic Lodge (Hillcrest # 594) and a 32nd degree member of the Scottish Rite, Hamilton. “Bert was a natural and charismatic leader with the ability to inspire others,” the family said in a statement.“Bert made everyone feel that they mattered and that he enjoyed being with them. We will miss his warm and genuine smile. He has left a legacy and the world a much better place.

Bert’s spirit remains with us.” ■

Kingsway Financial Services Inc. has made executive changes to create a leadership team, align management responsibilities and formulate Kingsway’s strategy for the future. Shelly Gobin has been appointed senior vice president and CFO. She will assume overall responsibility for reinsurance in her new role. Colin Simpson has been appointed senior vice president and chief strategy officer. Simpson is currently president and CEO of York Fire & Casualty Insurance Company and will remain in this position for the foreseeable future. In his role as chief strategy officer, Simpson will assume responsibility for strategic planning, corporate underwriting development, strategic shared services and group acquisitions. Dennis Fielding has been appointed senior vice president and chief administration officer. He will assume responsibility for information technology, procurement of goods and services, facilities management, business continuity and disaster recovery planning. Kathleen Howie has been appointed vice president and general counsel of Kingsway Financial. F. Michael Walsh has been elected non-executive chairman of Kingsway Financial Services Inc. “These executive changes are the next phase in implementing Kingsway’s future direction,” said Shaun Jackson, Dennis Fielding president and CEO of Kingsway Financial. ■

Bert Hares

Shelly Gobin

Colin Simpson

F. Michael Walsh

Kathleen Howie

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The creativity and evolution of the risk management profession were featured among topics discussed at the RIMS 2008 General Session in San Diego, California.“We all know that risk management strategies are evolving,” RIMS president Janice Ochenkowski told conference attendees.“When we leave San Diego, let’s take the lessons, ideas and contacts back. But, let’s do it with a new energy and vibrancy — a motivation not only to change the way we talk about risk, but also the way we think about risk management.”

After introducing the 2007-08 RIMS Board of Directors, Ochenkowski passed the microphone to Chris Gardner for his keynote address, entitled “Breaking Cycles.” Gardner’s autobiography was the basis of the Will Smith film The Pursuit of Happyness. Gardner talked about his life as a single dad with an infant son as he broke into the world of Wall Street stock brokering. He stressed the need for dedication and conviction to succeed. ■

home in Toronto on Apr. 27, 2008. He was 35 years old. Described as “energetic and enthusiastic,” Mongeon, the loving husband of Nicole and devoted father of two children, was the vice president of the energy Canada division of Charles Taylor Adjusting of Toronto. Mongeon began his insurance career in 1992. He developed expertise in manufacturing/fabrication processes, natural resource industries and construction. He held particular knowledge associated Christian Mongeon with the automotive industries, forestry and mining industries, petrochemical and energy sectors. Remembrance donations can be made to the Starlight Foundation.

Online donations and condolences can be made at www.lessardstephens.com. ■

Terrie-Lynne Devonish, chief counsel for Aon Canada, was recognized as one of Canada’s Top 40 Under 40. The program, managed by The Caldwell Partners, honours 40 Canadians in the private, public and not-

for-profit sectors who are under the age of 40. Devonish has provided expertise, insight and a deep commitment to enhancing operational excellence and corporate governance since joining Aon Canada in October 2007 in the newly created role of chief counsel, according to a company release announcing the award. Devonish and her peers were selected from more than 1,500 nominees by an independent advisory board that included 27 business leaders across Canada. Honourees were chosen based on five key criteria, including: vision and leadership; innovation and achievement; impact; community involvement and contribution; and strategy for growth, the release noted. ■

73 www.canadianunderwriter.ca • June 2008

the risk management community for more than 30 years. She is a founding member of the William H. McGannon Foundation. “When I learned that I was to receive the Harry and Dorothy Goodell Award, my first thought was that it seems a bit awkward to receive an award for doing something that I really love and that brings me tremendous personal satisfaction,” Wolfson told delegates. “While participating in RIMS and other industry associations, I've learned from some amazing risk managers and gained a tremendous amount professionally and personally.”

Ochenkowski added: “Diane Wolfson has devoted more than 30 years to advancing and raising the profile of the risk management profession. RIMS is proud to award such a distinguished honour to a trailblazer in the profession. It could not be given to a more deserving person.” ■

Christian Mongeon passed away suddenly at his

MOVES & VIEWS

Diane Wolfson, a member of the Quebec chapter of the Risk and Insurance Management Society (RIMS), received the Harry and Dorothy Goodell Award during the RIMS 2008 General Session in San Diego, California. RIMS president Janice Ochenkowski likened the award to a lifetime achievement award. Wolfson, the director of risk management at CAE, has been involved with

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Daniel W. Riordan has been named president of Zurich North America Commercial’s surety, credit and political risk group. The newly created group combines Zurich’s surety group and its emerging markets operation. Riordan will lead an international team to develop and market Zurich’s portfolio of surety, credit insurance and political risk insurance products to con-

tractors, investors, international banks, multinational companies and infrastructure developers across North America and in emerging markets globally. “Dan has led the development of our political risk and credit lines [which] his team has built into a world-class business,” said Seraina Maag, president of Zurich’s specialties business unit. ■

Daniel W. Riordan

MOVES & VIEWS

The CSIO board of directors honoured Policy Works Inc. with the CSIO Achievement Award for Policy Works’ achievements in commercial lines XML implementation. The inaugural award was presented at CSIO’s AGM in Toronto on Apr. 24; it will continue to be presented at AGMs in coming years. “We hope that this award will not only honour those that make significant contributions, but to stimulate greater innovation in favour of the independent broker distribution channel,” says CSIO chairman Bob Fitzgerald. Nominations were reviewed with respect to the following criteria:

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74

1. The most measurable return on investment (as determined by brokers themselves), delivered as a result of a vendor’s seamless implementation of CSIO commercial lines standards and used by the independent broker distribution channel; 2. The broadest packaged offering of CSIO commercial lines data standards delivered to the independent broker distribution channel; 3. The greatest number of active CSIO commercial lines real-time implementations between trading partners within the independent broker distribution channel. ■

Steve Kaukinen, CSIO president, presented the award to Policy Works president Kevin Campbell.

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The sixth annual GK KOVA Cup drew employees from Aviva Canada and Giffin Koerth Forensic Engineering together on Apr. 16 at Moss Park Arena.

Team Blue/Our Faults defeated Team White/No Faults by a score of 14-9. A post-game reception was held at the Pat Quinn Lounge, where Ron Koerth was given a special award for allegedly rough-housing during the game. The Herbie Award went to Tom Moran for stopping 80 out of 94 shots on net. ■

MOVES & VIEWS 75 www.canadianunderwriter.ca • June 2008

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HKMB HUB International held its 3rd annual Hockey Challenge for Charity at Toronto’s Air Canada Centre on April 21. After insurance

MOVES & VIEWS

industry colleagues chose to pit their hockey skills against one another for fun, HKMB organized their first Hockey Challenge for Charity game in 2006. Held at the RICOH Coliseum in 2007, the event raised more than $2,000 last year in support of the United Way of Greater Toronto. The United Way and WICC (Women in Insurance Cancer Crusade) were the charities selected to benefit from the 2008 fundraiser. About 30 skaters took to the ice, representing a broad cross-section of industry players”— including insurance companies, brokers, adjusters and suppliers. ■

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The Risk Management Counsel of Canada

MOVES & VIEWS

(RMC), a national network of law firms that works with the insurance industry, recently held its annual insurance industry social event at the Steam Whistle Brewing’s historic Roundhouse in Toronto. The Event entitled, ‘CANAD-OPOLY’ included attendee participation and exposure to regional-themed food, entertainment and refreshments. WICC (the Women in Insurance Cancer Crusade) was chosen as partner for this event. For each person that accepted their invitation to participate, the RMC donated a

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78

certain amount to WICC. Domenic Venturo, a partner with RMC member firm Scott Hall LLP, spoke to the audience about the RMC's decision to turn the event into a benefit for WICC. ■

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PCUC’s Spring Thaw Event was held on Apr. 17 at The Rosewater Room in

Announcement

Toronto. The annual event added some sunshine to everyone’s day: attendees warmedup to great company, cocktails, food, and special entertainment. ■

Murnie Phillips, CRM Vice President & Energy Claims Manager

Aon Corporation is the leading global provider of risk management services, insurance and reinsurance brokerage, and human capital consulting. Through its 36,000 professionals worldwide, Aon readily delivers distinctive client value via innovative and effective risk management and workforce productivity solutions.

www.aon.com

79 www.canadianunderwriter.ca • June 2008

As Canada's leading insurance brokerage and risk management firm, Aon Reed Stenhouse services commercial and personal clients through a national network of offices from coast to coast.

An organization with strong Canadian roots, our specialists have been meeting the insurance and risk management needs of Canadians for more than a century.

MOVES & VIEWS

With over 20 years experience in insurance claims, Murnie Phillips has gained unique insight and skill in dealing with major energy industry claims, as well as claims within the mining and power generating industry. This has included working with major oil & gas construction projects in the oil sands of Alberta and their related losses.

Murnie was strongly involved in Hurricanes Katrina and Rita, providing claims solutions for companies affected by damage to offshore facilities in the Gulf of Mexico. Murnie has also assisted clients dealing with both large and small pipeline breaks and the resulting pollution, property damage and bodily injury claims.

Murnie has developed global experience working with clients and their claims in various parts of the world including Mongolia, Kergyz Republic, Indonesia and China. In his new role as Aon’s Energy Claims Manager, he will work closely with Aon’s Energy team to provide enhanced claims service and solutions to Canada’s energy sector.

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The Honourable Order of the Blue Goose International, Ontario Pond held its 8th annual Scotch Nosing on Apr. 24 at Jamie Kennedy at the Gardiner in Toronto. Dozens of noses attended this

MOVES & VIEWS

exclusive event, including an esteemed panel of judges. Throughout the evening, guests sampled some of Scotland’s rarest and finest single malts and enjoyed the expertise and humorous delivery of Ed Patrick, one of Scotland’s finest international Scotch whiskey experts and the president of the Companions of the Quaich Whisky Appreciation Society. Proceeds of the event were donated to WICC. The event was sponsored by Blouin Dunn, Barristers & Solicitors; Giffin Koerth Forensic Engineering & Science; Matrix Loss Adjusters and Masterclean Contracting and Cleaning. Each year, rare whiskies are chosen and donated by William Blakeney and Ruth Henneberry of Blakeney Henneberry Murphy Barristers & Solicitors. ■

www.canadianunderwriter.ca • June 2008

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Announcement

Randy Fulton Claims Manager, Prairie Region

Aon Corporation is the leading global provider of risk management services, insurance and reinsurance brokerage, and human capital consulting. Through its 36,000 professionals worldwide, Aon readily delivers distinctive client value via innovative and effective risk management and workforce productivity solutions.

www.aon.com

81 www.canadianunderwriter.ca • June 2008

As Canada's leading insurance brokerage and risk management firm, Aon Reed Stenhouse services commercial and personal clients through a national network of offices from coast to coast.

An organization with strong Canadian roots, our specialists have been meeting the insurance and risk management needs of Canadians for more than a century.

MOVES & VIEWS

Bringing a wide range of skills and indepth experience, Randy Fulton has joined Aon as Claims Manager in the Prairie Region. Randy’s strong technical and litigation management skills, as well as his experience handling multimillion and multi-billion dollar claims, make him an excellent addition to Aon’s Claims team.

Randy has recently worked as an Insurance Risk Manager for PCL construction and as an Executive Claims Adjuster for CGI Adjusters in Edmonton. Prior to those positions, Randy worked in a variety of insurance-based roles in Toronto, gaining experience in handling large and complex claims.

In his new role at Aon, Randy will develop claims strategies and provide advocacy for clients in a variety of industries. Working with both the regional and national claims teams, Randy will lead Aon’s Prairie Region claims team in the delivery of distinct client value and innovative claims solutions.

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The Guarantee Company of North America held its Toronto GOLD Centre Appreciation Reception on

Feb. 28th, inviting brokerages across the GTA and their personal lines teams to join in the festivities.

The reception was held at the Royal Ontario

MOVES & VIEWS

in Toronto.

www.canadianunderwriter.ca • June 2008

82

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