AUTO RATE REGULATION
A BUSINESS INFORMATION GROUP PUBLICATION Publications Mail Sales Agreement #40069240
CREATE A BRIGHTER FUTURE. MAKE PROGRESS.
Taking on the responsibility of risk is what we do at ACE. With our expert underwriting, superior claims handling, and local market experience, you can focus on the possibilities, not the liabilities, to make progress in your business. For more on ACE Canada, visit www.ace-ina-canada.com P R O P E R T Y & C A S U A LT Y
A C C I D E N T & H E A LT H
Cover Story 10 Need for Speed Canada’s insurers are taking advantage of a soft market and growing consumer confidence to urge more flexible regulation around setting auto insurance rates.
VOL. 75, NO.5, MAY 2008
PUBLISHED BY BUSINESS INFORMATION GROUP
Profile: FRESH AIR — Glen Johnson, president of the Ontario Mutual Insurers Association (OMIA), is saying his good-bye to the industry after 30 years in the business. BY VANESSA MARIGA
22 Insight: MARITIME CAPS — After Alberta’s Court of Queen’s Bench eliminated the government’s cap on minor injury auto claims, all eyes have turned towards the Maritimes, where caps are also facing Charter challenges.
HUMAN CAPACITY – A comprehensive survey of Canada’s insurance industry demographics shows some curious imbalances — including a dependence on female workers. BY PETER HOHMAN
44 ALUMINUM PARTS – Aluminum is a new material used in auto parts because it’s lighter and cuts down on fuel costs, but will its repair costs outweigh its advantages? BY GREG HORN
BY VANESSA MARIGA
MIXED BAG — At first glance, Canadian insurance industry financial results in 2007 portray a calm and healthy market, but dig a little deeper and one finds deteriorating auto results and commercial lines rate-cutting. BY JOEL BAKER
THE ONTARIO EFFECT — Canada’s auto results in 2007 speak to the dominant impact of Ontario’s deteriorating condtions.
AUTO INSURANCE GAPS – Bill 18 in Ontario may have protected the interests of car leasing and rental companies, but some glitches in the implementation of the legislation may spell bad news for the leasing companies’ insurers. BY DONNA FORD
WHAT PRICE SAFETY? – People purchasing vehicles tomorrow can expect to see all kinds of new safety technologies, but how much will they cost insurers to repair? BY LIANNE PERISSINOTTI
BY BARB SULZENKO-LAURIE
34 CHANGING GEARS — Guiding principles for Ontario auto reform should promote indemnity rather than entitlement. BY GEORGE COOKE
BY DAVID GAMBRILL
5 Editorial 6 Market Watch 63 Moves & Views
Senior Publisher, (416) 510-6800 firstname.lastname@example.org
Associate Publisher, (416) 510-6788 email@example.com
Editorial Art Director
Production Manager (416) 510-6760
Editor, (416) 510-6796 firstname.lastname@example.org
Account Manager, (416) 510-5122 email@example.com
Associate Editor, (416) 510-6793 firstname.lastname@example.org
Advertising Sales, (416) 510-5114 email@example.com
Fax: (416) 510-6809 MEMBER AUDIT BUREAU OF CIRCULATION
SUBSCRIPTION RATES: 2006 CANADA 1 Year $34.95 + $2.45 GST = $37.40 2 Years $48.95 + $3.02 GST = $46.11 3 Years $62.95 + $4.41 GST = $67.36 Single Copies: $7.50 + .53 GST = $8.03 Annual Statistical Issue (included with above subscription) or separately: $37.00 + 2.59 GST = $39.59 ELSEWHERE 1 Year $42.00 2 Years $68.00 3 Years $95.00
GST Registration number 890939689RT0001 Second Class Mail Registration Number: 08840 Publications Mail Agreement #40069240 Return undeliverable Canadian addresses to: Circulation Dept., Canadian Underwriter 12 Concorde Place, Suite 800 North York, ON, M3C 4J2
Director of Creative Advertising Services
Print Production Manager
Fax: (416) 442-2191
Canadian Underwriter is published thirteen times yearly (monthly + the Annual Statistical Issue) by Business Information Group, a division of BIG Magazines LP, a leading Canadian information company with interests in daily and community newspapers and business-to-business information services. Business Information Group is located at 12 Concorde Place Suite 800, North York, ON, M3C 4J2. Phone: (416) 442-5600. All rights reserved. Printed in Canada. The contents of this publication may not be reproduced or transmitted in any form, either in part or in full, including photocopying and recording, without the written consent of the copyright owner. Nor may any part of this publication be stored in a retrieval system of any nature without prior written consent. We acknowledge the financial support of the Government of Canada through the Canada Magazine Fund toward our editorial costs. ©Published monthly as a source of news, technical information and comment, and as a link between all segments of the insurance industry including brokers, agents, insurance and reinsurance companies, adjusters, risk managers and consultants. Privacy Notice From time to time we make our subscription list available to select companies and organizations whose product or service may interest you. If you do not wish your contact information to be made available, please contact us via one of the following methods: Phone: 1-800-668-2374 Fax: 416-442-2191 E-mail: firstname.lastname@example.org Mail to: Privacy Officer, 12 Concorde Place., Suite 800, North York, ON, M3C 4J2
T:8.125 in S:7 in
The best thing to do in this situation is not panic. Control your breathing. Now call AIG Cat Excess Liability.® Our companies offer the highest available gross-limit capacity, $150 million/€150 million, along with dedicated claims teams with access to an unparalleled worldwide claims network. With 14 years’ experience and a proven track record in the large-capacity, highexcess market, when catastrophe strikes, we’ll be there to handle the situation. Nice going. That could have gotten ugly.
www.aigcatexcess.com AIG Cat Excess Liability® is a unit of the property and casualty insurance subsidiaries of American International Group, Inc. (AIG). Insurance is underwritten by member companies of AIG, and is subject to underwriting review and approval. Please refer to the actual policies for complete details of coverage and exclusions. Coverage may not be available in all jurisdictions. Non-insurance products may be provided through independent third parties.
This advertisement was prepared by BBDO New York CLIENT: PRODUCT: JOB#: SPACE: BLEED: TRIM: SAFETY: GUTTER: PUBS: ISSUE: TRAFFIC: ART BUYER: ACCOUNT: RETOUCH: PRODUCTION: ART DIRECTOR: COPYWRITER:
American International Group Chapter 1 for Canadian Underwriter P85812 Full Page: 4/C 8.375 in x 11.125 in 8.125 in x 10.875 in 7 in x 10 in None Canadian Underwriter 5/1/08 Al Hadjuk Lauren Cofield Phil Brolly None Tony Russo Joseph Volpicelli Bryan Flynn
Filename: P85812_AIG_COR_V2 Proof #: 2
Path: Studio:Volumes:Studio:Mechanic...5812_Mechanicals:P85812_ AIG_COR_V2 Operators: James Lipp / James Lipp
Created: 2-27-2008 5:03 PM Saved: 4-9-2008 4:16 PM Printed: 4-14-2008 3:50 PM Print Scale: None
Fonts Swiss 721 BT (Bold Extended, Extended, Roman, Light), Univers (55 Roman, 47 Light Condensed), Helvetica Neue (95 Black, 93 Black Extended) Graphic Name Color Space Eff. Res. AIG-Cat_Exc_Logo-Lrg_reg.eps, CorporateSurvivalGuide.psd (CMYK; 555 ppi)
Ink Names Cyan Magenta Yellow Black
Legal is 5.5 pts.
HIGH RES ART
PRINTED ON LASER
Chapter One: Realizing your catastrophic liability insurance may not handle a catastrophe.
Back to the Basics
David Gambrill Editor email@example.com
5 www.canadianunderwriter.ca • May 2008
mortgages off their books. And it all came crashing down when the bad mortgages went into default. The whole financial process was far too complicated. The natural instinct is to say: “Someone must be accountable for this mess.” If these people are found, they will be drawing on insurers to help them pay the damages if they are sued. Institutions sued thus far include the large investment banks and mortgage lenders. Estimates suggest the D&O and E&O insurance claims alone will be worth a total about US$9 billion. Some U.S. commentators say the subprime market collapse will lead to record losses for insurers, with claims higher than the US$41.4 billion (Can$45.18 billion) paid out for Hurricane Katrina. It remains to be seen what the U.S. courts will do. One key question for insurers in these cases seems to be whether subprime damage awards and settlements payments will be considered “losses” (covered by insurance) or as “restitution” or “disgorgement” of profits illegally obtained (not covered by insurance). Another obvious arena in which this will play out is in the regulatory arena. Obviously, when all of the dust settles, regulators will be looking for ways to strengthen the securitization process. It remains to be seen what long-term affect this will have on the industry. But certainly slowing down the circulation of capital in order to avoid the kind of financial disasters seen in the subprime scenario most likely will have some long-term impact on insurers’ investments and further D&O and E&O coverages. Which brings us to the topic of risk management. How could something like this happen, it might be asked, if all of the proper risk management procedures and policies were in place? That’s a good question. PACICC has asked this question recently in these pages and it will be interesting to see and learn from the litigation that ensues from the subprime crisis just how weak internal process and controls at many major financial institutions still are. Clearly more work needs to be done in this area; it will probably be years before the dust settles and the courts and regulators will be able to provide the industry some kind of direction. How big and messy is this crisis? Big enough that it involves every player in this industry — as well as many other financial industries as well. Which begs the observation raised by the reinsurer noted above: Maybe it’s time for the financial services industry to get back to the basics and really analyze just what it is everyone is supposed to be doing.
ome time ago, a Canadian reinsurance company executive casually commented on the swirl of controversy around the concept of finite reinsurance. Paraphrased quite a bit, his argument essentially was: Sometimes in the effort to make and move money, the insurance industry has become too sophisticated for its own good. One has to wonder if this same argument holds true in light of the subprime mortgage crisis in the United States. This is a financial services mess of huge order — A.M. Best likens its scope to that of a huge natural catastrophe, predicting the subprime fiasco could cost the North American financial services area as a whole almost US$1 trillion over a period of two or three years. Given this type of scope for damages, it’s hard to imagine insurers will not be caught up in this in ways hitherto inconceivable. Thus far, Canadian (re)insurers have reassured markets the subprime mess doesn’t affect them. In the United States, some (re)insurers dabbling in the securities markets have proceeded to post significant writedowns. At its annual general meeting in Toronto, the Property and Casualty Insurance Compensation Corporation (PACICC) noted: “because most P&C insurers in Canada hold conservative, high-quality fixed-income investments, the industry’s exposure to subprime debt concerns is small.” This, however, speaks to only one area in which the subprime mess is likely to affect Canadian insurers (i.e. in the area of investments). But there are at least two other ways in which subprime might have some ramifications north of the border — i.e. D&O and E&O litigation costs, and calls for increased regulatory oversight over financial derivatives and securities markets. Before addressing the financial consequences of prospective D&O and E&O litigation, first a very brief summary of what happened. Characterizing the issue to quite a degree, the subprime crisis in the United States could be described as a securitization gone horribly wrong. Investment bankers re-packaged mortgage loans to people with poor credit histories as collateral for new “securities,” and proceeded to sell these securities to investors. Bond insurance made the securities more attractive to some ratings agencies; based on high credit ratings, investors bought the securities. Accounting rules allowed investment banks to create so-called “special purpose vehicles” to move the bad
Canadian Market Newfoundland scraps tax on insurance premiums ewfoundland and Labrador's department of finance has retroactively eliminated the provincial 15% retail sales tax (RST) on insurance premiums. Insurers and brokers are no longer required to collect the tax. If a person purchased or renewed a contract of insurance on or after Jan. 1, 2008, that person will receive a refund of the tax paid, a statement from the department of finance says. Industry critics said the tax was the
M A R K E T WAT C H
highest of its kind in any of the G8 countries. Broker and insurer associations, as well as consumer groups and business associations, have been calling on the government for years to remove or lower the tax, arguing that it puts them at a disadvantage compared to their provincial counterparts. The annual cost to the provincial treasury of removing RDT on insurance premiums will be about Cdn$94 million this fiscal year, and Cdn$75 million annually thereafter.
“While we need to impose taxes to provide health care, education and other public services, this particular tax just did not seem fair and many have advocated for its elimination,” Premier Danny Williams told the House of Assembly. When the government assumed office in 2003, large deficits made it impossible to eliminate the tax at that time, Williams continued. “As circumstances improved, we had many priorities to address before we could address this problem.” ■
Canadian federal government cracks down on auto theft rime Minister Stephen Harper unveiled amendments to the Criminal Code intended to take “dead aim” at organized auto theft rings. The new legislation will make it a crime to alter, destroy or remove a Vehicle Identification Number (VIN). The definition of trafficking and stolen property will be expanded to include stolen cars and car parts. Under the new law, it will be a crime to knowingly sell, give, transfer, transport, send or deliver goods that have been acquired criminally or to possess such property for the purpose of trafficking, Harper said. Not only will this help police crack down on chop shops, it will also increase protection for homeowners against break-ins
because the law will address trafficking in all types of stolen property, not just vehicles and parts, he added. “Organized crime treats auto theft as a business and a very lucrative one at that,” Harper said. “Roughly one in five cars stolen in Canada is linked to criminal gangs.” Auto theft costs Canadians roughly Cdn$1 billion a year, in addition to the Cdn$600 million it costs insurers, Harper said. In addition, Canada Border Services officers will be given the authority to examine and detain suspect goods at the border, including vehicles. The Canada Border Services Agency will also have the authority to search containers used for shipping stolen vehicles. ■
Ontario auto rates on the increase www.canadianunderwriter.ca • May 2008
ntario auto rates are on the rise, according to data posted by the Financial Services Commission of Ontario (FSCO), the provincial insurance regulator. Rate applications approved for 2008 Q1 averaged +1.05% based on the entire market, FSCO noted in an online bulletin. Rate changes approved in 2004,2005,2006 and 2007 were -10.60%, -2.43%, -1.27% and +0.55%, respectively, for the entire market. In 2008 Q1, for the 43.37% of the market that had rate changes approved, the average rate change was +2.42% when weighted by market share. Among the companies in Ontario with a market share of 1% or greater, here are the approved rate changes shown for each insurance company: ■
ING Insurance Company of Canada
Pilot Insurance Company
Economical Mutual Insurance Company
Co-operators General Insurance Company
Personal Insurance Company
Traders General Insurance Company of Canada
The Nordic Insurance Company of Canada
Farm Mutual Reinsurance Plan Inc. Scottish & York Insurance Company Limited COSECO Insurance Company York Fire & Casualty Insurance Company
It’s hard to be humble when your statistics seem to brag.
When you’re getting a 4.8 out of 5 in customer satisfaction, it’s easy to get a little boastful and forget what got you to the top in the first place. But not us. We prefer to let the numbers speak for themselves and ensure that every Tom, Dick or Harry who drives in with a dent, bang or crunch, drives out happy.And, it’s been proven that happier customers result in higher customer retention rates for insurance companies (up to 98%). So you can see why partnering with CARSTAR is good for your numbers too. For more information please contact 1.800.665.2264 ext 246 or email firstname.lastname@example.org
“Over 120 locations nationwide”
The Co-operators reports its 2007 profits are up he Co-operators Group Ltd. announced a net income of Cdn$154.8 million in 2007, up from Cdn$133.4 million the previous year. “The strong financial performance allowed the organization to make an unprecedented contribution of more than [Cdn]$1 million to The Co-operators Foundation, through which it reinvests in Canadian communities,” the company announced in a press release. “This is the largest single commitment of
funding the organization has ever put into The Co-operators Foundation [which now sits at Cdn$6 million], through which financial assistance is provided to social economy enterprises and other worthy causes in Canada.” Looking at the 2007 balance sheet, The Co-operators’ property and casualty segment wrote Cdn$2.11 billion in premium last year, up from Cdn$2.099 billion in 2006. The company’s combined ratio on the property and casualty side dropped from 99.8% in 2006 to 98.3% in 2007. ■
Your Right Choice for Quality Claims Solutions Jacques Beland, CIP District Manager, Quebec
At Cunningham Lindsey, we offer you more than just claims handling know-how. You’ll receive customized solutions unique to your claim or program requirements; online claims tracking and comprehensive management reporting; an expanded network of skilled adjusting professionals both here and abroad; and the highest level of service in the industry with performance reports to prove it. We’re working hard to make your choice for the right claims partner that much easier. Visit our website at www.cunninghamlindseycanada.com or email us at email@example.com.
Claims D&O and E&O claims from subprime to match scale of Category 5 hurricane losses he scale of the subprime crisis has thus far had the equivalent impact on the insurance industry as a Category 5 hurricane hitting Miami, A.M. Best reports. As of 2008 Q1, D&O and E&O claims and litigation linked to the subprime crisis were up 400% year-on-year, Greg Flood, president of Ironshore Insurance's professional liability facility, IronPro, told BestWeek Europe. Flood compared the entire subprimerelated crisis to one of the slowest-moving continuous train wrecks he'd ever seen. “It's pretty straining on the D&O marketplace right now,” he told BestWeek. “We're continuing to see litigation emerging in the second quarter of this year and we might not see the end of the hump until the third or fourth quarter. We might not see the end of the entire thing until 2010.” Global D&O losses are now about US$4 billion; with the E&O market also being hit, that bill could double to US$8 billion, BestWire reported. Flood told A.M. Best the problem could get worse in the near future, noting the U.S. Securities & Exchange Commission and the Federal Bureau of Investigation are conducting investigations into the construction of mortgage-backed securities and other issues in the subprime area. If these inquiries discover any criminal activity or malfeasance, more litigation might result, compounding the D&O and E&O situation, Flood added. “Big legacy insurers have to be thinking out their reserve positions right now,” he told BestWeek Europe. “Especially those involved in financial institution business. A lot of carriers have reduced their limits and companies are taking smaller positions, smaller portions of risks, and at the same time they’re looking at their reserve positions.” ■
continued on page 58...
n o i t a Educ , s r e k o r b r fo ! s r e k by bro
INSURANCE BROKERS ASSOCIATION ONTARIO
IBAO's School of Insurance provides its broker members with a progressive, professional, and current educational program, in keeping with the knowledge and standards expected of today's professional broker.
Helping brokers help brokers, makes good business sense. George Cook, President & CEO, The Dominion of Canada General Insurance Company
The Dominion is pleased to continue its long term sponsorship of the IBAO School of Insurance and the top student awards. We thank IBAO for the ongoing opportunity to partner on broker professional development, and for their ongoing consumer-focused, strategic support of independent brokers.
www.canadianunderwriter.ca â€˘ May 2008
AUTO RATE REGULATION
Canadian insurers are taking advantage of soft market conditions and renewed public confidence to ask politicians and regulators for more flexible means to change auto rates By David Gambrill
11 www.canadianunderwriter.ca â€˘ May 2008
etting Canadian insurance carriers to agree on anything in the context of a highly competitive environment is often an exercise in herding cats. But if you ask any insurance company engaged in the practice of setting auto rates theses days, you will hear a surprising amount of unison: in the world of regulating auto rates, less is more. This is probably not a surprising revelation, since most businesses in any field donâ€™t like regulatory red tape impeding their marketplace activities. Indeed, Canadian insurers have talked to everybody and anybody for years about their desire for more flexibility in the establishment of the countryâ€™s auto rates. The difference this time, however, is that the argument seems to be coalescing into the form of concrete political action and lobby efforts. In addition, in theory anyway, the current soft market and the political environment may have created the conditions for politicians and regulators to be somewhat more amenable to the argument; certainly more so now than
Cover Story they were during the hard market in 2001-04. As a politician and/or regulator, it’s easier to be flexible and trusting when auto rates are down, coverage is available and the auto insurance market is competitive. Canadian insurers see the public’s increasing trust in the industry during this soft market cycle as a window of opportunity to discuss more flexible models for setting the country’s auto rates. More flexibility, they argue, would go a long way towards avoiding the kind of hard-market cycles that precipitated less flexible methods of regulation in the first place. But while regulators are always willing to talk to the industry about appropriate filing methods, the end result is that it’s the politicians who will change the rules, not the regulators, who
www.canadianunderwriter.ca • May 2008
the insurers can submit their filings for approval any time they choose. One key feature of these models is the requirement that auto insurers justify their requests for a rate change with full actuarial support and analysis. Alberta is often cited as the premier example of this sort of approach. Insurers in the province have very little control over how mandatory auto insurance rates get set, since the Alberta Automobile Insurance Rate Board, through a premium grid, has established the allowable percentage change for individual insurers’ rating programs. The rate board will review insurers’ requests for different premium levels as “offset adjustments” to mandatory grid rates by up to 10%, but such changes must be “revenue neutral” for insurers. The board takes a more flexible, “file-anduse” approach when it comes to “The current system, which is sort of rigid pre-approval, I don’t persetting rates for optional auto sonally think is working for anybody. It’s not working particularly coverages. well for consumers. It’s not working particularly well for the compaPrior-approval models can ny and its shareholders, and I’m not at all convinced it even works all also mandate when insurers can that well for the regulators.” ask for rate changes. In New — George Cooke, Dominion of Canada General Insurance Company Brunswick, for example, the New Brunswick Insurance Board, a prior-approval system, requires the province’s insurance compaimplement the rules as legislated by Parliamentarians. The bot- nies to appear before the board, with full actuarial documentatom line for regulators is that whatever filing system is used, it tion, if they file more than twice a year. must protect the public. “Our mandate is to protect consumers File-and-use models generally inhabit the middle ground of by ensuring that auto insurance companies in the province the regulatory spectrum. Under these models, the market, more comply with the Insurance Act and Regulations,” the Financial so than the government, determines premium pricing. Insurers Services Commission of Ontario (FSCO) said in a public state- still file proposed rates changes to the government for approval, ment when contacted for comment on this story. “The regula- but the turnaround times for the company to use these rates are tory approval process protects consumers not only in terms of faster. In such models, the government does not presuppose rate the rates charged and what consumers pay but also what factors adjustments; also, in some instances, insurers don’t have to support their every request with a full-fledged actuarial analysis. In insurers can use/not use in rating.” addition, there are fewer restrictions on when a company can file THE UNIVERSE OF RATE-SETTING MODELS for a rate change. In the public arena, insurance companies’ arguments for Insurers generally hail use-and-file models as the most flexible improved rate-setting methods are often couched in the broadest method of setting rates. In these models, the insurers use their terms of requesting “more flexible regulation.” But what does this new auto insurance rates at the very same time they file them mean in the context of Canada’s multi-jurisdictional approach to with the regulator, with no waiting time for review. If the regulasetting auto rates? How are rates established now, and what is it tor has a problem with the rates, it will get back to the company auto insurers would like to see in the future? after the fact. But in this model, market forces — another way of The universe of auto insurance rate-setting regulation in saying competitive pricing — will prevent auto insurance premiCanada can be characterized simply as being inhabited by three ums from going through the roof. The assumption is that with a different models. These models appear on a continuum, varying lot of competition in the market, consumers can always opt for according to the degree of government involvement. the insurer with the lowest price. On the one side of the spectrum, the highly-regulated side, Quebec’s method for setting auto insurance rates is often cited there are prior-approval models, or what are known as “file-and- as a Canadian example of a use-and-file model, although it doesapprove” models. Such models come in varying shades of grey, n’t really apply to jurisdictions that require insurers to provide but basically they require insurers wishing to change their auto accident benefits coverage. In Quebec, the government’s use-andinsurance rates to submit their proposed rate changes to the reg- file system applies only to physical damage and optional auto ulator and then wait for approval prior to implementing the rate coverages. The government, not the province’s auto insurance changes. In some cases, regulators following this model require industry, picks up the tab for accident benefits. Quebec would insurers to submit at particular times of the year; in other cases, probably not be offering a use-and-file system if this were not the
What progressive collision repair centres are doing Throughput Performance Solutions by PPG provides collision repair centres with the tools and courses to improve their Quality, Speed and Lower Cost of Operation. How you and your policy holders benefit: â€˘ shorter cycle times, which get vehicles through the repair process quicker â€˘ streamlined processes that reduce waste and save on costs â€˘ expert and guaranteed workmanship you can depend on For more information please contact PPG Customer Service at 1-888-310-4762.
ÂŠ2008 PPG Industries www.ppgrefinish.com
CUSTOM DIE CUT SCORE FOLD PERFORATE VARNISH FULL BLEEDS BIND
C O L O U R S
DATE: April 24, 2008 FILE NAME: 8088_PPG_Lean_Ad_CanUNDRWrtr_v1.indd PROJECT MANAGER: Katy
TRIM F I N I S H I N G
CLIENT: PPG CONTACT: Jen PROJECT: Lean Ad - Canadian Underwriter
PANTONE ??? PANTONE ??? PANTONE ??? PANTONE ???
3 OUTH 3 ERVICE 2 D 3U I T E " URL I NGT O N /. , , ! s 0H O NE s &AX s W W WT AT EM ARK ET I NGI NC C O M ÂŠ 4AT E - A R K E TIN G ) N C
Cover Story case. Outside of Canada, insurers often point to the states of Illinois, Missouri and New Jersey as successful applications of the use-and-file model. SHIFTING TO A NEW MODEL So where on this spectrum do Canadian auto insurers think it’s most realistic to be? Most characterize Canadian provinces as being somewhere in between prior-approval and the most constrained forms of file-and-use models. Virtually all insurers agree prior approval models are definitely not where the industry should be today. “The current system, which is sort of rigid preapproval, I don’t personally think is working for anybody,” says George Cooke, the president and CEO of Dominion of Canada General Insurance Company. “It’s not working particularly well for consumers. It’s not working particularly well for the company and its shareholders, and I’m not at all convinced it even works all that well for the regulators. To my mind, what we have is about the worst scenario that you could get.” Prior approval models encourage more volatile swings in the
approve system, it can easily take six months of actuarial time and delays between getting the material ready, filing it, justifying it, responding to questions from the regulators,” observes JeanFrancois Chalifoux, the general manager and senior executive president of Desjardins Group Insurance. “Quite often, you can have a delay going from six to nine months. Whereas in a file and use system, everything can be done in less than 30 days and we move on.” In one extreme example of how slow turnaround times can affect consumers, one insurer has taken the Nova Scotia Insurance Review Board to court because of the length of time it alleges the board took to approve the company’s proposed 8% premium decrease. The suit is ongoing, but it points to the frustration insurers feel when it comes to setting auto rates. “We expect the regulators to validate … and monitor the competitiveness of the market and monitor complaints carefully and ensure that we’re solvent,” says Chalifoux. “But micro-regulating the setting of the rates in this market environment is unjustified. Rate approval really delays our ability to respond to a
“At the moment, in some provinces it may take as long as three to four months to get an approval. And actuaries have to work for roughly a month before that to prepare a filing. Then there is an implementation that takes another two, three, four weeks. So in the best scenario, you can change your rates twice a year.” — Martin Beaulieu, ING Insurance
www.canadianunderwriter.ca • May 2008
auto insurance cycles, insurers argue, because the time required to approve rate increases (or decreases) does not allow insurers to adapt quickly to changes in the market place. As Martin Beaulieu, senior vice president of personal lines for ING Insurance, observes: “At the moment, in some provinces it may take as long as three to four months to get an approval. And actuaries have to work for roughly a month before that to prepare a filing. Then there is an implementation that takes another two, three, four weeks. So in the best scenario, you can change your rates twice a year. And if you compare that to other industries like retail, where some of them change their prices on a weekly or over even daily basis, we have a long way to go before we would even think that we are in that same environment.” Claims costs drive pricing, insurers note, and so if insurers facing higher costs can’t get a 2% increase in place this year, for example, that may mean the request for a larger increase down the road. But once steep rate increases and dwindling coverage start to happen en masse, politicians’ phones start to ring with consumer complaints, and then regulators start requiring auto insurance reforms and steep rate decreases. And these regulated responses, insurers would argue, are exactly the kind of dynamic that caused the need for steeper prices to begin with. When it comes to setting auto rates, timing is of the essence. The less red tape, the faster the process goes. “For the file and
changing environment. And when you run a business, that’s something you’d like to avoid, especially in a highly competitive environment.” Insurers also question the utility of producing a full actuarial analysis for even the most inconsequential rate filings. That costs a lot of money, they note, which in turn discourages them from filing rate changes as frequently as they would prefer in order to respond to claims costs and other market conditions. “What happens in a regular, competitive marketplace, when we look at economic studies of how fast prices change, [is that]… it could take an industry three months to reflect [a marketplace cost change] and roll it out into their prices to consumers,” says Jane Voll, vice president of the Insurance Bureau of Canada [IBC]. “That’s a lot faster than the way prices adjust in a regulated marketplace, where you have to build up your actuarial evidence.” In a prior approval system, she adds, “you have to have … enough of a change [in rates] that you can warrant the cost of the actuarial filing that you are going to have to make. The whole process itself is time- and cost-intensive. So you save it up so it’s worth it. It’s like housecleaning: you wait until it’s bad enough and you do it.” Prior approval methods also discourage innovation, insurers note. Even if a company comes up with the most creative insurance product on the market, if it must meet a heavily regulated
www.canadianunderwriter.ca • May 2008
price requirement, the product may end up being too costly to turn around time for reviewing and approving as they are less offer to consumers. In this case, regulatory pricing constraints complex than a major filing.” may discourage products that don’t fit within the regulators’ narInsurers generally acknowledge this as an improvement, but row bandwidth. they also note the simplified filing method can’t be used if a preSo if Canadian insurance companies want to move away from mium increase is proposed. “It’s very restrictive in the sense that prior-approval regimes, what is it that they want? Some form of it doesn’t allow you to respond to areas of your book in which file-and-use system would be the next best step on the continu- you may need to increase rates by 5% or maybe even 10%,” says um, they say. Scott Lennox, director of national pricing of The Co-operators. The bottom line, says Voll, is that the model for setting auto “In this day and age, companies are focussing so much more on rates should support an auto insurance market in which rates are segmentation and doing so much analysis on the interaction of available, affordable, stable and competitive. And by far, insurers believe file-and-use sysI don’t think anybody wants the Wild West out there...In our mind, we tems are the way to think there is a difference between regulators who approve rates [i.e. achieve these aims. “The in file-and use systems] and regulators who think their mandate is to theme would be anymake rates.” thing that allowed the — Michael Donoghue, Allstate Insurance Company of Canada companies to react quicker and faster [to market conditions] will have more positive impact for consumers at the end of the day,” rating factors that having that flexibility to pull some factors up says Shawn DeSantis, the senior vice president of Royal & and some down is really important. By not having that, you can’t SunAlliance Canada. “I would suggest to you that given the size respond that quickly [to market conditions].” of the marketplace in Ontario, we should move a lot faster on fileand-use than just a simplified [prior-approval filing]. It’s kind of THE PROPER ROLE OF THE REGULATOR making a marginal gain ... From our perspective, we clearly think Some have suggested insurers, as a matter of principle, would a file-and-use process would allow us to increase affordability, probably prefer to have no regulation at all. But insurers beg to react quicker and bring more consistent prices to consumers over differ, saying regulators are necessary to make sure the companies the long run.” are actually using the rates they file. “I don’t think anybody wants Ontario’s model might be classified as a form of “file-and-use” the Wild West out there,” says Michael Donoghue, the president system, although most insurers liken it to a hybrid model that and CEO of Allstate Insurance Company of Canada. “There is contains elements of both a prior approval system and a file-and- probably some fear among my colleagues that some, for whatevuse. Once companies in Ontario file for a rate change, the gov- er reasons, might say ‘Here’s our chance to go after market share,’ ernment has a 30-day time period in which to respond. If the and do some things that would not in other times be done. That insurer hasn’t heard within this period, the rate change is deemed takes me back to [the fact that] you have to have some principles… “In our mind, we think there is a difference … between approved and may proceed to market. In 2001, Ontario introduced a rate filing process known as the regulators who approve rates [i.e. in file-and-use systems] and “Respond to Market” (R2M) process. This allowed insurers to regulators who think their mandate is to make rates. It’s those bypass the step of doing a full actuarial analysis if their proposed who stay in the latter, who make rates, that I think go beyond rate changes were consistent with those offered by other insurers their mandate.” Establishing systems for executive oversight and accountabiliand fell within a narrow bandwidth. (The band at the time ranged between a 7% decrease and a 3% increase). But the R2M ty would be an essential role for the regulator in any file-and-use was abandoned after the Liberal government came to power in system, says Cooke, whose professional background includes 2004, promising a 10% insurance rate decrease. The thinking working for a regulator. Cooke said he would not support any inside some insurance circles is that the Liberals didn’t want system of file and use if it did not include some way to hold insurinsurers to be able to bypass the mandatory 10% rate decrease ance companies and their chief executive officers accountable for through the use of the R2Ms, which allowed insurers small inappropriate variations in premium rates. He likened an appropriate system to the one evolving out of the Sarbane’s-Oxley Act, increases on a quarterly basis without full actuarial analysis. Ontario now has a “simplified” filing system, similar to the in which corporate executives and officers in the United States are R2M. “In order for companies to implement rate changes more held personally responsible for any financial misstatements the quickly, FSCO has developed Simplified Filing Guidelines,” company makes. “What you need to go with [file and use] is an FSCO noted in a statement. “Even though these rate filings fall administrative system of fines and penalties that was created under a prior-approval system, these filing types have a quick sometime after the mid-1930s,” he says. “If somebody does some-
REST ASSURED “A new generation in collision repair performance.” At Assured Automotive, we deliver on our promise to provide each policy holder with a quality collision repair. We fully understand that a positive repair experience with us, leads to a repeat policy holder for you! Assured Automotive is the largest corporately owned chain of collision facilities in Ontario and a proven leader in the collision repair marketplace. We have 30 locations throughout the GTA & Surrounding Area. Our growth and sustainability has been fuelled by strong leadership and performance at every level of the company – our production employees, store managers and support staff. Operational consistency allows us to achieve business results which outperform industry standards. Our corporately owned business model puts us in complete control of cost structures and decision making – leading to more predictable performance management outcomes for our customers.
Outperform with Assured!
Cover Story thing wrong, there’s some discretion that can be applied by the commissioner. But for somebody who’s grossly, maliciously and flagrantly abusing the system, there’s a whole different set of penalties, including personal sanctions against the officers.” Supplementing government oversight of the overall market, a competitive market will ultimately keep premium pricing at levels the consumer can afford, noted Shaun Jackson, the president and CEO of Kingsway Financial Services. “When you have 80 companies competing, the free market will take care of that (keeping prices low for consumers),” he said. “When you have a competitive, free market, that actually discourages companies from increasing rates sharply.”
www.canadianunderwriter.ca • May 2008
CONFIDENCE GAME One problem for the industry, says Jeff Goy, vice president of automobile underwriting at Wawanesa Insurance Company, is that some regulators vacillate between prior-approve and file-anduse models, depending upon the market cycles. “Part of the issue is the filing guidelines at FSCO or in Alberta have at various times been prior approval, file-and-use, or a benchmark of various amounts, and they change somewhat, flipping back and forth, depending on the crisis and how the regulator thinks [the model] is the best way to handle a crisis,” he says. “There has to be a building of confidence, I think, with the regulators of the industry that to have less regulation would be in everyone’s best interest. I think the interim step would put a bit of a box around the types of the things that would fit into the category of being eligible for a file-and-use; outside of that box, you would still have to have some more rigid approval processes. Hopefully, that box grows.” How big might the box grow? Even the various file-and-use models proposed for Canada, in which regulators would oversee the market as a whole (and penalizing in some way those whose rate-changing activities fall outside the box), seems a far cry from the kind of use-and-file systems seen in U.S. states such as Missouri, New Jersey and Illinois. In Missouri, for example, the government states explicitly: “The Missouri Department of Insurance does not set insurance rates.” If anything, the government stipulates only that premium increases cannot be obtained immediately after a collision in which the driver was not deemed to be at fault. A state of New Jersey document notes the government will not intervene if insurers file an amended rate increase of no more than 7%. Such maximum allowable rates are sometimes referred to as a ‘hurdle rates.’ The interesting (and counterintuitive) thing about these examples of file-and-use and use-and-file systems, Voll observes, is that premium prices in these deregulated models do not head skyward when the sky’s the limit. “When we look at jurisdictions in the States, only a handful have this hurdle rate system,” she notes. “Those that do have a hurdle rate find that if you set that
rate at 7% or 10%, 30% or whatever, the market doesn’t go up to that amount. They compete. So their average price actually stays below what you actually set that hurdle rate to be. That’s the gist of it.” The market everyone loves is Illinois, Voll added, because they’ve got a ‘just-use-it’system.“The thing about that is, it shows you it really works,” she says. “They’ve been doing that since the 70s. They’ve had a few cycles over the period between the 70s and now, they’ve ridden them all out fine, without anyone having to intervene. They have 300 insurers there. Even the high-risk drivers are served by the voluntary market. They have a teeny-tiny residual market.” Canadian insurers are well aware the industry has a long way to go before establishing enough trust with the regulators to move to these sorts of use-and-file systems. Most regulators still remember well the high prices and poor availability characterized by the hard market in 2001-04. As a result, most insurers advocate a transition to file and use first, so that some measure of trust might be established. “I think regulators, the way I see them, can play a huge role in terms of oversight of the overall system without having to get involved in micro-managing each insurer,” says Beaulieu. “I think
“When you have a competitive, free market, that actually discourages companies from increasing rates sharply.” — Shaun Jackson, Kingsway Financial Services
this is the role that I see the regulators can play, in managing by exception.” But for the government to be willing to let the market determine pricing, Beaulieu says, “this will require that trust is built between regulators and the industry.” IBC and its individual member companies appear hopeful the current round of discussions with regulators across the country will ultimately bear fruit. For its part, the IBC is promoting the idea of “industry stewardship,” involving the identification of factors that indicate when price changes will be necessary. If such measures can be created — consider them an ‘early-warning detection system’ that precursors hard and soft markets — then politicians, regulators and consumers alike will be able to determine when claims costs require insurers to make upward or downward adjustments to current rates. Thus informed, the system would move quickly with rate adjustments in order to avoid the kind of “sticker shocks” that breed a pendulum swing towards a more heavily regulated, prior approval form of regulation. IBC is apparently in talks with the Alberta regulator about implementing some form of the stewardship model. “The trick is to get indicators that everyone knows and trusts and believes and are credible enough to warrant action,” says Voll. “We can’t let the indicator that motivates action be headlines in the newspaper and the number of calls to politicians. We need a better leading indicator.”
value: n. the full worth of something. Consider the cost of the premium against the coverage and factor in the cost of efforts to make a claim. Chubb Insurance better defines its policies. When you have better defined coverage, you gain better value in insurance.
If you seek value for your clients, Chubb is your recommendation.
Chubb Defines Insurance
www.chubbinsurance.com Chubb Insurance refers to Chubb Insurance Company of Canada. The precise coverage offered is subject to the terms, conditions and exclusions of the policy as issued.
BREATH of FRESH AIR
www.canadianunderwriter.ca • May 2008
As Glen Johnson, president of the Ontario Mutual Insurance Association, prepares to retire, he reflects on the highs and lows of the insurance industry and the traditional value system used by the mutuals to tackle modern day issues By Vanessa Mariga
alling short of the requirements for dental school admission was one of the greatest things to ever happen to Glen Johnson, president of the Ontario Mutual Insurance Association (OMIA). After a career spanning more than 30 years in the insurance industry, Johnson has announced his plans to retire within the coming year. He laughs as he recalls his foray into the industry, citing the process of elimination, curiosity and serendipity as some of the driving forces that led him to his current role. It’s clear from his tone that while he may have inadvertently stumbled across OMIA as a career option, he considers himself lucky to have been part of the association for the past three decades. Johnson is a native of Cambridge, Ontario. After realizing his childhood dream of dentistry would not become a reality, he turned his focus to business, quickly ruling out a career in accounting or sales. An ad for an insurance adjuster position, tacked to a placement board at McMaster University, piqued his interest. The element of investigation involved in the job was enough to sell Johnson on considering the insurance industry as a career path. After searching out a job in the adjusting field, he landed a position with Crawford & Company (Canada)’s Toronto office. The five-week training course in Atlanta, Georgia, and the use of a company car were the icing on the cake, he chuckles. After a stint with Crawford’s Toronto office, Johnson happily transferred to the company’s new Kitchener location. It was an opportunity for him and his wife, his high school sweetheart, to return to their home turf, he says.
Four years later, in 1978, fate in the form of cabin fever would take Johnson’s career around its next corner. “As far as getting to the mutuals, I was actually snowed in one day — one of those big snowstorms in the 1970s — saw an ad in the paper for an office manager at the Ontario Mutual Insurance Association and scribbled out a hand-written letter,” Johnson recalls. “I sort of did it because I was bored and couldn’t get out of the house and ended up getting an interview and getting the job.” He started off as office manager, before working his way up to the position of vice-president in the mid-1980s. He finally became president in 1990. GETTING OUT THE BRANDING IRON The most remarkable thing about landing the job with OMIA, he notes, was the fact that until that point he had never heard of the farm mutuals. Even after spending all of his childhood summer vacations working on his grandparent’s farm in Lucan, Ontario, and working as an independent adjuster for four years, he admits the concept was new to him. That sparked what would become his pet project over the years: developing a provincial branding program. “Because I worked on the farm every season, I never saw the end of a little-league season, and I used to think about my buddies back in Cambridge playing baseball,” he recalls of his time on the farm. “But I think in the long run, it really helped me because I understand farming and the rural community. It’s completely different than the urban setting.”
Photo: Simon Cheung
OLD ISSUES, NEW SOLUTIONS, TRADITIONAL VALUES The brand may be changing, but some of the issues are seemingly timeless — including the public perception of Ontario’s auto insurance market. In 1977, the year before Johnson joined
21 www.canadianunderwriter.ca • May 2008
Together with his team at the association, they focused on the common elements between and significant selling points of the more than 70 farm mutual insurers at the time (today there are nearly 50). Some of those mutuals had existed for as long as 150 years. “The fact that they operate on an insurance-at-cost basis, they’re owned by the policyholders and the policyholders are the directors and they are financially secure because of the guaranty funds they set up, these points link [the mutuals] all together,” he says. In keeping with the concept guiding the Insurance Brokers Association of Canada (IBAC)’s “Bipper” program, OMIA developed the logo of a black ‘M’ — with a red maple leaf in the centre — that mutual insurers feature on their letterhead and signage, alongside their own logos. “Probably the biggest hurdle would be that the companies all brand themselves in their local communities,” Johnson said. “They are all very independent companies and they do co-operate to a great degree through the association, but that was the biggest hurdle.” It seems ironic one of the first tasks Johnson tackled as association president would also be among his last. As OMIA prepares to move into its new headquarters early next year, Johnson says it’s time to refresh the brand. The new headquarters building is at the juncture of the 401 and Highway 24, where thousands of cars will whiz by every day. “The association is in the process of hammering out a fresh brand. It’s a good time for it,” he says.
OMIA, the farm mutuals had made their foray into the auto market. The issue of how to address the needs of consumers in a volatile market has been a major point of discussion over the years, and will likely continue to be, Johnson says. In the history of its operations, the association has worked with each one of the province’s three government parties; each time, auto insurance was a key issue. “I think there is a need for the industry and the government to help consumers to understand what drives the price of auto insurance better than we currently do,” Johnson says, adding that price and availability are two factors that launch the auto insurance issue into the realm of politics. “I think there will always be an insurance cycle, especially in auto insurance. I think part of the solution in dealing with that is making sure that consumers understand what drives those prices.” Johnson acknowledges the industry does not have a great public image. “The farm mutuals probably have a better image than the average company, but the industry in general — including us — does not have a great image,” he says. “ So when you are trying to tell consumers what drives the price of something like auto insurance, right up front you have to deal with the fact that they’re going to be reluctant to believe you. It’s a tough sell, I know. But I think it’s important that we just keep hammering away at it.” While the rest of the industry grapples with issues of succession and retention, Johnson believes the best part of working in the farm mutuals industry is the sense of camaraderie. “I think the highlight of working here has been the type of people I’ve worked with,” he says. “People come into the farm mutual system and they don’t leave. That tells you that it’s a good place to work. There’s a real team feeling: we’re the little guys and we have to work together and stick together to be able to compete with the big guys and there’s something fun about that.” As he prepares for retirement, Johnson hopes the OMIA will maintain its current value system on which it has been based for the past 126 years. It has been based on principles such as cooperation and compromise, he says. “Even though they [the mutuals] compete on their borders, they have to continue working together in order to enjoy the success they have enjoyed in the past.”
Ounce of Prevent Now that the Alberta Court of Queen’s Bench has weighed in on the constitutionality of the province’s cap on minor auto injuries, Canada’s insurance industry anxiously looks to courts in the Maritimes to inoculate governments against widespread Constitutional challenges to legislated injury caps
By Vanessa Mariga
www.canadianunderwriter.ca • May 2008
hen Justice Neil Wittmann of the Alberta Court of the Queen’s Bench issued his longawaited decision in the controversial and politically charged case Morrow v. Zhang, the stroke of his pen struck like a dagger into the heart of the province’s Cdn$4,000 cap on soft-tissue injuries. Wittmann effectively eviscerated the cap along with the province’s minor bodily injury regulation (MIR). To make matters worse for the industry, Wittmann refused the application of a stay that would have at least allowed the industry to staunch the bleeding after the elimination of the cap. In the meantime, the Alberta decision has caused the industry to turn its gaze to the east, where three provinces, Prince Edward Island, New Brunswick and Nova Scotia, prepare to hear challenges to their respective caps on minor bodily injuries as well. Murmuring around industry water coolers prevails about the potential influence Wittmann’s decision may yield on these cases. Plaintiff lawyers hope the Alberta decision will lend their arguments strength. The defence bar, on the other hand, believes the legislation in Alberta differed greatly from those in the Atlantic provinces, shedding a ray of hope on the defendant’s case. As the industry tenses in anticipation of the political battles about to be fought in the East Coast courtrooms, it prepares for the worst and hopes for the best. A
cone of silence surrounds the issue, with lawyers on all sides not wishing to prejudice their legal cases by arguing them first before the court of public opinion. Judges tend to look askance at such tactics. But public documents, including both statements of claim and defence, have been filed, and shed some light on the facts and legal arguments at stake in the Atlantic Coast litigation. The linchpin of the Alberta case was the Charter challenge to the cap which held that the cap discriminated against those with injuries listed in the MIR. In making his decision, Justice Wittmann wrote that the cap “is demeaning to [the party suffering a soft tissue injury] because it suggests that their pain is worth less than that of other injury sufferers, in particular, members of the comparator group. It also confirms prejudices that soft tissue injuries are generally faked or exaggerated.” And so the big question is, is there any difference in what’s being argued on the East Coast? PRINCE EDWARD ISLAND As of press time, information as to when the case of Waite v. Richard and Richard would be heard was unavailable. A statement of claim filed in the provincial court in January 2007 outlines the events. The plaintiff, Lisa Waite, alleges that Peter Richard in 2005 rear-ended her vehicle when she stopped at an intersection in Summerside, P.E.I.. Among her claims,
which have not been proven in court, is that Richard drove on a highway without due care and attention, operating a vehicle without brakes adequate and effective to stop the car. The statement of claim says Richard failed to stop, slow down, swerve, honk his horn or manage his vehicle in order to avoid an impact when he saw or should have seen that the collision was about to occur. According to Waite’s statement of claim, as a direct result of the collision, Waite “sustained permanent serious impairment of an important bodily function caused by continuing injury which is physical, mental, or psychological; the particulars of which include, but are not limited to, the following injuries: pain and discomfort to her neck; pain and discomfort to her left shoulder; pain and discomfort to her lower back; pain and discomfort to right trapeziues, general loss of flexibility, strength and endurance as well as straining, spraining and tearing of the muscles, tendons, ligaments, nerves and vessels throughout the body.” The injuries, says the statement of claim, have caused Waite “severe pain and suffering. She has sustained, and will continue to sustain pain and suffering, loss of enjoyment of life, and loss of amenities.” Waite’s claim goes on to say she has not be able to participate in those recreational, social, household, athletic, employment activities, and numerous activities of daily living to the same extent to which she did
tinuing injury that is physical in nature. As far as P.E.I. is concerned, serious impairment “means an impairment that causes substantial interference with a person’s ability to perform his or her usual daily activities or his or her regular employment.” Unlike Alberta’s legislation, which specifically points to “i) a sprain, ii) a strain, or iii) a WAD injury caused by that accident that does not result in serious impairment,” the definition of a minor injury in P.E.I. does not specify the nature of an injury and focuses instead on the impact of the injury on the person’s life. In Alberta, it was successfully argued that people suffering from whiplash injuries are treated unfairly, because a Cdn$4,000 cap applies to them but not to members of an equivalent comparator group who are not subject to the cap. But it remains to be seen what happens when no specific injury is identified in P.E.I.’s cap legislation. In Waite’s description of her injury, she points specifically to ongoing ailments and a decrease in the quality of her life post-accident. It therefore remains open for lawyers in the P.E.I. case to argue she did not in fact suffer a minor injury, and thus the cap does not apply in her situation. NEW BRUNSWICK More than 150 challenges to the MIR have been filed with the Court of Queen’s Bench in this province, but none of them have yet to be heard. One of the chal-
23 www.canadianunderwriter.ca • May 2008
before being in the accident. She goes on to outline the continuing need for medical treatment, treatment expenses, as well as loss of income. But Paragraph 10 of the statement of claim is perhaps of the most interest to insurers. Essentially, it reads that P.E.I.’s “threshold legislation” is contrary to s.7 and s.15 of the Canadian Charter of Rights and Freedoms, Constitution Act, 1982,“and that as such the province’s threshold legislation is unconstitutional and inoperative.” Waite has served the Attorney General of Prince Edward Island and the Attorney General of Canada with a notice that she intends to “challenge the constitutional validity and the operation of the aforesaid threshold legislation.” As of press deadline, it could not be confirmed whether the Attorney General had filed a statement of defense as an intervener in the case. But a statement of defense filed by counsel representing Richard rejects the argument in Paragraph 10 of Waite’s claim. Richard’s counsel maintains the province’s threshold legislation “is not contrary to the Canadian Charter of Rights or Freedoms or unconstitutional or inoperative.” The actual wording of P.E.I.’s threshold legislation reads: “minor personal injury” means an injury that does not result in i) permanent serious disfigurement, or ii) permanent serious impairment of an important bodily function caused by con-
lenges, Martin v. J.W. Bird and Company Limited, was scheduled to be heard in April 2008, but was delayed at the last moment. Counsel are still waiting for the court to set a new date. In this particular motion, the defendant, Mitchell Bye, worked for J.W. Bird and Company. His duties included driving a company-owned cube van. In February 2006, Bye was on duty making a delivery to the plaintiff’s, Glen Martin’s, place of work. Bye backed the cube van up to a storage shed, stopped the vehicle, got out of it and started to unload supplies from the back of it. At the same time, Martin stood behind the van and picked up the supplies. “Suddenly and without warning, the defendant vehicle started to back up and violently struck the plaintiff, pinning him between the defendant vehicle and the storage shed, and causing him significant injuries,” a statement of claim filed with the court says. Martin’s statement of claim cites a number of injuries. The primary injury is a fractured ankle that Martin says led to a loss of flexibility, strength and endurance, as well as the straining and tearing of muscles, tendons, ligaments, and nerves throughout his left foot. Like Waite, Martin is arguing that New Brunswick’s “threshold legislation” (and therefore the injury regulation) are contrary to s. 7 and s.15 of the Charter of Rights and Freedoms. He goes on to argue that should his Charter challenge fail, the courts should nevertheless find that he has sustained a “soft tissue injury” instead of a “minor personal injury,” and such an injury has caused him a “permanent and serious impairment of an important bodily function caused by continuing injury which is physical in nature.” This leads to the province’s definition of “minor personal injury,” contained within its Insurance Act. Here the definition of a “minor personal injury” is identical to that contained in P.E.I.’s definition (noted above). Once again, unlike the definition in Alberta’s MIR, no specific injuries such as “soft-tissue” injuries are specified in New
Brunswick’s cap legislation. It remains to be seen what impact this might have when it comes time for the court to compare two groups for the purpose of assessing discrimination. What would the comparator group to the minor injury class be in New Brunswick? Again, similar to the case in Prince Edward Island, it remains open for the New Brunswick court to find that the plaintiff’s injuries will continue to affect the quality of his day-to-day life. In this case, the court might rule the injuries are not in fact minor but catastrophic, in which case the province’s Cdn$2,500 cap on minor injuries would not apply. The statement of defence filed by the provincial government and the attorney
www.canadianunderwriter.ca • May 2008
lenge seems to be the furthest down the litigation path of the three provinces. The test case in this province, Hartling v. Nova Scotia, is set to be heard in the Supreme Court of Nova Scotia in October 2008. Also, the province’s definition of a minor injury has an interesting wrinkle to it: it contains a very specific time period as part of the definition of a minor injury. In this case, according to a 2006 Supreme Court of Nova Scotia motion, the applicants allege they have been discriminated against on the basis of physical disability and sex by the province’s definition of a ‘minor injury.’ The definition causes them to be subject to a cap on their injuries of Cdn$2,500, the plaintiffs argue, a threshold they must cross before their injuries are
Nova Scotia’s definition of a minor injury is identical in all but one respect to the definitions of minor injuries in P.E.I.and New Brunswick. It remains a live issue whether or not plaintiffs’ counsel will be able to find a suitable comparator group in aid of proving their clients suffered discrimination. general says that, with respect to s. 15 of the Charter, “the threshold legislation and injury regulation do not subject the plaintiff to differential treatment to any relative comparator group.” Alternatively, the statement of defence argues, “the threshold legislation and injury regulation do not subject the plaintiff to differential treatment on the basis of any enumerated or analogous ground of discrimination under s. 15 of the Charter.” Moreover, it continues, “even if the threshold regulation and injury regulation constitute differential treatment of the plaintiff on an enumerated or analogous ground, such differential treatment does not constitute substantive discrimination under s. 15 of the Charter.” Finally, as argued in Alberta, even if the cap breached the Charter under s. 7 and s. 15, the attorney general “states that any such violation is a reasonable limit prescribed by law, demonstrably justified in a free and democratic society” under s. 1 of the Charter. NOVA SCOTIA Nova Scotia may be the province to watch in the coming months, since its chal-
deemed to be something other than ‘minor injuries.’ In this way, the cap economically disadvantages them, they argue. In addition, they allege their s. 7 Charter rights are breached in that “the liberty and security of the person is violated by the cap by denying them the right to make fundamental personal choices,” Nova Scotia Supreme Court Justice Margaret J. Stewart noted in a consideration of the plaintiffs’ 2006 motion. “They say the definition of minor injury in s. 113B (1) of the Insurance Act discriminates or affects their rights because it caps them.” In this particular case, two of the plaintiffs, Helen Hartling and Anna Marie MacDonald, suffered injuries that had yet to be classified as minor by their respective insurers. The court therefore deferred consideration of their Charter challenge on the grounds that doing so without a determination of the injuries by the insurers would be mere ‘speculation.’ Nevertheless, Stewart granted the challenge standing on the argument that Hartling and MacDonald had already been “directly and significantly” affected by the MIR, regardless of the eventual outcome of their claims.
“They argue the very existence of the legislation impacts on them in a very real and direct sense and affects their ability to present their claims,” Stewart wrote. “Their claims have been prolonged or delayed due to the uncertainty as to whether the cap will apply to restrict their claims. They have experienced financial costs of accumulating medical opinions to establish that their injuries cross the minor injury threshold established by the legislation. If the legislation is struck, they will no longer need to seek to establish, by medical evidence, that they fall outside the scope of the cap.” Nova Scotia’s definition of a minor injury is identical in all but one respect to the definitions of minor injuries in P.E.I. and New Brunswick. For this reason, it is a live issue whether or not plaintiffs’ counsel will be able to find a suitable comparator group in aid of proving their clients suffered discrimination. But Nova Scotia’s cap legislation contains a twist, which may or may not have a bearing on the case. In Nova Scotia, a minor injury is one that “resolves within twelve months following the accident.” It thus gives a clear time frame by which to define the plaintiffs’ injuries. If the ailments persist beyond 12 months, then the injury is not considered minor; once again, the cap does not apply. THE PRIMARY DIFFERENCE Reading through the various challenges and cases before the court in the Maritimes, it becomes clear that the length and impact of an injury — and not necessarily the type of the injury — may play a key role in the outcomes of the Charter challenges there. In a “Client Update” by the legal firm Stewart McKelvey, it’s noted that “under Alberta’s MIR, an injury had to first be a sprain-, strain- or whiplashassociated disorder to even potentially fall within the cap, with the analysis under the MIR then moving to consideration of factors such as the injury’s impact upon the particular individual’s employment or activities of daily living.” With this in mind, the report continues, “the Alberta scheme was more conducive to the argument that it had an impermissible ‘targeting’ effect.” This may just be the hinge that the cap challenges turn on. But, like the rest of the insurance industry right now, we will have to wait and see…
By Joel Baker, President and CEO, MSA Research Inc. This article is an excerpt from the Q4/2007 MSA/Baron Outlook Report, which was released in April 2008. For information on the full report please visit www.msaresearch.com
Figure 1 ndustry results at the end of 2007 confirmed our readings at nine months, with two main storylines emerging amid apparent healthy returns. The first story is that companies exposed in any meaningful way to Ontario auto saw their results deteriorate in 2007. In fact, the direct accident-benefit loss ratio for Ontario cracked 102.9% in 2007, up more than 20 points over the 2006 figure, which stood at 82.3% for the same population of companies. This story is addressed in detail by Barb Addie’s article, ‘As Goes Ontario Auto...’ published in the third-quarter 2007 issue of the MSA/Baron Outlook. The second story relates to the commercial lines arena, which is in the midst of cutthroat competitive pricing. Despite the plummeting pricing, underwriters have yet to bear the consequences due to relatively benign claims activity in the year. In the absence of these consequences, the soft-pricing saga is expected to go on for a while yet, to the dismay of brokers and underwriters alike.
I www.canadianunderwriter.ca • May 2008
THE BIG PICTURE Before addressing these two storylines, let’s examine overall industry results. At first bush, they appear to be quite strong. Figure 1 includes information on reporting entities as of Mar. 24, 2008 (excluding Lloyd’s and Genworth). The
same population of companies is shown for prior years. To eliminate survivorship bias, the chart also includes historical data for primary companies that ceased writing business in 2006 and prior. Premium growth in 2007 has (barely) kept pace with inflation at 2.7%; net claims,
dBag which benefited from Cdn$1.5 billion on prior-year releases, nevertheless grew at a rate of 5%. This, combined with a ramp-up in general expenses of 8.5%, resulted in a 24.5% drop in underwriting income on a calendar-year basis. A 7.1% up-tick in investment income buffered the bottom line, which dropped by about 4% over 2006.
try (excluding Lloyds and most reinsurers) held more than Cdn$7 billion in excess capital, enough to comfortably support an additional Cdn$11 billion of net premium writings. Or enough capacity to write a replica of Canada east of the Ontario-Quebec border (Quebec and the Maritimes), plus another Manitoba and another Saskatchewan. For those who are Starbucks fans, we refer to this situation as “A vente in a tall cup.” In Figure 2 (see page 28), we see overcapacity is present in the commercial lines arena (see FM, Northbridge and Chubb) as well as in the personal lines segment where, for example, Wawanesa has enough capacity to write more than Cdn$1 billion of additional business. Aviva and ING, on the other hand, are exhibiting tighter capital management by running on lower MCTs. All in all, the capital bloat has been reduced by about Cdn$1 billion over 2006. The reasons for this include higher dividends, lower profits and the change in accounting standards. The direction is con-
structive, but the quantum of lazy capital in the industry remains remarkably high. LOOKING AT LOSS RATIOS For commercial writers as a whole, the net loss ratio improved by 3 points to 54.3% in 2007 from 57.3% in 2006. This is predominantly thanks in part to an eightpoint drop in liability losses, to 53.7% in 2007, due to considerable favorable loss development (the 2007 accident-year liability loss ratio for commercial writers was 61.4%) Although liability losses for commercial players were moderate in most regions, large spikes were witnessed in Nova Scotia and New Brunswick due to reported losses by Lombard, GCNA, LIU and RSA. Furthermore, hail and storm losses pummelled some commercial insurers in the prairies. Results in British Columbia took a turn for the worse in virtually all lines. Auto results show a miniscule improvement, but these results do not include ICBC’s data, which will only be available later. Property results deteriorated, albeit
27 www.canadianunderwriter.ca • May 2008
OVERCAPACITY STILL A PROBLEM Despite more than Cdn$3 billion in capital outflows via dividends and homeoffice transfers, industry capitalization continued its steady climb, reaching Cdn$30.8 billion at year-end 2007 versus Cdn$28.5 billion for the same companies in 2006 (refer to the green line in Figure 1). Minimum Capital Test (MCT) levels remained more or less stable at year-end. An abundance of capital, combined with a slight drop in income, conspired to lower the industry ROE to 14.7%, down from 16.9% in 2006 and 18.3% in 2005. Overcapitalization is continuing to undermine underwriting discipline in Canada. As of the end of 2007, the indus-
At face value, Canada’s 2007 industry results seem very healthy and calm, but what lurks beneath the surface are nasty undercurrents of deteriorating auto results and commercial rate-slashing
Absent substantial rate-taking, we expect Ontario auto results to continue their downward drift in 2008.
more moderately than in other western provinces. In addition, Liability loss ratios in B.C. deteriorated by 16.4 points in 2007, bringing them very close to the national average of 56.6%, though from a very low base. Similar deterioration was seen in PEI, New Brunswick and, to a lesser degree, in Nova Scotia. Those looking for good news will find
it in Quebec. Insurers there experienced improved results in property lines as well as in liability lines during the year. Personal lines companies saw their overall net loss ratios deteriorate by 2.7% — to 67.1% in 2007 from 64.4% in 2006. This deterioration was most pronounced in the auto line, where the accident-benefit loss ratio ramped up 14 points to 94.4% in 2007 from an already troubling
www.canadianunderwriter.ca • May 2008
* Group metrics presented on a pro-forma basis. Consolidated figures may differ. R&SA group figures exclude Canadian Northern Shield. ** Total population figures (except for dividends declared) exclude Lloyd’s.
80.5% in 2006. This is a result of the troubled auto regime in Ontario, coupled with curtailed rate growth. There is little solace in looking to adverse prior-year development as the culprit (the running rate): the fresh 2007 accident-year loss ratio stood at 96.6% indicating that in fact the 94.4% calendaryear ratio actually benefited from slight favorable prior-year development. In addition to the AB run-up, personal and multi-line companies saw deterioration in commercial property, auto physical damage, liability and surety. CLOUDY OUTLOOK FOR 2008 We expect results in most regions and lines to deteriorate during 2008 for the following reasons: • Extremely inclement weather in heavily-populated regions of Canada during 2008 Q1. The impact on insurers will be seen when results are released in mid-May. • The Feb. 8, 2008 decision by Alberta Court of Queen’s Bench Justice Neil Wittmann, which struck down Alberta’s minor injury Cdn$4,000 cap on nonpecuniary damages, has retroactive as well as prospective financial implications for auto insurers operating in Alberta. If the decision is upheld, additional unrecoverable claim costs will adversely impact results for insurers operating there; rates for compulsory coverage will need to rise substantially. It will also embolden challengers in Ontario and Atlantic Canada, causing financial as well as political travails for the industry there as well. • Absent substantial rate-taking, we expect Ontario auto results to continue their downward drift in 2008. Furthermore, personal- and multi-line insurers looking to offset weak auto results will continue exerting downward pricing pressure on commercial lines. Cheap reinsurance capacity is also reducing discipline in the commercial arena. • Volatility in financial markets will present insurers with further stresses. Rest assured, we will be following these issues closely as the year plays out.
Why is our ability to listen, innovate and share a passion for their success so important to our clients?
Itâ€™s what wedo to make them f a s t e r , b e t t e r and s t r o n g e r .
Serving the insurance and risk management needs of Canadians from coast to coast. For more information, please visit us at www.aon.ca.
The Ontario Effect Claims and financial data over the past few years support the notion that Canada’s auto insurance results are guided by what happens in the Ontario auto market
By Barb Sulzenko-Laurie, Vice-President, Policy Development, Insurance Bureau of Canada
quick glance at the 2007 data might suggest things remain favourable for auto insurers in Canada. But a closer examination reveals some troubling signs, especially in light of the fact that Ontario accounts for more than half the private auto insurance business in the country.
A www.canadianunderwriter.ca • May 2008
AUTO PREMIUMS REMAIN STABLE The price of the product remains a good news story for consumers all across the country, including Ontario. The out-ofpocket cost of insurance for Canadian drivers fell last year, in many cases for the 4th year in a row (See Figure 1). The largest decline in average premiums was in New Brunswick, where the average rate dropped 11%. Even in Alberta, where rates rose 1%, insurance premiums fell in real terms, considering a rate of inflation of 5% in the province. Falling rates meant that insurance could remain a modest cost for most households — requiring an outlay of 3% of personal disposable income in most parts of the country. The most significant exception is Ontario, where car insurance premiums amount to an average 5% of personal disposable income. UNDERWRITING RESULTS – LOSS RATIOS Outside of Ontario, the underwriting results remain positive. Following government reforms, auto insurance markets in Alberta and Atlantic Canada improved in 2004 and have remained stable, competitive and profitable since then (up to and
including last year). Figure 2 depicts underwriting performance for auto lines outside of Ontario using the methodology of Dr. David Cummins of the Wharton School of Business at the University of Pennsylvania. It measures the “next to peak” to the peak in the 1 minus loss ratio. In plain language, the effect of this method on a line graph is that a trend of rising loss ratios is presented as a downward line (deteriorating) and a trend of declining loss ratios is presented as a rising line (improving).
CLAIMS COSTS Claims costs declined in most parts of the country. As a result, loss ratios declined or remained steady, and threats to market stability in 2008 remained low (See Figure 5 on Page 32). This was the case in Newfoundland and Labrador, Nova Scotia, New Brunswick and Alberta. Although claims increased and premiums declined in P.E.I, causing the loss ratio to
A SOLUTION IS A GUARANTEE FOR SUCCESS – LET US SHOW YOU HOW WITH
The Guarantee Company of North America is Canada’s leading specialty insurer. We take pride in providing specialized quality products via the independent broker network with a “Guarantee” of excellence to our policyholders.
• Professional Claims Services • Committed to the Independent Brokers • Commercial Lines - No Contract required - No Premium Volume required
• Personal Lines - Contract required
PRODUCTS WE OFFER: • Contract Surety • Commercial/Miscellaneous Surety • Fidelity Bonds • Directors’ and Officers’ Liability • Credit Insurance • Guarantee GOLD®
31 www.canadianunderwriter.ca • May 2008
Using the same methodology, we see in Figure 3 that the Ontario auto insurance market, in contrast to the trend in the non-Ontario market, is in the second year of deteriorating underwriting results, drawing ever closer to difficult market conditions. Auto insurance reforms were implemented in that province in 2003 and successfully controlled costs through the following year. Beginning in 2005, however, things took a turn for the worse. Figure 4 — which combines the trends seen in both Figures 2 and 3 — tells the auto underwriting story for all of the provinces combined. As you can see, its downward tail more closely resembles the Ontario-only graph than the nonOntario graph. The lesson? When it comes to auto insurance, as goes Ontario, so goes the rest of the country.
rise, there is still room for these trends to develop before costs become a problem. Although the data spelled stability in most parts of the country, they suggest the opposite in Ontario. Consumers enjoyed premium reductions in this jurisdiction, but claims grew at a concerning 10.2% rate over the previous year. This brought the loss ratio to 78.4%, a significant leap from the 71.5% posted in 2006. Year-end financial data reveal few clues as to the causes of claims growth. For this, we need to rely upon actuarial data (at the time of this writing, available only for the first six months of 2007). Using the half-year actuarial data, we find that although all of the provinces with private auto insurance saw small increases in the frequency of claims (between the first half of 2006 and the first half of 2007), there an accompanying rise in the severity of claims only in Ontario and P.E.I. Figure 6 shows claims severity for all coverages. The increase in frequency and severity in Ontario and PEI resulted in claims cost growth of roughly twice the growth experienced by the rest of the provinces, at 13.5% in Ontario and 16.9% in PEI.
www.canadianunderwriter.ca • May 2008
ONTARIO AUTO – CLAIMS COST DRIVERS So what are the cost drivers affecting claims costs in Ontario auto? An Insurance Bureau of Canada study of data from 2004 to 2006 (See Figure 7) indicates that costs on the accident benefits portion of the product are being driven by medical rehabilitation costs — in particular, the number of assessments and ancillary benefits (i.e. homemaking/home maintenance and attendant care).
Stepping back to look at long-term trends in both accident benefits and bodily injury claims, we see both have been steadily rising. The 2004 reforms (Bill 198) resulted in a dip for that year, but both have continued to rise ever since. EFFECT OF RESERVE RELEASES Returning to the national picture, it should be noted the underwriting picture becomes more concerning when the positive impact of reserve releases is removed from the equation. Development on prior-years’ claims was again favourable, producing an undiscounted reserve release of Cdn$1.4 billion. While the reserve releases evident in the financial data are for all lines of business, the majority (68%) is from auto insurance, followed by 12.3% from the liability line and 10.1% from the commercial property line. Favourable development stemmed primarily from the 2004 accident year, for which insurers released 3.5% of previously established reserves for 2004 and prior years. Releases from 2005 and 2006 accident years were -48.6% and 21.4% respectively. Removing the favourable effect on loss ratios of claims reserve releases provides a more accurate picture of real underwriting performance in 2007. For the past two years, we see that claims net of reserve releases grew 12.4% in 2007. This is much faster than premiums, which grew at 2.6%, personal disposable income, which grew at 6.1%, and the rate of inflation, which was 2.2%. This situation concerns more groups than just shareholders. If past insurance cycles are any guide, continued deterioration in underwriting performance will also bring the solvency supervisors knocking on the door to request capital increases or reduced writings in order to maintain security ratios. CONCLUSION As we’ve seen, the auto insurance story for most provinces remains relatively positive, albeit less so when the effect of reserve releases is removed. The most worrisome exception, of course, is Ontario. In fact, if claims continue to grow in 2008 at the rate at which they accelerated in 2007, Ontario auto insurers could find themselves dipping into capital in order to keep the line of business afloat. Because Ontarians are already spending more of their disposable income on auto insurance than consumers in any other province (in part because the Ontario product is significantly more generous), it is hoped that this unsustainable trend can be addressed through reduced costs via reforms to the system.
Ski l l
AsoneofCanadaâ€™ sl eadi ngs pec i al t y c ommer c i alaut oi ns ur er s ,Ki ngs way pr ov i de sc ov e r a gef orawi der angeof v ehi c l et y pes ,t hatar euni queandf or whi c hc ov e r a gei snotr e a di l ya v a i l a bl e i nt hemar k et pl ac e.Letours ki l land e x pe r t i s ewor kf ory ou.
GEARS The guiding principles for Ontario auto reform should include affordability, predictability, competition and fairness — and should apply the principle of indemnity rather than entitlement
By George Cooke, President and CEO, Dominion of Canada General Insurance Company
www.canadianunderwriter.ca • May 2008
’ve been asked for my wish list for auto reform in Ontario. Although I understand the appeal of a simple road map to the perfect system, the reality of auto product reform is more complex and fluid than that. A number of factors contribute to this, not the least of which is that we are not at the present time in a crisis situation that would limit the options and require an immediate, politically-driven resolution. In addition, we are not creating a new product in a vacuum of stakeholder interests. Finally, the product itself represents an integration of decisions and compromises; like multiple levers operating a complex machine, individual changes must be considered in a context of give
and take among competing and conflicting policy goals. Instead of a simple road map then, what follows is a discussion of what in my view should be the guiding principles for auto product reform. Recognizing where we are today, I include a list of options that, if implemented in accordance with the guiding principles, could enhance and improve a system that works, but still could work better. AFFORDABLE AND FAIR The auto product is different in every province in Canada, as a result of being redesigned or tweaked to respond to political imperatives at various times.
Having been involved in a host of product reform initiatives in many jurisdictions, I have observed that, while the devil is truly in the details when it comes to outcomes, the real imperative is to ensure the product design decisions are made based on principles of affordability, fairness and indemnification, with the effect of encouraging healthy competition. The fundamental challenge is how to balance the conflicting requirements that a system be both affordable for consumers and fair to injured persons. In attempting to find that balance, some considerations must be factored in so that the dynamics of the system will operate in the consumers’ overall interest.
Player or spectator?
A CIP Designation is like a hole in one. To excel at golf, you need the right tools, the coaching of a trained professional and the willingness to manage your game to win. Whether you’re a broker, an underwriter, adjuster or actuary, a Chartered Insurance Professional designation will give you a significant edge when the final score is on the line. The internationally recognized 10 course program puts an emphasis on practical application of theoretical knowledge. It builds on your experience and helps you to elevate your game. Through extensive public marketing, both insurance consumers and employers are learning the value of a CIP designation and understand that it indicates the pinnacle of the profession. Contact your local Institute or Chapter today to register for the upcoming semester. Choose an in-class program, taught at a location near you, or distance learning courses.
Are you ready to improve your scorecard?
CLIENT: Insurance Institute
Spyderworks Inc. 3176 Ridgeway Drive, Unit 59 Mississauga, ON Canada L5L 5S6 Tel.: (905) 608-8845 • Fax: (905) 608-9480
The Professional Standard
SOFTWARE: Adobe Illustrator CS
PROJECT: CIP Trade Golf
DATE: March 10, 2008
INKS This is proof is for colour break, TINTS not for colour. Refer to Pantone and process match books for accurate colour samples. This is a digital colour mechanical artwork. No traps have been made. It is the responsibility of the printer to identify to film separator/plate maker required press specifications.
Carefully check all copy and dielines. This artwork is proceeding to film or direct to plate. Once approved, it is the client’s responsibility for any errors either in these materials or those resulting from their use.
What does ‘fair’ mean to injured persons? To me, it must mean the application of the principle of indemnification rather than entitlement. The goal of the system should be to restore injured persons to their pre-accident state to the extent that is reasonably achievable. While helping people to improve themselves or their situation is a laudable goal, it is not — and should not be — the goal, or unintended outcome, of any system of insurance. Consumers are best served when companies enthusiastically seek their business, and when companies must compete to achieve and retain these relationships with consumers. Competition drives innovation, puts downward pressure on costs and raises the bar for service. It is unreasonable to expect that businesses will be bullish in an environment in which costs are unpredictable and their ability to price based on these costs is either constrained
their businesses if they lack confidence in their ability to predict claims costs. To be stable and predictable, costs must be contained to a reasonable extent, given that the premium collected today must be sufficient to pay today’s losses over the next several years. Since the late 1980s, there have been many attempts to create a hybrid no-fault system. Generally, economic loss has been no-fault and rule-based; non-economic loss has been subject to the tort regime and available only to more seriously injured persons. These hybrid systems have required tinkering or overhaul roughly every three to four years. Given this, there is a very real risk of consumers becoming jaded by these multiple attempts to balance fairness and affordability. All stakeholders influencing design of the system must strive to enhance its resilience and longevity.
Fairness requires smooth and timely delivery of accessible benefits. People who are injured should be able to proceed with their recovery without battling the system to be indemnified for economic losses associated with their injury.
www.canadianunderwriter.ca • May 2008
or threatened by political forces external to the risks being insured. Predictability is also important because insurers must sell the auto product to all comers without knowing its actual cost. Yes, we have good estimates, but they will always be wrong. It may take many years to know the actual profit, if any, earned from a specific sale. Hence being able to predict costs with reasonable accuracy and ease is a desirable feature of any system. In this regard, the insurers’ desire to know what they are likely to earn aligns with consumers’ desire to know what they are likely to have to pay. Keeping transaction costs low and capable of being controlled will contribute to predictability, to the benefit of both consumers and insurance company shareholders. STABILITY Stability is also a worthy objective: consumers have a realm of expectation between renewals and insurers need a reasonable basis on which to rely in reserving. Prudent insurers will hesitate to grow
In the period immediately prior to the introduction of the first hybrid no-fault product, the tort system in my view was not working at that time. I recall it was excessively adversarial. There were delays, abuses of process and considerable transaction costs. Based on this observation, I would say any increased reliance on the tort regime would require judgments to be timely, information to be disclosed and a level of compensation earned by the legal community to be fair to lawyers and accident victims. The regime must offer timely and affordable outcomes for plaintiffs. Rule-based systems, or those that are heavily dependent on process, require active and ongoing management to deter abuse. This means those charged with protecting consumers’ interests must be vigilant, as well as willing and able to intervene on consumers’ behalf. In Ontario today, in my view, minor or relatively minor injuries are still being overcompensated, while some of the most seriously injured people may not receive
enough. Unnecessary treatment and excessive assessment, combined with cumbersome processes and an insufficient degree of transparency, increase costs for lesser injuries to the benefit of those abusing the system. For Ontarians who sustain more serious injuries, the compensation needed to indemnify very young accident victims can exceed current policy limits. As well, a small number of those whose injuries fall between minor and major, and who have not purchased optional additional coverage, may not be adequately compensated. In order to be fair, the system must be seen to be fair by consumers; this is possible only if the system is capable of being understood. A degree of simplicity — or at least, the absence of complexity — is a key attribute in fostering the confidence and trust of consumers. As well, other measures in place to maintain consumers’ trust must be transparent: conflicts of interest or other potential risks to consumers’ interests should be revealed and understood. Fairness also requires smooth and timely delivery of accessible benefits. People who are injured should be able to proceed with their recovery without battling the system to be indemnified for the economic losses associated with their injury. Indemnity, not entitlement, as the basis for coverage must be a vital part of the foundation of the system. Achieving a balance between what are ultimately conflicting priorities is not easy; regrettably, we have not achieved the ideal in any jurisdiction. Nevertheless, it is surely worthwhile to seek a common set of objectives in support of an affordable, fair system that is truly aligned with consumers’ interests. Only when this is achieved for consumers can the interests of all other legitimate stakeholders be properly addressed. With the above discussion of guiding principles in mind, what changes could be made to the current Ontario auto product? There are no simple answers. Again it must be understood we are not starting afresh in the absence of complex integrated past decisions, nor are we being driven to respond to a crisis. To be effective, any or all of the following suggestions must be considered and implemented in a way that preserves an acceptable balance between affordability, fairness and indemnification and encourages competition.
Custom Software Solutions Providing IT Solutions for Brokers and Insurance Companies.
Limit no-fault accident benefits to indemnification only, reducing benefit levels to the lowest possible, given that our health care system already offers extensive no-fault treatment. • Make the auto product first payor or mandate commutation of any first payor benefits payable under other insurance policies. • Limit no-fault accident benefits to indemnification only, reducing benefit levels to the lowest possible, given that our health care system already offers extensive
www.canadianunderwriter.ca • May 2008
no-fault treatment. In this scenario, access to the tort regime for excess health care costs would be available for serious injuries. • Reduce the number of assessments permitted for non-serious injuries. • Adjust timelines to ensure timely delivery of treatment, but only treatment that is necessary.
• Permit the establishment and use of preferred provider networks, if the insured has elected this approach at the time of purchase. • Don’t adjust the verbal threshold for non-economic loss before the courts have defined in practical terms what it means. Once the threshold has been defined, adjust it only if change is needed and the cost of doing so is affordable for consumers. • Subject to affordability, set the deductible for non-economic loss at a level that eliminates only non-economic loss payments for minor injuries. • Enhance the capability of judges to handle complex personal injury cases, either through broadly-based training and/or the establishment of a specialized court. • Enhance the training and staffing of regulatory authorities and increase their emphasis on enforcement to eliminate, or at least punish, abusers of the system, including insureds, practitioners and insurers. Also, enhance disclosure of market conduct and related practices, as well as regulatory interventions and penalties. • In pricing, permit a timely response by insurers to changes in underlying costs and trends, recognizing that a competitive environment affords the best protection of consumers’ interests. Can these suggestions be implemented in ways that improve and enhance the current product, as well as achieve a balance between affordability and fairness? I think so. Of course, sweeping and more fundamental changes, if carefully devised, also could achieve balance. Once an approach is chosen, then the process of practical, contextual compromise can begin. Whether the approach is modest or ambitious, it is a lot easier to compromise effectively in the absence of a crisis. In any event, it must be remembered that while the objective of the system is to affordably indemnify those who are injured, those who are paying will not accept abuse, inefficiencies and overcompensation.
The Insurance Institute of Canada has done a comprehensive survey to determine where the demographics of Canadian society will be taking the insurance industry workplace in the future
By Peter Hohman, President and CEO, The Insurance Institute of Canada uman capacity issues such as recruitment, succession planning, education and training are at the forefront of industry concerns today. The need to attract new entrants to the insurance industry has become a resonant call from the industry’s CEOs and human resource professionals. These concerns are well-founded: they are confirmed in the findings of a recently-released demographic research report conducted by The Insurance Institute of
www.canadianunderwriter.ca • May 2008
Canada on behalf of the industry. Our primary objective in conducting this research is to add value to the industry by bringing much-needed information regarding future hiring needs, training and development requirements and potential leadership gaps. We know the industry will benefit from original and unique data representing a snapshot of the industry today, some predictions regarding human resource capacity in the industry in the future, as well as recommendations for addressing the identified needs. We are pleased with the scope of the report. We are confident it provides something the industry has not had before and desperately needs: a comprehensive and credible understanding of the human
The specific objectives of the research were to: • Analyze statistical data on insurance industry occupations in Canada available from Statistics Canada. • Develop demographic profiles of both current and terminated employees by occupation from data supplied by participating employers and provincial regulators within the property and casualty insurance industry. • Analyze links between industry demographic profiles and current demographic profiles of Canada’s labour force at the provincial and national levels. • Conduct a survey of the perceptions of senior human resources professionals within the industry on the issues and trends impacting the recruitment and retention of
capacity needs of the property and casualty insurance industry now and for the future. ABOUT THE STUDY To conduct the research study, The Insurance Institute commissioned Dr. Richard Loreto, one of the foremost experts in Canada on applying demographics to labour force analysis. He came highly recommended by the renowned author and demographer David Foot. In authoring the report, Loreto used Foot’s Boom, Bust and Echo cohort analysis and developed retirement projections using industry-supplied data to identify the future impacts of demographic change on the industry’s core occupations. [Please see Chart below.] The research study consisted of two
workers in the selected occupations. • Identify the degree to which the perceptions of senior human resources professionals are consistent with the demographic realities of the industry. • Project the change in the property and casualty insurance industry’s professional work force for the period from 2007 to 2017 that is attributable to demographic factors. • On the basis of the research, identify the strategic implications of demographic trends for the property and casualty insurance industry's professional work force and make appropriate recommendations regarding the management of demographic change.
kind of research, I have never had a better data set to work with,” said Loreto, the principal of R.A.L. Consulting Limited and author of the research. “For a first effort, the response from the industry’s stakeholders was fantastic. As a result, the quality of the analysis is extremely high. In addition, this project positions the industry to carry out effective human resource planning both now and in the future.” The final report contains in-depth and comparative analysis, identifies the variance between the human resources professionals’ perceptions and the realities of the industry’s demographic composition and projects the anticipated demographic change in the industry from 2007 to 2017. The report then identifies strategic implications for the industry based on the demographic trends and makes appropriate recommendations regarding the management of demographic change. To our knowledge, this type of industry-wide research has never been done before. To now have real, industry-specific demographic data — both to confirm what we believed anecdotally, and to project future implications of the demographic imbalances in the industry’s workforce — is significant and timely. KEY HIGHLIGHTS For the purposes of this article, we’ve compressed the research findings contained in the full report to these 10 key points: Imbalances Need Balancing The insurance industry has a number of imbalances in the age, gender, geographic and occupational composition of its work force. Specifically: • General concerns about the aging labour force in Canada are mirrored in the industry-specific data. With a median age of 41, the industry’s work force is aging in lock step with Canada’s labour force. This suggests the insurance industry is not a young work force and will continue to age (Canada’s labour force is projected to reach a median age of 44 within the next 10 years). • Although the median age for the industry work force is in step with the rest of the country, the industry’s proportion of people from the Baby Boomer generation (born between 1946 and 1964) is not. The
insurance industry’s share of Boomers is larger than in the labour force as a whole (in 2007, 49% of people working in the insurance industry are between 41 to 60; compared to 45% percent in the rest of the general population). • Further, in certain key occupations — brokers and adjusters, for example — median ages are significantly higher than the rest of the industry and the general labour force. • Not only is the industry’s work force aging, but industry employees retire younger (by two to three years). • The over-representation of females in the industry’s core labour force age groups leaves the industry dependent on workers who constitute less than 50% of the entire labour force and who have lower participation rates. The industry’s dependence on female workers may be a problem as competition for workers heats up over the next 10 years. A similar concern exists with regard to the situation where males are over-represented in core labour market age groups. The report acknowledges that both recruitment and retention become strategic challenges. • The share of boomers is highest in Western provinces (except Alberta); small towns and rural areas; the smallest companies, such as mutual insurers, but also the Crown Corporations; and the management group (where 70% are boomers). Incoming Will Not Replace the Outgoing There are not enough entrants to replace those exiting the industry’s labour force. Compared to the overall labour force, and compared to the minimal standard that there should be one person entering the work force for every worker who can retire, the industry’s entry-to-exit ratios are very low. Furthermore, they have been in a pattern of steady decline for some time. Using the yardstick of the entry-to-exit ratio to measure the impact of work force aging, the report indicates the most problematic areas are Western Canada, the small towns and rural areas, companies with fewer than 100 employees, mutual companies and Crown corporations. From an occupational perspective, all occupations (except actuaries and sales-and-service employees) are well below one.
41 www.canadianunderwriter.ca • May 2008
phases: the first involved conducting a “census” of industry employers; the second included a survey of human resources professionals. For the census data collection, we asked employers and the four largest provincial regulators to provide primary demographic data on their employees and their licensees, respectively, during the period between August and October 2007. Forty-three insurance and reinsurance companies, adjusting firms and brokerage firms participated in the study. Also, four insurance councils/regulators provided demographic data on their membership. In the end, the response included nearly 91,000 records (representing 28,300 records of active employees within organizations, 12,500 terminated records and 50,000 records from four regulatory bodies across the country). Due to the high number of records received, the data analysis is highly credible and representative. For instance, the industry data compare to the Statistics Canada data from the Labour Force Survey and 2001 Census. Also, the data are verifiable when company data are compared with data from regulatory bodies. Subsequently, a survey of human resource professionals in the insurance industry was conducted during the period November to December 2007. This survey assessed perceptions about recruitment and retention issues. Forty-four (44) responses were received from across the country. "In my long experience of doing this
Retirement Projections Give Reason for Pause Retirement projections for the industry indicate 25% of the current labour force could retire by 2017. In B.C., it’s 38%. In Crown corporations, it’s 39%. For the occupational category of management (all levels of current managers) 40% could retire by 2017. The majority of those eligible to retire will do so between 2012 and 2017. Leadership Void Looms Assuming the under-45 age group is the immediate feeder group to management, there is less than one worker under the age of 45 for every manager currently in the industry’s work force. The management cadre is the group that will be affected the most by demographic change. Existing middle and other managers are targeted for moving up. Non-managers are targeted to move in. Training and development explicitly focused at this group will be essential.
www.canadianunderwriter.ca • May 2008
Key Roles at Risk Regarding occupations, the research justifies the industry’s concerns about recruitment, retention and succession planning in the broker and adjuster communities. The data project high losses among the most experienced groups in these specific occupations. Data from the four regulators send an even stronger note of alarm than industry sample data. For example, within the adjusting community in B.C. and Alberta, a significant proportion of adjusters are in the upper echelons of the Boomer cohort, likely to retire within the next 10 years and leave substantial gaps in the adjusting ranks and leadership. For brokers and agents, the report demonstrates that one-third could retire within the next 10 years; significantly more could retire if they are in the management cadre. As the report indicates, the implications for recruitment, retention, and training and development are profound. Key Sector at Risk There is a “demographic divide” between the industry’s Crown corporation sector and private sector. Employees in the Crown sector are older across most occupational categories and retire earlier than their counterparts in private sector companies. The report emphasizes that over
the next five to 10 years, recruitment issues will be paramount for three Crown corporations, as the impact of retirement hits home in highly competitive regional labour markets. Targeted Recruitment Required In an aging work force situation, recruitment is critical. Not surprisingly, the report recommends recruitment efforts be targeted at the youth market and states “catching [the attention of the future labour force entrants] at the secondary and post-secondary school levels is imperative.” The research lends credence to the value of The Institute’s Career Connections program and calls for greater action and outreach in the future. [See Sidebar 2 for more information about the Career Connections program.] The research report recommends further strategic sources for recruitment, namely immigrants, aboriginals (especially in Western Canada), and the younger occupational groups currently within the industry (e.g., sales and service employees). The report acknowledges these sources are not easily “mined;” substantial investment in training and development, above existing industry levels, would be required. Retention Gets Greater Attention In an aging work force situation, retention is of equal importance to recruitment. The research report points to two retention “hot spots”: the Bust cohort (born between 1967 and 1979) and the Boomer cohort. Given that members of the Bust cohort are currently in their thirties, over the next 10 years they will migrate to their forties. However, the Bust cohort is smaller than the Boomer cohort. From a labour force perspective, this means not enough people in the Bust cohort are available to replace those currently in their forties — even if you factor in support from the immigrant population. For the insurance industry specifically, it is particularly worrisome the research shows that the Bust cohort appears to be a breeding ground for voluntary and non-voluntary exit at the company level (it was beyond the scope of the research to calculate precise exit rates form the industry). The report recommends that (a) employers revisit their retention policies and analyze the issue in relation to younger
employees to both understand the reasons for exit and the incentives for staying; and (b) employers come to a better understanding of the aspirations of their current part-time employees as a prelude to assessing their suitability for full-time employment. Reinvention, Rather Than Retirement, May Be the Solution The aging and potential retirement of large numbers of Boomers brings a new retention issue to the fore. The industry, especially in the West, has a substantial Boomer component. By 2017, they will range in age from 51 to 70 in an industry in which 60% of employees retire by age 60 and 80% by age 65. In the aging labour force scenario, the report questions whether the industry can let its most experienced workers simply leave? The aging of the industry’s work force calls for human resource management policies that facilitate the “re-invention of the mature worker.” Systematic Action Required Projections for consumer spending indicate there will be above average growth for the products of the property and casualty insurance industry. This bodes well for the continued growth of the industry, but also substantiates the need to ensure the appropriate supply of human resources to satisfy the growth in demand. Ensuring sufficient human resources in the future will require greater attention and broader strategic efforts for the recruitment and retention of workers. The report recommends the need for industry-wide and company-specific systematic work force planning. CONCLUSION This research provides the industry with useful information and data not presently available on current and future recruitment and retention issues. The responsiveness of the industry netted a sizeable data sample that has ensured its credibility and the verification against Statistics Canada data and the four regulator data sets. Given the significance of the findings, the research will provide employers with sufficient impetus to develop — and lead time to implement — appropriate strategies to meet their future human resource requirements.
07-3999 CU Transport
What if reducing risk was a mutual priority?
For more information, speak to your Zurich broker or visit our Web site:
Our fleet specialists are dedicated to safety. With more than 50 years of transportation industry experience, Zurich understands the complexities of your business, including the importance of reducing risks on the road and moving cargo across borders. With our broad capabilities, Zurich can meet the coverage needs of customers including automobile, cargo, liability, warehouses and terminals. Our underwriters and risk services professionals also have an in-depth understanding of the transportation industry. Because of our experience, our customers can feel protected and keep their trucks moving. www.zurichcanada.com
Because change happenz速 and Zurich速 are trademarks of Zurich Insurance Company
The New Breed of
AUTOPARTS Aluminum use in auto parts is not restricted to exotic sports cars, meaning the costs of repairs might be going up
By Greg Horn, Vice President, Industry Relations, Mitchell International
www.canadianunderwriter.ca • May 2008
44 luminum vehicles are everywhere. You don’t have to look very far to find them. You probably see one nearly every day driving to work. You may think there can’t be that many all-aluminum vehicles out there: after all, not many of us drive an Audi A8 or a Jaguar XJ sedan. Still, even though these vehicles are well known for being forerunners in aluminum construction, their production numbers don’t come anywhere near those of one unassuming vehicle — the humble Grumman Olson Mail delivery vehicle. Yes, that’s right: that box truck with the sporty Canada Post paint job is made from aluminum (aluminum exterior panels to be exact). Aluminum construction is an advantage in this case because it’s both
lightweight and provides corrosion resistance. But repairing the slab-sided panels of these vehicles is more like aircraft repair, involving the riveting of a replacement sheet into place. People in the collision repair industry, repairers and insurers alike, will have to adapt to these repair methods, since these vehicles are becoming more prevalent on today’s roads. These repair methods include partial construction or, in several cases such as the Audi A8 and the Jaguar XJ, full construction. As more of these vehicles hit the streets, collision repair facilities need to educate themselves on proper repair procedures for these vehicles in order to keep up with the changes and handle these
types of repairs. And it’s not just shop personnel who need to expand their knowledge; insurers also need to be aware of different repair procedures, costs and repair cycle time considerations. Both shops and insurers are partners in the collision repair process, which must meet the expectations of customers demanding quality repairs. Why aluminum? Push is finally coming to shove. There’s no denying we like our cars and SUVs big, but we don’t like paying for poor mileage at the pump. Obviously we need a solution to this problem. This factor, coupled with a government requirement to increase mileage capabilities, has put automakers in a position to find an
prize indemnity underwriters inc. The premier HOLE IN ONE product in Canada for the last 10 yearsâ€Ś
COMPARE! COMPETITIVE RATES including DISCOUNTS for multiple holes or tournaments, hole length over 180 yards, number of golfers under 144. HIDDEN HOLE $1,000 included with each hole in one purchased. PRIZE VALUES up to $1,000,000 available. WOMEN GOLFERS start from LADIES TEES (min 135 yards). PRIZE RE-INSTATEMENT up to $50,000 automatically included. HOLE LENGTH from 125 yards. MODIFIED HOLES subject to underwriter approval. PROFESSIONALS may be included. HOLE IN TWO may be insured on certain PAR 4 HOLES. SHOOTOUTS up to $1,000,000. P.I.U.I. QUOTES & PREMIUMS are net of commission. However up to 15% BROKER FEE is permissable. INSTANT QUOTES and policy issuance on-line or by a REAL PERSON. Your choice. Prize Indemnity Underwriters Inc. is a Managing General Agent for Echelon General Insurance Company. We do not compete with our Brokers and we do not write direct to the public.
Please contact Marlene or Anna at 4-995 Elgin Street W, Cobourg, ON K9A 5J3. Telephone: 1-888-264-9352 Fax: 905-373-1529 Email: firstname.lastname@example.org
answer to lighten vehicles. Add to this the ‘green’ factor — 70% of aluminum used to construct today’s vehicles is obtained from recycled metal — and you’ve got a near-perfect solution in aluminum, which offers a combination of environmentally-sound construction, lower weight, rigidity and durability. The key here is to recognize this material is only “near-perfect”: some challenges come into play in terms of paint adhesion and collision repair. Despite this, automobile manufacturers of both European and American nameplates are taking notice of aluminum’s advantages. NOT ONLY THE EXOTICS European automakers BMW and Mercedes alone together produce more than 700,000 partial aluminum body structures annually. They account for two-thirds of the 570 million pounds of aluminum sheet imported worldwide in 2006 (double the amount shipped in 2002). Their European counterparts, Audi, Jaguar, Ferrari, Rolls Royce and Lotus are also key players, producing about 100,000 all-aluminum body vehicles combined. American nameplate manufacturers are working to keep pace with European manufacturers, having realized the weight-saving benefits of aluminum. A Ford Motor Company spokesman, for example, has estimated an average of 250 pounds of aluminum is used in each vehicle now produced. It’s clear both American and European manufacturers are using aluminum more often, albeit in different capacities. European manufacturers may be leaders in terms of using innovative aluminum body panel applications, but 2006-model North American cars still exceed their European counterparts in aluminum use by almost 60 pounds per vehicle on average. North American manufacturers achieved this by using more aluminum-intensive engines and a higher percentage of automatic transmissions that are well-served by light aluminum casings.
www.canadianunderwriter.ca • May 2008
DID INSURERS AND BODY SHOPS TAKE NOTICE? When the newest-generation Jaguar XJ was introduced six years ago, its construction was even more advanced than that of
Pre or Post Aluminum Make Model Lincoln TC w/steel
Avg. Part $
Avg. Labor $
Avg. Add'l cost $
Avg. Paint Materials $
Lincoln TC w/Aluminum
the Audi A8. Using state of the art Alcan Aluminum Vehicle Technology — a joining system that enables the production of a sheet-based aluminum structure similar to, but lighter and stiffer than, a conventional stamped structure — the world's first volume-produced aluminum monocoque car established new standards in fuel efficiency, handling and safety. However, the collision repair industry as a whole didn’t seem sure aluminum usage
Pre or Post Aluminum Make Model
Avg. Part $
Avg. Avg. Add'l Labor $ cost $
Avg. Paint Materials $
BMW 5 Before Aluminum
BMW 5 With Aluminum Front $2,568
Jaguar XJ Before Aluminum
Jaguar XJ After Aluminum Body
would soar. Many collision repairers believed these vehicles were part of a limited, ultra-exotic group of vehicles. Given the low production numbers, the costs involved with becoming a certified cosmetic or structural collision repairer did not seem worth the investment. Insurers shared the same hesitation. Logically, they felt that since the production of these vehicles would be limited, so too would the number they would have to insure. Their hesitation stemmed also from the tight manufacturer- and dealer-controlled repair processes that prohibited non-certified repair shops from performing repairs and wondered if that would add to repair costs. ARE REPAIR COSTS FOR ALUMINUM HIGHER? The simple answer? Yes, some are. Results of our recent comparison between the current aluminum models of the BMW 5 Series and the Jaguar XJ-Series and their steel predecessors, both with certified repair programs, point to this factor. Why was the Audi A8 excluded? The A8 was a completely new vehicle when it was introduced; since there was no previous comparable model made of steel and roughly the same class of vehicle, the Jaguar XJSeries and the BMW 5 Series provided a more level playing field and more accurate comparison. Results of this comparison revealed some remarkable increases in costs, especially when looking at the costs of labor and parts along with paint and materials costs. A Mitchell data study of repairable collision estimates found increases in average parts costs, as well as labor, additional items and paint costs, associated with aluminum since the introduction of each model. Dramatic increases in the cost for average parts jump right out for the BMW. But they are even more striking for the Jaguar. The costs of purchasing the raw material and creating hardened aluminum body and structural parts are expensive; logically, it would be expected for these costs to be passed on in the retail
WHERE INDUSTRY LEADERS MEET
O c t o b e r 1 - 3 , 2 0 0 8 - H i l t o n L a c - L e a m y, G a t i n e a u - O t t a w a , Q u e b e c The NICC is Canada’s pre-eminent insurance conference attended by senior executives of insurers, brokers, reinsurers, risk managers, regulators and industry associations.
Sessions and speakers include:
• • • Together with our senior advisory committee of • industry leaders, we are making the 2008 • conference an outstanding event. • • In addition to the impressive agenda, • the NICC also offers you considerable opportunities to meet colleagues, network and • • strengthen your business relationships. • Social events include a pre-conference golf • tournament, a high-quality spousal program, an • opening night cocktail reception, a gala dinner • and exciting post-dinner entertainment.
Gregg Hanson – Conference M.C. Don Drummond, Chief Economist, TD Bank Financial Group Julie Dickson, Superintendent, OSFI Andrew Coyne, National Editor, Maclean’s Claude Dussault in conversation with the supers of ON, QC and AB Global reins. CEO panel Patrick Thiele, Jean-Luc Gourgeon and Chris O'Kane Nic de Maesschalck, World Federation of Insurance Intermediaries IBC presentation on climate change challenges A legal debate between Richard Halpern and Alan D’Silva Risk manager issues – moderated by Susan Meltzer Actuarial auto panel – moderated by François Boulanger Robert McDowell and Philipe Sarrazin on part XIII of the ICA Commercial lines panel – moderated by Robert Landry Insuring to Value - moderated by Kevin McNeil
Register online at www.niccanada.com or contact Laura Viau at email@example.com. PLATINUM SPONSORS
NICC sessions are accredited by RIBO. Please visit www.niccanada.com for details
A Mitchell data study of repairable collision estimates found increases in average parts costs, as well as labor, additional items and paint costs, associated with aluminum...
being passed on in the form of increased labor and other shop-influenced prices. Additional costs and paint and materials costs spiked as well, partially due to the additional procedures and special preparation needed for aluminum panel refinishing.
ember it’s th m e e pe
price of collision parts. The cost of joining these certification programs, once nominated by the local Jaguar dealer, can be high for body shops. Some shops report spending between US$70,000 and US$100,000. It appears these costs are
ep thing oving. sm
www.canadianunderwriter.ca • May 2008
Royal & SunAlliance is a leading provider of home, car and business insurance through our network of local brokers across Canada. We have simplified and refined our brand. Same bright ideas. Same great products. And importantly, the same positive people. After all, it’s people not words that get things moving. So get moving, visit www.rsagroup.ca. © 2008. The RSA logo is licensed for use by Royal & Sun Alliance Insurance Company of Canada.
Is this dramatic increase also found on the more commonly driven cars moving toward the use aluminum bolts on panels? To find out, we looked at the restyled 2003-06 Lincoln Town Car with an aluminum hood. Ford indicates more than half of its cars have aluminum hoods now, and the manufacturer is moving towards the use of aluminum lift gates on selected SUVs. To illustrate the impact of an aluminum hood, we charted the vehicle model with the steel hood (noting the part price of each). We then charted what we found against the same information found for the Jaguar and BMW. Overall, the parts and labor costs are high. But for this selected model, data show there was little appreciable change in the repair costs when the aluminum part was limited; in fact, the costs were lower with the aluminum panel car compared to the steel panel vehicle. It is important to note these are both luxury vehicles; in the case of the Lincoln and Jaguar, the manufacturers — up until the announced sale of Jaguar to Tata Motors — were owned by the same parent company, Ford Motor Company. Jaguar requires certified cosmetic repair and will not allow non-certified repairers to purchase aluminum collision parts for Jaguar. But every collision repairer can purchase an aluminum hood and repair a Lincoln vehicle. Taking the question of whether aluminum increases the cost of repairs a step further, data indicate two trends: 1) the more aluminum in use, the higher the repair costs and 2) the more aluminum in use, the more control the vehicle manufacturer will have over the repair process. So what should we take away from this study? Anytime there are dramatic changes in the repair costs from comparable models, it is important to look at your companies’ individual loss history with the vehicle to verify the premium properly reflects the underwriting risk.
The 2008 Learning Summit Register today for the 45th Annual Conference in beautiful Whistler, British Columbia September 21-24, 2008 Fairmont Chateau Whistler www.ciaa.org
The Canadian Insurance Accountants Association (CIAA) travels to Whistler, B.C. for an outstanding business program and superb conference facilities. Keynote speaker is Don Bell, one of the founders of WestJet, widely considered the company’s “culture guru” who championed teamwork and customer service. The recently retired EVP brings a compelling story of how your people can take your business to amazing heights. Contact conference director Sandra Taylor of the Ontario School Boards’ Insurance Exchange at firstname.lastname@example.org or call 519-767-2182.
Founded in 1934, the CIAA promotes the study, research and development of financial management and insurance accounting. Join the CIAA today by visiting www.ciaa.org
GAPS As implemented, Ontario’s Bill 18 may have protected the interests of car leasing and rental companies, but perhaps not the interests of their insurers
By Donna Ford
young passenger suffered devastating injuries in 1997 when she was ejected from a leased car that had been negligently driven. The driver’s insurer paid its $1 million limits, and the leasing company’s insurer settled on the eve of trial in 2004 for just under $10 million, exclusive of costs. This case and others like it prompted car leasing and rental companies to lobby the Ontario government to change its vicarious liability rules. The leasing industry argued a lease was simply one of a number of methods to finance the acquisition of a vehicle, and thus leasing companies should not be exposed to unlimited liability simply because a vehicle continued to be owned by the leasing company under this form of financing. The Ontario government responded with Bill 18 in 2006, but the solution may now be proving to be unduly complex, according to Stephen R. Moore, a partner with the Toronto firm of Blaney McMurtry LLP.
A www.canadianunderwriter.ca • May 2008
Moore spoke on this topic in November 2007 at an Ontario Bar Association CLE conference entitled “Third Annual Hot Topics in Motor Vehicle Insurance.” He made his argument again in February 2008 at Osgoode Hall’s Professional Development Conference entitled “Managing and Litigating Motor Vehicle Accident Claims.” Moore believes government drafting errors and delay further complicated the introduction of Bill 18, which amends the Compulsory Automobile Insurance Act, Highway Traffic Act and Insurance Act. Most notably, until the new OEF 110 — which reduces coverage for lessees or drivers of leased vehicles — can be endorsed on the Standard Excess Automobile Policy (SPF 7), which provides excess liability coverage for drivers on a standard policy, the new legislative scheme benefits the car leasing and rental companies, but not their insurers. In the absence of amendment, Moore argues, insurers will probably continue to insure operators and possibly lessees to the full policy limits.
THE NEW REGIME The changes contained in Bill 18 took effect on Mar. 1, 2006. The basic scheme is fairly easy to understand: • A “lessee” is now defined as “a person who leases or rents a motor vehicle or street car for any period of time.” • For the first time, lessees are liable in the same manner as the owner of a vehicle for any loss or damage caused by the negligent operation of the vehicle. Also, the owner, operator and lessee are jointly and severally liable to the plaintiff (although it is unclear what their liability is to each other). These provisions apply to bodily injury and death claims (referred to in this article as B.I.), and to property damage claims (referred to in this article as P.D.) that might be caused by the operator of a rented or leased vehicle. • The provisions that limit liability of lessors apply only to B.I. and do not apply to taxis, livery vehicles and limousines. (Lessors are still fully liable for P.D.) The liability of lessors is essentially limited to Cdn$1 million, less any insurance the
The re-ordering of priority of policies is only supposed to apply to bodily injury claims. However, the wording of the revised OAP 1 appears to mandate a re-ordering for all claims, including property damage claims.
INSURANCE ISSUES The re-ordering of priority of policies is only supposed to apply to B.I. claims; however, the wording of the revised OAP 1 appears to mandate a re-ordering for all claims, including PD claims. There is also a priority re-ordering for all claims in the new OPCF 5C, which provides coverage
to the lessor for short-term vehicle leases. Courts will need to interpret these ambiguities. The OEF 110 endorsement, which takes effect on or after Jan. 1, 2008, is available for endorsement on the SPF 7. The OEF 110 endorsement provides that
the maximum amount of insurance available under the excess policy is capped at Cdn$1 million — or any other larger figure that the insurer might specify — less any insurance available to the lessee/renter or the driver. Once that figure is reached, any remaining limits under
51 www.canadianunderwriter.ca • May 2008
lessee or operator has available. If such other policies exist, the lessee’s policy responds first, the operator’s policy responds second and the lessor’s policy responds third. The Cdn$1 million maximum liability of the lessor can be modified by regulation (there are currently no such regulations) or an act requiring the vehicle to carry higher limits (the Public Vehicles Act, for example). These amendments do not apply if the lessor was negligent. • Amendments to the Compulsory Insurance Act require persons renting or leasing vehicles for periods in excess of 30 days to be able to demonstrate the vehicles are insured under auto insurance policies. Moore says the entire package of new and revised policies and endorsements should have been approved before the legislation took effect. But due to a lack of coordination between the government and the Financial Services Commission of Ontario (FSCO), Moore contends, FSCO introduced them on two separate dates after Mar. 1, 2006. The result was slightly different rules for three different time periods. These three time periods include: • Mar. 1, 2006 to the vehicle’s auto insurance renewal date in 2007; • from the vehicle’s auto insurance renewal date in 2007 to the renewal date in 2008; and • from the vehicle’s auto insurance renewal date in calendar 2008 onwards. In some cases, different vehicles in the same collision may be governed by different rules. It is possible that the renewal dates for the primary and excess coverage on the same vehicle will be different.
the SPF 7 are only available to the named insured (leasing or rental company). In the context of short-term rentals, this endorsement appears to have fixed the problem that the SPF 7 insures drivers and lessees. If the car rental company is insured pursuant to an OAP 1, with limits of Cdn$1 million endorsed with an OPCF 5C, as well as a SPF 7 endorsed with an OEF 110, then the maximum for which these insurers will be obliged to indemni-
— which is a significant change from the past. For rating purposes, prudent insurers are now asking commercial insureds to provide full particulars of how often employees, partners, etc. are renting vehicles, as well as how often they drive their own vehicles on company business. Two new endorsements to this policy are available for new business and renewals on or after Jan. 1, 2008: • OEF 98A permits insureds to have
For rating purposes, prudent insurers are now asking commercial insureds to provide full particulars of how often employees, partners, etc. are renting vehicles, as well as how often they drive their own vehicles on company business.
www.canadianunderwriter.ca • May 2008
fy the renters or drivers is Cdn$1 million. But, as already noted above, until the OEF 110 is used, the new scheme benefits the car leasing and car rental companies at the exclusion of their insurers, who will probably continue to insure operators and possibly lessees to the full policy limits. FSCO issued two bulletins when it announced the changes that took effect beginning on Jan. 1, 2007 and Jan. 1, 2008, respectively. In Moore’s opinion, the bulletins confuse the situation further because they direct or encourage changes to be read into policies in force on or after March 1, 2006 and they will require judicial interpretation. For those who rent cars and do not own their own automobiles, it appears their coverage is capped at Cdn$1 million. Moore stresses the need for insurance companies to issue a driver’s policy to those people who wish additional coverage, as it appears that such coverage is not available now. NON-OWNED INSURANCE The SPF 6 is the standard non-owned auto policy. Under the revisions, if an automobile is rented in the name of a company (i.e. an employer), the policy will provide the primary coverage — primary to the policy of the owner of vehicle
excluded drivers under this policy, and • OEF 98B (Reduction of Coverage for Lessees or Drivers of Leased Vehicles) provides that this coverage is excess to any coverage the renter or driver has available to respond to the claim; it essentially makes the SPF 6 excess coverage only where a partner, officer or employee rents a vehicle for company business. Moore anticipates most brokers would recommend placing the OEF 98B endorsement on any SPF 6 coverage they write. There may be situations in which both the employer’s OAP 1 and SPF 6, endorsed with an OEF 98B, may be obliged to respond to the same loss. THE SEARCH FOR PARTIES AND DEEPER POCKETS A police report provides the names of the owner and driver of a vehicle, but usually does not indicate if the car was leased or rented. An MVA plate search should be done, Moore argues. Sometimes the owner of the plate and the owner of the vehicle to which the plate is attached are different entities; usually this means the vehicle is leased or rented. Moore says counsel will want to get production of the rental agreement and police notes to get any additional information on possible parties.
If someone is injured through the negligence of the driver of a leased or rented vehicle, in order to have access to more than Cdn$1 million, counsel will start looking for other parties, Moore observes. If it is determined the driver of the leased or rented vehicle was in the course of his or her employment, the employer will be added as a defendant on the basis of vicarious liability. However, even if the vehicle was not being used for company purposes at the time of the accident, the driver should be asked (usually at discovery) if the vehicle was rented for business purposes, Moore says. On the basis of the OCF 98B, if the answer is yes, there may be access to the insurance. MINDING THE GAPS Moore says FSCO has failed to understand real distinctions between the interests of leasing and car rental companies. For example, he argues, if FSCO felt car rental companies should provide renters and drivers with a minimum coverage of Cdn$1 million, this should have been mandated in the OPCF 5C. Such an approach would have allowed FSCO to issue an endorsement amending the SPF 7 policy so that, for leasing and car rental companies, no coverage would have been available for the driver or owner. This would have preserved the ability of excess insurers to subrogate against the lessees and drivers in appropriate circumstances, Moore says. The current OEF 110 may be appropriate for car rental companies, but not for car leasing companies. Moore believes that if the courts accede to FSCO’s request or demand that expanded coverages be read into policies effective Mar. 1, 2006, then people who own and rent cars will have coverage for their vicarious liability as renters under their own insurance policies from that date. Generally, until a car rental or leasing company’s excess policy is endorsed with the OEF 110 (not possible before Jan. 1, 2008), the excess policy probably provides coverage to the driver to the full limits of the excess policy, Moore observes. For this reason, Moore suggests insurers recommend to their car rental and leasing clients that they consent to having this endorsement added to their excess policies immediately.
Safety at What Price? A number of new gadgets to improve vehicle safety are in the works, causing collision repair centres and insurers to wonder how much it will cost to repair the new technology
By Lianne Perissinotti, Director of Marketing, Collision Solutions Network
ohn and Jane are a newly married couple with their first child on the way. One sunny afternoon, they set out to purchase a minivan for their growing family. Upon arriving at the dealership, Charlie, an experienced car salesperson greeted them. As Charlie welcomed the couple, he thought back to how many couples similar to John and Jane he had helped before. He thought back to the days of the dependable Oldsmobile Cutlass and how different the purchasing expectations of buyers today are from back then. “How can I help you today?”asked Charlie. “We’re looking to purchase a minivan,” Jane answered. “Something reliable but most importantly safe. We want airbags, cruise control, power locks and doors with remote key entry, a GPS…oh…and a DVD player to entertain the little one. Just the basics.” Charlie thought to himself: Just the basics? That’s more than just the basics. Are Jane’s requests really more than just the basics? The automotive world
J www.canadianunderwriter.ca • May 2008
has evolved greatly with the introduction of new and improved technology for consumer safety and convenience. Consumers no longer consider the “basics” to be getting someone from Point A to Point B. Consumers in the new millennium are looking for the conveniences available in the market; now they are considering those conveniences to be a standard necessity. It is evident consumers’ expectations increase at the same rate technology does. What do you consider when purchasing a new vehicle? Do you think about the same features as John and Jane? As you know, these features are all offered at price; some are now accounted for in the base price of a vehicle. But have you ever stopped to consider what it would cost to repair or replace these additional features? Not likely. No one plans to have an accident, but the cost of repairing these modern automotive conveniences is an issue faced by collision repairers on a daily basis. And rising costs to repair vehicles will in turn have an impact on insurers
when it comes to underwriting and pricing an insurance product. So let’s look at some of today’s “basic” features and see how they might affect a collision repair centre or insurer’s costs. SAFETY FEATURES Airbags Upon purchasing a new vehicle, consumers like John and Jane are looking for additional safety features. One of the most popular features is additional airbags. In the past, airbags were only offered for the driver and front passenger. Today, they are present throughout the vehicle. They include side airbags and airbags for the passengers seated in the rear of the vehicle. These features have been added to the vehicle to protect against high-impact collisions, but sometimes they deploy in a low-impact collision. A deployed airbag can add between $3,000 and $7,000 to the repair costs (including replacement and labour and parts related to the airbag deployment), which increases the potential the vehicle will be ‘written-off.’
pg56CUW May-08-Ins Svcs
• INSURANCE PUBLICATIONS •
• RESTORATION •
The Claims Professional Magazine www.claimscanada.ca
Specialized and friendly legal assistance to general insurance brokers.
• LEGAL • “Serving Canadians Coast to Coast” • Mergers, acquisitions, sales • Producer/employee agreements and issues • Succession planning and implementation • Shareholders/partnership agreements • Financing (416) 324-2610 Email: email@example.com www.borlak.ca
MOISTURE CONTROL SERVICE 24 Hour 1-800-MUNTERS (1-800-686-8377) www.muntersmcs.com • Water Damage Recovery Services • Document/Media Restoration • Temporary Humidity Control Over 35 Offices in North America Access to Thousands of Equipment Units
• CAREERS •
• Insurance Industry Online •
PROPERTY RESTORATION SPECIALISTS Toll Free 24 Hr. Assignment and Emergency Response #
Although you cannot put a price on the safety of your family and friends, you can put a price on the repair of the vehicle. The vehicle may only have $2,000 worth of collision damages, but airbag deployment can increase the average repair cost significantly. Driving Editors Couples like John and Jane may be interested in a new safety technology in the works from IBM. An article written by Lucian Dorneanu, a science editor, describes a more complex type of driverassist technology currently being researched. This technology aims to give cars “reflexes” that would prevent accidents and traffic jams. For example, these active safety devices would allow vehicles to communicate with one another and exchange information received through road infrastructure and satellite transmissions.
all Canadian collision repair facilities will be obliged to change to waterborne paint or a low-VOC (Volatile Organic Compound) paint. Environment Canada’s goal is to have a stop-sell/stop-manufacture date of existing paint technology by Jan. 1, 2009. Although the proposed legislation date will certainly be extended to allow for a smooth changeover for existing collision repairers, waterborne paint will inevitably become the standard of the future. Converting to this environmentally friendly waterborne paint technology is not a small investment. There are training costs to consider. Also, training time might translate into reduced production time, as the trainees work through the learning curve. There are also costs associated with equipment investment. Collision repairers must invest in additional drying systems to increase the
The cost of repairing these [safety features] is an issue faced by collision repairers on a daily basis. And rising costs to repair vehicles will in turn have an impact on insurers...
Eco-friendly Solutions: Paint Consumers, especially in the younger demographics such as John and Jane, are now looking towards using environmentally friendly technology in all facets of their life. The collision repair industry is not exempt from striving to provide ecofriendly solutions. In the coming years,
airflow in their paint booths, because waterborne paint technology requires more drying time than current paint process. Thus, to maintain the same production levels using waterborne paint as that for using the previous paint technology, collision repairers must invest in additional drying systems that range in price from $2,000 up to $20,000! It’s a large investment, but how do you put a price on the future of our environment? In addition to the purchase of these drying systems, collision repairers are faced with increased paint preparation time. The associated production costs of waterborne paint are still being determined, but eco-friendly solutions will no doubt cost collision repairers, insurers and ultimately the consumer additional funds. Eco-friendly Solutions: Hybrids Among couples such as John and Jane, there is a growing concern regarding the cost of operating a vehicle. Fuel prices have steadily increased over the past few years as production of this natural
ESTIMATING In tandem with the new technological advances, the cost of determining whether a vehicle can be repaired has evolved. With the introduction of the Internet and modern technology, preparing an estimate with insurance companies has become much more technologically advanced. If John and Jane were involved in an accident with their new minivan, they would receive a computerized detailed estimate of the damages. This would be shared with the insurance company electronically to obtain the insurer’s approval. To conduct business effectively with insurers, collision facilities must invest in computers, digital cameras and also subscribe to estimating software packages to communicate with the insurance companies’ image desks. The associated costs and constant upgrades can translate into thousands of dollars each year. Although the requests of John and Jane seem extravagant, they are in keeping with those of most consumers. As the use of technology increases in automotive manufacturing, the expectations and requests of consumers similarly evolve. One must consider the impact increased technology will have on the collision repair industry. As technology increases, collision repairers must adapt and invest in their businesses accordingly. In the coming years, this can have serious implications on the repair process, as well as for insurers. We will need to consider the unseen investments made by collision facilities and factor these investments into the future and safety of all those on the road.
57 www.canadianunderwriter.ca • May 2008
Vehicles would be able to take corrective action when the situation demands it. Also, they would be able to provide the driver with vital feedback on potentially dangerous situations. This will transform the vehicle into an intelligent tool that can react to environmental stimuli and adapt to rapidly changing circumstances on the road ahead. If this technology becomes a standard part of vehicles in the future, it may help to reduce the number of collisions. However, if such technology is damaged in a collision, it will undoubtedly increase the average repair cost. Only time will tell how much it might cost in the future to repair these types of safety features.
resource has lessened and demand has increased. With the introduction of hybrid vehicles, automotive manufacturers have been answering the call of consumers and benefiting the environment in the process. The hybrid vehicle typically achieves greater fuel economy and lower emissions than conventional internal combustion engine vehicles. But although hybrid vehicles benefit the environment, damage to a hybrid battery can run approximately $2,000 to $3,000 per battery pack. Similar to deployed airbags, if damaged, the hybrid battery can turn a once-repairable vehicle into an irreparable write-off.
...continued from page 8
Canada’s class action plaintiff bar driving U.S.-style litigation in Canada anada’s class action plaintiff bar is becoming more sophisticated as it adopts U.S.-style litigation practices, people attending an AIG Canada product symposium were told. Canadian plaintiff lawyers are increasingly seeking contingency fees in class action cases, Alan D’Silva, partner at Stikeman Elliott LLP, suggested. “We're seeing the courts approving multiples of four or five times the plaintiff lawyers’ fees,” he noted. “And with that, we’re seeing the development of a very sophisticated plaintiffs class action bar in Canada.” In theory, the Class Proceedings Act is intended to offer consumer protection and modify the behaviour of organizations doing something wrong, D’Silva observed. But “what we're seeing is — and this is not surprising, given the fees that lawyers can recover in these types of cases — some of these cases are in fact lawyerdriven and not consumer protection- or altruism-driven,” he said. The most recent example of this phenomenon, D’Silva noted,
M A R K E T WAT C H
www.canadianunderwriter.ca • May 2008
is a case called Garland v. Consumers’ Gas Co. Initiated 10 years ago, the case addresses whether a late payment fee charged by the gas company is an illegal interest payment under the Criminal Code. It went up to the Supreme Court of Canada a couple of times,” D’Silva said.“Eventually the class action got certified and it got settled. And Consumers’ Gas [now Enbridge] settled the case for $24 million,” D’Silva said. The underlying assumption was that the $24 million would serve as indemnity for all of the people who had paid the late fee. “The problem was, when they started to implement the settlement, they couldn't figure out who had overpaid and who hadn't because they didn’t have the proper records,” D’Silva observed. “So $12.5 million of the settlement went to the lawyers who were active in the case, and the rest went to a charity fund. “The story in that case is — without being critical of anyone — settlements are getting completely out of whack. Here’s a case where plaintiff lawyers say that this is a consumer protection case, they walk away with $12.5 million and the consumer gets nothing.” ■
Bill 22 in B.C. may require insurers to pay all bodily injury health care costs nsurers will be on the hook for all health care costs related to bodily injury claims if Bill 22 is passed in British Columbia, warns Jonathan Hodes of Clark Wilson LLP. Since the 1950s, the insurance industry in British Columbia had an unofficial agreement with the Ministry of Health that insurers would repay the government for hospital costs incurred by claimants injured as a result of the negligence of the insured, Hodes wrote in the Clark Wilson LLP April 2008 newsletter. In practice, this occurs only occasionally and the agreement is likely unenforceable, he added.
But that may change in the future, now that B.C.’s legislature has introduced Bill 22, the Health Care Costs Recovery Act. Key features of the legislation include: • when a plaintiff commences legal action for personal injuries or death, he or she must include a health care services claim in the legal proceeding; • health care services claims would include all government-funded services, including hospital costs, medicare and continuing and future care costs; and • if an insurer becomes aware its insured has or may have caused personal injuries to or death of a beneficiary, the insurer
must notify the government within 60 days. It must then comply with the ministry’s requests for further information. “If Bill 22 is passed, insurers handling claims in British Columbia will have to contend with the added layer of damages in every claim,” Hodes writes. “In particular, [they] will have to ensure that the relevant notice provisions are complied with in order to close their files. “U.S.-based insurers will see their B.C. claims fall into line with their experience south of the border, while Canadian insurers will see their exposure increase on virtually every claim.” ■
Insurers can conduct examination under oath in adversarial situations he Supreme Court of Canada has rejected leave to appeal a decision that found insurers are entitled to conduct an examination under oath of an insured regardless of whether or not the relationship between the insurer and insured is adversarial or a lawsuit has commenced. In Baig v. The Guarantee Company of North America (GCNA), Ontario’s Court of Appeal reversed the decision of a motions judge, who found the examination of oath insurers are entitled to conduct under Statutory Condition 6(4) of Ontario’s Insurance Act to be redundant in the situation of a threatened legal action. In an adversarial situation, the motions judge ruled, the insurer already had the right to examine the insured for discovery in a lawsuit. “I do not agree with the motion judge’s conclusion that Statutory Condition 6(4) ceases to apply once the relationship
between the insurer and the insured becomes adversarial or when litigation is commenced,” Ontario Court of Appeal Justice Russell Juriansz wrote for the Appeal Court. “There are no words in the provision that indicate an insurer’s right to examine an insured is limited to the situation in which their relationship is not adversarial.” GCNA insured Rehman Baig’s 1999 BMW M3 convertible for Cdn$71,300 after Baig submitted an appraisal signed by Leanne Giilick of Discount Appraisals. The car crashed in 2004. Subsequently, GCNA learned Giilick was the common-law partner of Baig, and that together they operated Discount Appraisals. When the insurer tried to examine Baig under oath about the car’s initial appraisal value, Baig’s lawyers refused to answer the questions. ■
Risk management Companies gearing up slowly for International Reporting Standards
Reinsurance Aon predicts cat rates to continue slide in ‘08
interim and annual financial statements for fiscal years. “This is a chance to review the exposure draft from a fatal-flaw perspective and determine whether the move to IFRS will create any unique issues upon application within Canada,” Salole said. ■
PLAN NOW TO JOIN US FOR TIWA’s
Montana’s… The Last Best Place, 145 John Street, Toronto
Best Pint-Face Winner Receives a Prize
5 T H
A N N U A L
Pub Night! WHEN:
Thursday, June 26, 2008 5:00 pm
NTO TORO NCE RA U S N I EN’S WOM TION CIA O S S A
BBQ Dinner Included Cash Bar DOOR PRIZE CONTRIBUTIONS ARE WELCOME Please contact us ahead of time to advise of your prize donation so that we can recognize your company appropriately.
Tickets: $30 each. Order Deadline June 23, 2008! Order form available at: www.tiwa.org in the ‘Events’ section FOR TICKET INQUIRIES CONTACT:
Yvonne Hird at ServiceMaster of Canada firstname.lastname@example.org (t) 905-670-0077 ext. 446 There are a limited number of tickets to this popular event so don’t delay. Tickets are not refundable. Tickets are available only through advance purchase and will not be sold at the door.
www.canadianunderwriter.ca • May 2008
t current pricing levels, and given the current capitalization of the property and casualty reinsurance market, Aon Re Global estimates it would require a groundup property catastrophe occurrence loss in the range of between US$30-50 billion to change the current softening of property catastrophe reinsurance rates, terms and conditions. Aon Re Global’s market expectations for the June 1 and July 1 renewals for Canada include a -7.5% to -12.5% rate on line change, a capacity change of 10% to 15% and a stable retention change.
1, 2011 was just confirmed in midFebruary, he continued. Still, now is the time to get ready, Salole noted. Earlier this month, CA released an exposure draft of the coming standards, outlining what will be expected when IFRS is adopted for the
M A R K E T WAT C H
anadian companies are generally nearer the starting gate than the finish line when it comes to preparing for the country’s transition to International Financial Reporting Standards (IFRS), a survey by the Chartered Accountants of Canada (CA) has found. Just over half of the 550 senior executives in Canadian companies surveyed indicated their company would need to adhere to IFRS, a CA release says. Among those executives, only 8% confirmed their companies have either started (4%) or completed (4%) the conversion process. About three in four said their companies have either not started to assess the impact (42%), or are in the process of assessing the impact (30%). “The results are not surprising,” said Ron Salole, vice president of standards with the Canadian Institute of Chartered Accountants. The changeover date to IFRS of Jan.
INSURANCE INTERNET DIRECTORY online at www.canadianunderwriter.ca ACCIDENT REPORTING CENTRES ACCIDENT SUPPORT SERVICES INTERNATIONAL LTD. Collision reporting to Insurers & Police, promote claims programs, fight fraud, photo imaging damage, electronic delivery & total customer service to insureds. www.accsupport.com ACCOUNTANTS WILLIAMS & PARTNERS INC. Forensic and Investigative Accountants. www.williamsandpartners.com ASSOCIATIONS CANADIAN INDEPENDENT ADJUSTERS' ASSOCIATION (CIAA) "The voice of Independent Adjusters in Canada" www.ciaa-adjusters.ca
MCLARENS CANADA International Loss Adjusters and Surveyors www.mclarens.ca P.C.A. ADJUSTERS LIMITED Property Casualty All-Lines Adjusters. www.pca-adj.com SCM ADJUSTERS CANADA LTD. Committed to providing leading edge claims management services. www.scm.ca COLLISION SERVICES CERTIFIEDFIRST NETWORK Consider it done.™ www.certifiedfirst.com CONSULTING FIRMS
I N S U R A N C E C O M PA N I E S AMERICAN INTERNATIONAL COMPANIES "The Strength to Be There". www.aigcanada.com AVIVA CANADA INC. Home Auto and Business Assurance. www.avivacanada.com/ FM GLOBAL The leader in property loss prevention. www.fmglobal.com GRAIN INSURANCE AND GUARANTEE COMPANY Commercial Lines Underwriters www.graininsurance.com THE GUARANTEE COMPANY OF NORTH AMERICA “Specialized insurance products...professional service” www.gcna.com
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
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
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 ....................................................2 AIG ..............................................................................4 Aon Reed Stenhouse.................................................29 Assured Automotive..................................................17 Aviva Canada Inc..........................................72 (OBC) Canadian Insurance Accountants Association (CIAA) ..................................................49 canadianunderwriter.ca .............................................51 Canadian Underwriter magazine..............................67 CARSTAR Automotive Canada.................................7 Chubb Insurance.......................................19, 71 (IBC) CIP Society................................................................62 Crawford & Company (Canada) ..............................15 Cunningham Lindsey..................................................8 Custom Software Solutions ......................................37
The Guarantee Company of North America ...........31 i-hire.ca ......................................................................38 Insurance Brokers Association of Ontario (IBAO)....9 Insurance Institute of Canada ...................................35 KRG Children’s Charitable Foundation Golf..........53 Kingsway General Insurance Company...................33 National Insurance Conference of Canada ..............47 Prize Indemnity Underwriters Inc............................45 PPG Canada Inc. .......................................................13 RIMS Canada Conference – Toronto.......................39 Royal & SunAlliance................................................48 TIWA Pub Night .......................................................59 Wawanesa Insurance.................................................25 WICC Ontario Golf ..................................................55 Zurich Canada ...........................................................43
Attention Producers Feel like you are being taken advantage of...or exploited, disenfranchised... Want to own your book and be given the respect you deserve... It's time...stop procrastinating and do something about it... We are a championship team...looking for championship players! Make it happen and don't be a spectator...get on the field of your life... Reply in confidence with your resume, your expectations, goals and objectives along with your value proposition statement to: Canadian Underwriter Magazine, Box # 1000, 12 Concorde Place, Suite 800, Toronto, Ontario, M3C 4J2
Get the job. Done. TM
CU Seminar ad May June 08b
Putting the pieces together.
Events and Seminars Calendar You work hard to protect your clients’ property. Now, it’s time to ensure that you apply the same kind of energy and commitment to your own success. CIP Society Events and Seminars give you the opportunity to learn, to network, to catch up on industry developments and to think about your career. Attention Industry Decision-Makers:
Seminar Series: Institute’s Demographic Research
PROedge Seminar: Sexual Abuse Claims - Defending the Next Wave . . . . June 4
of the P&C Insurance Industry Work Force in Canada Ottawa . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . May 27 Vancouver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . May 28 Halifax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . June 3 Kitchener-Waterloo . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . June 5 Toronto . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . June 12 Winnipeg . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . June 18 Calgary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . June 19 Edmonton . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . June 25
Edmonton PROedge Seminar: Finance for the Non-Financial Professional . . . . . . . . . . June 4 PROedge Seminar: Boiler and Machinery . . . . . . . . . . . . . . . . . . . . . . . . . . June 20
OTTAWA Annual CIP Spring Luncheon . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . June 19
Keeping you at the forefront of the P&C industry. The CIP Society. MEMBERS BENEFIT. www.insuranceinstitute.ca/cipsociety
Upcoming Events: for a complete list please see: www.canadianunderwriter.ca and click ‘My Events Calendar’ in the nav. bar on the homepage.
Toronto’s famed Roy Thomson Hall, usually host to symphonies, provided the backdrop to the AIG Canada 2008 Symposium in April. Industry delegates gathered to discuss The Globalization of Liability: Managing Multinational Solutions. Paul Brophy, senior vice president of AIG Executive Liability’s
Christopher Blum, senior
vice-president and general counsel of AIG Executive Liability, Alan D’Silva, partner at Stikeman Elliot LLP, and Helaine Pruzan, director of foreign general claims at American International Underwriters. ■
IntegResource Canada, a restoration company, has announced that Genesis Restorations is now a partner contractor. “Genesis is a valued addition to our national network and will provide exceptional restoration service in the Vancouver, Fraser Valley and Okanagan regions,” IntegResource Canada notes in a release. Genesis is the first partner company to IntegResource Canada in British Columbia. ■
John McGlynn, president and CEO of Kingsway General Insurance Company, accepted Toronto Insurance Women’s Association (TIWA)’s Patron of the Year Award. Kingsway
was recognized for encouraging the personal and professional growth of its employees and supporting the common good of society through TIWA. The association also honoured its past presidents at its April dinner meeting at the Toronto Board of Trade. ■
63 www.canadianunderwriter.ca • May 2008
Lloyd’s of London has appointed LoriAnn Lowery as its new president of Lloyd’s North America and Deborah Moor as president of Lloyd’s Canada. Lowery will be responsible for all business operations across the United States and Canada, including business development and distribution, communications and marketing, a Lloyd’s release says. She most recently served as managing director and national practice leader LoriAnn Lowery for risk management and financial products for Wells Fargo Insurance Services. Moor is currently the head of international regulatory projects in Lloyd’s international market access team. She will begin working in Canada in September, taking over for Nicholas Smith who held the position Deborah Moor for nine years. ■
MOVES & VIEWS
national accounts division, moderated the first panel session, exploring globalization and litigation trends around the world. Panel participants included
Chubb Insurance Company of Canada lifted the curtain on its new product, Film Producers Risk Policy, at the Canadian Film Centre. The event was hosted by Ellen J. Moore, president and CEO of Chubb Insurance Company of Canada, as well as Nellie Lindner, senior underwriter, Andrew Steen, senior vice president, and Gene Williams, vice president of Chubb & Son and worldwide entertainment manager for Chubb Commercial Insurance. Guests from across the country were treated to hors d’oeuvres and a private screening of a video detailing the new form of coverage for the film industry. ■
wicc “Mardi Gras in Toronto” WICC Ontario held its 12th annual gala dinner on March 25, 2008 at The Westin Harbour Castle Hotel in Toronto. This dinner has become one of the key fundraising events for WICC and has grown tremendously since its inception over 12 years ago. WICC and its industry supporters have come a long way together from the first dinner in the spring of 1997, which had an attendance of less than 200 people. Once again this year the dinner gala was sold out with nearly 650 in attendance. WICC Dinner Co-Chair and the evening’s emcee, Marilyn Horrick, extended a great WICC appreciation to all of the ‘simply outstanding’ dinner volunteers, sponsors, contributors, prize and auction item donors, WICC National Sponsors, event producers and all attendees for their unwavering support and commitment in the effort to mobilize the Insurance Industry in the fight against cancer. $325,000 PRESENTED TO CANADIAN CANCER SOCIETY – OVER $2.8 MILLION RAISED TO-DATE WICC co-chairs Carolyn Horan and Jean Faulkner presented Peter Goodhand, president of the Canadian Cancer Society, Ontario Division with the largest cheque ever from WICC for $325,000! This sum brought the total raised by WICC Ontario to more than $2.8 million since its inception in 1996 and one step closer to WICC Ontario’s goal of $3.0 million dollars raised by the end of 2008!”
to WICC either financially donating in excess of $5,000 or by donating extensively of their time and energy – above and beyond the average call. This year there were 3 recipients of the Gold Flame Award: ENTERPRISE RENT-A-CAR In 2007, Enterprise Rent-a-Car decided to direct the donations from their Annual Golf Tournament to WICC. They raised over $12,000 from this tournament. They have recently announced the 2008 tournament will also be in WICC’s honour. Accepting the Gold Flame award on behalf of Enterprise Rent-aCar was Alessandro Orlotti, Group Sales & Marketing Manager. GUY CARPENTER CANADA In 2007, Guy Carpenter hosted a Monte Carlo Casino Night fundraiser. This event raised $17,600 which was donated to WICC. Guy Carpenter has identified WICC as the charity of choice for the 2008 Casino Night. Accepting the Gold Flame award on behalf of Guy Carpenter was President & CEO Don Callahan. SERVICEMASTER OF CANADA ServiceMaster of Canada began a series of seminars to educate Canadian brokers on property restoration related claims topics, charging a nominal fee in support of WICC. In 2007, ServiceMaster awarded WICC with a cheque in the amount of $15,000. Accepting the Gold Flame award on behalf of ServiceMaster Canada was Mary Ann Anderson, National Insurance Relations Manager.
THE GOLD FLAME AWARDS Over the course of the year, WICC has many companies and individuals that donate in excess of $5,000 per year, in fact some in excess of $50,000. WICC is grateful to every one of these companies and individuals. The Gold Flame Award recognizes some of the people and companies who made substantial contributions
THE LEW DUNN MEMORIAL AWARD The Lew Dunn Memorial Award is in memory of Lew Dunn, who was President of the former CGU Group Canada, now Aviva Canada, until he lost his battle with cancer in 1999. The award in his honour is presented to
$325,000 Presented to the Canadian Cancer Society at WICC Ontario’s 12th Annual Gala Fundraising Dinner! the volunteer or company demonstrating significant initiative in raising funds and/or awareness for WICC — in essence, the WICC 'volunteer of the year'.
The WICC Board of Directors was honoured to present TWO Lew Dunn Memorial Awards: NANCY THORNE Nancy Thorne is a broker in New Brunswick and former cancer survivor. In 2003, Nancy and her colleagues organized a Fun Night which began as a Pub Night. Since then, this has become an annual community event in Saint John, NB. WICC is grateful to Nancy and her volunteers who have extended the reach of WICC into the New Brunswick community and raised $13,108 in 2007 and almost $45,000 since 2003! Nancy was unable to attend the dinner event but she commented “that everyone has such a great time the Fun Night just keeps getting bigger and better every year. It has now become a competition to see who can raise the most money. We are proud to support this wonderful organization.” LINDA WAHRER Linda Wahrer (WICC Board of Directors – past Co-Chair 2000–2007) started her work with WICC at its inception 12 years ago and has functioned as the WICC Board Co-Chair for the past 7 years. She chaired the WICC Golf Tournament and was instrumental in the incorporation of the WICC Board of Directors and its by-laws. In addition, Linda’s collaborative and results-oriented style has helped to define and achieve some of WICC’s loftiest goals. Linda has truly been an outstanding WICC ambassador whose charisma, passion and dedication to WICC have been unparalleled. Linda Wahrer’s value to WICC – priceless. Sandy Dunn, in honour of her late husband Lew, presented the award to Wahrer. THE WICC HALL OF FLAME WICC’s next and final award, the Hall of Flame, was created in 2005 to recognize the outstanding success of the ‘Crawford Cares’ program. This award is presented to an organization whose level of financial contri-
bution to WICC is significant, whose employees and/or community are significantly engaged in raising awareness and fundraising and whose commitment of contributions is made over several years. This year’s winner will join our two previous winners. Firstly, Crawford & Company (Canada) whose Crawford Cares program has raised over $200,000 since inception 5 years ago. Secondly, Bill Blakeney who introduced WICC to the likes of Crawford, the Honourable Order of the Blue Goose, Fred DeFrancesco as well as the Accidental Benefits - all of which have donated significant amounts of time and money to WICC! ING CANADA INC. – WICC’S 3RD ‘HALL OF FLAME’ INDUCTEE In May 2005, ING Canada was the title sponsor for the Ottawa Marathon. Imagine more than 27,000 people of all ages, generations, able-bodied, disabled and from various countries gathered to partake in the ING Ottawa marathon! This 3-day event was a sea of activity with numerous events — 2K, 5K, 10K, Marathon and Full Marathon events that could be walked, ran or in-line skated. There was something for everyone! ING launched a challenge to their branch offices in Ontario. Approx 600 ING employees & family members participated, and collected pledges of just over $20,000. ING is once again sponsoring the 2008 event, and once again has selected WICC as its charity. Total contributions from the ING Ottawa Marathon since 2005 are $143,138! ING Canada was presented with a Gold Flame award in 2005, and awarded the Lew Dunn award in 2007. Accepting the Hall of Flame award on behalf of ING Canada was Tracey Laughlin, Regional Vice President, ING Insurance Company of Canada (and WICC Ontario Board Member) accompanied by Claude Dussault, Chairman of the Board, ING Canada Inc.. CLAUDE DUSSAULT – MADE “HONORARY CHAIR OF WICC” WICC also announced that Claude Dussault, Chairman of the Board, ING Canada Inc. was made an Honorary Chair of WICC.
“WICC Ontario’s 12th Annual Dinner Gala”
KRW PROMO for mag
Canadian Underwriter magazine receives 7 Nominations in the 2008 Canadian Business Press (CBP) ‘Kenneth R. Wilson’ (KRW) Editorial Excellence Awards: Best Editorial Best Professional Article Best Merchandising / Marketing Article Best Feature Article Best News Coverage Best Website [www.canadianunderwriter.ca] Best Cover
From the hundreds of quality entries received each year from Canada’s leading business magazines, Canadian Underwriter magazine is honoured to have received 7 nominations in different award categories. On June 4th, 2008 in Toronto, the Top Five, Silver and Gold winners in each of the 20 categories will be revealed at the KRW Awards Dinner.
‘Kenneth R. Wilson’ (KRW) Awards: Regarded as one of Canada’s top business writers, Kenneth R. Wilson wrote with clarity and authority. His opinions were widely sought and respected. It is the memory of Kenneth R. Wilson, his example and his achievements in business press journalism that the Canadian Business Press association (CBP) honours each year with these awards.
For more information please see: www.cbp.ca
MOVES & VIEWS
Brokers and industry partners gathered at The Steamwhistle Brewery in Toronto for the April 3 preview of the Insurance Brokers Association of Ontario (IBAO)’s MyInsuranceShopper.ca. The new Web site allows consumers to obtain online quotes and information from brokers through a single point of entry, putting the broker front and centre in the battle for online business. While munching on hors d’oeuvres and sipping pints of Steamwhistle, guests were treated to a presentation and a sneak peak of the Web site as well as radio ads that are part of an aggressive marketing campaign for the new service. ■
www.canadianunderwriter.ca • May 2008
Page 69 12:21 AM 5/7/08 pg63-70M&V_v1_DG_VM
MOVES & VIEWS
www.canadianunderwriter.ca â€˘ May 2008
Marsh has created a new global leadership structure for its Global Risk Management division. Peter Cleyn was selected to serve as
MOVES & VIEWS
the regional leader for Canada. The company, as part of the shuffle, has also established a multinational practice that will coordinate Marsh’s delivery of insurance brokerage and risk consulting services for clients operating in all Peter Cleyn parts of the world. ■
McLarens Canada has opened a Moncton, NB office. Pierrette LeBlanc has been appointed branch manager. She has more than 20 years of experience working as both an independent and staff bilingual all lines adjuster. McLarens Canada has expanded its national presence over the past year, establishing 12 additional locations in Ontario, Quebec, British Columbia, Nova Scotia and PEI. “We remain focused on our strategic expansion plans and will continue on this theme throughout 2008,” the company notes in a release. ■ Aviva Canada, has re-branded its subsidiaries Pilot Insurance Company and Scottish & York Insurance Co. Ltd. Moving forward the companies will be known as Aviva Pilot and Aviva Scottish & York. Aviva, which has been insuring
Canadians since 1906, was created out of an amalgamation of numerous insurance companies. The company is in the final stages of creating a single corporate brand. “By adopting the Aviva brand mark, Aviva Pilot and Aviva Scottish & York clearly become part of the ‘One Aviva’ value proposition for consumers and insurance brokers in Canada,” Aviva Canada president and CEO Robin Spencer said in a press release. ■
www.canadianunderwriter.ca • May 2008
Allstate Insurance Company of Canada has
expanded its presence in Eastern Canada with the opening of three new agencies — one in Saint John, NB and two in Moncton, NB. Last year, the company announced it was redesigning the look and feel of its existing offices and launched the “new Allstate Insurance Agency.” The new agency platform “creates a consistent delivery model,” with agents in each office accountable for managing specific consumer needs. These specific needs include creating and developing new business relationships; identifying additional features to meet changing and evolving insurance needs; and strengthening relationship at renewal and providing customer service and support, an Allstate release says. Fifteen new Allstate Insurance Agencies are now in operation, with plans for an opening in Fredericton later this year, the release adds. ■
CGI Group Inc. has launched a service to help Canadian govern-
ment agencies and police identify vehicles that do not have insurance. CGI teamed up with the Insurance Brokers Association of Ontario to refine its Insurance Validation Service through a number of pilot projects in Ontario and Atlantic Canada in 2007, a CGI release says. These pilot projects and field trials included an evaluation conducted by RCMP National Traffic Service. By helping the authorities to identify uninsured drivers, the system is designed to minimize the number of incidents involving uninsured drivers, which results in the consumer paying higher insurance premiums and registration fees. “Now that we have shown that the solution helps address this serious concern, we look forward to working with all parties to make this service available coast-tocoast,” said Wayne Beck, vice president of consulting services at CGI. ■ ING Insurance has launched a new and improved ‘My Name Identity Theft Assistance Plus’ product in Ontario. The product
reimburses basic expenses associated with identity theft. Furthermore, it covers the costs of replacing any stolen government-issued identification; legal fees incurred to recover any assets someone else fraudulently acquired; and up to four credit reports and 12 months’ worth of credit monitoring. Along with providing the enhanced coverage, ING Insurance is collaborating with Fellowes, a global manufacturer of business machines, and TransUnion, a leader in credit and information management, to educate Ontario consumers and encourage them to take a more proactive role in protecting themselves from identity theft. “Surveys have shown that while most people have heard of identity theft, they are not well informed as to exactly what it is and how it happens,” said Chris Ross, product development manager for ING Insurance. “The education campaign we have launched in Ontario is critical to ensure our customers understand the scope of the problem and more importantly how to protect themselves from becoming victims.” ■ Desjardins Group and recycling company Cascades have teamed
up to support each other’s sustainable development and business reciprocity initiatives. Under the agreement, according to a joint release, the two companies will collaborate in: developing a preferred partnership for the Desjardins Paper Challenge; co-operating to fulfill the 12 corporate actions adopted by Desjardins as part of the Change the World, One Step at a Time campaign; Cascades’ development of a service as part of an energy efficiency program for Desjardins Group’s real estate holdings; and Cascades’ offering a service as a recovery agent/recycler to Desjardins Group’s residual materials management program and/or acting as an accreditor for Québec's ICI ON RECYCLE! program. The Co-operators has donated Cdn$10,000 to Big Brothers Big Sisters of Guelph (BBBSG) to help reach out to potential volun-
teers and new funding sources. The funding will enable BBBSG to carry out a four-phase, re-branding and promotional campaign, recruitment videos aimed at both potential volunteers and corporate partners and membership in a database through which the organization gains access to new sources of potential funding. The final phase of the campaign is expected to be in place by late 2008.
CHB 14204 Broker wealth
wealth: n. valuable possessions or resources. Insurance protects the wealth your clients have accumulated. The more wealth, the greater the need for protection against risk. Clients trust you to recommend the best policy to manage that risk. Chubb Insurance better defines its insurance to reduce risk and protect wealth.
If your clientâ€™s wealth is worth protecting, Chubb is your recommendation.
Chubb Defines Insurance
www.chubbinsurance.com Chubb Insurance refers to Chubb Insurance Company of Canada. The precise coverage offered is subject to the terms, conditions and exclusions of the policy as issued.
Want to change insurance with us? a) “We will certainly do our part” b) “We’re very excited about changing insurance” c ) “I applaud your willingness to change” d) “Totally love let’s change insurance” e) “Insurance doesn’t need to change”
These are some of your responses to our new campaign to change insurance. Visit www.joinourmission.ca to see all of the responses and to leave your own. This is about starting conversations. Let’s Change Insurance.
Aviva CU May2008 - Final.indd 1
4/24/2008 4:56:07 PM
Published on Jun 9, 2014
Canada’s Insurance and Risk Magazine. Since 1934 Canadian Underwriter, Canada’s leading insurance journal, has provided insurance profession...