Canadian Underwriter February 2009

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

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VOL. 76, NO.2, FEBRUARY 2009 CANADA’S INSURANCE AND RISK MAGAZINE. PUBLISHED BY BUSINESS INFORMATION GROUP

www.canadianunderwriter.ca

COVER STORY:

Bridging the Data Divide As the use of XML standards becomes more prevalent throughout the industry, brokers are now asking if the time is right to move towards a multiple-carrier interface through their broker management systems (BMS).

By Craig Harris

34 FEATURES

12

44

New Legacies

No Free Lunch?

If insurers program their new computer systems in the same way they used to program their legacy systems, then look for history to repeat itself.

Until the industry fixes the insurance-to-value (ITV) issue, policyholders who do pay fully insured value for their homes will be subsidizing their neighbours who don't.

BY PETER SYMONS

22 IFRS Readiness Canadian insurers should get their IT people involved early in the conversion to International Financial Reporting Standards (IFRS).

BY MAHMOUD SAFAVI AND

BY TODD RISSEL

52

16 Our Survey Says

56 The Widget

J.D. Power and Associates last year conducted its firstever consumer satisfaction survey related to Canada’s property and casualty industry. Some of its results may surprise.

As part of its mission to make the insurance product more comprehensible to consumers, Aviva Canada has prepared a new ‘Widget’ that allows consumers to get their questions answered through the broker channel.

BY LUBO LI

BY PAUL FLETCHER

26 Reinsurance Regulation Canada's solvency regulator has solicited industry opinion on its blueprint for future reinsurance regulation.

BY ROBERT MCDOWELL AND KOKER CHRISTENSEN

Here’s one way to stop wasting time on IT problems and focus instead on the core functions of insurance.

Business Intelligence (BI) technology is available to help insurance companies better determine their top (and bottom) sellers.

BY GIOVANNI DAMIANO

48 Swimming Upstream What happens to IT investment when there’s an economic downturn?

Outsourcing I.T.

60 Rate your Broker

BY SCOTT ANDREW

64 Recruiting Online Online job fairs and the expanded use of social networking technology can help the industry take recruiting to the next (cyber) level.

BY DON GIVELOS

BY RENEE DUREPOS

NEIL PARKINSON

February 2009 Canadian Underwriter

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VOL. 76, NO.2, FEBRUARY 2009

PROFILE

10 Centre of the Storm Geoffrey Machum, a partner at Stewart McKelvey in Halifax, represented one of the insurers in the landmark Hartling case, which upheld the constitutionality of the Nova Scotia auto insurance cap on minor injuries.

BY VANESSA MARIGA

Senior Publisher Steve Wilson steve@canadianunderwriter.ca (416) 510-6800

Associate Publisher Paul Aquino paul@canadianunderwriter.ca (416) 510-6788

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

Art Director Gerald Heydens

Associate Editor Vanessa Mariga vanessa@canadianunderwriter.ca (416) 510-6793 Account Manager Michael Wells michael@canadianunderwriter.ca (416) 510-5122 Advertising Sales Christine Giovis christine@canadianunderwriter.ca (416) 510-5114

Art Consultation Pylon.ca Production Manager Gary White (416) 510-6760 Print Production Manager Phyllis Wright President Bruce Creighton Vice President Alex Papanou

SPECIAL FOCUS

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Editorial

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EDITORIAL

The Waiting Game

Case law on minor injury caps is now officially all over the map. This leaves us with a situation that fits squarely within the four corners of the mandate of the Supreme Court.

David Gambrill, Editor david@canadianunderwriter.ca

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Canadian Underwriter February 2009

Most people observing the court proceedings associated with caps on payments for minor auto injuries expect the issue to go all the way to the Supreme Court. The recent decision in Nova Scotia’s Hartling case all but seals the deal.

In Hartling, the Nova Scotia Supreme Court upheld the constitutionality of the province’s Cdn$2,500 cap on insurance payments to victims of minor auto injuries.

In doing so, the trial judge in the Nova Scotia case made an explicit — if fleeting — reference in his decision to the Alberta Court of the Queen's Bench decision last year that came to precisely the opposite conclusion that he did.

The Alberta court concluded that its province’s Cdn$4,000 cap on minor auto injuries was constitutionally invalid based on the grounds that it discriminated against people suffering from “soft tissue injuries” (i.e. such as whiplash victims). The Alberta judge noted the legislation reinforced a discriminatory stereotype that whiplash victims were somehow faking their injuries or were “malingerers.”

The Nova Scotia judge, in contrast, upheld the auto injury cap in his province, finding that it was not discriminatory against women or people with disabilities.

In and of themselves, the contradictory decisions might have been enough to warrant the Supreme Court taking a second look, assuming an appeal (you can bet the house and the car on it). But the fact

that the Nova Scotia judge draws a comparison between the facts in his case and the facts in the Alberta case will most definitely engage the Supreme Court’s mandate to ensure consistent law across the land.

In Nova Scotia, the legislation does not define the character of a minor injury in the same way as Alberta’s cap legislation. For example, in Nova Scotia, the legislation does not list characteristics such as “soft tissue injuries” in an effort to categorize a group.

In contrast, the Nova Scotia decision spends a great deal of time discussing when and how a minor injury “resolves,” which is a cornerstone of the Nova Scotia cap legislation. It’s the temporal nature of the injury, and not the character of it (as in Alberta), that saved the day for the insurance industry in Nova Scotia.

“The legislative scheme being attacked [in Nova Scotia]...is, as noted, broader than the Alberta provision held by [Justice Neil] Wittmann to be unconstitutional,” Nova Scotia Supreme Court Justice Walter Goodfellow wrote. “The cap [in Nova Scotia] applies to all minor injuries and not restricted solely to ‘soft tissue injuries.’”

Based on this explicit comparison between cap laws in Alberta and Nova Scotia, case law on minor injury auto caps in Canada is now officially all over the map. This leaves us with a situation that fits squarely within the four corners of the mandate of the Supreme

Court, which only agrees to hear appeals of cases that have broad, national implications.

What happens now? Lots of politics, that's what.

Of course trial lawyers will attempt to score some points with the public on behalf of their wounded clients. To counter this, insurers have praised the Nova Scotia decision as a win for consumers generally, because insurers won’t have to raise their insurance premiums.

Insurers should probably appeal to the public’s sense of fairness as well. The Nova Scotia decision, for example, serves to correct the tendency of trial lawyers to collapse a legitimate distinction we all make between minor and catastrophic injuries. Speaking rhetorically, it makes perfect sense to pay the victim of a hangnail nothing and the person with the brain damage and spinal cord injury $1 million in damages. Why? Not because hangnails are inherently better or worse than brain or spinal cord injuries, but because hangnails go away or “resolve” quickly, whereas catastrophic injuries are permanent and drastically alter how victims live their lives.

Insurers need to drive home the point with the public that victims of serious, long-lasting or permanent injuries are not subject to cap legislation.

In the meantime, will someone please launch the appeal that will send this mess to the Supreme Court once and for all?

The suspense is killing us.

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Claims NOVA SCOTIA AUTO CAP UPHELD Nova The Supreme Court of Nova Scotia in January upheld upheld the the province’s cap on insurance insurance payments for minor auto auto ininjuries. But the ink had had barely barely dried on the decision decision before before itit was subject to an appeal. appeal.

Scotia, In Hartling v. Nova Scotia, Nova the Supreme Court of Nova Charter Scotia dismissed a Charter province’s challenge to the province’s minor Cdn$2,500 cap for minor saying the the cap cap auto injuries, saying discriminate on on the the does not discriminate basis of either sex or disability. decision, In his 104-page decision, ScoSupreme Court of Nova Scotia tia Justice Walter Goodfellow Justice Walter Goodfellow said saidevidence the evidence the case the in theincase bebefore him only failed to fore him notnot only failed to esestablish infringement tablish anan infringement of of the the applicants’ rights a applicants’ rights on aon balbalance of probabilities, ance of probabilities, “but“but overwhelmrather established overwhelmno stigmatistigmatiingly that there is no marginalization zation or marginalization legislation. resulting from the legislation. stigmatiza“What limited stigmatizamarginalization extion and marginalization exists a by-product ists is is a by-product of of thethe which preadversarial system which dates the [cap] legislation and pre-dates the [cap] legislation which, through the process and which, through the of education, etc., is everprocess of education, etc., diminishing.” is ever-diminishing.”

FSCO UPHOLDS ASSIGNING, INCORPORATING PSYCHOLOGICAL IMPAIRMENT PERCENTAGES The Financial Services Commission of Ontario (FSCO) has upheld the controversial practice of assigning percentages to psycho-

8

Canadian Underwriter February 2009

logical impairments and combining these with physical impairment ratings for the purpose of determining an individual’s whole person catastrophic impairment.

In Maria Augello and Economical Mutual Insurance Company, Maria Augello was injured in a 2002 motor vehicle accident and was assessed for a catastrophic impairment. Based on a 55% or more whole person impairment, she was found to have fallen within the definition of a catastrophic impairment.

However, the insurer’s assessors did not agree with the formula for assessing the whole body impairment. In particular, they disagreed with the method of combining assigning percentages to psychological impairments with physical impairments to determine the whole body impairment.

Without combining the psychological percentages, the insurer’s assessors determined Augello’s whole person impairment score was 20%.

FSCO arbitrator John Wilson noted that combining psychological impairments with physical impairments to determine whole body impairment was consistent with the purpose of the province’s accident benefits legislation.

The exact language of the province’s Statutory Accident Benefits Schedule (SABS) allows for a determination of brain impairment “in accordance with the American Medical Association’s Guide to the Evaluation of Permanent Impairment” resulting in “marked” or “extreme” impairments due to mental or behavioural disorders.

Canadian Market ONTARIO AUTO RATES ON THE INCREASE The Financial Services Commission of Ontario (FSCO) approved automobile rate increases averaging 2.57% in 2008 Q4, based on the entire market.

For the 69.37% of the market that had rate changes approved in 2008 Q4, the average rate change was 3.71% when weighted by market share.

The rate changes approved in 2008 averaged to an increase of 5.59%, compared to an increase of 0.55% in 2007, a decrease of 2.43% in 2006, and a 10.6% decrease in 2005.

ALBERTA AUTO INSURERS GRANTED RATE INCREASES The Alberta Automobile Insurance Rate Board (AIRB) has released its 2008 Q4 decisions report, with the majority of insurers applying for rate increases.

Four insurers applied for increases in base premiums, which on average would result in an estimated 5% increase on premium level for additional coverage.

These insurers include Alberta Motor Association Insurance Company (3.4%), Aviva Insurance Company of Canada (7.7%), AXA Canada (5.4%) and Traders General Insurance Company (3.5%).

Seven insurers applied for increases in premium level for additional coverage. On average the estimated increase amounted to 7.5%.

CANADIAN INVESTMENT LOSSES OCCUR AS CAPITAL DWINDLES Investment and capital losses associated with Canada’s economic recession are happening at a time when the country’s industry is in need of capital to offset claims costs, a Swiss Re online newsletter reports.

In its report, Implications of the Financial Crisis on the Canadian P&C Industry, Swiss Re figures show that as of nine months’ end in 2008, the average yield on invested assets declined to 4.2%, down from 5.1% last year.

Year-to-date invested assets grew by only 1% through the first nine months of 2008, significantly down from 7% growth in 2007.

The reinsurer also observes that Canadian P&C insurers reported realized and unrealized net investment gains of Cdn$1.1 billion during nine months’ end in 2008, resulting in a 3% decline in industry capital funds.

“With only few public companies, the Canadian P&C industry generally has little access to capital, and a declining capital base therefore raises more concerns at a time of rapidly rising claims costs,” Swiss Re notes. “Declining share prices and widening spreads have increased the cost of capital for insurers and made it harder to raise funds.”

Reinsurance GLOBAL REINSURANCE PRICING STARTS TO FIRM UP Global reinsurance prices firmed up for Jan. 1, 2009 renewals

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MARKETPLACE

and are expected to remain that way for April and July 2009 renewals, according to the January 2009 Reinsurance Market Outlook issued

by Aon Benfield.

Aon Benfield expects the reinsurance renewal market in April and July 2009 will be similar to the January market, assuming only limited additional turbulence in the financial markets and no significant reinsured catastrophe losses, the company notes.

U.S. hurricane and earthquake reinsurance pricing will increase modestly, and pricing of other global natural perils will remain firm, similar to the January market.

The credit crisis and the severity of hurricanes in 2008 combined to shrink the capital base of many reinsurers.

It is estimated reinsurers will be entering 2009 with 15-20% less economic capital than in 2008, Aon Benfield notes.

Regulation FAIR VALUE DEBATE MORE VIGOROUS THAN EXPECTED Fitch Ratings anticipated debates about fair value (FV) accounting in 2008, but “the increased scrutiny accounting received in the wider global finance debate exceeded our expectations,” the ratings agency notes in a recent report.

The report is entitled, Accounting and Financial Reporting: 2009 Global Outlook.

This year looks to be “a bellwether for the direction of FV accounting” and also for further convergence of U.S. Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Standards (IFRS), C Fitch’s report says.

The report says analysts and investors should be aware of some important, longer-term accounting changes that the accounting standard setters will debate in 2009.

“They include: financial statement presentation, revenue

recognition, distinguishing between liabilities and equity, lease accounting and accounting for insurance contracts,” the report says.

“The business combination standard may add volatility to an acquirer’s income statement."

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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 corpservices@cl-na.com.

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PROFILE

In the Eye of the Storm Vanessa Mariga Associate Editor

Geoffrey Machum, a partner at Stewart McKelvey in Halifax, was a key figure in a big win for the insurance industry on the issue of auto insurance caps for minor injuries.

Insurers in Nova Scotia started 2009 with a huge sigh of relief when Supreme Court of Nova Scotia Justice Walter Goodfellow upheld the constitutionality of the province’s Cdn$2,000 cap on minor injuries.

Similar constitutional challenges have been launched across the country. But until January 2009, only one had entirely worked its way through a court: the Alberta Court of Queen’s Bench in 2008 decided in Morrow v Zhang that Alberta’s Cdn$4,000 cap on minor soft tissue injuries was unconstitutional. Alberta Court of Queen’s Bench Justice Neil Wittmann ruled that the cap in Alberta discriminated against soft-tissue injury victims, and the decision is now under appeal.

To some, Goodfellow’s deci-

10 Canadian Underwriter February 2009

sion in Hartling v Nova Scotia et al. might be viewed as evening the score in a national battle between insurers and trial lawyers over the legitimacy of capping auto insurance claims payments to people who suffer minor injuries. Insurers say the caps are necessary to stem the tide of rising premiums and claims costs. Trial lawyers say the caps limit the tort rights of their clients (minor injury claimants).

One of the lawyers in the centre of the maelstrom is Geoffrey Machum, a partner at Stewart McKelvey in Halifax.

He represented Aviva Canada, one of the insurers, in the landmark Hartling case.

Machum has practiced law since 1985. In the late 1980s and early 1990s, he cut his teeth on Coughlan et al v.

Westminer Canada Ltd., a sixyear-long case that involved the take-over of a Nova Scotia mining company by an Australian mining company.

Machum's involvement in Coughlan essentially led to his making partner at Stewart McKelvey. In 2003, he earned the appointment of Queen’s Counsel by the ripe age of 43.

(A ‘Q.C.’ designation goes to select lawyers who have had at least 10 years of professional experience.)

Although his portfolio includes an array of commercial cases, Machum elected to focus on insurance after teaching insurance law at Dalhousie University for three years in the 1990s.

“When you go to law school, not a lot of people are sitting there saying: ‘When I graduate, I want to become an insurance law practitioner,’” he says. “But what you realize very quickly is that every major part of life is underwritten in some fashion; it has an insurance implication.”

Machum says he would

begin each of his lectures by asking students to set aside their textbooks and look at the day’s headlines to determine their relevance to insurance.

“It really got the students engaged in the fact that insurance is a part of everyday life,” he says. “It’s a little bit of a hidden practice in that you don’t see it in the headlines, but it’s there.”

The “human element” of insurance continues to interest him in the practice of insurance law. “That’s really important to

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PROFILE

me,” he says. “It underlies all of these very interesting, dayto-day factual situations and it gets you involved in some really interesting cases.”

Machum is at a point in his career when he can pick and choose his cases. So when the cap challenge came across his desk, he realized the importance of the decision, enlisted the help of junior partner Christa Hellstrom and took on the case.

THE CHALLENGE Machum is fully steeped in the background of his case. Nova Scotia auto insurance premiums in 2003 were swelling to as much as the Cdn$1,000 to Cdn$1,500 range, he says, making it difficult for young people or seniors to afford the mandatory coverage. Steep premiums tend not to curry favour with the public; eventually, they catch the eye of regulators, he notes. As well, insurers were expressing concern about growing claims costs. Therefore, in order to reduce insurers’ costs (and thus allow them to pass the savings on to consumers in the form of decreased premiums), the province instituted a Cdn$2,500 cap on general damages for pain and suffering related to minor injuries arising from a vehicle collision.

Following the legislation,

regulations were passed that defined a minor injury. Rather than targeting specific types of injuries such as sprains, strains and whiplash, the Nova Scotia definition of a minor injury hinges on whether there is a “serious impairment” and whether or not that impairment resolves within a 12-month time frame.

“That regulation was the subject of an attack by a group of plaintiffs that argued these amendments to the legislation were not constitutional; that they violated the Charter; and that they discriminated against accident victims,” Machum says.

The allegations included that the regulation perpetuated the stereotype that accident victims were malingerers. Also, the plaintiffs claimed, the cap discriminated against women and young people as well as people with pre-existing and psychological conditions.

“The judge found on all counts that neither the evidence nor the law supported the arguments of discrimination,” Machum says. “He found that not only did [people challenging the legislation] not prove [the legislation to be discriminatory], but they fell ‘far short’ in proving their case.”

The victory was quite significant for the province of Nova Scotia and the Canadian insur-

ance industry at large, Machum acknowledges. It comes as Wittmann's decision in Alberta is still at play, and while Prince Edward Island and New Brunswick have similar challenges working their way through those provinces’ courts.

In addition, Ontario insurers and trial lawyers are now asking the Government of Ontario

“What you realize very quickly [as an insurance lawyer] is that every major part of life is underwritten in some fashion; it has an insurance implication.” to reform its auto insurance legislation.

When asked about the differences between the Alberta decision in Morrow v Zhang and Hartling v Nova Scotia et al., Machum says that he was “heartened by the fact that whether [Morrow] was a right or wrong decision, [Justice Goodfellow] found that there were differences in how Nova Scotia approached the problem [of rising insurance premiums] and how Alberta approached the problem.”

In Nova Scotia, the cap legislation focussed less on labelling the characteristics or locations of minor injuries, and more on the time it took for the symptoms of an injury to “resolve.”

But the legal battle is far from over, he says. Shortly after the victory in court, counsel for all plaintiffs’ in the Nova Scotia cap challenges have now confirmed their intention to appeal the decision.

The court date for the appeal has yet to be determined, but Machum remains confident the decision handed down by Justice Goodfellow provides a solid foundation for the insurance industry and province of Nova Scotia to emerge successful once again at a higher court.

“Justice Goodfellow gave a very thorough and well-considered decision,” Machum says. “He wrote extensively about the evidence that was before him and he had the benefits of daily transcripts before him, eliminating any guess work or having to work from memory alone. Needless to say, in any appeal, we the respondents will be endorsing this decision. It’s clear he put a lot of thought into this decision and wrote extensively on both the evidence and the law.”

February 2009 Canadian Underwriter 11

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Legacy

Behind

If the industry isn’t careful, the same dynamics that led to problems with legacy systems might also corrupt successor technologies.

Peter Symons Managing Partner, OARBIC Inc.

There are some definite advantages to having gray hair: if you’re lucky, you’ll have grandchildren to spoil and you’ll have the wisdom and perspective to realize the current financial challenge is not the end of the world as we know it. And perhaps of greater relevance to this article, you got to see legacy systems before they were legacy systems.

A great deal has been written about the challenges of legacy systems — the emergence of convoluted spaghetti code, business rules deeply embedded in code, multiple and confusing IF statements (used for conditional formatting) and so on. But it’s important to understand that most legacy systems didn’t come that way. Legacy systems “out of the box” were remarkably good in their day. Code was typically quite clean and well laid out. Many used “called subroutines” that philosophically were a precursor to a services oriented architecture (SOA): they had large blocks of code that were re-used or “consumed” by many areas of the system. Some even had “external tables” that drove many of the processes.

So what happened? How did legacy systems

12 Canadian Underwriter February 2009

and spaghetti code become synonymous?

Most importantly, what lessons can be learned from this?

I would suggest that time happened. Pressure happened.A lack of design happened, as did a lack of quality control, coding standards and just plain bad workmanship. In the rush to get things done, people took shortcuts.They didn’t analyze and design changes properly, and they didn’t subject their code to standards, peer reviews and code walkthroughs.

Most of the damaging changes to legacy systems occurred before it was recognized that coding wasn’t the only phase of a project. In those days, there was very little time — or management patience, for that matter — devoted to the design phase of a project. In fact, there is even a term coined for this general lack of tolerance for the process. The term is ‘WISCY,’ which stands for ‘Why Isn’t Sam Coding Yet?’ This was the manager’s cry during the heady days of the 1980s and early 1990s, when the goal was to get the code laid down as quickly as possible so that the programmer could get onto the next problem.

And what about testing? Production is the ultimate test, isn’t it? So why waste time doing much pre-testing? As long as you could sneak through one test path, all else must be right. Right?

Well, sadly, no. It was actually very wrong. And what was the end result of all of this haste?

Illustration: Anson Liaw

Leaving a

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People didn’t think through all the ramifications of a change. So when a production problem occurred, often in another area of the system, the programmer’s next step was to fix that problem as quickly as possible. Because of time constraints, he or she would not fix the problem by going back and re-thinking and re-doing the original change; instead, he or she would add more code to the now ‘problem’ area.This would cause subsequent problems in other areas of the system, which were again fixed with more code; before long, the system was a mess — spaghetti code, convoluted logic and no documentation. The ultimate result was a system difficult and expensive to maintain, and incapable of responding quickly to market pressures.

So why, you might be asking by now, does this trip down memory lane matter?

Much has been learned from the lessons of the past, you might be saying to yourself. Legacy systems are being replaced, most IT departments have learned how to enforce project management techniques, set coding standards, conduct design and code reviews, create and execute quality standards and so on. So why does the past matter?

It matters because, as the saying goes, history has a nasty habit of repeating itself. There is a substantial risk of these problems being repeated with the very systems that are being used to replace legacy systems. The real problem is that the risk may not be well recognized.

The following is a quote (with the product name removed) from the Web site from one of the best systems available today. It is important to note that just about every other vendor has, or could have, a similar statement posted on their Web site: “This product can help eliminate the need for IT to manually code all product changes. Qualified business users can easily make rate changes, add new products, change workflow rules, commission structures and document output or create and run new reports.The focus of your scarce IT resources can shift from product programming to strategic initiatives.”

In other words, at the very moment IT departments have figured out how to

14 Canadian Underwriter February 2009

design and implement changes properly, avoid spaghetti code and understand that the actual coding part of any change is only a small percentage of the overall work, industry vendors have created systems that move the responsibility for and work on many changes away from the IT departments and into the hands of the end user.

Not that this is a bad thing. It is clearly sensible for the originator of a change to be the executor of that change, since it means that there is no “hand-off ” process required. There is no misunderstanding of requirements, there is no competing with other departments for IT resources.

At this point, the industry is spending billions of dollars replacing systems that in large part have become unwieldy, not necessarily because of a poor initial design, but because of 20-30 years of poor technique.

But — and this is a very big “but” — users now have a similar opportunity to make all of the same mistakes that the IT departments have made over the years.

These mistakes have been eliminated for the most part by IT departments through painstaking trial and error, tough lessons learned and the consequent development of various methods and techniques. The critical part is that all of those lessons learned by IT departments have possibly — or even probably — yet to be learned

by the user departments, since user departments have never been deeply involved in these processes before.

It is unquestionably true that the tools included in most modern systems help eliminate many problems. But the bottom line is that if changes are implemented and they are not fully thought through; if they are not designed properly with the “big picture” in mind; and if they are not extensively tested with appropriate test strategies, test plans and so on, this will create havoc in even the best of the modern systems.

So what’s the answer? One answer is to ensure, as the quote above says, that the business users are “qualified.” That means more than just being knowledgeable in insurance and being aware of the mechanical aspects of making changes. It is critical that business users be knowledgeable in understanding how to design changes, how to test changes, how to ensure that a change made by underwriting does not adversely impact claims, billing and so on. It means implementing the discipline that project management brings to the table, even if it is only a “one-line change.”

At this point, the industry is spending billions of dollars replacing systems that in large part have become unwieldy — not necessarily because of a poor initial design, but because of 20-30 years of poor technique. I suggest the industry give serious consideration to spending a few more dollars examining and implementing appropriate techniques around the change management and implementation processes for their user departments.A reasonable argument says that if the industry doesn’t spend that extra money, if it doesn’t enforce all the lessons learned by the IT departments, the chances are great the industry will get to learn those lessons the hard way, all over again.

Of course if that does happen, it will be good news for those grandchildren that I spoke of at the start.They will have lots of work to do in 20 years or so replacing those legacy systems all over again.

You know, the ones with all the spaghetti rules in their external rules engines…

Feb 09 IBAO School Ad

2/10/09

4:31 PM

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We are pleased to continue The Dominion is pleased toof our long term sponsorship continue long of term the IBAO its School Insurance sponsorship of the and its top student IBAO awards, School of Insurance and thank IBAO for and theirthe top student awards. ongoing, consumer focus and strategic development of We thankbrokers.

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pg16,18,20,21Consumer_v1_DG_VM

2/11/09

9:46 AM

Page 12

Voice The

Consumer’s

J.D. Power and Associates polled more than 10,000 Canadians to gauge their satisfaction with the country’s insurance products. Some results were surprising…

Lubo Li

Senior Director, Canadian Financial Services and Insurance Practice Leader, J.D. Power and Associates

J.D. Power and Associates has been measuring consumer preferences for four decades, providing key performance indicators for various industries in various parts of the world. Late last year, we finalized the results of our inaugural Canadian Home and Auto Insurance Customer Satisfaction Study.The study solicited the feedback of nearly 15,000 personal auto or home policyholders across the country, attempting to bring the voice of the customer to the property and casualty industry in Canada.The goal was to provide insurers specific information to help them improve their customer experience.

To this end, the survey identifies: • competitive benchmarks in customer satisfaction among both home and auto insurers; • key drivers that affect policyholders’ experiences with their primary insurers; • “moments of truth” and best practices in meeting and exceeding customer expectations; and • changing consumer insurance needs and attitudes.

There were a number of interesting findings in the study. For example, consumer opinions expressed in the study suggest that consumer experiences with direct writers’ service levels might be more positive than publicly portrayed. Also,

16 Canadian Underwriter February 2009

customer satisfaction appears to be driven more by the insurer’s customer service than by its premium/pricing or policy offerings.

COMPETITIVE BENCHMARKS As with our other customer satisfaction benchmark studies, primary dimensions of the customer’s experience are explored through detailed ratings of various customer “touch points” (that is, areas of the system in which consumers have a direct interaction with insurers, agents or brokers). We assess the importance of these touch points on customers’ overall satisfaction with their primary insurers. Combining the importance and evaluations of various touch points, a Customer Satisfaction Index (CSI) model was built. CSI values ranged from 100 to 1,000 points, with the higher numbers indicating higher satisfaction levels.

The following charts show the 2008 CSI scores and rankings of Canadian auto and home insurers. Please note that only insurers with sufficient sample size are included in the ranking. Government-run auto insurers, as well as private auto insurers in Quebec, are excluded from the publicly released ranking.

It is interesting to note that the eight brands ranking higher than the private full coverage auto industry average are either exclusively agent-based or direct in terms of distribution. Among the 12 brands that rank below the average, eight have their policies distributed primarily through independent brokers. This seems to suggest that although the broker channel still accounts for the

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pg16,18,20,21Consumer_v1_DG_VM

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Page 14

majority of the policies written in Canada today, the insurers’ direct or exclusive-agent channels are delivering Private Full Coverage Auto Insurer CSI Rankinga better customer experience, thus providState Farm 757 ing a stronger foundation for future growth.

Belairdirect 749 A comparison of our industry benchJohnson Insurance 736 mark studies show that customer satisfacRBC Insurance 722 tion scores for the property and casualty CAA Insurance Company 718 insurance industry are generally higher Co-operators (The) 713 than Motor those of the home building AMA (Alberta Association) 710industry, butMeloche trail Monnex those of automobile TD Insurance 707dealership service.This Private Full Coverage Industry Avg.poses a challenge 701 to insurers. APersonal consumer might enter (The) 697 into a relationship with an auto insurer Pilot Insurance Company 697 with Allstate shaped by their 694 expehigh expectations 693hotel or rience at aWawanessa car dealership, bank, TD Insurance Home and Auto 692 therediner, for example, and favourite AXA Insurance (Canada) 686 if they fore experience disappointment Dominion of Canada (The) 678 do not get what they expect from their 674 insurers.PC Insurance ING Insurance 673 Customer satisfaction is a moving tarRSA (Royal & Sun Alliance) 671 get. It can be viewed as the function of a Economical Insurance Group (The) 666 customer’s experience minus his or her Aviva Insurance Company of Canada 657 pre-existing expectations.

To meet and 500 600 700 800 exceed such expectations, insurers not only have to continuously improve their products and services, but also learn from the best practices in other industries.

Home Insurer CSI Ranking BCAA

812

SSQ General

787

Belairdirect

777

Promutuel

775

La capitale

763

State Farm

762

Industrial Alliance

758

Desjardins General Insurance

755

Personal (The)

737

Johnson Insurance

737

TD Insurance Meloche Monnex

736

AXA Insurance (Canada)

735

Co-operators (The)

730

Industry Avg.

728

ING Insurance

720

Dominion of Canada (The)

710

TD Insurance Home and Auto

709

Economical Insurance Group (The)

707

Allstate

707

AMA (Alberta Motor Association)

707

Portage Mutual Insurance Insurance

705

RBC Insurance

701

Wawanesa

696

SGI Canada

678

Aviva Insurance Company of Canada

677

Pilot Insurance Company

674 600

500

700

800

900

KEY DRIVERS Auto Insurance Driver Private Full Coverage Auto Insurer CSI Ranking Belairdirect

775

RBC Insurance

763

CAA Insurance Company

762

AMA (Alberta Motor Association)

755

TD Insurance Meloche Monnex

737

701

Personal (The)

697

736

Pilot Among Insurance Those CompanyDealing

735 730

697 with Multiple Reps

Allstate

694

Wawanessa

693

60% 773 TD Insurance Home and Auto

728 720

Incidence

Dominion 40% of Canada (The) PC Insurance

709 707 707 707 705

632

ING Insurance

700

671

677

18900Canadian Underwriter February 2009

Home Insurance Driver

600

673 666

674

Auto Insurance Driver

678

RSA20% (Royal & Sun Alliance)

678

800

800

Economical Insurance Group (The)

Never Had to Repeat

696

686 674

Aviva Insurance Company of Canada 54 0% 500

701

900

692

AXA Insurance (Canada)

710

Price/ Premium 25%

707

Private Full Coverage Industry Avg.

737

Customer Service 28%

718

Policy713 Offerings 21%710

Co-operators (The)

758

700

749

Billing 736 Payment 722 15%

Johnson Insurance

34 600

Sometimes Had to Repeat

500 404

400

657

12

700

800

Often Had to Repeat

300

Incidence

777

600

Claims 757 12%

State Farm

787

Claims Index

812

J.D. Power and Associates’ customer satisfaction studies operate on two fundamental premises. First, the studies must Claims the individual insurer’s permeasure 8% Billingformance in a competitive context. SecPaymentond, the studies Customermust reflect what is im17% the customer. Evaluating portant toService 38% specific customer experience at various Policy Offerings “touch points,” and assessing the relative Price/ 20% importance Premium of each touch point on over17% helps us determine the all satisfaction, “key drivers” of consumer satisfaction with the insurance industry. # People Interacted With The 2008 Canadian Home and Auto Insurance Customer Satisfaction Study identifies the im60% 900 portance of five policy holder satisfaction 761 800 724 drivers: customer service; • 40% 700 612 • price and/or premium; 600 • policy offerings; 20% • billing and/or payment; and 500 • claims.

400 22 40 38 As the following charts show, customer 0% 300 1 2 3+ service is the most important driver of Person People People customer satisfaction, accounting for Home Insurance Driver

Claims Index

CSI Ranking

0

2/11/09

RBC Insurance

701

RBC Insurance 701 pg16,18,20,21Consumer_v1_DG_VM Insurance RBC 701 2/11/09

Wawanesa Wawanesa Wawanesa SGI Canada SGI Canada SGI Canada Aviva Insurance Company of Canada Aviva Insurance Company of of Canada Aviva Insurance Company Canada Pilot Insurance Company Pilot Insurance Company Pilot Insurance Company

Aviva Insurance Company of of Canada Insurance Company Canada Aviva

9:46 AM

Page 16

500 500500

696 696 696 678 678 678 677 677 677 674 674 674

500 500500

600 600600

700 700700

800 800800

657 657 600 600600

700 700700

800 800800

900 900900

is by far the single most important factor among those who have filed a claim in the past three years — 41% for auto Claims Claims Insurer CSI Ranking Home Claims Claims Claims Private Full Coverage CSI home Ranking Claims claimantsAuto andInsurer 52% for claimants.

8% 12% 8% 12% 8% 12% BCAACustomer 812 Billing Many claims handling processes or Customer Billing State Farm 757 Billing Customer Billing Service Billing Payment Customer Billing SSQ GeneralService 787 Payment standards can be implemented to imPayment Customer Service Payment Customer Belairdirect 749 28% Payment 17% Service Payment 15% 17% Service 28% Belairdirect 28% 777 17% Service prove customer experience.

One is to 15% Johnson Insurance 38% 736 15% 38% 38% Promutuel 775 Policy minimize the number of claim centre RBC Insurance 722 Policy Policy Price/ Policy Policy Offerings Price/ PolicyLa capitale 763 Price/ Offerings Offerings CAA Insurance Company Premium 718 representatives with which customers Offerings Offerings Price/ 20% Premium Offerings Premium 762 21% State Farm Price/ 20% 25% Price/ 20% Co-operators 21% Premium must(The) interact. Another713 is to ensure the 25% 21% 25% Premium Premium Industrial Alliance 758 17% AMA (Alberta Motor Association) consistency of claimant710 information that 17% 17% Desjardins General Insurance 755 TD Insurance Meloche Monnex captured so that 707 customers do is being Personal (The) 737 Private Full Coverage Industry Avg. 701 not have to repeat the information when Those Dealing with withJohnson Multiple Reps Among Those People Interacted Interacted With Insurance 737 Among ## #People Personal (The) 697 Dealing withMultiple MultipleReps Reps Among ThoseDealing People InteractedWith With they deal with multiple representatives.

TD Insurance Meloche Monnex 736 Pilot Insurance Company 697 the long 28% of auto insurance policy As AXA Insurance (Canada)holder 60% 900 sat735run by building consumer loyalty.

60% 900the charts below show, each of these 773 Allstate 60% 694 900 60% 900 60% 900 60% 900 773 773 In fact, isfaction and 38% Co-operators of home (The) policyholder two processes significantly affect cus730 this 761year’s auto study shows Wawanessa 693 761 800 800 724 761 800 800 724 800 customers who reported satisfaction. In both segments, tomer 800 satisfaction, resulting in different Industry Avg. customer 724 being "de728 TD Insurance Home and Auto 692 40% 700 40% 700 ING Insurance 700 720 with their insurers’ services612 are service overshadows price/premium or lighted" claims handling CSI scores.

632 40% 40% 700 40% 700 AXA Insurance (Canada) 40% 686 700 632 632 612 612 Dominion of Canada (The) 600 twice710 as likely to recommend the insurer policy offerings.

Auto insurance is a678 complex product.

600 Dominion of Canada (The) 600 600 600 600 Insurance and Auto to 709 friends and family, as well as This mayTDcome asHome a surprise many to their Consumers’ needs for different coverage PC Insurance 674 20% 500 20% 500 Insuranceproperty Group (The) and 707 20% 500 20% 500 20% 500casu20% 500 60% more likely to continue using the people, Economical since Canada’s options change with their lifestyle and 404 ING Insurance 673 404 404 Allstate 400 707 400 insurer for other insurance policies, than alty industry has long been considered a family circumstances.

Consumers expect RSA (Royal & Sun Alliance) 671 400 400 400 400 22 40 38 54 AMA34 (Alberta Motor Association) 707 12 2222 4040 3838 just 5454 Economical Insurance Group (The) 666 consumes who said they were "modercommodity with the majority insurers and the agents or brokers work12 34business, 0% 0% 12 300 34 300 0%0% Never Had Portage 0%0% 300 300 Mutual Insurance 705 Sometimes Had OftenInsurance Had 300 1 2 3+ 300 Aviva Insurance Company of Canada 657 Never Had Sometimes Had Often Had 1 2 3+ ately pleased" with their insurance services. of policies written through independing on their behalf to be proactive in reHad Sometimes Had 1 2 3+ toNever Repeat to Repeat Had toOften Repeat Person People People RBC Insurance 701 to to Repeat to to Repeat to to Repeat Person People People Repeat Repeat Repeat Person People People 600 700 800 needs reggovernment’s direct parent brokers.The viewing 500 their auto insurance Wawanesa 696 ticipation in the auto insurance market in MOMENTS ularly and recommending the most OF TRUTH SGI Canada 678 four provinces and heavy regulation in appropriate policy options.They also exGiven the relatively infrequent purchase Aviva Insurance Company of Canada 677 focus others has shaped the industry’s pect insurers’ representatives to clarify cycle of the insurance prodor renewal Pilot Insurance Company 674 on rate and premium rather than deliv- uct, it is critical that insurers accurately the policy statement in consumer600 700 800 900 500 ering a superior customer experience. identify the key customer touch points friendly terms, so they understand the However, insurance is a service indus- and relentlessly enforce customer-ori- coverage, benefits and avoid any surprises Insurance Driver try, and policyholders expect their pri-Autoented when accidents do happen. service processes or standards.The Home Insurance Driver mary insurers to provide the same level goal should be to make sure each of In spite of these consumer expectaof service they have come to expect from these touch points turns into a “moment Claims tions, only 40% of all policyholders in Claims 8% other service industries. By putting cus- of12% the survey reported having their policy truth” that delights customers and Customer Billing their needs reviewed within the past year by tomers first and differentiating themBillingshapes their entire experience about Service Payment Customer Paymentinsurers. selves on service, insurers theoretically someone from their insurer. Forty-four 28% 17% Service 15% would not have to rely so heavily on precent said their policy needs had never One such “moment of truth” is in the per38% Policy mium discount to attract or retain cus- Policy area of claims handling been reviewed after initial purchase.This Price/ handling. Claims Offerings Offerings tomers. Accenting customer service will accountsPremium lack of review is a problem, particularly for only 8-12% of overall 20%home Price/ 21% 25% help insurers win the competitive race in and auto policyholder satisfaction, but itPremium as stated by customers of governmentClaims ClaimsIndex Index Claims Index

Home Insurance Insurance Driver Home Home InsuranceDriver Driver

Incidence Incidence Incidence

Incidence Incidence Incidence

Claims ClaimsIndex Index Claims Index

Auto Insurance Insurance Driver Auto Auto InsuranceDriver Driver

17%

Among Those Dealing with Multiple Reps 900

773

60%

600 20%

500 404

Incidence

700

632

800

724

Claims Index

Incidence

800 40%

900 761

40%

612

600 20%

500

400 0%

54 Never Had to Repeat

20 Canadian Underwriter February 2009

34 Sometimes Had to Repeat

12 Often Had to Repeat

400 40

300

700

38

22

0% 1 Person

2 People

3+ People

300

Claims Index

60%

# People Interacted With

pg16,18,20,21Consumer_v1_DG_VM

2/11/09

run insurers (61%) and those who reported purchasing their policies through brokers (50%). It is no surprise that the policy review process has a direct impact on customer satisfaction.Those who have had recent review (within the past year) have substantially higher levels of satisfaction than those who either never had a policy review or only had one in the distant past.

Another “moment of truth” is when insurers increase their premium rate and have to communicate the bad news to customers. What we have seen is that although premium increase leads to lower satisfaction level, it can be mitigated through proactive communication with more of a personal touch. Customer satisfaction can be salvaged somewhat if they are notified of premium increase in advance, particularly if the notification is done with a phone call from the agent, broker or insurer representative directly.

9:46 AM

Page 17

brokers representing multiple brands (and therefore, presumably, offering the best option). Forty per cent considered brokers to be “middle men” and preferred to deal directly with an insurer.

This rift is more pronounced among people who bought their policies through different channels: those who bought through a broker have a much higher preference for the broker channel (75%), while most who bought direct favour the direct channel (55%).

THE GUARANTEE solution ahead

A majority of policyholders are interested in consolidating all their insurance and financial needs with one firm (61%), although they are hesitant to commit to purchasing insurance from their primary banking institution (20%).

Not surprisingly, those who are currently with bank-affiliated insurers such as Desjardins, RBC Insurance and TD Insurance Home and Auto are more likely to commit, with roughly one-third to one-half expressing interest.

5/5/08

3:41 PM

Page 1

CONSUMER NEEDS AND ATTITUDES Given the high level of public scrutiny related to auto insurance, it is no surprise that Canadians have strong opinions about the industry, its regulation and the government’s role in it. More than 40% of our survey respondents found insurance products difficult to compare because each insurer uses different terms.

More than 30% of respondents believe there is too much regulation in the industry.

When it comes to the ongoing debate between private versus government run auto insurance, one-third of respondents think private insurance offers better services and more benefits. One-fifth believed government-run insurance is less expensive. Those currently being served strictly by government-run insurers in B.C., Manitoba, and Saskatchewan held a somewhat ambivalent view about whether a government-run insurer offers less expensive insurance. Twenty-seven per cent agreed that it does, while 31% disagreed. Quebec policyholders, who deal with both the government-run SAAQ and a private insurer of their choice, tended to hold a more favourable view of the private sector and its benefits.

In terms of channel preference, a majority preferred to deal with independent

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pg22,24NewTech_v1_DG_VM

2/11/09

9:52 AM

Page 12

Converting

I.T. staff and departments will play a pivotal role in any company’s successful conversion to IFRS reporting standards, so get them involved early in the process.

Mahmoud Safavi Senior Manager, KPMG Advisory Services

Neil Parkinson Partner, KPMG Insurance Practice

Adopting International Financial Reporting Standards (IFRS) — as Canada’s “publicly accountable enterprises” (a definition that includes insurers) are required to do by 2011 — is much more than a financial or accounting exercise, as its name and acronym might suggest. Indeed, successful adoption of IFRS depends on a much deeper, holistic, organizational-wide commitment.

Information technology (IT) personnel are key stakeholders in the IFRS conversion process.They will undoubtedly be pivotal to its eventual outcome. We at KPMG estimate — based on our global experience helping businesses through this exercise — that IT involvement represents about 30-50% of the overall effort and cost associated with most IFRS conversions. Many Canadian property and casualty insurers expect that this IT component will be less, at least in 2011. But the first

22 Canadian Underwriter February 2009

adopters of IFRS in Europe and Australia commonly underestimated them.

More IT implications will likely arise when the anticipated new global insurance accounting standard is introduced to IFRS in 2013 or 2014.This prospect will tempt many to put off developing final IT solutions until the second stage of IFRS changes, but at the risk and cost of maintaining temporary “band-aid” processes for two or three years.

IT proficiency is necessary to help ascertain whether a firm’s existing information systems, data flows and business intelligence reporting packages are capable of accommodating accounting and reporting requirements under IFRS. IT personnel can determine what changes are required to any of those items, along with various other applications, technology and controls within the organization.Their professional judgment early on in the conversion process can help avoid unnecessary costs, duplication of effort and serious risk of failure at more critical stages later on as their project nears completion.

For example, existing systems might need to be modified and new interfaces and/or mapping table changes implemented to accommodate new IFRS accounting and reporting requirements.

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IFRS I.T.

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2/11/09

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Alternatively, it might be necessary to design or purchase new IT systems in order to ensure the correct accounting and financial information is captured at source and properly flowed into the firm’s sub-ledgers and general ledger.

IT professionals should be used to assist with many functions during the IFRS conversion process. They could, for instance, be required to design new or existing information systems to accommodate changes to their firm’s chart of accounts, perhaps involving the creation of new accounts or deactivation of those no longer required. Special modifications might also be required to account for specific items required under IFRS, including more complex and detailed depreciation requirements for components of property, plant and equipment; new impairment charges or a reversal of previous impairments; and revaluation increases or decreases associated with certain assets, among other tasks.

All of these processes could become more complex when the organization has subsidiaries and branches across Canada. If they have different systems, a separate IT assessment to determine unique design or implementation requirements for each of these systems could be a vital first step towards ensuring consistency in the new environment.

A multi-national conversion would likely entail additional complexity, requiring an assessment of various accounting systems and/or financial reporting requirements in each of those jurisdictions.

However, IT knowledge is required to assist with far more than ensuring information systems accurately record data for accounting or financial statement reporting purposes.

Senior management should also ensure that information systems take tax considerations into account, perhaps for several countries.They should also be mindful of regulatory initiatives such as The SarbanesOxley Act of 2002 (SOX) for public firms listed on United States stock exchanges, and similar legislation affiliated with

24 Canadian Underwriter February 2009

Page 14

Common observations [in Europe] were that [IFRS] conversion projects started too late, had inadequate project planning and staff resources, treated IFRS narrowly as just another accounting policy change and often applied temporary, band-aid solutions rather than enduring IT and process solutions.

Canadian Securities Administrators (CSA)’s National Instrument (NI) 52109 for firms on Canadian exchanges.

As SOX and NI 52-109 emphasize, internal controls over financial reporting systems are of paramount concern today, since chief executive officers and chief financial officers of public companies need to sign off on the veracity of internal controls used to produce their financial results.Therefore, IT professionals should ensure that systems do not compromise vital security.

The degree of IT involvement can vary depending upon which approach a company takes to implement its IFRS reporting. A full conversion involving comprehensive system changes at source to the firm’s automated systems will likely require the greatest IT commitment.

A shadow reporting or workaround approach that employs tools such as spreadsheets to support IFRS reporting needs on a short-term basis might involve the least.

The key is to get IT personnel involved in the IFRS conversion process early and to the maximum extent necessary, so their knowledge and experience can help determine how the company’s information systems, data flows and other relevant business intelligence processes might be affected. Experience has shown this can help the IFRS conversion run much more smoothly.

About 100 countries are currently undertaking or have already been through an IFRS conversion. Senior management in many of those firms — particularly in the European Union nations and in Australia prior to their 2005 deadline — discovered to their detriment that they underestimated the organization-wide impact of IFRS, including the level of IT involvement required to successfully implement the new standards.

It would be wise to learn from the experience of those first adopting IFRS in Europe, Australia and elsewhere. Common observations were that conversion projects started too late, had inadequate project planning and staff resources, treated IFRS narrowly as just another accounting policy change and often needed to apply temporary “band-aid” solutions rather than enduring IT and process solutions. In addition, knowledgeable new hires and consultants were in short supply.

We in Canada have the advantage of learning from both mistakes and best practice examples of what went well.We also have no excuses if we make the same mistakes the IFRS “pioneers” made.

pg25 Crawford

2/6/09

3:20 PM

Page 53

John Sharoun, Chief Executive Officer, Crawford & Company (Canada) Inc., is Pleased to Announce the Following Appointments:

Steven DelGreco

Silvana Facciolo

Sylvie Tremblay

Anthony Tuson

Manager, Toronto West

Director, Business Development

Director, Operations

National Account Executive

Steven DelGreco has been named manager of Crawford’s Toronto West branch. Reporting to Bill Johnstone, vice president, Global Technical Services (GTS) and Greater Toronto Area (GTA), DelGreco will apply his 22 years of experience to the management of a group of multi-line adjusters and support staff in one of Crawford’s largest branches and will work with other managers across the country to provide a seamless team environment.

Silvana Facciolo joined Crawford as director, business development in the firm’s Sales and Marketing division, reporting to Gary Gardner, senior vice president, Sales and Marketing.

With over 25 years of experience in the insurance industry, Facciolo will apply her strong interpersonal and client service skills to several key account management projects. She will also be involved in sales and marketing initiatives across the country.

Sylvie Tremblay was named director, Operations and will be reporting to both Greg Smith, vice president, National Programs and Pat Van Bakel, senior vice president, Claims Operations. She will concentrate primarily on several special projects with Crawford’s Regional Claims Centres (RCC) in Mississauga and Montreal.

She will also be involved with several coaching and mentoring initiatives across Ontario and Quebec. Fluently bilingual and fully licensed in both Ontario and Quebec, Tremblay has over 30 years of experience in the insurance industry.

Anthony Tuson, National Account Executive, has moved from his current position in Vancouver to Crawford’s downtown Toronto location on Front Street. Reporting to Gary Gardner, senior vice president, Sales & Marketing, Tuson will continue to be responsible for commercial P&C accounts across Canada. With 14 years of experience in the industry, Tuson will also put his expertise to good use enhancing Crawford’s initiatives with several of its key accounts.

“These seasoned claims professionals all have extensive experience in the insurance industry and will undoubtedly bring enthusiasm and a commitment to excellence to their respective roles,” said Sharoun. “We are truly pleased to welcome Steven, Sylvie, Silvana and Anthony to their new roles on the Crawford team.”

Crawford & Company (Canada) Inc. is a wholly owned subsidiary of Crawford & Company (www.crawfordandcompany.com). Based in Atlanta, Georgia, Crawford & Company is the world’s largest independent provider of claims management solutions to insurance companies, and self-insured entities, with a global network of more than 700 locations in 63 countries. Major service lines include property and casualty claims management, integrated claims and medical management for workers’ compensation, legal settlement administration, including class action and warranty inspections, and risk management information services. The Company’s shares are traded on the NYSE under the symbols CRDA and CRDB.

www.crawfordandcompany.ca

pg26,28,30OSFI_v1_DG_VM

2/11/09

9:56 AM

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BACK

FUTURE to the

Canada’s solvency regulator, the Office of the Superintendent of Financial Institutions (OSFI), is asking the industry for its opinion on the future direction of reinsurance Robert McDowell regulation.

Financial Institutions

and Services Group, Fasken Martineau

Koker Christensen

Financial Institutions and Services Group, Fasken Martineau

Canada’s solvency regulator, the Office of the Superintendent of Financial Institutions (OSFI), in December 2008 released its Discussion Paper on OSFI’s Regulatory and Supervisory Approach to Reinsurance.

The discussion paper provides an overview of the Canadian regulatory and supervisory regime applicable to reinsurance, summarizes a number of current OSFI initiatives related to reinsurance and seeks input on the direction of reinsurance regulation and supervision. The paper is significant not only because it reveals OSFI’s thinking on reinsurance but also because it invites industry to comment on its approach to reinsurance, thus offering an opportunity for insurers and reinsurers to influence Canada’s reinsurance regulatory regime.

26 Canadian Underwriter February 2009

CONTEXT AND BACKGROUND OSFI released the discussion paper in the midst of what is referred to in the paper as “recent developments in global markets.” The current global economic crisis has put a spotlight on the risk that financial institutions can fail and the significance of counterparty risk. This presumably informs OSFI’s thinking and is reflected in the fact that a central focus of the discussion paper is the availability of capital/collateral in Canada to satisfy policyholder claims in the event that an institution fails.

The discussion paper is also informed by international trends in reinsurance regulation and supervision. The International Association of Insurance Supervisors (IAIS) in October 2007 released its Discussion Paper on the Mutual Recognition of Reinsurance Supervision, which addresses a framework for an international reinsurance supervisory system.The IAIS followed this up in October 2008 with the Guidance Paper on the Mutual Recognition of Reinsurance Supervision.The National Association of Insurance Commissioners (NAIC), an organization of insurance regulators from the 50 states, the District of Columbia and the five U.S. territories, adopted the Reinsurance Regulatory Modernization

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Framework Proposal in December 2008.

The proposal seeks to modernize U.S. state-based regulation of reinsurance.

Similar initiatives are currently underway in other jurisdictions including the European Union and Australia.

OSFI’S GUIDING PRINCIPLES The discussion paper sets out the following five “guiding principles” underlying OSFI’s regulatory and supervisory approach to reinsurance: • policyholders of federally regulated insurers must be adequately protected; • regulation and supervision should be proportionate to risk; • OSFI must have the ability to assess those risks effectively; • a level playing field among financial sector players should be maintained where appropriate; and • effective coordination with other insurance regulators is critical.

Three general observations can be made about how these principles inform the discussion paper. First, it is clear from the discussion paper that OSFI’s top priority is policyholder protection; it is not a coincidence that this is the first of the five guiding principles. Second, OSFI is attempting to take a more risk-based approach to reinsurance regulation and supervision, and appears open-minded about eliminating or changing existing rules based on fixed percentages. Third, OSFI recognizes that the global nature of the reinsurance market requires coordination among insurance regulators, but also recognizes that this is difficult to achieve.

OSFI is soliciting views from the industry on a number of reinsurance issues, which the discussion paper has organized into three broad sections. The sections (and issues) are listed under the headings of unregistered reinsurance, registered reinsurance and governance.

UNREGISTERED REINSURANCE Collateral requirements for unregistered reinsurance If a federally regulated insurer cedes business to an unregistered reinsurer, it is 28 Canadian Underwriter February 2009

Page 14

only entitled to credit if the reinsurer vests collateral in trust to cover the ceded liabilities and the associated capital requirements.The United States has similar collateral requirements. These requirements have been criticized for failing to take account of the financial strength of the reinsurer: the same collateral requirements apply regardless of how well capitalized the unregistered reinsurer is. Some have argued that these types of collateral requirements put foreign reinsurers at a competitive disadvantage and amount to protectionism.

25% limit on risks ceded to unregistered reinsurers Property and casualty insurers are only permitted to cede 25% of the risks insured by them (measured by premium) to unregistered reinsurers.This limit does not apply to life insurers. It has been argued that the 25% limit constrains appropriate management of risk by diversification and limits access to very strong

The paper is significant not only because it reveals OSFI’s thinking on reinsurance but also because it invites the industry to comment on its approach to reinsurance. reinsurers. As well, a premiums-based limit may not correspond to the amount of risk being transferred.The discussion paper notes that an alternative to the 25% limit would be to adopt a general requirement that companies adopt adequate reinsurance cession practices and procedures.This could be bolstered with guidance regarding wording and clauses to be included in reinsurance contracts.

Letters of credit as collateral OSFI prescribes the types of assets that are acceptable as collateral for an insurer to obtain credit in situations in which it has ceded risks to an unregistered reinsurer. Letters of credit are recognized as acceptable collateral, but their use is limited to 15% of the risks ceded. Some

argue the 15% limit is unjustified given how secure letters of credit are.

Mutual recognition for reinsurance supervision It has been argued that collateral requirements and other prudential restrictions on ceding risks to unregistered reinsurers increase the cost and decrease the availability of reinsurance. Some say these restrictions would be unnecessary if there were an effective global regime of “mutual recognition” for reinsurance.

Mutual recognition essentially involves regulators in different jurisdictions accepting and relying on one another’s regulatory systems. In this scenario, reinsurers would be regulated by regulators in their “home” jurisdiction; foreign reinsurers would be able to reinsure risks in “host” countries — and the ceding company could obtain credit for this reinsurance — without the reinsurer being regulated by regulators in the “host” country.

The discussion paper notes there are significant challenges to implementing a mutual recognition system on a global or even on a bilateral basis, including wide variation in regulatory and capital requirements across various jurisdictions.

In addition, the discussion paper states that to eliminate or reduce collateral requirements through a mutual recognition system, risk-based capital requirements for federally regulated ceding companies would need to reflect the additional risk of conducting business with a company in a specific jurisdiction.The impact of a mutual recognition agreement on provincial regulatory regimes would also need to be considered.

An alternative to a mutual recognition system addressed in the discussion paper is risk-based collateral requirements. For example, under the Reinsurance Regulatory Modernization Framework Proposal recently adopted by the NAIC, collateral requirements would vary based on the rating assigned to a reinsurer.

Approvals for unregistered reinsurance with related parties An insurance company entering into reinsurance arrangements with a related

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party unregistered reinsurer requires OSFI’s approval. According to the discussion paper, these approvals accounted for more than half of all reinsurance-related approvals administered by OSFI.And yet, the transactions for which approval is sought are often insignificant to the overall risk profile of the insurer and are subject to other controls. OSFI is soliciting the industry’s views on what changes could be made to streamline approval requirements without putting policyholders at risk.

REGISTERED REINSURANCE Capital Requirements OSFI’s view is that property and casualty and life insurance companies face similar counterparty and operational risks related to reinsurance.

OSFI imposes a fixed capital/asset charge on property and casualty insurers ceding risks to registered reinsurers. A capital charge applicable to Canadian life insurers that cede risks to registered reinsurers will be implemented in the next round of major changes to the credit risk component of the Minimum Continuing Capital and Surplus Ratio (MCCSR) to address counterparty risk.

When insurers cede a significant portion of their insurance risks to a reinsurer, they are exposed to operational risk. Currently, life insurers have a 20% flat capital charge on business embedded in their 120% MCCSR to account for this risk. Since life insurers are not subject to any ceding limit, it is possible that the 20% flat charge could be inappropriately reduced to zero when an insurer cedes all of its business.To address this, OSFI will implement a minimum capital charge of 25% of MCCSR gross capital requirements for life insurers to account for operational risk. This is a temporary measure until a capital charge for operational risk is developed.

75% fronting limit Property and casualty insurers cannot cede more than 75% of their risks (measured by premiums). The rationale for 30 Canadian Underwriter February 2009

Page 16

this is that when an insurer does not have sufficient “skin in the game,” it is less likely to engage in appropriate underwriting. The discussion paper states this limit may not be effective because certain lines of business may be fully fronted despite this limit.The discussion paper notes other OSFI tools and mitigating factors can encourage prudent underwriting and sound risk controls standards. It has been suggested that the 75% limit be replaced with an explicit operational risk capital charge on property and casualty insurers. The discussion paper also suggests that general principles regarding reinsurance risk could be set out in a guideline that would apply to life and property and casualty insurers.

Approvals for registered reinsurance transactions A new approvals regime for Canadian insurance companies came into force in 2007. Similar changes for foreign companies are expected to come into force on Jan. 1, 2010.

GOVERNANCE Guideline on corporate governance The discussion paper highlights the importance of sound business practice and controls in managing reinsurance risk and refers to OSFI’s Guideline on Corporate Governance in this regard.

Guideline on sound reinsurance practices and procedures (B-3) The discussion paper states that Guideline B-3 is currently being updated and will apply to all reinsurance cessions by federally regulated insurers (Guideline B-3 currently only applies to unregistered life reinsurance). The discussion paper states that revised Guideline B-3 will underscore OSFI’s expectation that insurers establish and implement sound reinsurance cession practices and procedures encompassing the following elements: • a reinsurance management strategy; • criteria for assessing the suitability of a reinsurer;

• appropriate risk concentration limits; • parameters for delegation of certain responsibilities; • adequate internal systems for monitoring reinsurance transactions; and • sound risk management and compliance mechanisms.

Guideline on reinsurance agreements (B-13) OSFI is concerned about the uncertainty regarding coverage when there is a time lag between the initiation of a reinsurance arrangement, the execution of a summary document and the execution of the full agreement. Guideline B-13 (a draft of which was released in December 2006) will set out prudential considerations relating to time lags in reinsurance arrangements and will address wording used in reinsurance agreements.

Insolvency and other contract clauses Guideline B-13 will also address appropriate wording and clauses for reinsurance agreements. The discussion paper highlights the importance of insolvency clauses, which are provisions that specify that a reinsurer must continue to make full payments to an insolvent insurer without reduction resulting from the ceding company’s insolvency. While most reinsurance agreements in Canada contain an insolvency clause, an insolvency clause is not required for the reinsurance receivable to be recognized as an asset for regulatory capital purposes.The discussion paper states consideration will be given to amending existing guidelines regarding contract clause requirements with respect to insolvency, offset, cut-through and other clauses.

The Property and Casualty Insurance Compensation Corporation recommended in its November 2008 issue paper (Re)Assurance of Solvency: Reinsurance assets in insurance company liquidations that only reinsurance arrangements that include an appropriate insolvency clause should be recognized as allowable assets under MCT/BAAT for property and casualty insurers.

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Bridging the Data Divide Technology has evolved to a point when brokers may soon be able to use XML standards to communicate with multiple insurers using broker management systems. But what will that mean for carriers’ individual Web portal solutions?

By Craig Harris Freelance Writer

34 Canadian Underwriter February 2009

With

the growing acceptance of industry XML standards for data transfer, brokers are asking if the time is finally right for multiple interface with insurance companies directly through their broker management system (BMS). This would render the proprietary carrier Web portal, long a sore point for many brokers, obsolete. The only problem? Insurers have invested millions of dollars in their portal solutions, and so they won’t be abandoning them easily.

Undeterred, and led by their national association, Canada’s insurance brokers are taking a fresh look at the age-old problem of interface between broker management systems and carrier back-end technology. The focus is on pragmatic solutions that are tested and validated by BMS vendors — and based on XML standards. The big debate is whether the transmission of data should take place inside or outside insurer portals.

February 2009 Canadian Underwriter

35

COVER STORY

Bridging the Data Divide The Broker Perspective The Insurance Brokers Association of Canada (IBAC) is quietly trying to figure out a way for the latter approach to actually work. In other words, they would prefer to see straight-through processing of transactions directly from any BMS to multiple insurers. In recent months, its technology committee has consulted with BMS vendors on a proof of concept to test whether their systems can extract a standard XML auto policy file for new business and policy change. The XML file, based on Centre for Study of Insurance Operations (CSIO) standards, could be sent directly to an insurer’s back-end system via the Internet in real time without requiring the involvement of a company portal.

It is still early days in the investigation, according to IBAC CEO Dan Danyluk. He notes it is important to first explore the capabilities of major BMS vendors active in Canada. “We have come up with a clear, small test about a message and whether that would work,” says Danyluk. “Once we know the answer, it will determine next steps. We want to first see if we can light a match before we build a bonfire.”

Specifically, IBAC’s technology committee has gone to the “pan-Canadian” BMS vendors for a response on how long it would take them to create an XML-standard message for an auto insurance policy. There is no fixed time frame for the project, according to Danyluk, but the long-term goal is to achieve multiple interface with insurers without the necessity of portal access.

The transaction would begin in the BMS and end there as well.

“We strongly believe that: 1) brokers ought to be able to choose the broker management system that fits their brokerage,” Danyluk says. “And 2), if you are really going to do the job as a broker, you need to be in a position where you can do multiple interface with your insurers.”

The Vendors’ Perspective The BMS technology vendors have already responded with their comments. Keal Technology (sigXP) has, for 36 Canadian Underwriter February 2009

example, stated that it would require 30 days to meet the proof of concept test, while Custom Software Solutions Inc. (The Broker’s Workstation) has indicated it is currently ready.

“We cannot do this in a vacuum. If we do, all we will create is a divide between the technology group, the carriers and the brokers.”

Applied Systems Inc. (The Agency Manager, Epic) says it has received information from IBAC and sat in on meetings, but “at this point we are not able to participate in a proof of concept,” according to Doug Johnston, the company’s vice president of partner relations and product innovation. “It is not that we are not interested in what IBAC is doing, but our plate is pretty full. We believe in what they are doing and we think it is a serious endeavor.”

Others say they are encouraged that IBAC is taking a leadership role in technology.

“From our perspective, IBAC has asked us to prove this concept and whether we are willing to work on it,” notes Scott Andrew, president and CEO of Custom Software Solutions Inc (CSSI).

“We said yes, because we are already doing it; there is no risk in it for us. It is an attainable goal and we will see where

they go next with it. The other ways we have tried to do it as an industry in the last 15-20 years clearly haven’t worked.

If IBAC can influence positive change from its position, I’m all over that.”

Patrick Durepos, president of Keal Technology, said he believes it’s “a leadership issue as to why this has not been done before,” but brokers have a very strong lobbying voice. “There are very few industries that have a group of members so strong on the lobbying front,” he says. “That is what we are going to start to see in the next few months. Once they throw their weight behind this project, companies will say: ‘Okay, this is what we have to do.’”

Meeting of Minds The bottom line is that everyone has to get together at the table, sit down, put aside their differences and say what needs to be said to make things work for all parties concerned, says Peter Blodgett, president of the Insurance Brokers Association of Ontario (IBAO).

“This is a national issue, so let’s look at the bigger picture,” he says. “It doesn’t make any sense for Manitoba to be farther ahead than Ontario when it comes to technology or vice versa. We all have to be on the same page.”

So what do insurance companies think about the prospects of brokerinitiated, straight-through processing of transactions based on CSIO XML standards? Out of the four insurers that agreed to be interviewed about the topic (two declined or did not respond to interview requests), none had any specific knowledge of the IBAC-led initiative.

And for some, this is a problem right off the bat.

“I don’t think this is the type of work that can be done outside the carrier world, and then [have the brokers] turn around [to the carriers] and say: ‘Here you go,’” Johnston says.

“I have been very vocal to IBAC about that. We cannot do this in a vacuum.

If we do, all we will create is a divide between the technology group, the carriers and the brokers. I have been critical of that, and I have not made friends on this point.”

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Bridging the Data Divide

The Company Perspective Jack Ott, senior vice president and chief information officer for ING Canada, says he understands that IBAC and brokers would like to speak to insurance companies to see if the carriers “can get our act together” with BMS vendors generally. But “the reality is that this problem doesn’t get solved with general pronouncements,” he says. “It gets solved when key companies and key players sit down, talk, work things out and start pilot projects.”

Instead of focusing on multiple interface models, insurance companies in recent years have been developing their own proprietary broker portals.

The intent is to give brokers the kind of functionality they are asking for, but only through the individual company’s space. This has translated into some individual successes, particularly in terms of current capabilities in real-time policy inquiry, billing status, rating and new business transactions. The competitive mantra for companies these days is ‘ease of doing business.’

Whether the solution in question is Gore Mutual’s GoBroker technology, Economical Insurance’s Group’s Connex Suite, Aviva Canada’s Fastrax portal for commercial lines or ING Canada’s similar venture, Savers, many say there is tangible progress.

“I think companies, including Aviva, have been working feverishly on making proprietary portal activity work,” notes Bob Fitzgerald, executive vice president and chief marketing and underwriting officer at Aviva Canada. “The 38 Canadian Underwriter February 2009

companies’ portals have become more foundationally stable, and people are looking towards solutions and partnering with various BMS providers, be it WARP or Nexisys. There are vendors out there looking to tackle this space of point-to-point integration.”

Ott, whose company is also working with several BMS vendors, agrees there is a lot of activity on the integration side. “What I am seeing is a real change in attitude on both sides of the fence,” he says. “Both the BMS vendors and the carriers are finally getting the message that brokers have been sending for awhile: they [brokers] want the BMS to be the centre of their brokerage universe. That is where transactions start.

This is where they do business. So we need to align to that.”

Gore Mutual vice president of information services and chief information officer Richard Meertens says his company’s GoBroker technology has enabled several key functions for brokers. These include policy view for all personal and commercial lines, including dec pages [“declaration” pages are the first page of the policy] and billing notices, commercial lines new business providing instant quote, bind, issue and electronic policy delivery and policy change functionality for auto and billing.

“Gore Mutual recognizes the significance of broker management system integration and we are proud to be making progress in our quest to deliver solutions,” Meertens notes.

For Economical Insurance Group’s se-

nior vice president of operations, Jorge Arruda, the whole point of technology investments is to increase broker efficiency. “A matter of decreasing something from minutes to seconds, when added to the whole policy lifecycle, could result in big gains for the broker,” he says. “The development of the Connex Suite solutions like Edge and Rogo are the initial rollout of our ongoing technology solution strategy.”

Despite this activity, the question remains: Do proprietary portals really give brokers what they want? The only answer lies in broker participation or “take-up” rates for the portals. Insurers won’t discuss publicly how many brokers use their solutions; some sources say there has been private frustration at the relatively low participation rates, often at less than 20%.

“The insurers that have spent millions of dollars in building those portals are awfully disappointed with the take-up rate from brokers,” says Durepos. “Brokers do not use them because they want to work within their systems.”

Andrew says it would only be a matter of time before brokers realized carrier portals were not what they wanted. “My eight-year-old prediction was a 20% take-up for company Web portals,” he says. “If it was a 40% uptake, I would be pleasantly surprised.

Let’s just say, I am not surprised.”

The Future of Portals In a position paper on the use of multiple company Web sites issued last

COVER STORY

Bridging the Data Divide August, IBAC lists several disadvantages of individual interface solutions.

Ultimately, the association does not recommend them to brokers.

“The challenge with insurers’ portals is that they require an incredible focus for a period of time, which makes it more challenging to respond to all your insurers,” notes Danyluk, who adds that the position paper was for internal information purposes.

“We think it is important that brokers have a choice whether to use a portal or not.”

Blodgett notes that when a broker goes into a company Web portal, it still represents a double-entry system.

“There are steps being taken to get us closer to that ‘One-entry, do-it-once’ technology that we are looking for, but we are not there,” he says. “Instead of one-touch, we are now at one-and-ahalf touches.”

In fact, several insurers are publicly questioning whether the broker portal is the right long-term strategy when it comes to everyday broker-generated transactions.

“Our long-term broker integration strategy starts and ends with the BMS,” Arruda says. “The Economical Insurance Group is purposely avoiding extensive development of our broker portal because we’re focusing on a broker’s natural workflow. This isn’t to say that in the future a solution developed under our technology integration brand won’t utilize the portal. We’ll just eliminate the requirement to sign-on and greatly reduce or eliminate duplicate entry of data.”

Ott says portals “are here to stay” to support the relationship between the broker and the company. “But we really see them diminishing in importance as far as the transactional side is concerned,” he adds. “It is currently frustrating for brokers. They keep telling us: ‘Look, push the transactions back into our BMS,’ and we keep launching new features of the portal. I am really hoping this is the tactical mid-term and we will gradually move away from that.

Unfortunately, I think a little more patience is required.”

40 Canadian Underwriter February 2009

“The insurers that have spent millions of dollars in building those portals are awfully disappointed with the take-up rate from brokers. Brokers do not use them because they want to work within their systems.”

Why Patience is Required Patience is required because the road to multiple-company interface is long and littered with obstacles. Despite the good intentions of both insurers and brokers, the integration process for various BMS and carrier back-end technology systems can get bogged down in the details of data-storing, sending and mapping — especially when it comes to policy change.

“While new business is important, policy change occupies about 80-90% of the activity on in-force business,” Fitzgerald observes. “That is really the ease of business issue on the personal lines side. I think every company is doing something or a series of things around trying to address longstanding broker concerns.”

Ott says that “if you look at the objective of round-trip XML processing from the broker management system, there are still some significant hurdles to overcome, especially around endorsement processing. The reality is that a lot

of insurance transactions are back-andforth and are heavily dependent on the reaction of the end user.”

The key obstacle is lack of standardization among BMS, Meertens says.

“This makes integration with company systems challenging, as we must build integration with — and license with — each individual BMS on the market. While the movement to standardization is happening, it is moving more slowly.”

Arruda agrees. “There is inconsistency between broker management systems, creating fragmentation,” he says. “The industry is committed to CSIO standards, but the industry doesn’t neces-sarily store, send or map the same information. Integration that works for one BMS does not always work for the next.”

It is perhaps surprising that some BMS vendors acknowledge that the traditional weaknesses with integration have been more on the front-end than the back-end.

“I think the real barrier over the years has been the BMS vendors,” says Andrew. “To put the onus on the companies entirely is not fair. They have spent money; they have tried to do as much as they can, working around the vendor systems out there. Really, they are trying to plug holes that the vendors won’t.”

When it comes to policy change, Johnston says traditional broker management systems have been unable to handle the kind of data necessary to process these transactions. “From a broker technology side, we need the ability to transmit a more robust data set to the carrier when a transaction is occurring,” he notes. “That means we need better policy history and better management of multiple terms of a policy.” Applied Systems’ new BMS, Epic, will have those features. It is set for launch in Canada in the third quarter of this year.

From Front to Back But if the BMS vendors build it, will the companies be able to receive the data?

The fact of the matter is that it depends on the specific insurer at hand. Different companies are in different stages of

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COVER STORY

Bridging the Data Divide development when it comes to technology. Some argue a greater investment in integration has to take place in the companies’ back-end systems.

“If the energies are focused on the back end, then all companies that want to work in the independent broker channel will end up saying: ‘This is where we need to spend effort, not on the portal,’” says Durepos. “The backend scenario will permit the ‘catch’ of an XML file. The take-up rate from brokers would be a lot better because they would almost instantly see their efficiency improve.”

The concept of brokers ‘pitching’ standard CSIO XML files from their BMS and insurance companies ‘catching’ the data in their back-end systems and sending it back to the BMS is an ideal vision of efficiency in this distribution channel. It is, in fact, what IBAC is pursuing as it probes the capabilities of first BMS vendors and then insurance companies.

“I have to believe that companies do want to see this come to a point where functionality is key, and we are able to communicate with them and do our jobs in a manner that is time and cost-effective for all parties involved,” says Blodgett.

“We think that the value of the broker advice proposition comes about when you can easily access your multiple markets and distill your information into simple advice for the consumer,” says Danyluk. “That is really what technology is all about, at least at the first step. The second step is: Can we take that distilled knowledge, put it in and close the transaction for the consumer? There is a lot there in terms of accessibility and speed. That is really what we are trying to get our heads around.”

Andrew believes that what IBAC is asking for can be delivered. “We’re delivering it today to more than 200 brokers,” he says, adding that CSSI’s I-Biz integration solution has been active since 2004 and is fully rolled out with Wawanesa Insurance.

“Any activity needs to start in the 42 Canadian Underwriter February 2009

broker system, whatever that looks like, and then can be sent in a done transaction via Web services or [through] whatever [the] company system [happens to be], which then sends the results or record sets back to the BMS.” Think about it this way, says Durepos: “If companies are saying they are dis-

“We have a lot of straight-through, round-trip, real-time transactions available today, defined in XML standards and implemented by a number of carriers.

Those initiatives need to continue if we are going to learn what works and what doesn’t work.” appointed with the take-up level of brokers with their portals, and the frontend solutions like Nexisys and WARP are not able to get critical mass in the market, that is a lot of energy wasted.

We have to stop and say: ‘How we can do this differently?’ That is what IBAC is doing.”

Other sources are bullish that some aspects of this scenario will play out in the next year or two, albeit on a smaller scale.

“I am optimistic that a lot of the pieces are coming together and coming into focus,” observes Ott. “The CSIO

XML standards are rapidly maturing, the technology itself for integrating systems has come a long way, particularly with things like Web services, and there is a willingness on the part of carriers and BMS vendors to sit down and make this vision that the brokers have been telling us about a reality. I am pretty optimistic that over the next year or two, there are going to be some interesting breakthroughs.”

Johnston is equally enthusiastic. “I have been really encouraged over the last six months,” he says. “There has been a lot of work going on at carriers, and people don’t see that until it is out there. We have a lot of straight-through, round-trip, real-time transactions available today, defined in XML standards and implemented by a number of carriers. Those initiatives need to continue if we are going to learn what works and what doesn’t work.”

Fitzgerald sees lots of room for optimism, but not on the scale of an “industry-owned solution” akin to the failed CSIO Portal concept. “I see more innovation with middleware providers, and the willingness of BMS providers to come together and accelerate the plugging of gaps,” he says.

“Brokers are not homogeneous. Many have a view that they want to start and end in their BMS, or else they won’t play.

I think there needs to be a willingness to say: “One size doesn’t fit all.” What we are interested in is ease of business that is flexible enough to allow brokers of all sizes and shapes to work electronically.”

Instead of shooting for “many-tomany” solutions, as the industry has done in the past, the industry should be directing its attention to getting “one-to-one” solutions working on a standardized basis, Ott says. From there, the industry can expand to “many-tomany” concepts.

“From our standpoint, then, it is not going to be a battle of the PR announcements,” he says. “What we are offering is steady progress to achieve this vision of straight-through processing. This would be a good year to start to see that happening.”

symbility F I R S T

I N

M O B I L E

C L A I M S

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In the absence of perfect, 100% insurance to value, our hard-earned premium dollars may be subsidizing our neighbour’s premium.

Todd Rissel CEO, e2Value Inc.

Let’s start with the premise that we all know what a free lunch is. We also know what insurance-tovalue (ITV) is. Is either of these things a reality?

Perhaps it’s more appropriate to ask why ITV is so important. It seems to be a newsworthy topic as of late.Why does it attract so much attention and so much angst?

The ideal form of ITV is 100%. In this instance, a policy limit matches exactly what it would cost to rebuild the insured property at the time of loss. For example, a building that cost Cdn $500,000 to rebuild would have a structure policy limit of Cdn$500,000. Sounds simple, right?

But if your neighbor pays a premium amounting to only 60% ITV — which is 40% short of what they should pay — who gets hurt? This is

44 Canadian Underwriter February 2009

the “free lunch” in this story: it is a free lunch for your neighbour. If many consumers are not paying what they ideally should (and therefore proper rating can’t be determined), then insurance companies are not collecting enough premiums for continuing operations. Since the premium shortfall can’t be pinpointed to one home (or risk), this could result in higher rates for all the policies in a portfolio, because the company needs to remain solvent. This is where we learn, once again, that there is no free lunch: in the absence of 100% ITV, we are all paying for our neighbors’ lunches!

Over time, insurance companies, brokers and consumers all stand to lose if a chasm widens between insurance policy limits and the actual cost to replace a structure. How does each of the parties lose? For carriers, understanding a risk is vital to charging adequate premiums.Adequate premiums are vital to keeping carriers healthy. If carriers do not charge enough premium for the risk, they won’t be able to cover losses and could become insolvent. If carriers become insolvent,

Illustration: Anson Liaw

No Free Lunch

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brokers have fewer product options from which to select and fewer carriers for which to work. When consumers have fewer carriers competing for business, their rates tend to be higher.

ITV is not a new topic. In 1971, George L. Head published his book, Insurance To Value. It was the Kulp-Wright Book Award winner for 1975. Presented annually by The American Risk and Insurance Association, the Kulp-Wright Book Award goes to the author of a book considered to be the most influential text published on the economics of risk management and insurance.

Expanding on that book, Robert J. Kelley in 1994 wrote an article called ‘Homeowners Insurance To Value An Update.’ In it, he observed that ITV is “generally associated with the concept that the equitable, adequate and reasonable price... should vary with the amount of insurance.” He attributed the quote to George L. Head.

At the basic level, rates should change as values change and rates need to be adjusted for changing exposures. (Rates and prices are often confused, but that is another story for another time.) For consumers, brokers and carriers, it is important that each owner pays precisely what he or she owes for an insured structure or the risk. However, proper rates can’t be applied without understanding the cost to replace the structure. Proper understanding of the risk leads to proper pricing at a risk-adequate rate, allowing proper actuarial reviews and proper actuarial modelling.

Therefore, Head’s “equitable and adequate” requirement means that the rate changes with the exposure, and part of that exposure is the total value. In other words, no free lunches for a few, but rather lower-cost lunches for all.

After a catastrophic event like a hurricane or wildfire, the improper collection of premium can result in the dissolution of one or more companies. At the other end of the spectrum, proper ITV applied equally by all insurers would more than likely reduce the ultimate base insurance costs consumers pay; this in

46 Canadian Underwriter February 2009

turn would keep more insurers in business competing for consumers’ business.

In the ideal, proper ITV would allow a risk-by-risk adjustment of premium as opposed to wholesale increases on an entire book.

Head wrote his thoughts in 1971 and Kelley followed up in 1994. Therefore, ITV has been written about for at least 37 years. So why are we still discussing ITV and trying to achieve proper ITV?

If your neighbour pays a premium amounting to only 60% ITV — which is 40% short of what they should pay — who gets hurt? This is the “free lunch” in this story: it is a free lunch for your neighbour.

One complicating factor is that homes are fairly large, complex structures that can take months or sometimes years to build. Furthermore, they are personalized for almost every owner; the cost of personalizing a home can equal the cost of personalizing several cars. Complicating matters further, there are basic homes,

average homes and luxurious homes.

There are homes in the woods, homes on lakes, homes in the city, homes in old neighborhoods and homes in new neighborhoods. In order to have proper ITV, every variation of a home must be valued correctly.

It is a complex process to value homes.

Builders take days, if not weeks, to prepare detailed estimates. Valuations could not be produced in this way. Carriers and brokers don’t have the time to spend days or weeks on each valuation; homeowner premiums would be substantially higher if builder estimates were required for each insured property.Whereas there is a finite number of automobile manufacturers and variations (and we may have fewer of them in the next few months), there are an almost infinite number of homebuilders and variations.

The insurance market demands a quick and easy-to-use process that can be completed by a non-builder.That quick-andeasy process has been the Achilles’ heel of ITV. It is the hurdle to making ITV “equitable and adequate.”

Prior to personal computers, there were no easy, accurate and consistent processes to obtain proper ITV. The advent of PCs improved the situation, but limitations remained. Large, centralized computer systems could also be used, but they were not flexible enough to address the varied housing stock.

In the beginning, ITV calculation methods used pen and paper.The paper methods were later adapted to PCs. However, when the paper-based systems were transferred to PCs, which made them quicker to run, the systems were not reinvented for the computer. All these systems still relied on the individual’s skill in using the system; they also relied on the individual’s understanding of homes and the materials in a home. But inconsistent entries arising from inconsistent individual inputs led to wildly inconsistent applications of the systems.

Further, the data was disconnected. It was hard to study, review and refine methods and pricing since the data was spread out on individual PCs.The lack of

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a central repository for the data used to create the valuations meant actuaries were unable to easily review and analyze pricing, rate and risk evaluation.

A simpler process emerged, one that eliminated many of the problems with the paper- or PC-based systems. In the late 1990s, the Internet promised to provide the platform that would truly end the inequities in the ITV process. Automation and standardization, access to data and analysis of the entries and results all were attainable. With new resources available online, valuation providers would be able to determine the specific and true value of any property within minutes. The theory of ITV was put forth in 1971, but the true capability to arrive at proper ITV did not actually appear until 2003 with the availability and widespread use of true Web applications and broadband connections.

Think of it as 32 years of struggle, with five years of refinement.

A Web-driven centralized process has the ability to factor in the qualities of the actual property, as well as up-to-theminute and geographically tailored marketplace factors. These include inflation, worldwide changes in the cost of materials and local industry trends for any property in any country. Such a tool allows companies to operate on a realtime basis, achieving a true and objective assessment of replacement value.

So to advance ITV, historical technological development had to — and did — occur. In addition, changes to the systems themselves needed to occur.The systems designed for paper and then adapted to PCs and mainframes were as old and outdated as 1972 automobiles. Building methodologies have changed. Markets have changed. Calculation methodologies have changed. To illustrate this, imaging putting a new motor in a 1972 Chevrolet. That does not make it a new Chevrolet.The basic technology and underpinnings of the 1972 car will restrict the new motor to within the capabilities of the old shocks, suspension and limited safety features.Yes, those items could be updated. But at the end of the day, it is an old platform and a mismatch of parts.

Ideal ITV can be achieved if carriers and brokers act with discipline and dedication, tapping into the increased capabilities of ITV providers along the way. If all parties keep their expectations high, co-operate and maintain a long-term view (i.e. looking beyond the next sales cycle), then 100% ITV could be as commonplace as airbags, antilock brakes and fuel efficiency.

Technology allows ITV providers and

carriers to update methodologies faster, integrate faster and, more importantly, apply the right value to each home, thus eliminating free lunches. Business practices need to drive the process to enforce ITV. ITV can be a reality. Free lunches are not “free” for most of us: they are a delusion ultimately advantaging a few, while the rest of us pay for them. With correct ITV, though, we can all afford to buy lunch.

Bright ideas for insurance professionals...

For all your insurance information needs there is one website you can call home... .ca

Your online source for: • Daily Breaking Insurance News • Full Current Print Edition of Canadian Underwriter magazine online • Full Archived issues of Canadian Underwriter dating back to 1999 • Full Searchable database of news + archives by keyword(s) • Insurance Careers • Interactive Insurance Events Calendar • Insurance Marketer Database online • Industry Photo Gallery • Insurance Links • Free 2x Weekly Headline E-News Alert

www.canadianunderwriter.ca

February 2009 Canadian Underwriter 47

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I.T. Investment

Econo

in an

Downtmic A seized economy is causing brokers and I.T. vendors alike to re-examine what it would take for brokers to go ahead and revamp their I.T. systems Scott Andrew President, CEO Custom Software Solutions Inc.

Canada’s uncertain economic environment has threatened to become a factor in broker automation software investment decisions. A system change is a difficult decision at the best of times, and an even more challenging one in periods of general economic turmoil.

Are all broker software systems created equal? At the end of the day, they all do the necessary work at different levels of efficiency. But do some offer enough added benefits to justify a change, despite the extra expense and effort required to make that switch?

Ease of doing business, data exchange transparency, data integrity, customer retention, prospect to customer conversion rates, exceptional customer service, greater E&O protection, ease of compliance and ongoing financial considerations — we’ve all heard these buzzwords before, but they remain common goals that brokers still have on their wish lists into 2009 and beyond.

DECISIONS, DECISIONS Based on current economic conditions, consumers seem much more likely to evaluate their business relationships — including their insurance arrangements — and seek out suppliers that make it easier for them to conduct business. Brokers capable of meeting and exceeding these expectations will continue to win over consumers’ trust and loyalty. So is this the right time to be

48 Canadian Underwriter February 2009

urn

considering a change in one’s incumbent broker software, whatever it may be (i.e. rating, customer relationship management [CRM], commercial systems or broker management systems)?

Does one invest the time, money and effort in a system change now to strengthen the business for the inevitable turnaround? Or is it simply wiser to coast along with the incumbent systems already in place?

As a major supplier of software to the insurance industry, Custom Software Solutions Inc. (CSSI) recently asked these very same questions to its marketing team in a strategic business planning session.Would brokers tend to take a wait-and-see attitude with what happens with the economy before making decisions with respect to investing new dollars in automation? At first glance, who would blame them for staying put in the current economic environment? What would they do?

Conserve capital or invest it?

We all agreed there would have to be very compelling reasons for a broker to make such a change. CSSI realized a 500% growth in the Ontario market share in 2008, but what about our 2009 forecast? Could we expect the same rate of growth? So we asked ourselves what tools would prompt a broker to make such an operational change.

Points raised in the debate among members of the marketing team made us look at the true benefits of investing in a new Broker Management System (BMS).Are there enough value-added features to outweigh the cautious “wait-and-see” attitude? The new system must provide quantifiable efficiency gains, increased customer service levels and, of course, lower the cost of doing business, all of which must lead to an increase in the profitability and valuation of the brokerage.

EXPERTISE / INTEGRITY / RESPECT / TRUST / STRENGTH / STABILITY These characteristics should be the price of admission to any business relationship. At Great American, this is where the conversation begins.

The Property & Inland Marine Division of Great American Insurance Company / Canadian Branch www.GreatAmericanInsurance.com 330 Bay Street, Suite 800 Toronto, ON M5H 2S8 Scioto Plaza, Suite 2100 40 King Street West Toronto, ON M5H 3C2

Property & Inland Marine Division These values are fundamental to our success as one of the most respected property and casualty carriers in the United States. By partnering with a Canadian network of skilled independent brokers, we can offer our customers the unbeatable combination of security, protection and the peace of mind they need to build their businesses for the future.

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THE POS2 ADVANTAGE Similar to Einstein’s theory of e=mc2, CSSI coined a new theory called “the POS2 Advantage.” The POS2 Advantage delivers true ‘Point-of-Sale (POS)’ and ‘Point-of-Service (POS)’ features that put all of the necessary tools needed to be successful in the hands of the independent broker distribution channel. Generally speaking, brokers considering investing in a management system should look for a CRM system that deals with all their lines of business in the same manner within a single user interface and within one product.The solution should not force brokers to segment their book into various systems or subsystems; it should eliminate the need to bridge data between different products.

Using such a system as his or her base, a broker should be able to add fully integrated modules as required, including full rating and underwriting for both personal and commercial lines, management tools and reports, billing and accounting and integrated communication tools that allow brokers to interact easily with all of their business partners. This level of integration is intuitively simple, but is not yet common in the insurance systems marketplace. It is one of the keys to achieving operational efficiencies and empowering a sales organization, enabling an organization to compete today and in the future.

Under POS2, the CRM should provide access to all customer information needed to manage the brokerage, along with a robust event tracking system for E&O purposes, interactive claims management tools, integrated e-mail, scanning tools, powerful word processing and intelligent marketing tools that help brokers work on exceptions rather than have to manually mine their data to find those exceptions.

The CRM should be fully integrated into the rating and underwriting functions so that information is entered once and shared.The rating and underwriting tools need to provide quoting and rating functionality for personal lines, habitational, farm, automobile,ATVs, motorcycles, commercial auto, ratable commer-

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cial and referral commercial, as well as seamlessly integrated reconstruction cost evaluation tools for both habitational and commercial structures.

In the POS2 environment, management and accounting functions should be fully integrated to provide comprehensive tools for managing renewal retention.

Tools for policy-to-policy comparison can help to reveal underwriting discrepancies and up-sell opportunities without the need for the broker to look at paper or scan paper versions. Such tools would also result in customizable and predefined management reports.

Integrated billing would make policy invoicing and accounting a mere byproduct of the policy transaction issuance: detailed transaction rules for various commissions and fees would enable automated download processing and increased accuracy of billings. Also essential are receivables management tools and capabilities that help brokers offer finance premiums options internally, allowing brokers to offer plans that compete with insurers’ direct bill payment plans.

AUTOMATING TRANSACTIONS Brokers need to look at communication tools that cover automated interaction with both partner insurance companies and customers.The extent of automated interaction with an insurance company depends mostly on what the company has made available to the broker. It can range from a simple, automated, single sign-on with inquiry to more complex transactions. In particular, a POS2 system must offer the capability to communicate and transact endorsements that represent the bulk of the non-premium/revenue-generating transactions in the brokerage. Brokers need to partner with companies that want to embrace the automating and streamlining of transactions for both the broker and company to drive efficiencies and profitability on both sides of the transaction.

Software vendors are required to interact at these various levels of complexity.

Data collection and data integrity in the management system is an important part

of allowing these various transactions and integrations. Customer and policy data is a broker’s most important asset; it should therefore be collected, controlled and retained in an efficient manner. A broker’s policy data must never be overwritten by the download produced by insurance company data sets.The broker’s original data is invaluable because it is used to compare what was requested against what is received. If his or her data is overwritten on download, the broker has nothing against which to compare the data received from the company for accuracy purposes other than paper or scans.

Brokers should also be looking for their BMS systems, via the brokers’ own Web sites, to be able to interact with clients, prospects and risk managers online. If brokers can offer service to clients by means of their own Web sites, then clients would be provided with 24/7 access to do online quote requests, policy change requests, insurance purchases, policy review and account balance inquiry. Given the continuing growth of e-commerce, capabilities of this nature are essential for a broker to remain competitive.

Existing competitors, new competitors and direct writers are continuing to make use of technological advancements. Brokers must therefore continue to grow their business, improve customer relations and drive efficiencies in order to remain the preferred method of distribution in Canada.

A planned investment in a new BMS technology is a strategic business decision. For optimal results, the chosen solution should deal with all their lines of business, be fully integrated at all points, retain 100% of the data collected, embrace the POS2 concept and enable the broker to interact at various levels with their customers and insurance business partners as they look to the future with on-line Web services.

Although times are uncertain, brokers will always be interested in exploring alternative solutions that can make them more efficient and profitable. An investment today will pay off now and in the future.

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Outsourcing

I.T.

Headaches

Renee Durepos Vice President, Operations, Keal Technology

Are brokers information technology (IT) specialists? Most would say no. Brokers are insurance professionals with expertise in finding coverage suited to their clients’ distinct needs. In fact, for many brokers, if there were a simple way to outsource the headaches associated with software and hardware upgrades, data security, servers and hiring specialized staff, they would gladly do it.

Guess what? There is a way. More brokers are looking at outsourcing their IT infrastructure to a third-party specialist. It’s called an Application Service Provider (ASP).

An ASP is a technology firm that handles and maintains all the hardware, software and services necessary to operate your brokerage. It takes care of all upgrades, data security, back-up/redundancy, connectivity, virus and email spam protection in a sophisticated data centre environment. All brokers need is their desktop computers, an Internet connection and printers. Considering the ASP’s modern infrastructure and the fact that voice telecommunication can travel alongside data, it is now possible to outsource a broker’s phone system. Even “thin

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client computers,” which are less expensive than regular PCs, can operate in an ASP environment.

TRIM COSTS ASPs have been around for years, but their role has gained more prominence recently for several reasons. First, in tougher economic times, everyone is looking closely at ways to trim costs. Efficiency, both in time and money, is the order of the day.

An ASP gives brokers stable IT costing and a permonth price for technology services. That not only frees up time to focus on marketing and new business, but also cuts the costs associated with maintaining a full-time IT person or department.

A second trend is the increased complexity of IT requirements. Whether it is installing hardware, upgrading servers or software, dealing with virus protection or figuring out if the back-up worked last night, many insurance brokers are finding the responsibilities of managing IT onerous. Invariably, there are glitches that creep into a brokerage’s technology system, particularly if it is managed on a “part-time” basis. An ASP offers 24/7 access to the latest in leading-edge, continuously updated software and hardware.The expertise, and the responsibility for hiring and retaining that expertise, rests with the service provider.

Another factor is the increased flexibility of ASPs for brokers of all sizes. Today, with modern data centres and sophisticated IT infrastructures,

Illustration: Anson Liaw

Brokers now have the option to outsource their IT infrastructure to third-party specialists called Application Service Providers (ASPs).

global: adj. relating to the entire world.

Business may begin locally, but often with a view to global opportunities.

When you anticipate client growth, your insurance should be prepared.

Chubb Insurance has 120 offices in 29 countries to provide local expertise at global standards.

If your clients think globally, 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.

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ASPs are scalable to virtually any size of operation in Canada, from two to 2,000 users. Although small- to medium-sized brokers have tended to make more use of ASPs in the past, Keal, a leading broker management system vendor and technology specialist, is noticing increased interest in this kind of solution for larger brokers. Many of these firms operate in a paperless, online environment and understand the mission-critical nature of their IT functions.The inability to access client data, even if only for a short period of time, can result in sharp drops in productivity. The simple fact is that an hour of down time with 60 employees equals 60 hours of downtime for a brokerage.

For brokers considering making the move to an ASP, there are both advantages and issues to keep in mind before selecting a particular vendor. The first benefit of outsourcing is the potential for much greater productivity. Think about it: if you don’t have to dedicate staff to install and administer various systems, what could your brokerage do with the additional time and resources? At Keal, we have found that brokers who use an ASP are more profitable because they can focus on marketing, sales and service — in other words, the real business of providing insurance solutions to clients.

LAYERS OF PROTECTION Another critical advantage is the ability to access a highly sophisticated data security environment that has many more layers of protection than a typical brokerage can afford. For example, Keal’s data centre is powered by TELUS, which offers enterprise-grade servers, fault tolerant systems, backup power systems, redundant connections to high-speed Internet and the latest security data encryption devices. Brokers can feel confident that their data and systems are fully secure and protected in the event of a disaster or power outage. Can you say the same thing for your current disaster recovery processes?

ASP brokers get access not only to leading automation systems, but technology management experts. Their job is to know IT inside out rather than just occasionally troubleshoot problems. Since ASP

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firms hire and employ these qualified and accredited experts, it takes a load off the shoulders of brokerage principals, who have traditionally had to seek out internal IT staff. According to IT expert Kevin Wheeler, it is estimated that the technology sector will undergo a “talent shortage” between 2007 and 2012. Getting — and keeping — qualified IT staff will be more difficult for all firms. The costs associated with recruiting and training can be high, to say nothing of the costs associated with the ‘brain drain’ due to IT employee attrition.

The ASP service also offers the financial opportunity for brokers to “fix” IT costs that would otherwise be variable. A predictable cost structure can result in better budgeting and planning.With an ASP, your forecasted costs are your actual costs. With an in-house IT department,

If an easy way existed to outsource headaches associated with software and hardware upgrades, data security, servers and hiring specialized staff, brokers would do it. the expenses are more variable and extend to labour, equipment, licensing fees, unexpected upgrades and depreciation.

Another cost-related bonus of ASP is that it transfers a brokerage’s IT expenses from balance sheet to income statement, thus creating a deductible expense that is predictable, directly proportional to the number of broker employees and expensed in the same period it is incurred.

BIGGER BANG FOR THE BUCK Perhaps the prime benefit of an ASP is that a brokerage can get a bigger IT bang for its buck. Software is upgraded for you and hardware is maintained on a continuous basis. Brokers automatically have access to the latest versions and upgrades. In Keal’s ASP environment, for example, Keal can deliver any application, anywhere there is Internet connectivity to any device that will run the Citrix client software.

Brokers should keep a few factors in mind before making the leap to an ASP. First and foremost, the contract is king.

Any contract with an ASP should be carefully reviewed according to specific criteria. Brokers should ask for performance guarantees, which should clearly state written “up-time” standards, such as 99.7% (which is Keal’s guarantee). Any contract should also expressly note that all data belongs to the broker and that data can be accessed anytime by the brokerage.

Brokers should ask questions about the data centre infrastructure of an ASP. Are there contingency plans for alternate sources of power in the event of a disaster? Are systems monitored 24/7? What is the level of redundancy protection?

Another question brokers should ask is this: Where is the data centre located? If the centre is located in the United States, for example, one potential concern could be U.S. government legislation such as the Patriot Act. Under the act, communication and data transmission between Canada and the U.S. are subject to the Office of Homeland Security.

Another key issue for brokers to consider is whether or not the ASP in question has direct knowledge of the property and casualty insurance industry.

There are many solid application providers in the marketplace, but most have little familiarity with broker management systems, commercial management systems or EDI. If a broker experiences a technology-related problem, should he or she call the ASP or the BMS vendor? That problem is taken care of if the ASP and BMS vendor is one and the same.The ASP vendor will understand the main operating systems that brokers regularly use if they develop and support their own BMS and CMS solutions. It is a one-stop solution.

In the end, it is up to brokers to decide how they want to manage their IT strategy and budget. Some have been successful going the “in-house” route.

However, if you are experiencing the headaches of downtime, staffing changes, constant upgrades, server problems and data security/recovery issues, there is another way. The ASP may be an advantage worth considering..

Learn the right moves to come out a winner

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How many moves does it take to eliminate the obstacles to your risk management program? At RIMS 2009 Annual Conference & Exhibition you’ll find successful strategies for jumping the hurdles to an effective risk management strategy. Learn new and proven tactics offered in 120+ sessions, from hundreds of solution providers in the Exhibit Hall and by exchanging ideas with nearly 10,000 risk professionals.

It’s your move—register today for RIMS 2009 in Orlando.

www.RIMS.org/RIMS2009 Register now—the early bird discount expires February 20!

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Strange

Days Paul Fletcher

Senior Vice President, Marketing, Aviva Canada

In a song from the album ‘Strange Days,’ Doors’ singer Jimmy Morrison asks for the world; social media is a way for insurers to respond to consumers’ desire to have it all.

When Jim Morrison of the Doors sang “we want the world and we want it now” back in 1967, the Internet as we know it today was still decades away. But his sentiment echoes the information age and the feelings of most consumers when seeking product information online.

When you want to see a movie, a quick check online and you have the show times. For restaurant info, a few simple clicks and not only do you get the location but usually reviews and recommendations (don’t order the shrimp!). Product reviews and price comparisons are readily available online for everything from cars to vacation destinations. We have reached the point at which if we need information on a product or service and we can’t find it online instantly, we get frustrated.

So why can’t consumers find the clear and concise insurance information they desire online?

56 Canadian Underwriter February 2009

And why do brokers still have to deal with paperwork and insurers’ old systems when it seems every other industry is finding better ways? Good questions. We’re starting to change this for both consumers and brokers alike.

Let’s start with consumers and we’ll come back to the broker later on.

SOCIAL NETWORKING It began almost a year ago with last April’s launch of Aviva’s ‘Change Insurance’ campaign.This was our first foray into the market with a bold message that acknowledges many consumers find insurance is unnecessarily complex and frustrating.We challenged ourselves and declared that we were going to do something about it. Using TV and other media ads laced with humour and designed to provoke conversations, we were out there with the message: “We get it, and we are committed to leading the change.”

OK, not news. But my point is our response to consumers: We looked at the different ways people get information today and recognized the emergence of social networking. It became clear that this kind of media was here to stay, but the insurance industry was not yet adapting to the new reality. So we set out to change things for the increasing number of insurance consumers who

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use these sites, by becoming an early adopter of this technology within in our industry.

Enter changeinsurance.ca. The Web site started as an avenue for consumers to express and relieve their insurance frustrations. It was launched in April 2008 with a fun frustration quiz, a “frustrometer,” and most importantly, an area where consumers could tell us, in their own words, what they didn’t like about insurance.

And they didn’t hold back! We had more than 1,000 responses. Of course some stated the obvious — “reduce prices!” — but other themes emerged.

Some said they hesitated to ask questions about insurance questions for fear of their rates increasing. Some didn’t understand what they were covered for, nor did they have the time or patience to read the “manual” of jargon provided with their policies. We were also told it was often too difficult to get a “straight answer” from the insurance industry.

Hearing this, combined with feedback received during research conducted in the previous 12 months, led us to the latest version of changeinsurance.ca.Welcome to Web 2.0. This is also known as “social media” (i.e. Facebook, Trip Advisor or LinkedIn). Users not only gain information from these sites, but also use them to share their own experiences and opinions, ask questions and engage in conversations.This takes us all beyond the confines of our office or home and is more engaging than any collateral handout material could ever hope to be.

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as well as humorous elements that help educate the customer and puncture some public myths.

• Expert Profiles: We try to add a human face to insurance, by profiling some of our experts who are answering their questions.

• Premium Impact Calculator: This feature allows consumers to work out (approximately) the effect of a fender bender or other, similar incidents on their premium. “What if…?” is an extremely common question.

WEB FEATURE FOR BROKERS Another important feature was created especially for our brokers.The intention is to help brokers build capability in this new information world.

In taking this plunge into social networking, we wanted to add value to our brokers, put them at the centre of the conversation and — in a low risk way — give them a taste of the new environment by providing them with additional Web

In taking this plunge into social networking, we wanted to add value to our brokers, put them at the centre of the conversation in a low-risk way, and give them a taste of the new environment by providing them with additional Web site functionality. We call it the Widget.

THE SITE INCLUDES: • Straight Answers: This is the most frequently visited section of the site, where visitors can ask any insurance-related question anonymously or search for answers from previously asked questions.

• Blogs: Individuals both internal and external to Aviva provide insight and points of view on a host of topics from health concerns, lifestyle guidance, advice for new parents, how to make a home inventory to insurance-related issues and much more. (Thanks to our broker bloggers by the way!)

• Insurance Fact or Fiction: This section includes a personal risk assessment quiz,

58 Canadian Underwriter February 2009

site functionality. We call it the Widget.

The Widget allows brokers to add the “Straight Answers” function to their own sites.Via the Widget, customers can benefit from the Straight Answers content without ever having to leave their brokers’ Web site.

We’ve had more than 100 brokers download the Straight Answers Widget so far.

“The Widget allows clients and prospects to get simple answers to common questions,” says Jeff Roy of P.A. Roy, part of Excalibur Insurance Group in Clinton, Ontario. For potential clients, we’re hopeful the information will help

them get in contact with us for more information, or that it connects them to our online quoting service. For existing clients, this information will help answer their questions 24/7. I am hoping this new content will help increase our Web page hits and Google ranking, but it is still early.

“Today’s environment dictates that you be more interactive, and the demand for enhanced Web site communication is only going to increase,” says Greg Janes, vice president of business development with Smith, Petrie, Carr & Scott Insurance Brokers in Ottawa. “We believe visitors to our Web site are looking for more personalized content as we try to keep up with consumer’s evolving online expectations.Aviva’s Widget fit into our overall Web strategy, so we added it to our site.”

And so we end with our latest social media offering, AvivaPartner.ca.

Launched in January 2009 and built specifically for our broker partners, the Web site adopts many of the same social networking mechanisms as changeinsurance.ca.

Designed to make doing business with Aviva easier and faster for our broker partners, AvivaPartner.ca is an enhanced site that provides access to all Aviva systems such as the Portal, Fastrax, Doc and BVS. The social networking area of the site comes in the form of discussion forums (called “Conversations”), useful downloads and videos.

“We’re at the forefront, so we are learning a lot as we go with both these Web sites,” states Bob Fitzgerald, executive vice president of marketing and underwriting at Aviva. “Some areas will expand and some will just change based on feedback and popularity. But there’s no doubt it will continue to evolve and adapt to the needs of brokers and consumers alike.”

So Mr. Morrison was right: They do want the world — and we aim to help them find it. By the way, in case you are still asking yourself which Doors’ song that line comes from, it’s from the classic song ‘When the Music’s Over’ from the ‘Strange Days’ album. That is, if you haven’t already looked it up or found a review online (try rollingstone.com).

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In support of the Starlight Children’s Foundation

A/BC@2/G ;/G '

B63 1/@:C 444 Yonge Street, 7th Floor

www.starlightcanada.ca

Drinks, reception and dinner followed by auctions and entertainment.

Ticket sales and sponsorships: Carla Blackmore 416-586-3032 Auction donations: Wayne Briggs 416-730-3868 or 905-726-9758

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Rating Brokers

Intelligently Business Intelligence (B.I.) technology is now available that allows insurers to rate brokers using a wide array of metrics and standards.

Giovanni Damiano

Senior Vice President, Marketing, Chubb Insurance Company of Canada

Five years ago, technology started to develop in ways that would allow insurers to gain a better understanding of its network of brokers — from the value they brought to the distribution network to how they stacked up to one another. Now, powerful information technology (IT) tools have helped produce a commercial software application that could very well help every Canadian insurer better understand, manage and make decisions about their own networks of agents and brokers.

WHAT MAKES A BROKER BETTER? How do you identify the brokers who are performing at the top of their game, or the ones that are bringing the best value to your business? For

60 Canadian Underwriter February 2009

example, is it a straight function of Gross Written Premiums (GWP), in which instance brokers are doing well as long as they are bringing in business? Or does the broker’s loss ratio best define its net value to a carrier?

The answer of course is that it depends. GWP may seem a logical overall indicator, but it can be misleading without the right context. On the face of it, a $30-million-per-year broker is more valuable to an insurer than a broker that does $3 million a year in business. But what if one broker serves one local market and the other is a global firm? The right metrics also depend on the decision at hand: bind ratio can be far more telling, for example, when we are choosing brokers to invite to our sales training programs.

Put quite simply, smart business decisions are made when they are based on the right information.

The reality for some companies in 2004 was in stark contrast to the importance and myriad of metrics that existed within their organizations.

Even in a number-intensive industry such as ours, examples existed then of companies that used to measure broker performance based on only one

this summer join

WICC at Relay For Life the Canadian Cancer Society’s biggest event at Esther Shiner Stadium in North York on June 19, 2009 WICC invites everyone in the insurance industry to participate in a Relay For Life event this June.

Join the WICC HQ event at Esther Shiner Stadium, or find one closer to home at wicc.ca. There are already 110 community sites designated by the Canadian Cancer Society in Ontario, with 65,000 people expected to participate.

More than a fundraiser, Relay For Life is a unique, inspirational, outdoor community event that brings family and friends together overnight for 12 hours of fun and fundraising to beat cancer.

Help WICC realize its goal of 100 Ontario this summer.

teams participating throughout

For more information and to register your team(s) go to wicc.ca

WICC formed in 1996 to mobilize the Canadian insurance industry in the fight against cancer. Over $4 million has been raised across Canada to support cancer research projects since inception.

Design compliments of

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or two factors — the most prevalent among them being loss ratio. In some instances, carriers were not even that scientific: they viewed broker performance as a largely subjective notion defined by “gut feel.”

Clearly neither of the above scenarios lent themselves to making decisions based on the best information.

A NEW BUSINESS SOLUTION Especially compared to other industries, there is no shortage of metrics throughout the insurance business. Five years ago, the existence of valuable data was not the challenge: it was our ability — or lack thereof — to access it in a practical, meaningful format.

Specific challenges were two-fold.

First, in one example, a company could easily find a single metric on any given broker, but obtaining a more complete picture — i.e. looking at multiple metrics at one time — required either a great deal of manual effort, or the involvement of the IT team.

How do you identify the brokers who are performing at the top of their game? Is it a straight function of Gross Written Premiums (GWP)? Or does the broker’s loss ratio best define its net value to a carrier?

A second challenge, equally limiting in its implications, is that it used to be difficult to look at metrics on multiple brokers at one time. Countless hours went into creating sophisticated Excel spreadsheets to get around these limitations, a time-consuming task that almost always had to be done from scratch.

Such limitations were the result of several factors, one being the amount of data that still resides on our legacy systems. Fewer people today are skilled in

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these decades-old systems, making even seemingly simple updates extremely difficult. Even when IT could help, a constant stream of urgent priorities meant our enhancements could take days or longer to address.

Back in 2004, it wasn’t apparent what a solution to these problems would look like, let alone what direction we could provide to a vendor. One of the first major steps in producing a new technology, therefore, was to define precisely what was needed. The process started by talking to the insurers’ business unit leaders who stood to benefit from knowing more about our brokers. The system envisioned would be one that: • business decision makers, from underwriters to our CEO, would actually use; • provides an objective measure of broker performance based on verifiable data; • could show a complete picture of a broker’s performance based on numerous metrics; • allows users to compare multiple brokers across geographies, products and other factors; and • still incorporates qualitative broker attributes such as responsiveness or understanding.

It was important to clarify the business leaders’ roles. A new system would have to incorporate the right metrics and a sufficient number of them to facilitate better decision making throughout the organization.

The result of these deliberations was a new technology implemented in two iterations. Here are some of its most important features: • The system incorporates more than 25 different performance factors, including standard and proprietary metrics, as well as custom qualitative factors.

• Pull-down menus and report templates let users pick the metrics they want to see, how they want the data presented and the brokers they want to assess (i.e. individual or multiple, categorized by region, tier or other factors).

• New factors can be added to the system without having to bring in the vendor or even a carrier’s own IT staff.

In developing this commercial software application, it was important to keep the underlying structure of the application as generic as possible. For example, it should be able to communicate directly with legacy systems and Business Intelligence (BI) software that a company may already have, meaning the data on which it reports is always up to date and doesn’t need to be duplicated anywhere.

Gross Written Premium may seem a logical overall indicator, but it can be misleading without the right context. On the face of it, a $30-million-peryear broker is more valuable to an insurer than a broker that does $3 million a year in business. But what if one broker serves one local market and the other is a global firm?

Looking ahead, there are almost endless possibilities for us to build on systems we already have. For example, we might explore a more formal benchmarking system or a balanced scorecard for our brokers. Predictive modelling is another compelling option, one that would add the strategic value of broker performance data in our planning for the future. Just as we did in defining our needs initially, any decisions on future capabilities will be driven by the experiences and needs of our business leaders.

BI and other tools for performance management have come a long way since we first embarked on the project, but technology built specifically for insurers will always stand out from other technologies and software packages.

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Celebrating 75 Years as the ‘Voice of Insurance in Canada’ Jardine and Young Limited opened its doors for business on November 18, 1933, in the grip of the Great Depression.

Norman F. Jardine and his staff of two launched Canadian Underwriter magazine on January 1, 1934 and – for 75 years – Canadian Underwriter has been known as the voice of insurance in Canada.

In his inaugural editorial Norm Jardine wrote,

“To those that have given us advertising contracts and paid subscriptions, we extend our sincere thanks. We appreciate your confidence in us and can assure you that, if determination means anything, we shall prove ourselves worthy of it.”

The founders of Canadian Underwriter certainly proved their worthiness and 75 years later, the staff of the magazine are very proud and determined to uphold the legacy of quality and service that Norm Jardine and his team provided to the Insurance Industry.

All of us at Canadian Underwriter would like to thank you, our subscribers and advertisers, for your business, support and encouragement.

Sincerely,

Steve Wilson Senior Publisher

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Job Candidates that

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A layman’s guide to online recruiting.

It’s an online world out there. If you’re looking for insurance talent, it’s time to get savvy and go where the job seekers are.There are dozens of new and effective ways to reach elusive insurance job candidates in an increasingly digital world.

Don Givelos

Managing Partner, DGA Careers

CHANGING TIMES Great people are always in demand, but now much more difficult to find.The recruiting pyramid has been flipped upside down and it’s fair to say demand far outstrips supply, despite the current economic conditions. Years ago, there were 10 candidates for one open position; today, there are only one or two good candidates for 10 positions.

For this reason, your company has to work harder to stand out and attract the right candidates. Maximizing your presence online is how your company can make the most cost-effective use of your time, budget and resources.

64 Canadian Underwriter February 2009

Using new media to recruit online means a lot more than buying a simple ad on a career Web site. These days it embraces a wide range of new strategies that include: • online branding; • effective use of and position on major search engines; • career section on a company Web site; • corporate videos; • presence on social networking sites; and • online job fairs.

Let’s take a look at each of these areas and how they can help you recruit better, smarter and faster.

Online branding: Be identifiable Consider this: you spend thousands of dollars each year marketing your business brand to your customers. If you want to attract top talent, you have to do the same thing to reach out to the qualified workforce by developing a strong recruitment brand.

Mobilizing the Canadian insurance industry in the fight against cancer Be a part of something special: • Attend one of our events • Become a National Sponsor • Add WICC to your payroll deduction program • Make WICC your charity of choice • Honour someone in their battle against cancer with our Tribute Recognition program • Enter a team in the Relay for Life • Investigate starting a regional chapter of WICC Ontario Currently we have a Golden Horseshoe Chapter in Hamilton

Participate and help make cancer history!

Visit our website at www.wicc.ca to learn more about WICC Ontario, or contact Lyna Newman at execdirector.wicc@sympatico.ca

Design compliments of

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TIPS FOR CREATING A POWERFUL ONLINE RECRUITMENT BRAND Repetition: The more places and more frequently they see your name, your colours and logo, the more you will be perceived as a viable employer.

Consistency: Each of your job postings/ads should follow a strict format and contain the same “boilerplate” wording and information every time.

Detail: Provide as much unique information on the offering and your company as possible to engage potential candidates. Remember, you are differentiating yourself from every other employer on the site.

Choose different media: When recruiting for a position or positions, look beyond job postings to tile ads and banner ads to more uniquely reinforce your brand.

More is better: The more job postings or banner ads you have on a given recruitment site, the more leverage you have with that site to get more exposure.

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Branding for top talent should be part of your business plan. To build your “branding strategy,” first ask yourself what makes your company a great place in which to work.

Once you have identified your strong suits, put them in a statement and let potential candidates know through development of your visual and verbal brand. Get the word out that your company is a great place to work.

Thanks to the Internet, you can get that message and brand out faster and cheaper than ever before, in addition to reaching a much broader audience.

Search engines: Come up first Have you Googled yourself lately?

If not, do it right away. Exposure on the front page of major search engines is critical not only to the success of your business but also for recruiting candidates.

In fewer than 10 years, Google has become de rigeur for business research.

If your name doesn’t light up the front page of Google like a Christmas tree, then candidates won’t find you first. It’s as simple as that.

The best candidates always conduct research on the company before going to the interview. And where do you think they begin? First, your Web site and then Google, MSN or another search engine.

If your name is hard to find, it may create a negative perception in that candidate’s mind.

Two things are important: first, you must show up in relevant searches. Second, the information that displays about you should be positive.

Career section: Stand out Does the career section on your Web site engage potential candidates? Does it convince? Sell your company? It should.

An effective career section on your Web site must deliver a clear, compelling mes-

sage about your human resource values and policies.

Treat your career section like a giant billboard advertising what a great place your company is to work.The application process should be easy enough that a Grade 5 student can figure it out. The names of key managers with phone numbers and emails should be provided, inviting candidates to call directly.

Many job sites that list positions have application processes that take up to 15 minutes. The key to an effective career page, however, is this: the fewer clicks, the better. A brief (one-minute, ideally), user-friendly approach with a fast, streamlined application process will yield the best results.

Corporate video: Moving pictures speak louder than...

A recruiting video on your career section will help you deliver a dynamic, vibrant and contemporary message. Job seekers like to see current employees talking to them about what it’s like to work there, all the while getting a sneak peak at your office space. Corporate videos should be fast-paced, imaginative and no more than a minute. Always choose the newest, liveliest employees over a dull, stuffy senior executive. After all, the purpose is to attract candidates by appearing fun, professional and — very importantly — non-cliché!

The cost is probably less than you think. At about $1,000 per minute, a corporate video can be a smart use of your recruitment budget. And a 15-second video should do the trick.

Social networking: Generate “buzz” Social networking is one of the fastest growing trends on the Internet. These days, more and more insurance players are embracing these sites as an extension of their marketing and recruitment efforts.

• Facebook has become the most popu-

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The Barack Obama Win – A Social Networking Success?

Obama Campaign

McCain Campaign

Facebook friends

3.2 million

600,000

You Tube video views

20 million

2.2 million

Twitter

137,000

?

$639 million

$360 million

Funds raised online

lar social networking site in the world.

For insurance companies, it’s a good idea to create an online group for your company and invite both employees and would-be candidates to join. Some fear there is a chance for negative information to be shared. Just be sure to monitor these groups or blogs. An online group on Facebook will give candidates a better idea of what it’s like to work in your company and the chance to chat with employees currently working there.

In many cases, it can actually serve to dispel negative press or word of mouth.

The key is to make it an open group that anyone can join. And the nice thing is that you can create multiple groups on Facebook — one for current employees, one for candidates, one for alumni, etc.

• Linkedin is a business networking site created for professionals to connect with one another around the world. Overall, it is more of a one-on-one networking tool and better suited to individuals rather than companies.

• Twitter is a networking site with a large following in the United States and growing in Canada. Companies use Twitter to follow up with job candidates and customers from the past. An employer can create an account and send an invitation to follow your career. It allows an employer to follow previous applicants (perhaps they lost out on them) and keep their company’s name fresh with them.

Likewise, job seekers can follow their favourite potential employers who have profiles.

68 Canadian Underwriter February 2009

ONLINE JOB FAIRS: CREATE AN EVENT An online job fair is a great way to generate recruitment brand awareness, and create an influx of applications over a short, set period of time.

Take the recent example of a mediumsized Canadian insurance company that held an online job fair on a specialty insurance recruiting site. In a threeweek period, they received 100 applications, 59 of which qualified for interviews. Twenty-one of these candidates

The recruiting pyramid has been flipped upside down and it’s fair to say demand far outstrips supply, despite the current economic conditions. proceeded to second and third interviews, and half a dozen job offers resulted. All this in very little time — and for half the price of a traditional job fair.

When considering an online job fair, you have two choices.The first is to run it on your own, which involves using inhouse technology. If you take this route, you will be responsible for determining workflow as well as the look, feel and application retrieval process (not to mention the advertising). A recommended alternative is to look to a thirdparty site that has all of the mechanisms already in place to host it and make it as successful as possible.

An online job fair allows potential candidates to take part without running into someone they know, such as their manager. The job seeker can remain anonymous and apply to companies without having to take time out from their schedule to attend. As a result, employers get a more diverse range of applications than they would normally receive.

Here are some useful tips for running an effective online job fair: • the duration should be 2-4 weeks; • theme is key: Choose one that enhances your online brand; • have a prize that captures people’s excitement. For example: the first 20 applications could receive gift certificates or be entered into a prize draw for the season’s latest electronic device; • timing: Don’t set it up for late July or August or in a crunch time for your company. You need to create a working team that can be dedicated to it; • Use text that is creative, with carefully chosen words to attract job seekers; and • monitor results.

Don’t forget, an online job fair can be an excellent complement to a physical job fair.

So welcome to the digital age. To compete for the dwindling number of insurance top performers, it’s time to fire up the laptops, log on, think creatively and reach the candidates where they click — in as many compelling ways as possible.

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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.

Toronto

Southwestern Ontario

Event – Symposium 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . April 25

Windsor – London Knights vs Windsor Spitfires . . . . . . . . . . . . . . . . . . . . March 8 Detroit Red Wings vs Chicago Blackhawks – bus trip to Detroit . . . . . . . April 11

British Columbia Vancouver Seminar: Finance for the Non-Financial Professional . . . . . . March 25

Conestoga

Edmonton

Toronto Maple Leafs vs Buffalo Sabres – bus trip to Buffalo . . . . . . . . . March 27 Detroit Red Wings vs Chicago Blackhawks – bus trip to Detroit . . . . . . . April 11

Proedge Seminar – Directors’and Officers’Liability Insurance . . . . . . . . . March 6 Proedge Seminar – Occupiers’Laibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . April 16 Proedge Seminar – Third Party Downtime Claims . . . . . . . . . . . . . . . . . . . May 21

Halifax Event – Spring Fling at the Waterfront Warehouse . . . . . . . . . . . . . . . . . . April 23

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

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

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MOVES & VIEWS

UPCOMING EVENTS: FOR A COMPLETE LIST VISIT

www.canadianunderwriter.ca

AND CLICK ‘MY EVENTS CALENDAR” ON THE HOME PAGE

1

Harry Belmont, a former Carstar Automotive Canada franchise owner who sparked the company’s Cystic Fibrosis fundraising efforts, has passed away. Belmont was a former Carstar franchise owner who opened a Carstar location in Mississauga in 1995 and ran a successful business until he sold it in 2004. When his granddaughter was diagnosed with Cystic Fibrosis nine years ago, he met with Sam Mercanti, president and CEO of Carstar Automotive Canada, to ask for support. As a result, Carstar Collision Centres have raised more than Cdn$1.5 million to help find a cure. Many franchises have made the Canadian Cystic Fibrosis Foundation (CCFF) their charity of choice. Last year, Carstar bestowed upon Belmont the Lifetime Achievement Award for his years of service and passion towards helping others. On Dec. 26, 2008, Belmont passed away after a long and courageous battle with cancer.

2

Crawford & Company (Canada) Inc. has made organizational changes within its senior

70 Canadian Underwriter February 2009

management and added new members to its staff.

Pat Van Bakel [2a] has been promoted to senior vice president of claims operations. Gary Gardner [2b] has been promoted to the position of senior vice president of sales and marketing. Jaqueline Roy has been named vice president of administration. Heather Matthews has been promoted to the position of vice president of Healthcare Management Services.

Sheri Martinello, assistant vice president of Risk Management Services (RMS), will now lead Crawford’s Risk Management Services division across Canada.

Jennifer Virley has been promoted to the position of assistant vice president of project management. Ken Lloyd will assume additional duties as assistant vice president of compliance, quality and best practices. Mike Tolan has accepted additional responsibilities as director of quality and professional standards. Additionally, Sylvie Tremblay, Silvana Facciolo, Steven DelGreco and Anthony Tuson have joined Crawford & Company (Canada) Inc. Tremblay has

2a been named director of operations. Facciolo has joined Crawford as director of business development in the firm’s sales and marketing division. DelGreco has been appointed manager of Crawford’s Toronto West branch. Tuson, national account executive, has moved to Crawford’s Toronto location from Vancouver. He will continue to be responsible for commercial property and casualty accounts across Canada.

3

David Huebel has joined Catlin Canada Inc. as its chief underwriting officer. Huebel will be responsible for the implementation and execution of the Catlin Group’s underwriting plan for all lines of business across Canada. He was most recently the president and CEO of GCAN.

2b

3

4

Three Insurance Brokers Association of Ontario (IBAO) members have been appointed to the Insurance Brokers Association of Canada (IBAC)’s board of directors and executive committee. Outgoing IBAC president Danny Craig [4] has been elected chairman of the board. Justin MacGregor, previously IBAC’s vice president, is now president-elect of IBAC. Outgoing IBAO president Rodney Hancock will represent Ontario as a member of IBAC’s national board of directors.

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MOVES & VIEWS

8

4

5

Trevor Black has been promoted to branch manager in St. Catharines for Cunningham Lindsey Canada Claims Services Ltd (CLC). “Trevor has a number of exciting plans for our St. Catharines office, namely quality measurement, training and education,” Lorri Frederick, CLC’s senior vice president of the central region, said in a release. “He’s a highly motivated person and works hard for both CLC and our customers.”

6

The KRG Children’s Charitable Foundation donated Cdn$2 million to Canadian charities in 2008. The donation includes a Cdn$1.3-million contribution to the Hospital for Sick Children. The Cdn$2-million donation will be divided between the start-up of an inhouse Autism Network, Operation Art and various

other projects. Other donations for the 2008 year included Cdn$250,000 to the TOMORROW Campaign at Toronto’s Jewish Community Centre and Cdn$125,000 to Camp Oochigeas.

The Economical Insurance Group (TEIG) has introduced a “green” enhancement to its commercial policies for Mid-market, Expert and EXPRESS accounts.

Effective immediately, the TEIG Eco-Friendly Enhancement provides a sub-limit of Cdn$50,000 to replace damaged buildings, equipment, and/or stock with more environmentally friendly construction materials and/or more energy efficient equipment. There is no additional premium charge for the enhancement.

7

9

5

Jean Chretien, former Prime Minister of Canada, will be the keynote luncheon speaker at the 2009 National Insurance Conference of Canada (NICC). The conference will be held from Sept. 30 to Oct. 2 at the Ottawa Westin.

Registration for the event will likely open in March. A draft line-up of speakers and sessions includes ‘Market (Mis) Conduct — Shades of Grey;’ an OSFI presentation with Q&A; ‘Muddy Waters, Shifting Sands — Implications of IFRS and Solvency II;’ and ‘Facility’s Role in the Auto Cycle,’ among others.

Sovereign General Insurance Company has launched insure2green, a form of insurance coverage intended to help British Columbians upgrade to ‘environmentally-responsible’ building products when repairing or rebuilding their home after an insured loss. The product offers three levels of premiums, with varying levels of protection. For example, a premium of Cdn$30 per year gives a homeowner Cdn$5,000 worth of upgrades using environmentally friendly alternatives. For a premium of Cdn$38 a year, a homeowner can receive up to Cdn$7,500 worth of upgrades. An annual

premium of Cdn$45 raises the limit a consumer may receive in upgrades up to Cdn$10,000. Customers may choose to direct this additional claim payment towards the use of eco-friendly building materials such as cork or bamboo flooring, energy- and water-efficient appliances, energy-efficient lighting and HVAC systems, windows, doors and skylights incorporating new energy-saving technologies and water-saving plumbing fixtures.

10

ACE Canada has expanded its International Executive Assistance Services product to include emergency political evacuation and concierge services. Political evacuation coverage is automatically provided to reimburse an insured’s covered costs up to a policy limit, according to ACE. Additionally, a new online portal for travel preparation information is available. These enhancements are available at no additional premium to Canadian-based companies, non-profit organizations and education institutions with ACE Canada International Advantage Package Policies, the company notes.

February 2009 Canadian Underwriter 71

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W.J. Sutton & Co. celebrated its 30th anniversary with clients, brokers, markets, friends and family at The Dominion Club at 1 King St. West in Toronto (formerly a bank). The location for the celebration was symbolic: 30 years ago, in the same location, company founder Bill Sutton negotiated a bank loan to start the firm. The Toronto Maple Leafs were the first client back in 1978. Today, the company writes a wide range of special risk accident and health risks. It manages Sutton Sportscover Limited as well as reinsurance brokerage operation Sutton Re.

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“Get all the right connections!”

2009

Ontario Insurance Directory This outstanding directory is your personal address and telephone book dedicated solely to the Ontario Insurance Industry… find the company contacts you need immediately!

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February 2009 Canadian Underwriter

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Rowan Saunders President & CEO, RSA Canada The Board of Directors of Insurance Bureau of Canada (IBC) is pleased to announce the appointment of Rowan Saunders as Chair of the Board.

Rowan Saunders was appointed to the position of President & CEO of RSA Canada on September 1, 2003 and is a member of the Canadian Board of Directors.

Prior to his current role, he was Vice President, Personal Insurance for RSA, and also held the position of Vice President, Western Assurance Co., an Ontario- focused niche insurer.

Mr. Saunders was previously President, Agilon Financial, an affiliated company of RSA Canada. In this role, he was responsible for the company’s strategic development, operations, and overall financial performance.

Since joining RSA in 1987, Mr. Saunders has held progressive leadership positions in the areas of underwriting, marketing, sales and financial planning.

He is a chair of IBC’s Governance Improvement Committee, a member of the National Auto Insurance Strategic Committee and sits on the board of Codan, a Scandinavian insurance group. He also serves on the Board of Directors of the Institute for Catastrophic Loss Reduction.

He is also a member of the Young Presidents’ Organization.

A native of South Africa, Mr. Saunders has a Bachelor of Arts degree from York University, Fellowship from the Insurance Institute of Canada, and a Canadian Risk Management designation.

Insurance Bureau of Canada is the national industry association representing Canada’s private home, car and business insurers. Its member companies represent nearly 95% of the property and casualty (P&C) insurance market in Canada. The P&C insurance industry employs over 110,000 Canadians, pays more than $6 billion in taxes to the federal, provincial and municipal governments, and has a total premium base of $38 billion.

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The William H. McGannon Foundation teamed up with Junior Achievement Central Ontario to host the annual Student Management Training Seminar, offering high school students insight into a career in risk management. More than 220 students and 33 volunteer advisors from across the Toronto, York, Halton and Peel Region areas participated in the event on Dec. 6, 2008. One highlight of the event was the twohour ‘Business Survival Game.’

Students competed in teams of seven, taking on the roles of corporate executives. Each team represented a company, and each company received a spreadsheet including detailed budgets, revenues, expenses and potential risks facing the company. Working as a team, the executives had to prioritize and plan a risk management strategy for their companies.

The exercise had teams developing risk management strategies and risk-identifying techniques that were tested against fictional scenarios.

“The game enables [participants] to gain critical knowledge required to ensure the success of their Junior Achievement companies and all future business and life endeavours,” a letter from Junior Achievement says.

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WICC Alberta held its Gold Flame Awards Lunch on Jan. 22 at StampedePark. More than 300 people heard Insurance Brokers Association of Alberta (IBAA) CEO Ginny Bannerman share her cancer experience. Local emcee Sandra Jansen of CTV kept it all on time, while comedienne Erica Sigurdon had them in stitches. At the luncheon, WICC Alberta presented a cheque for Cdn$125,000 to the Canadian Cancer Society.

WICC Gold Flame Awards were presented to Mustang Investigations, Belfor Restorations Canada, Thompsen Fisher Insurance, AAIA, RSA, The Jim Sinclair Charity Golf Tournament Committee, The IBAA and ING Insurance.

Tom Hickey, B.Comm., CIP President Wedgwood Insurance Limited Geoff Wedgwood, CEO Wedgwood Group, is pleased to announce the appointment of Tom Hickey to the position of President, Wedgwood Insurance Limited. Tom brings over 25 years of experience to this position.

As Executive Vice-President for Wedgwood Insurance for the last three years, Tom’s keen sense of direction and ability to motivate others have set him apart as a leader. Tom has served as President, Insurance Brokers Association of Newfoundland (Two terms), Director of the Insurance Brokers Association of Canada, and President, Business Association of Newfoundland and Labrador as well as serving on many other industry committees.

Working with the best team in the business, Tom will be responsible for implementing Wedgwood’s Strategic Plan, leading the Company to become one of the largest insurance/risk management brokers in Atlantic Canada, and delivering superior results to clients, insurers, employees and shareholders.

Wedgwood Insurance Limited has been a preferred provider of insurance options in Atlantic Canada for over 40 years offering customers a range of residential and commercial insurance and risk management solutions. Wedgwood is one of the largest privately held insurance brokerage firms in Newfoundland.

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INSURANCE INTERNET DIRECTORY

ACCOUNTANTS

COLLISION SERVICES

Williams & Partners Inc. Forensic and Investigative Accountants. www.williamsandpartners.com

CertifiedFirst Network Consider it done.™ www.certifiedfirst.com

ASSOCIATIONS

CONSULTING FIRMS

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

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

CLAIMS ADJUSTING FIRMS Crawford Adjusters Canada One Globe, One Company www.crawfordandcompany.com Cunningham Lindsey International independent claims services. www.cunninghamlindsey.com Kernaghan Adjusters The Preferred Adjusting Solution. www.kernaghan.com McLarens Canada International Loss Adjusters and Surveyors www.mclarens.ca SCM Adjusters Canada Ltd. Committed to providing leadingedge claims management services. www.scm.ca

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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

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

INSURANCE COMPANIES AIG Commercial Insurance Company of Canada "THE STRENGTH to BE THERE". www.aig.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 Kingsway General Insurance Company The Specialty Insurer www.kingsway-general.com Royal & Sun Alliance Insurance Company of Canada Forward thinking since 1710. www.royalsunalliance.ca Sovereign General Insurance Company of Canada Since 1953 www.sovereigngeneral.com Wawanesa Insurance Earning your trust since 1896. www.wawanesa.com

PREMIUM FINANCING Third Eye Solutions Inc. Provides Internet-enabled premium financing/payment plan software solutions. www.thirdeyesolutions.com

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

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

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

RISK MANAGEMENT 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 and brokers in Canada and USA www.trifin.com

The ARC Group Canada Inc. Your Partner in Insurance Law and 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

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Approximately 300 people representing the insurance, bodyshop and collision repair industries attended the Canadian Collision Industry Forum (CCIF) meeting on Jan. 24, 2009 in Toronto. The speakers included Tony CanadĂŠ, CCIF chairman; Mary DiCaro of Mary Dicaro Management Consulting Services; John Edelen and Robby Robbs, both of I-Car International; Rick Turri, Audatex; Krista Friesen of the Clean Air Foundation; Cindy MacDonald, editor of Bodyshop Magazine; and Ken Boulton of The Dominion.

See all of our Insurance Industry Event Photos Online within the

ONLINE PHOTO GALLERY at canadianunderwriter.ca/gallery

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Dr. David K. Foot, professor of economics at the University of Toronto and author of the bestselling books Boom, Bust & Echo: How to Profit from the Coming Demographic Shift and Boom, Bust & Echo: Profiting from the Demographic Shift in the 21st Century, gave the keynote addresss at The Insurance Institute of Ontario’s Toronto Convocation & Awards Night on Jan. 22, 2009. He spoke to an audience of nearly 350 graduates and their guests about how changing demographics — especially the aging of the Boomer generation and the coming into the marketplace of their children, the Echo generation — will redefine society’s needs. About 800 guests and

graduates attended the graduation of new Chartered Insurance Professionals, Fellow Chartered Insurance Professionals, General Insurance Essentials students and Continuing Professional Development students. It was held in the John Bassett Theatre at the Metro Toronto Convention Centre.

ADVERTISERS’ INDEX ACE INA Insurance Applied Systems Canada, Inc. Berkley Underwriting Managers Canada, Ltd. Blouin, Dunn LLP Broker Builder Corp canadianunderwriter.ca Canadian Underwriter magazine Chubb Insurance ClaimsPro Compu-Quote, Inc. Crawford & Company (Canada) Inc. Cunningham Lindsey Canada Custom Software Solutions, Inc. Economical Insurance e2Value Inc. FM Global Great American Insurance Group The Guarantee Company of North America IBAO i-hire.ca ING Insurance Insurance Institute of Canada Keal Technology Kingsway General Insurance Company Microsoft Ontario Insurance Directory – 2009 PolicyWorks RIMS 2009 Conference Starlight Insurance Gala WICC Zurich Canada 78

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7 37 23 29 41 47 63 53 57 83 (IBC) 25 9 84 (OBC) 31 43 17 49 21 15 67 2 (IFC) 5, 19, 51, 69 32, 33 45 13 73 39 55 59 61, 65 27

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The holiday spirit kicked into high gear when members and friends of the Ontario Risk and Insurance Management Society (ORIMS) attended the 2008 ORIMS Christmas Luncheon on Dec. 18 at Toronto’s Hilton. Based on raffle ticket sales at the event, ORIMS funded a cash donation of Cdn$6,285 to the Daily Bread Food Bank. cont’d on Page 82.

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Munich Reinsurance Company of Canada

Jordan S. Solway, LLB Kenneth B. Irvin, President and Chief Executive Officer of Munich Reinsurance Company of Canada (MROC) and Temple Insurance Company, is pleased to announce the appointment of Jordan S. Solway to the position of Vice President, Claims and General Counsel.

Mr. Solway has also been appointed Vice President, Claims for Temple Insurance Company.

Mr. Solway joined the company in November 2008 and is responsible for the overall operations of the Claims and Corporate/Legal Departments.

Mr. Solway brings over 17 years experience to this position having worked previously in senior management roles with Arch Insurance (Canada) and Chubb Insurance Company of Canada.

Prior to that, Mr.Solway was a practising litigation lawyer with broad based experience in the areas of governmental liability, insurance law, professional liability and employment law.

Mr. Solway holds a Bachelor of Law Degree from Osgoode Hall Law School and is a member of the Law Society of Upper Canada. He is also currently a member of the faculty for the McMaster Degroote Directors’ College, a regular lecturer for the Insurance Institute of Canada and is a regular contributor to a number of legal and insurance publications.

MROC is Canada’s leading nonlife reinsurer, with offices in Toronto, Montreal and Vancouver. It is a member of the Munich Re Group, a world leader in reinsurance, serving more than 5,000 insurance companies in 150 countries.

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The ORIMS Christmas lunch also produced in-kind donations such as 1,500 pounds of nonperish-able food items and more than Cdn$600 worth of grocery cards.

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