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CANADIAN UNDERWRITER

VOL. 85, NO.6, JULY 2018

2018

CANADA’S INSURANCE AND RISK MAGAZINE. PUBLISHED BY NEWCOM MEDIA INC.

www.canadianunderwriter.ca

FEATURE PACKAGE

2018 Stats Guide Looking for a quick summary of the financial results of Canadian P&C insurers?

Do you want to know which insurance markets show the hottest growth? How is your region stacking up against the rest of Canada? What are trends behind the numbers?

All the answers and more are contained in our 2018 Stats Guide, your definitive guide to the latest P&C industry results.

STATS GUIDE WHAT’S INSIDE:

Comprehensive Results: More than 200 companies in detail Growth Charts: Hottest insurers by line and location Provincial Outlooks: Key trends, top performers

23

Exclusive Analysis: What happened, and what’s next?

FEATURES

13

20

17 Access Denied

Managing GDPR Risk

Automated Car Data

Remember the Sales Force

The EU’s new privacy breach law has teeth, and its reach extends into Canada. How to keep your clients from running afoul of the long arm of the European law

Insurers need access to proprietary data to determine fault when automated cars crash. Here’s how to get it

Tech can do more than improve the direct insurer-client relationship. For insurers, consolidating data can improve their business relationships with the broker channel as well.

BY IAN PHILLPOT

BY JONATHAN GRNAK

BY GIL QUESNELLE

July 2018 Canadian Underwriter

3

VOL. 85, NO.6, JULY 2018

Editor-in-Chief

Managing Director, Insurance Media Group

David Gambrill

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Director, Business Development

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Account Representative

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Jonathan Hogg

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Editorial

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Marketplace

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Canadian Underwriter July 2018

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EDITORIAL

Bun Fight

Trial lawyers, do you really want to reduce your clients’ premiums? Lower your fees.

David Gambrill Editor-in-Chief Canadian Underwriter david@canadianunderwriter.ca

About a month before the Ontario election, the province’s trial lawyers started a bun fight with property and casualty insurers over auto insurance.

The Ontario Trial Lawyers Association (OTLA) publicly proclaimed in May that “Ontario drivers continue to pay excessive auto insurance premiums in Ontario.”

Public media reported the claims of the trial lawyers without looking too deeply into the report’s assumptions. Out came the screaming headlines: “Ontario motorists overpaid $5B over five years for auto insurance.”

The lawyers’ position happened to dovetail nicely with Ontario NDP’s election campaign platform, which called for insurance companies to reduce their rates by 15 per cent.

“Is there room to reduce premiums further, and possibly achieve the 15 per cent reduction target?” the OTLA report prepared by Dr. Fred Lazar asks. “The answer is yes. Start with more realistic estimates for ROEs and operating cost assumptions.”

Lazar starts with a wildly generous return on equity (ROE) calculation for the industry’s auto results in 2016.

His figure, based on guesswork and assumptions, came out to about 15.9 per cent, whereas the Insurance Bureau of Canada reports the ROE was in fact 6.6 per cent.

The media reported on this discrepancy in the numbers, but the logic of Lazar’s argument bears further scrutiny.

Lazar thinks Ontario’s rate regulator has been setting its

ROE benchmarks for the industry too high for more than a decade. He contends that the Financial Services Commission of Ontario (FSCO) should be basing its ROE benchmark on a rolling 10-year average, which would have dropped auto insurers’ underwriting profit margins to below 2 per cent for most of 2001-16. In contrast, FSCO’s benchmark for underwriting profit was 5.2 per cent between 2001-12 (bumped up to 6 per cent in 2015-16).

One of the more controversial aspects of Lazar’s report is that he uses his preferred 10-year rolling average to calculate the public’s supposed premium “overpayments.”

Boiled down, Lazar’s argument sounds like this: “The regulator’s ROE benchmark is 11 per cent. Based on my sayso, it should be 4.5 per cent.

Using my numbers instead of FSCO’s, Ontario drivers overpaid by $5 billion over five years.”

Let’s apply the same flawed logic to trial lawyers’ fees.

Last year, lawyers debated whether to cap contingency fees (the legal fees deducted from awards that injured drivers receive from insurers).

Currently, there is no cap on contingency fees in Ontario, other than that they must be “fair and reasonable.” Also, they must receive judicial approval. Judges in Ontario have generally allowed contingency fees in the 20-25 per cent range. The Law Society last year rejected a recommendation to cap contingency fees at 15 per cent.

So, let’s be charitable and say the courts think a 20 per

cent contingency fee is fair and reasonable. Insurers, however, believe the fee should be capped at 15 per cent. That amounts to 5 per cent “excess fees” that lawyers charged their clients.

Assuming Ontario insurers accounted for roughly half the $13-billion in auto insurance claims paid out across the country in 2016 (Ontario insurers write roughly half the auto premium in the country), that means trial lawyers collected a whopping $325 million in “excess fees” in 2016 alone.

No one, including trial lawyers, should take this argument seriously. It is riddled with errors in calculation as well as questionable assumptions and reasoning. And yet, this is exactly the same sort of dodgy argument that trial lawyers just applied to insurers.

When all is said and done, it is unknown why trial lawyers started this bun fight. Do lawyers honestly believe, along with some Ontario politicians, that the industry can afford a 15% rate reduction?

News flash, it can’t. Auto insurance claims across the country have escalated 16 per cent in 2018 Q1, while the premium base decreased by 1 per cent.

Memo to Ontario’s new Tory government: Enforcing a premium rate reduction in this claims environment would be ludicrous and should not be attempted.

Trial lawyers, do you really want to reduce your clients’ premiums? How about doing something that would guarantee a decrease in claims costs for your clients’ insurers?

Lower your fees.

July 2018 Canadian Underwriter

7

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MARKETPLACE AUTO INSURER FACES LAWSUIT OVER CREDIT SCORES A major Ontario auto insurer faces a proposed class action lawsuit over allegedly using credit scores to adjust accident benefits claims.

Filed in Federal Court in April, the lawsuit is on behalf of all Canadians who made auto claims with The Personal Insurance Company after Jan. 18, 2012, “and who had their credit score information accessed by The Personal or its agents,” as asserted in the statement of claim.

The class has not been certified by a court. The insurer will be filing a statement of defence “in due course,” says a spokesperson for Desjardins General Insurance Group Inc. Allegations that The Personal accessed credit scores of accident benefits claimants have not been proven in court.

The statement of claim asserts that The Personal does not have a “direct business need” for credit scores from accident benefits claimants and is in violation of the federal Personal Information Protection and Electronic Documents Act.

SKIP THE INDUSTRY COCKTAIL MIXERS. HERE’S A BETTER WAY TO NETWORK Tired of attending yet another insurance industry cocktail event, idly stirring your drink with a swizzle stick and talking to everyone you already know?

Go ahead and skip that schmooze-fest.

There’s a better way to meet new people.

High-stakes shared activity is more likely to draw you together with new people, according to David Burkus, a best-selling author and associate professor of leadership and innovation at Oral Roberts University.

“Potent networks are not forged through casual interactions but through relatively high-stakes activities that connect you with diverse others,” Burkus writes in a blog for Harvard Business Review. “In other words, schmoozing at a mixer is far less likely to lead you to a powerful network than jumping into projects, teams, or activities that draw a diverse set of people together.”

Examples of more effective networking opportunities include serving on non-profit boards, organizing charity drives, playing in amateur sports leagues, or taking up a new hobby.

The key is to draw a more diverse set of people than normal to come together and work toward something big enough that it can’t get accomplished alone.

“The Personal respects and values the privacy of its customers but given the pending litigation, we cannot comment any further on the action,” the Desjardins spokesperson wrote to Canadian Underwriter.

If the plaintiffs were to succeed in court, their lawyers suggest the damages could be as high as $10,000 per person.

BROKER FINED FOR PRIVACY BREACH AFTER LEAVING AGENCY WITH HIS OWN CLIENT LIST A B.C. broker who believed he was leaving one agency for another with his own book of business received a $2,500 fine for a privacy breach after keeping a spreadsheet with his clients’ information.

Before joining his brokerage in 2004, the broker had a verbal agreement with the agency’s nominee that he would continue to own his book of clients that he had built during his time at the brokerage. During his 12 years at the brokerage, he managed his own client files, drew no salary, made income strictly on commissions, and was responsible for his own expenses.

He left the brokerage in 2016 to join another agency. When he left, he kept a spreadsheet that he maintained while representing the agency — including client names, policy numbers, and policy effective dates.

“The licensee stated he felt he did not act improperly, since he believed these clients to be his own,” the Insurance Council of B.C. wrote in its final decision imposing a fine for the privacy breach.

But council ruled that he did not receive permission from his previous agency to take the spreadsheet, nor did he have the express consent of the clients to keep the information on the spreadsheet.

July 2018 Canadian Underwriter

9

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MARKETPLACE NEW TELEMATICS PRODUCT FOR INFREQUENT DRIVERS Ontario brokers have a new auto insurance option for their customers with MyPace, a product intended for vehicles driven fewer than 9,000 kilometres per year.

MyPace measures distance travelled using telematics. It was approved this past February by the Financial Service Commission of Ontario, says Elliott Silverstein, manager of government relations for CAA South Central Ontario.

“This is the first (Ontario auto insurance product) I am aware of with an incentive for people to drive less,” Steve Kee, a spokesman for Insurance Bureau of Canada, told Canadian Underwriter.

Clients who select MyPace “will start with a base rate and be charged in 1,000 kilometre increments,” CAA Insurance president Matthew Turack said during a press conference. The “base rate” will be calculated using the same rating factors as for any other private passenger auto customer (such as make and model of vehicle, drivers’ experience and location). CAA will track the vehicle’s distance and charge for every 1,000 kilometers.

Once a vehicle is driven more than 9,000 km in a year, the price would then be no lower than a “traditional” auto policy, Turack noted.

BROKERS FEAR PRICING ISSUES MAY PROMPT COMPANIES TO EXIT ONTARIO AUTO Ontario brokers are concerned that if auto insurance results in the province continue to deteriorate, companies may start to leave the market.

Traci Boland, chairwoman of the Insurance Brokers Association of Ontario (IBAO), said companies are filing for rate increases, but not getting them.

Sometimes they are not even coming close to what they are requesting.

“We know that companies have to be financially stable and sustainable for the future,” said Boland, who is also a partner at Ontario West Insurance Brokers in London. “If they’re not able to sustain the auto product in Ontario, we’re worried that companies will start pulling out.”

The government is not actually looking at the problem, she said. “To mandate a reduction in premium does not fix the auto issue in Ontario.”

Boland encouraged government to implement several recommendations contained in a report by David Marshall, whom the government commissioned to review the province’s auto insurance system.

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Aviva Enterprise™ is a trademark owned by Aviva Canada Inc. The Aviva Enterprise™ policy is underwritten by Aviva Insurance Company of Canada. "/*0 +! ,+!&1&,+0 --)6ǽ ,/ "5 1 1"/*0Ǿ !"Ɯ+&1&,+0Ǿ )&*&1 1&,+0 +! extensions, refer to the actual policy wordings.

July 2018 Canadian Underwriter 11

MARKETPLACE HELPING THY COMPETITOR DURING ‘BIBLICAL’ FLOODING Competition for business between two local brokerages washed away for a time during the recent flooding in Grand Forks, B.C. Sam Cowan, vice president of sales and marketing with RHC Insurance Brokers Ltd., said the brokerage’s office in Grand Forks was shut down for several days after a power outage.

RHC’s competitor, Dave Dale Insurance Agencies Ltd., wasn’t so lucky. Their basement flooded and they had to set up a new temporary location.

Cowan’s instinct to help kicked in. “We went up there right away and said, ‘Hey, do you need any help?’ and made sure his customers knew where he was.”

Canadian Press has called the flooding “catastrophic.” Cowan, who estimated in late May that his brokerage was handling

120 residential claims, remembers driving over a highway bridge and seeing two or three feet of water hitting the bottom door of his truck.

Some homes didn’t have access to roadways, requiring search-and-rescue

teams to retrieve people with boats.

“There was a levee that broke near town as well that contributed to a bunch of the flooding in the south and part of the north end of town,” Cowan said. “It was biblical. It took everyone by surprise.”

BELAIR CASE EXPOSES HOW CLINICS CAN ABUSE AUTO CLAIMS SYSTEM Belair Direct has succeeded in quashing an auto insurance claim that illustrates how rehab and assessment clinics can potentially abuse Ontario’s accident benefits law.

In its ruling in Belair Direct Insurance Company v. Green, an accident benefits case, the Ontario Superior Court referenced a parallel court action launched by Belair Direct against a rehab centre and an assessment center that ended in a settlement. The parallel court action exposed a legal loophole allowing rehab and assessment clinics to overwhelm insurers with treatment plans.

In the settled action, the court noted in Belair, the insurer alleged that a rehab centre and an assessment centre “were abusing the provisions of the SABS [Statutory Accident Benefits Schedule] by inundating insurers with a huge volume of claims that an insurer could not possibly respond to within the 10-day period set out in the SABS.” The law requires insurers to respond to plans within 10 days or else they are deemed to have accepted — and therefore will pay for — the plans.

12 Canadian Underwriter July 2018

Long Arm of the Law How to protect your clients from running afoul of the European Union’s privacy breach law.

Ian Phillpot Vice President Box Canada

T

he European Union (EU)’s General Data Protection Regulation (GDPR) came into effect in May, forcing drastic changes to the way businesses around the world store and manage personal data.

In Canada, leading up to implementation, these adjustments were not happening fast enough. A survey from DocsCorp found that as of August last year, 73 per cent of Canadian and U.S. companies had not started to prepare for the GDPR; fifty-four per cent did not even know the deadline for compliance.

The GDPR poses particular challenges for insurers and their customers. Brokers need to provide clients with appropriate guidance on how to: • prepare data for compliance, • avoid extensive penalties, and • advise clients on the type of coverage they need to pursue in case of a violation.

The GDPR rules are wide-ranging. They encompass all businesses working with EU data, and include strict mechanisms for implementing tighter rules around handling of client data.The regulation applies to companies in all countries, including Canada, that have access to EU citizens’ personal information.

Fines for violating the GDPR are immense, and there’s no way to opt out. Businesses must comply or be subjected to heavy fines of up to €20 million (about Cdn$30 million) or four per cent of their global gross revenue, whichever figure is the greater.

By understanding the primary regulations introduced by the GDPR, as well as the potential penalties for businesses that don’t comply, brokers will be able to identify which companies are at a higher risk of violation. In addition, they will be able to provide these clients with the appropriate guidance on the right coverage and the best practices for risk mitigation.

Here’s what brokers need to know about the GDPR, and what they need to do to better prepare their clients with the right coverage.

KEY ASPECTS Transparency Under Article 5, it is necessary for companies to be fully transparent about the data they possess and aware of the information they’re storing and collecting, in case a GDPR regulator requests that data.

This includes records of consent for collection of data, and the installation of proactive privacy practices that are transparent to customers.

Usage Controls The GDPR also enforces strict new usage controls over personal data under a company’s control.

These include principles such as “data minimization,” “data portability,” and the infamous “right to be forgotten.” This last principle, detailed in Article 17, provides data subjects with a new right to request access to and deletion of their personal data.

Organizations must delete personal data on request based on a number of specified grounds, including whether the personal data is no longer necessary for the original purpose for which it was collected, or if data subjects withdraw their

July 2018 Canadian Underwriter 13

consent. A response to this request must be completed within one month.

The GDPR places great emphasis on the role of consent in personal data usage and collection. All businesses must secure consent from users to use or share their data.

Please welcome Javier Ibaùez The Wawanesa Mutual Insurance Company, founded in 1896 and one of the largest property and casualty insurers in Canada, is pleased to welcome Javier Ibaùez as the Director for Business Development – East, which includes the key Ontario, Quebec and Atlantic regions.

Javier is a dynamic business leader in the P&C industry with expertise in creating and embedding sales cultures. He’s held various leadership positions with several large Canadian insurance carriers and has a deep understanding of the marketplace.

Mr. Ibaùez holds a Bachelor of Arts degree from York University, a Masters degree from St. Francis Xavier University and has completed post-graduate studies in marketing, strategy CPF ȨPCPEG CV VJG ;QTM 7PKXGTUKV[ Schulich School of Business.

Based out of the Ontario Regional 1HȨEG KP 6QTQPVQ ,CXKGToU GZRGTVKUG in broker channel management, sales effectiveness, and sales compensation will ensure that the Wawanesa Business Development team delivers an innovative and modern value proposition to brokers across Canada.

wawanesa.com

14

Canadian Underwriter July 2018

Breach NotiďŹ cation Rules Companies will be required to report any data breaches within 72 hours to both GDPR regulators and to those directly

affected by the breach. Failure to report properly and fully within 72 hours could result in penalties of up to four per cent of global annual revenue. The Canadian government also recently announced new breach notification rules, which do not yet state the notification timeline. However, those that take the appropriate steps to comply with the GDPR will be well prepared by the time the Canadian regulations come into effect on Nov. 1, 2018.

STEPS TO MITIGATE RISK Preparing your data The best approach to mitigate risk is preparation. Companies need to be prepared to understand the data under their possession. This will require data mapping – understanding where it sits, where it is flowing, and who has access – both inside and outside Canadian borders. They will also need to reorient how they develop data capture application forms so that they’re clear, straightforward, and customers can understand to what they are agreeing.

For many businesses, it will also require the implementation of new data management processes. For the collection of new data, as well as the organization of older data within their systems, they need to be prepared to have full visibility of customer information. That way, if a regulator were to request access to the organization’s data, they’ll be fully prepared to comply.

Hiring a data point-person It may be of value to hire a data controller to oversee how data is being managed by the organization. The controller would be responsible for knowing how future changes to GDPR legislation might affect the personal data under their control, as well as what type of notifications the company will need to deliver to their customers. This position ultimately becomes the point person in the case of a query from the regulator, with the insight to demonstrate that the organization hasn’t violated the GDPR.

Cyber risk insurance Brokers should also be prepared to suggest appropriate types of coverage in the case of a breach or penalty. Cyber risk and data breach insurance can provide businesses with indemnities if first-party losses and third-party liabilities arise because of cyber incidents and violations of the GDPR. These policies can underwrite the costs and expenses that are incurred by the company, as well as the costs and expenses incurred by policy holders, in the event of a data breach.

Given GDPR’s substantial penalties, this type of coverage can greatly benefit companies at risk of a cyber breach. Most cyber policies also cover the cost of notification in the event of a breach. Some policies even provide response teams that can coordinate the legal or other expert advice required to respond to incidents. However, the extent to which insurance will be able to cover fines is still uncertain and will only be determined as time goes on and more incidents are brought to court. It’s unlikely that coverage will include the full extent of a fine. However, it’s important for brokers to know and advise clients that many insurance policies do not cover fines associated with non-breach associated penalties of the GDPR.

Innovate to thrive in a growing market

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ne of the biggest realities emerging in the commercial insurance sector is the changing needs – and therefore expectations - of commercial insurance customers. It is crucial for a business of any size to have appropriate coverage in place SG@S HR QDâDBSHUD NE HSR TMHPTD MDDCR ‰ EQNL U@KTDR @MC QDUDMTDR SN FDNFQ@OGX M@STQD NE ATRHMDRR @MC âDWHAKD ENQ ETSTQD FQNVSG OK@MR

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This year, we have evolved our focus on and dedication to these top commercial brokers by launching the Keystone program, offering a select group of commercial brokers across the country access to a number of exclusive privileges, from preferred pricing and dedicated service to enhanced product packages. Ultimately, our focus in the mid-market sector is to enable our best underwriters to have deeper, more strategic relationships with fewer brokers. This approach allows us to establish partnerships that are grounded in mutual RTBBDRR R VHSG @MX NE NTQ OQNFQ@LR VD VHKK AD HMBNQONQ@SHMF feedback from Keystone brokers into future enhancements to the program to maximize its value to our broker partners.

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market customers.

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S SGD DMC NE SGD C@X 12 ŒR @OOQN@BG ‰ @R HS RGNTKC AD ENQ any commercial insurer – is to invest in providing greater differentiated service and products, that will help our broker partners win more often with their existing and new customers in the commercial sector.

Paul Lucarelli, SVP, Commercial Insurance at RSA Canada, joined RSA in 1995 as part of the Commercial Underwriter Trainee Program. He has held progressive strategic and technical leaderships roles in Commercial Underwriting leading up to his current position as the company lead on Commercial Insurance.

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Access Denied

Finding Fault with Data How insurers can access data to determine fault in collisions involving automated vehicles.

B

lameworthiness or liability in any crash involving a vehicle equipped with selfdriving technology will continue to be the main roadblock to the effective implementation Jonathan N. Grnak and adoption by consumers of autonomous veBarrister & Solicitor hicle (AV) technology.

Danson Recht LLP The question is: How do you determine liability when the data supplying the clues is being interpreted and stored in proprietary systems that serve exclusively for the benefit of vehicle manufacturers?

CASE STUDY: UBER CRASH What Went Wrong?

The U.S. National Transportation Safety Board (NTSB) released in May its preliminary report on the now infamous fatal crash involving Elaine Herzberg and an Uber Technologies Autonomous Test Vehicle.

There has already been one settlement reached between Uber and certain Herzberg family members; now that the NTSB report has been released, there will no doubt be further lawsuits arising out of this incident.

What went wrong that caused the Uber vehicle to strike a pedestrian? Nothing can conclusively be stated at this point. However, certain details point to a catastrophic failure of at least one aspect of the vehicle’s self-driving technology.

According to Uber, the Volvo SUV involved in the crash was equipped with seven cameras, one laser (LIDAR), 360-degree radar coverage, Inertial Measurement Units, and a custom computer that processes and stores data. On top of that, the vehicle had a human operator just in case any or all the above sensors failed.

In addition to the technology listed above, the vehicle was factory-equipped with several advanced driver assistance functions, the NTSB

July 2018 Canadian Underwriter 17

report indicates. They include a collision avoidance function with automatic emergency braking, as well as functions for detecting driver alertness and road sign information. All these Volvo functions are disabled when the test vehicle is operated in computer control, but operational when the vehicle is in manual mode.

According to the NTSB report, the self-driving system relies on an attentive operator to intervene should an emergency maneuver be necessary. Additionally, the operator is responsible for monitoring an interface in the centre stack of the vehicle containing diagnostic messages. One of the operator’s tasks is to tag events of interest on the diagnostic screen for subsequent review.

This would appear to explain why in the video released by the Tempe Police Department the human operator appeared to be distracted and looking down when the vehicle struck the pedestrian.

Who is to Blame?

Some will blame the Arizona government for their lax regulations in ensuring vehicles are safe for public testing.

Some will blame Uber, and others the pedestrian or the operator of the vehicle.

At first glance, it would appear as though the pedestrian was at least partially liable for the accident. The NTSB report noted that the pedestrian was intoxicated, dressed in dark clothing, and her bike did not contain any side reflectors. Also, she crossed the road at a location that was several hundred feet from a crosswalk.

A video released by the Tempe Police Department suggested the location of the collision was extremely dark and the pedestrian appeared out of nowhere.

However, other videos of this roadway that have since been uploaded to YouTube suggest the road is in actuality adequately lit, with good sightlines.

Ascertaining whether or not liability could rest with the operator of the vehicle is tricky. Generally speaking, operators have a duty to keep a proper lookout, although this did not appear to be

18

Canadian Underwriter July 2018

the case when this accident occurred, based on the video footage. Confusion arises because Uber required the operator to monitor a computer interface located in the centre stack, thus forcing the operator to take his eyes off the road.

This seems to be a mandated distraction, since Uber required their operators to not only monitor the computer interface, but also be attentive enough to intervene during emergency situations, as all of the standard safety features were disabled while in autonomous mode.

PROPRIETARY DATA Since manufacturers want the public to perceive their vehicles as safe, they have an economic interest in keeping the data stored in their vehicles private, which could limit law enforcement, insurers, or other stakeholders from easily gaining access to it. This data will be necessary to determine fault in accidents.

To uphold public safety, coherent regulations must be adopted to enable the sharing of data between manufacturers, law enforcement, insurers, and other

Coherent regulations must be adopted to enable the sharing of data between manufacturers, law enforcement, insurers, and other stakeholders.

As it stands, a majority of fault seems likely to fall to Uber. We know now that the vehicle sensors identified the object six seconds before impact. However, only 1.3 seconds prior to impact did the computer realize an emergency maneuver was required to mitigate a collision with a pedestrian. Taking reaction time into consideration, a controlled study by the National Highway Traffic Safety Administration (NHTSA) in 2000 found that the average driver needed about 2.3 seconds brake time. If it took the computer until 1.3 seconds pre-collision to identify the emergency, a human operator would not have been able to react in time.

SAFETY REGULATIONS In Canada, there has been no development of any type of federal AV regulatory framework. In Ontario, liability for crashes still rests on the owner or operator of the vehicle, full stop.

In the United States, NHTSA is essentially ceding responsibility to individual states to develop their own regulations for AVs. Since states want the business, a race to the bottom is created in which vehicle manufacturers influence how AV regulations are drafted and ultimately enforced.

stakeholders. Furthermore, these regulations must require insurers to pay out quickly to injured parties for damages caused by AVs. Insurers may very well hold the key to the development of these regulations.

By developing policies of insurance that mandate access to vehicle data in exchange for the ability to insure AVs, insurers can guarantee transparency while simultaneously forcing manufacturers to continue to develop AVs with safety as a top priority. Access to vehicle data potentially allows insurers to determine liability more easily, allowing for more timely payouts to injured parties. Of course, if it is determined that a manufacturer is at fault, insurers must act in good faith by willingly providing payouts first before attempting to recover from the at-fault party.

Until AVs make up 100% of all vehicles on the road, there will continue to be interplay between semi-autonomous vehicles and those being manually operated. As a result, insurers and law enforcement will require a means to quickly determine fault for accidents, which will accordingly necessitate changes to current motor vehicle regulations across the world.

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Remember the Sales Force?

Here’s why carrier efforts to consolidate data should focus on brokers as well as consumers.

Gil Quesnelle Director of Sales (U.S. and Canada) VUE Software

E

veryone talks about the end client, but very few are talking about the carrier-to-broker relationship.

In any industry conference today, there is a lot of discussion about serving the client and the direct client model – i.e. selling insurance directly to the client online. Carriers are always looking at the client, but how closely are they looking at their brokers? To grow their business, companies need to use data from their brokers’ performance to guide future strategy and support their broker sales force.

WHY BROKERS MATTER Several common themes run through the industry right now; three of the major ones are data, consolidation, and performance review. All are interconnected, like a row of dominoes. Most of them tie back to

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Canadian Underwriter July 2018

technology. But another, hidden factor underlying them all would support business growth, only carriers seem to be missing it — the producers.

Data Data must come first. A plethora of data is accumulating; it has reached staggering proportions in both our consciousness and reality. In Canada, similar to the situation in the United States, too many different systems are in play. This is the result of technology purchases that insurance companies have made along the way without integrating them appropriately or quickly enough. When this fails to happen, culling data is a complex and costly business.

Consolidation Carriers want data consolidation. They want one location in which they can concentrate all the information they have regarding their brokers’ distribution. This includes information about different types of distribution arms, internal versus independent agencies, different regions, and the list goes on. They want it in one location. Without that, they can’t get that

consolidated view of who is producing what for them. Additionally, in Canada, there’s a popular trend for carriers to buy distribution, both on the life and health sides, and to some extent in property and casualty. This adds to the challenge of getting a consolidated view.

Performance Review This flows logically from the carriers’ need for consolidation.

Carriers can’t market to brokers and agents in the field when they can’t see in one view what the brokers and agents are producing for them. Consider the complexity of the offerings that brokers and agents sell today. Carriers need to know what types of business that their brokers and agents bring in, so they can apply the appropriate compliance and monitor them. They need to look for trends apart from the obvious.

Say, for example, that a broker is trending; maybe he has developed a good P&C market on a certain product or product line. He’s managed to penetrate a wealthy lakeside community and has written policies on every cottage owner’s luxury boat. Then a disaster strikes: suddenly every boat owner is submitting claims for their destroyed vessels. Given all those costly boat repairs and replacements, maybe that signals too much of the agent’s book of business was focused in one area. Carriers need to be able to understand where their claims will come from so that they can correct course on distribution; it’s helpful to get an early warning that such a risk is simmering.

Who are the good producers, and who are the non-producers?

Who’s bringing in profitable business? What’s my claims ratio?

What’s my loss ratio on these books of business? How can I get insight from the data, so that if there is a problem, we can correct it?

Company growth hinges on the answer to these question; data analytics can help to answer them. Over the years, we’ve seen companies terminate contracts with agents because they weren’t producing. Analytics will better inform those decisions.

It becomes easy to understand the full picture of how agents perform when distribution is the core system in a carrier’s IT strategy. When you think about it, distribution is not only how producers get paid, it also indicates how productive they are, given that they get paid on commission.

CARRIERS SUPPORTING BROKERS There’s an oft-quoted saying in the industry: “Insurance is sold, not bought.” While we recognize that some products can be sold online and off the shelf, that’s not always going to be the bulk of an insurance company’s business.

How do carriers support their agents and inside sales people? Data, consolidated and analyzed, can help improve that carrier-agent relationship, ultimately supporting the end client.

RESPOND. RESTORE. RESCUE.

LEGACY BARRIERS Many carriers, however, are not using data to improve their understanding of their brokers and agents. An underlying reason is that agent data is stuck in legacy systems that are in urgent need of replacement. It’s hard to access agent productivity data from old, legacy policy administration systems. Data warehouses now serve this function, but the question is, can you access the data anywhere close enough to real time to meaningfully use it?

Carriers simply cannot rely anymore on their policy administration system to calculate their agent commissions.

They need to get these functions out of their back office and into a true distribution platform; here, they can control and address the data, plus they can gain flexibility regarding reporting, monitoring, and consolidating various distribution arms.

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contents

Exclusive to Subscribers Comprehensive Comprehensive Results: Results: More More than than 200 200 companies companies in in detail detail Growth Growth Charts: Charts: Hottest Hottest companies companies by by line line and and location location

OVERVIEW

WHAT’S WHAT’S WRECKING WRECKING THE RANKINGS THE RESULTS? THEOutlooks: RESULTS? Provincial Key Provincial Outlooks: Key trends, trends, top top performers performers

National National Canadian Canadian P&C P&C industry industry results results Total 54 Total Business Business 54 seemed seemed destined destined to to improve improve Exclusive Analysis: What happened, Exclusive Analysis: What happened, and and what’s what’s next? next? after after aa 2016 2016 wildfire wildfire in in Alberta Alberta Automobile 60 Automobile 60 set set aa record record for for most most claims claims Property 62 Property 62 payouts. payouts. But But results results weren’t weren’t Underwriting Profitability 63 Underwriting Profitability 63 that that great great in in 2017, 2017, and and this this year year they Major 64 they are are getting getting worse. worse. Blame Blame Major Lines Lines 64 the the car car –– and and the the weather weather –– for for wrecking wrecking everything. everything.

Provincial Provincial Total Total Business Business Automobile Automobile Property Property

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66 66 68 68 70 70

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BY DAVID DAVID GAMBRILL GAMBRILL UNDERWRITING 2018 Stats Guide package right away.RESULTS

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BRIEFING NOTES

Insurers Insurers Reinsurers Reinsurers Total Total Business Business

Cover CoverJuly JulyV9.indd V9.indd 11

Provincial Provincial Outlooks Outlooks and and Analysis Analysis British British Columbia Columbia Alberta Alberta Saskatchewan Saskatchewan Manitoba Manitoba Ontario Ontario Quebec Quebec

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44 44 46 46 48 48 50 50 52 52

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Automobile Automobile Property Property

80 80 82 2018-06-14 3:22 2018-06-1482 3:22PM PM

COMPANY RESULTS 5-year 5-year financial financial overview overview ofof more more than than 200 200 companies companies

84 84

2018 2018 STATISTICAL STATISTICAL GUIDE GUIDE 23 23

Organized by

4th Annual

Insurance Analytics Canada Summit September 25 - 26, 2018 | The Westin Prince | Toronto, Canada

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Turning Data to Analytics to AI

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MOVES & VIEWS UPCOMING EVENTS: FOR A COMPLETE LIST VISIT

www.canadianunderwriter.ca

1

Veronica Scotti [1], president and CEO of Swiss Re Canada, has been appointed chairperson of global partnerships for the reinsurer. She has been Swiss Re Canada’s CEO since 2015, when she replaced Sharon Ludlow. Replacing Scotti effective July 1 is Monica Ningen, most recently Swiss Re’s head of property underwriting for the United States and Canada.

Ningen will be president and CEO of Swiss Re Canada & English Caribbean. Scotti joined Swiss Re in London, England with the acquisition in 1999 of investment bank Fox Pitt Kelton. Before joining Swiss Re, she had worked for Banque Paribas, Union Bank of Switzerland and Banco di Napoli. Scotti plans to move to Switzerland with her family this August.

Ningen, who has more than 20 years of experience in the industry, started her career at reinsurance broker E.W. Blanch. She joined Swiss Re in 2006 when Swiss Re acquired GE Insurance Solutions. Ningen plans to move this August to Toronto.

2

Gerry Hooper [2a] has retired from the board of directors of Economical Insurance and is now chairman emeritus.

Hooper was Economical’s chair of the board from 2005 through to 2016. A former CFO of Schneider Foods, Hooper joined Economical’s board of directors in 1999.

164 Canadian Underwriter July 2018

Economical’s current chair is John Bowey [2b], who is also chair of Economical’s special committee on demutualization.

3

Karen Higgins is now executive vice president and CFO of The Co-operators. She replaces Bruce West, who announced his retirement earlier. Higgins was vice president of finance in The Co-operators’ life insurance operations. She has also worked for Clarica and Sun Life. Higgins joined The Co-operators in 2008 as vice president of corporate finance. In 2011, she took on the role of vice president of finance of the property and casualty operations.

4

Wayne Guy [4a] retired as vice president of ClaimsPro’s Atlantic region. After Guy’s departure, ClaimsPro divided its Atlantic region department into two districts. Mike Connolly [4b] is district manager for Nova Scotia and Newfoundland, while Calvin Roberts will be district manager for New Brunswick and Prince Edward Island. Both will report to Christopher Tirrell, vice president of operations for Eastern Canada. Before joining ClaimsPro, Guy was the founder and owner of Provincial Adjusting, a Newfoundlandbased adjusting firm that SCM acquired in 2005.

5

Brokerage Hub International Limited recently acquired

1

2a

5a

5b

Les Avantages Sociaux Delta Inc., a Montreal-area benefits brokerage operating as the Delta Group.

Terms of the deal were not disclosed. The Delta Group team will join Hub Quebec.

Roger d’Eschambault [5a], founder and chairman of the Delta Group, will report to Stephen Blais [5b], president of Hub Quebec.

The Delta Group provides support and actuarial services for group insurance and retirement plans, as well as human resources and disability management, for mid-size and large businesses in Canada.

6

Claims services firm Crawford & Company (Canada) Inc. has appointed Sandra Harbans to Crawford Canada’s Lloyd’s unit as director of operations.

Her insurance experience includes claims, finance and underwriting administration. She has also managed treaty and facultative claims for business written through the Lloyd’s syndicates, as well as overseeing the claims process, conducting audits and ensuring regulatory compliance for Lloyd’s business. Harbans has a liberal arts degree from St. Joseph’s College and a certificate in accounting from Ryerson University. Crawford operates five Lloyd’s hubs in North America, including Toronto, Montreal and Vancouver.

7

Canadian Broker Network (CBN), a consortium of independent insurance brokerages, has sold managing general agent South Western Insurance Group Limited (SWG) to Three

MOVES & VIEWS

2b

6 Holdings Inc. Existing SWG staff remain under the leadership of the current president, John Barclay. Terms of the transaction were not disclosed. Toronto-based South Western places commercial insurance including pollution liability and professional liability. Among its target markets are bars, nightclubs, rooming houses and upholsters.

8

Sedgwick Claims Management Services Inc. has two new adjusters in Canada. James Palmer has joined Sedgwick Canada as a major and complex loss adjuster, supporting the combined Sedgwick and Cunningham Lindsey Management Services Inc. teams in Canada. Sedgwick completed its acquisition of Cunningham Lindsey this past April. Palmer, whose special-

3

9a ties include liability claims, joined Cunningham Lindsey in 2010 at its Indonesia location. Sedgwick also appointed Allan Plaggenhoef as senior claims adjuster in its Halifax office. Plaggenhoef’s specialties include auto, fire losses, environmental contamination and medical malpractice, among others.

9

FirstOnSite Restoration Limited has appointed two new managers in British Columbia, where the disaster restoration firm has six offices. Erik Hecht [9a] is now director of operations for British Columbia, while Frank Wood [9b] is now business operations myanager for British Columbia. Hecht worked in the fire protection and life safety industry before joining FirstOnsite, which is headquartered in Toronto.

4a

9b FirstOnSite has 40 locations across Canada and a network of more than 20 partner affiliates. In B.C., FirstOnSite has locations in Vancouver, Victoria, Surrey, Abbotsford, Chilliwack and Fort St. John.

FirstOnSite provides restoration services to both commercial and residential properties after incidents such as wind storms, fires, flooding hail, vandalism, break-ins and vehicle crashes.

10

Toronto-based Kingsway Financial Services Inc., which used to own Jevco Insurance Company and York Fire & Casualty Insurance Company, intends to get out of the non-standard auto business. Kingsway entered into a letter of intent to sell its insurance underwriting firms,

4b including Mendota Insurance Company and Mendakota Insurance Company. Kingsway writes non-standard auto in several U.S. states, with most of its premiums coming from Florida, Texas and California. The sale was a “tough decision” that came after significant debate, stated Larry Swets, CEO of Kingsway since 2010. In insurance underwriting, Kingsway reported combined ratios of 106.1% in 2017, 106.8% in 2016 and 101.5% in 2015. Subject to regulatory approval, the sale of the non-standard auto business is expected to close in the third quarter of this year.

Kingsway also provides extended warranty coverage in the United States for equipment including vehicles and heating, ventilation and air conditioning equipment. In 2010, Kingsway sold Jevco to The Westaim Corp., which in turn sold Jevco in 2012 to Intact Financial Corp. In 2008, Kingsway sold York Fire & Casualty to Quebec City-based La Capitale General Insurance Inc.

July 2018 Canadian Underwriter

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GALLERY

Beautiful Banff was again the setting of the Annual Convention of the Insurance Brokers Association of Alberta, held May 6-9, 2018.

The event kicked off with a golf tournament and biker-themed cocktail reception hosted by Peace Hills Insurance. It continued with a rollicking keynote presentation by “The Wealthy Barber” David Chilton, before moving into a series of educational seminars and panel discussions, the President’s Gala dinner, and the closing night’s Hospitality Suite. More than 600 brokers and other insurance professional attended the conference, held at the Fairmont Banff Springs.

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Canadian Underwriter July 2018

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

continued on page 168 ...

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July 2018 Canadian Underwriter

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GALLERY ... continued from page 167

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Canadian Underwriter July 2018

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

Putting the pieces together.

Events and Seminars Calendar CIP Society Events and Seminars give you the opportunity to learn, to network, to catch up on industry developments and to advance your professional and career development.

CIP Society Seminars & Events

A Changing Workforce—Multi-City Tour

Webinar—Manufacturers & Wholesalers ................................................August 16 Webinar—Commercial Risk Assessment ................................................ August 29 Hamilton—Annual Volleyball Tournament ............................................. August 29 Kitchener—Assessing Commercial Risks............................................. September 6 London—Annual Golf Tournament ..................................................... September 7 Hamilton—The Connected Community............................................ September 11 Ottawa—Personal to Commercial Boot Camp ................................. September 17 Cobden—Cyber Liability: Exposures, Coverages and Emerging Trends ..September 28 Edmonton—Oil & Gas: Exploration, Production and Insurance ............ October 17 Webinar—Certificates of Insurance ........................................................ October 31

Vancouver ................................................................................................... October 3 Calgary ........................................................................................................ October 4 Edmonton ................................................................................................. October 16 Winnipeg .................................................................................................. October 17 Regina ....................................................................................................... October 18 Kitchener ...................................................................................................October 30 Ottawa ...................................................................................................... October 31 Montreal................................................................................................ November 15 Toronto .................................................................................................. November 19 Halifax ................................................................................................... November 21

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

Canada’s P&C industry was feeling particularly charitable at the 24th Annual Starlight Insurance Gala held on Saturday, May 12, 2018 at the Fairmont Royal York in Toronto. Attendees set a new record for granting 45 wishes to young Canadian children who live with serious illness or life-altering injuries. Valued at approximately $3,000 each, wishes create an opportunity for children to provide relief from the stress and boredom of hospitalization. Starlight grants wishes in four categories.

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Canadian Underwriter July 2018

Children can choose to meet their favourite celebrity; take a Canadian travel adventure; select an item they’d love to have; or have a dream experience, such as be a “ballerina” or a “fire fighter” for a day.

Elina Anker provided a moving personal testimony of how wishes can make a difference for children whose lives are consumed by frequent hospital visits. The Starlight Gala includes a silent auction in addition to a call for granting wishes. In total, the event raised $238,954. .