The Ontario Broker November 2014

NOVEMBER 2014

GEORGE McCARTER KNOWS THAT CHANGE CAN PROFIT BROKERS

“THE PROFIT ISSUE” 02 04 06 08 12 14 16 17 18

ASSOCIATION NEWS VIEWPOINT YBC UPDATE TECHNOLOGY UPDATE E&O CORNER 94TH ANNUAL CONVENTION HR UPDATE LEGAL MATTERS COMMUNITY VIEW

The official publication of the Insurance Brokers Association of Ontario (IBAO)

ASSOCIATION NEWS The Official Publication of the Insurance Brokers Association of Ontario (IBAO) Published by

Strength Through Creativity

Editor Angela Stelmakowich astelmakowich@canadianunderwriter.ca

416-510-6793 Senior Publisher Steve Wilson steve@canadianunderwriter.ca

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Account Manager Michael Wells mike@canadianunderwriter.ca

Account Manager Christine Giovis christine@canadianunderwriter.ca

Account Manager Elliot Ford eford@canadianunderwriter.ca

Art Direction Stephen Ferrie The Ontario Broker is published monthly by Canadian Underwriter magazine (www.canadianunderwriter.ca).

Canadian Underwriter’s Insurance Group of publications is part of Business Information Group (www.businessinformationgroup.ca), a subsidiary of Glacier Media Inc., a leading Canadian information company with interests in daily and community newspapers and business-to-business information services.

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The articles that appear in this publication represent the opinions of the authors and do not represent or embody any official position of, or statement by, IBAO; nor do they attempt to set forth definitive action standards or to provide legal advice.

Insurance Brokers Association of Ontario 1 Eglinton Avenue East, Suite 700 Toronto, Ontario M4P 3A1 Tel: (416) 488-7422 Fax: (416) 488-7526 Toll Free: (800) 268-8845 (888) ASK-IBAO www.ibao.org Annual subscription is $52 + tax.

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2

Kevin Warren Vice President, Operations IBRI Canada needs its companies to grow.

The insurance industry needs its insurance brokers to grow.

In the spirit of “The Profit Issue,” this month’s theme of The Ontario Broker magazine, we congratulate brokerages across the province that have proven themselves relevant and strive to grow through innovation, and for continuously developing a strong consumer base.

But profit and growth isn’t easy. It means new ideas, thinking outside the box and aligning yourselves with strong, innovative partners.

To quote from one of David Burkus’s books, The Myths of Creativity: “The world’s most common reaction to a new idea isn’t to beat a path to our door. It’s typically to beat down the idea or, perhaps just ignore it.” Burkus goes on to say: “Creative ideas, by their very nature,

November 2014 / THE ONTARIO BROKER

invite judgment.”

To Ontario brokers who are tackling the insurance world with a vision of something bigger, something more, we salute you.

The IBAO is your partner in driving collaborative solutions.

At the IBAO Convention last month in Ottawa, the broker-owned telematics solution was presented to the members in attendance. This is an example of creativity. We have aligned IBAO with one of those strong innovative partners in Quindell.

I congratulate the IBAO Board of Directors on its vision and forward thinking to deliver a solution to the membership that will bring value to those full voting members who embrace it.

One of the offers is ingenie, an insurance product priced and designed specifically for those aged 16 to 24.

It’s not just an insurance product; it’s an entire experience. It’s driver training and education.

It’s peace of mind for the parents. It’s a connection beyond an insurance policy.

The 16- to 24-year-old market in Ontario is currently underrepresented by insurance brokers, and underserved by the insurance industry in general.

Go where the growth is After Convention, most of the questions we received were about the IBAO rollout strategy for ingenie: 1. one beta brokerage began offering the ingenie product on October 17; 2. a group of 22 brokerages will be added to the beta group in November/

early December to test and perfect the following: a. the workflow, b. the technology, c. the marketing materials, and d. help IBAO define what queries need to be addressed with regard to broker education; 3. all principals of full voting member brokerages received an email from Randy Carroll November 4, inviting any brokerage to be an early-adopter/distributor of ingenie. These brokers will be scheduled for launch and be given access to the product, the education and the marketing materials as capacity for volume becomes available following beta.

As with any responsible roll-out of technology, particularly this very innovative ingenie model, the roll-out must be measured and controlled.

We are pleased with the interest we have received from our membership to be on the early-adopter list. If you did not receive this email, and would like to be an early-adopter, please email Nadia Sartor at nsartor@ibao.on.ca and ask to be put on the list.

Following the completion of the early-adopter segment, ingenie will be available to all full voting members — but only if you want to be involved.

The product does not lend itself to every brokerage business model.

But if you’re ready in the future, let us know.

Commercial lines growth The insurance broker community in Ontario has

also seen considerable growth in the commercial lines product space. The product availability is becoming more sophisticated on the insurer side, and many insurance brokers are shifting the weight of their book in response.

Another broker-owned telematics product is focused on commercial.

So how about offering a telematics product to your commercial clients?

We are pleased to reveal “Fleetadvisor.”

Fleetadvisor was designed and produced by IBRI using Quindell technology and is available exclusively to IBAO full voting members.

Presented at Convention, this exciting new product will, without a doubt, increase the value you bring to commercial clients. Installed in trucks and cars, it gives fleet managers access and control of fleet vehicle data at any time.

This commercial solution is a new way for you to foster customer loyalty and build engagement.

• capture driver and fleet scores to leverage rate discussions with insurance carriers; • put your brokerage in a position of a true fleet risk management advisor.

You and your clients can adopt this technology with or without insurer involvement; • approach a client with this tool as a value-add to their business, in addition to the traditional insurance coverage that they currently obtain from your business; • negotiate an agreement with an insurer and have the insurer write the business on a case-by-case basis in exchange for access to telematics data and ability to select the risks that use the most innovative risk management practices; • develop a market-wide commercial telematics program with an insurer.

I’d encourage any broker who has any interest in this program to contact me at kwarren@ibri.ca or 416.488.7422, x104.

equally as important as getting the product built, so energy has been infused behind these deliverables to support you in these respects.

As brokers are scheduled and brought on board for any of the offers, registration for education sessions will be established and marketing collateral provided.

The broker-owned telematics solution aside, cheers to all brokers who value growth and strive for profitability through creative thinking.

Creative ideas are all around us.

The opportunities are ripe for the picking.

The question is — are you ready to go out there and grab them?

Strength through creativity For all of the IBAO telematics offerings, marketing collateral and education sessions will be available.

Getting the product to market is

November 2014 / THE ONTARIO BROKER

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VIEWPOINT Stephan Bernatchez, C.I.B. FCIP President Insurance Brokers Association of Canada

Reaching the Peak Performance Peak performance in the brokerage world means a lot of things. When linked to insurance sales and producer development, peak performance means Elite Force – Best Practices Producer Academy.

Selling is a difficult skill, especially when selling intangible products that no one really hopes they will ever need, but everyone knows the importance of having, just in case.

Producer Academy, IBAC’s premier sales training program presented on behalf of our member associations, recognizes this somewhat harsh reality and meets it head-on with a proven sales process and results that work for any brokerage — large or small, commercial or personal lines, rural or urban.

We’re fortunate to have access, right here in Canada, to the most comprehensive insurance sales training program available, teaching the full sales process — from goal setting and

prospecting, to landing new accounts and securing renewals.

The content is built around three key principles — essentially, character traits that producers must embrace as a way of life for them to be successful: discipline, persistence and consistency.

All of this valuable learning is structured around a 12-day classroom format, presented as four, three-day sessions held each quarter in Toronto.

The content is built around three key principles — essentially, character traits that producers must embrace as a way of life for them to be successful: discipline, persistence and consistency.

Significant gains, substantial benefits

more and more brokers and brokerages are learning first-hand about its benefits.

For Sean Murray of WCL Bauld General Insurance in Bedford, Nova Scotia, Producer Academy “truly differentiates itself from other sales programs in that it’s specifically tailored for insurance production.

Producer Academy also provides a framework that helps you to develop the tools and best practices essential to becoming a successful producer. I have much faith in the program and would recommend it to anyone serious about taking their career to the next level.”

Adds Scott Bryson of Bryson & Associates in Ajax, Ontario, “Producer Academy taught me that in order to be a great producer, you need to develop a good working relationship with your account representative.

The term ‘producer’ basically means business that your company would not have written if you were not out generating new leads. We all get caught up in our clients’ needs and we lose focus on new business. We can actually give better service to our clients if we let our account managers handle our accounts. As a producer, I can then go and personally deliver the documents to the client in order to build that business/personal relationship with them. As our facilitator Glenn White would say, ‘Friends do not leave friends.’”

The next offering of Elite Force – Best Practices Producer Academy begins March 31, 2015 in Toronto.

I invite you to attend the program and experience first-hand how you can reach your own peak performance in insurance sales.

There is much to be gained from the program. Brokerages benefit in many ways, perhaps the most important way being increased commissions, which, when factored in over time, mean that book value could increase significantly over the initial tuition investment — an investment that is substantial and well worth it when you consider the fact that producers come away from the program more motivated and focused on getting real results from their sales efforts.

It’s hard to put a price on the value of having a sales force that is completely committed to building the business and ensuring its long-term success. This last point is critical since one of the key factors in perpetuating the broker channel is having strong, capable producers to help keep your brokerage business competitive and going well into the future.

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YBC UPDATE Dave Elliott Chair YBC

Business 101: Profit = Revenues – Expenses When I think of profit, I’m reminded of a story of an Indian jewelry store in Arizona.

I first came across this story while reading Robert Caldini’s Influence - the Psychology of Persuasion. Right there, in the first chapter on the first page, Caldini describes the inability of a jewelry store owner to sell some very well-priced turquoise jewelry.

The owner has tried everything from various display locations to telling her staff to push the wares — yet nothing has worked. Before leaving for a buying trip, she scribbles a note: Everything in the display case, price x 1/2.

Upon her return a few days later, the owner is surprised to find that every last piece of the jewelry has been sold.

When she asks how this happened, the employee advises that she misread the 1/2 as 2. The employee effectively sold the entire lot for twice its original price.

If this doesn’t scream profit, I don’t know what does.

Nothing is more effective at increasing value and reducing expenses than a motivated, knowledgeable, empowered staff. An educated staff with in-depth knowledge of available products will be able to demonstrate to prospective clients the value of any additional coverages.

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November 2014 / THE ONTARIO BROKER

Show value to increase your revenue As an insurance broker with no control over the price of policies, you may think we are in a slightly different position than the jewelry store owner — not so. The turquoise jewelry did not sell because the price doubled; it sold because the higher price gave the illusion of higher value.

As brokers, we need to continue to educate the consumer about the value of purchasing through our channel.

Nobody wants to buy an insurance policy, so the value to consumers relates to security that they will be protected should something go wrong.

The broker channel is the only channel that offers an insurance consultant who not only explains and suggests coverage, but also surveys markets to find a competitive price and acts as an advocate to ensure that the consumer is treated fairly in a claim.

Though we can’t control prices, we do control the value of our product.

Don’t focus on selling a policy; focus on showing your value. If you increase your value, you’ll increase your sales and, thus, increase your revenue.

Invest in tech to enhance customer experience and reduce expenses Promoting broker value is useless if consumers have a difficult time transacting business with you.

Investing in the proper technology will enhance the customer experience, thereby making it easier to do business with you while also reducing expenses by streamlining broker workflow.

We’re lucky that we are in a time where there are many cheap technology options available that can enhance both the customer experience and the efficiency of our workflows.

E-signature is a perfect example of this. It allows clients to sign documents anywhere, instantly, by smartphone or computer. It also reduces broker expenses related to printing and mailing, as well as the time spent following up for signatures.

I have never been more excited to be a broker: technology is cheap, abundant and just waiting for us to embrace it.

Though we can’t control prices, we do control the value of our product. Don’t focus on selling a policy; focus on showing your value. If you increase your value, you’ll increase your sales and, thus, increase your revenue.

Invest in your people Nothing is more effective at increasing value and reducing expenses than a motivated, knowledgeable, empowered staff. An educated staff with in-depth knowledge of available products will be able to demonstrate to prospective clients the value of any additional coverages.

A knowledgeable staff will also be able to quickly navigate the subtle differences among companies to ensure that the customer is matched with the best company for his or her specific situation — all while completing work accurately and efficiently, thus reducing expenses.

Finally, if staff members are empowered, they will be able to create a customer experience that surpasses any direct writer.

Empowerment can take many forms: giving staff authority to pay a parking ticket received by a valued client while in to pay his or her premium; sending a small thank-you to a client who refers another; or even taking the time off to participate in local organizations.

I would be remiss if I didn’t mention the benefits of having your young brokers involved in YBC and the YBC Conference, which will not only motivate them by speaking with like-minded individuals, but also increase their knowledge by attending education sessions that are specifically geared towards them.

So what is Dave’s three-step rule to profit? Promote your value, enhance your customer experience and focus on workflow efficiencies to reduce expenses.

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TECHNOLOGY UPDATE Philomena Comerford President & CEO Baird MacGregor Insurance Brokers LP

Uber Technology Does Not Trump the Law Society’s romance with transportation network apps comes with serious caveats. This is certainly the case with Uber, Lyft and other similar underground taxi services booked through online apps.

While temptingly convenient to the consumer — along with the drivers enrolled in these networks looking

to earn a little extra cash — both the passenger and the vehicle owner are exposed to significant risks. Typically, these drivers are not municipally licensed, using personal vehicles to ferry customers who are generally unaware that the network’s vehicles are not insured properly for this purpose.

The Ontario Application for Automobile Insurance – Owner’s Form (OAP 1) requires the applicant to answer an explicit question: Will the described automobile… be used to carry passengers for compensation or hire? If the answer is “yes,” the broker is then obliged to inform any prospective insurer, and if that insurer is agreeable, to attach a Permission to Carry Paying Passengers endorsement (OPCF 6A).

The second problem the broker faces — if the applicant’s vehicle is being used in a transportation network — is that driver(s) would not normally hold the requisite taxi licence to operate the

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vehicle as a taxi, and by insuring the vehicle as a taxi, this flouts the public vehicle municipal licensing bylaws.

If the auto policyholder fails to disclose that the vehicle will be used as a taxi, either deliberately or through ignorance of the implications, onerous penalties are described in detail under the Declaration of Applicant section of the application.

In the absence of a 6A endorsement, and if a claim occurs while the vehicle is being used as a taxi, the policy’s exclusionary language comes into play.

This lesson was learned the hard way south of the border as illustrated in the NBC Bay Area Investigative Unit’s April 24, 2014 coverage of uninsured Uber claims in the San Francisco area.

“Uber’s policies can leave drivers and passengers in the lurch if there are accidents. And despite administering background checks, Uber still employs drivers with criminal records that include burglary, domestic assault and drug trafficking.”

Uber describes itself as a technology company — not a transportation company — thereby sidestepping any responsibility for the quality of the driver, fitness of the vehicle, driver training and municipal regulatory compliance.

Thoroughness of background checks is a concern. Consumers who use this technology are at risk because of the questionable automobile insurance coverage and the lack of municipal oversight, particularly with respect to the quality of the criminal background checks.

Networks say they carry umbrella and general liability coverage, but if the primary auto policy becomes invalid, even non-owned automobile liability coverage would not meet the Ministry of Transportation financial responsibility requirements, and any undisclosed operation of a vehicle as a taxi is tantamount to driving without insurance.

Worst case scenario? The failure to disclose a vehicle’s use as a taxi, could result in a voiding of the auto policy ab initio. Brokers would be well-advised to inform customers of the risks associated with these networks.

George McCarter, head of Pearson Dunn Insurance, believes brokers can profit if they look forward, prepare and embrace the change that is now unfolding in the insurance industry. BY ANGELA STELMAKOWICH

SEE CHANGE With the rapid pace of change in the insurance industry, brokers would do well to recognize that what once was will not be in the future.

But George McCarter, president and chief executive officer of Pearson Dunn Insurance Inc., suggests that brokers should not view change with fear or trepidation, but rather as an opportunity to strengthen their positioning.

It is critically important that brokers heed changing customer dynamics and stay current with their capacities and capabilities in the digital, electronic space, George recommends. As well, brokers need to capitalize on the very traits that differentiate them from their competitors.

No longer will a one-size-fits-all model do. Customizing an experience to the customer’s specific wants and needs is clearly the way forward. “As

brokers, we need to understand that we’ve got to deliver a customer experience that’s based on each individual because in today’s society, we are all becoming more and more accustomed to getting things the way we want it, the way we like it,” George says.

Focusing on delivering an individualized experience each time there is an interaction with a customer will be what differentiates the independent broker, he contends. As such, brokers will need to adapt to the digital space.

“If (customers) want to communicate through a chat line, if they want to text us, if they want to e-mail us, if they want to come see us, if they want us to come see them — we need to be that flexible and we need to have the technology capabilities to communicate efficiently and quickly,” he says.

That means anticipating what may

develop. “I think we are going to have to prepare for the changes and products that we will be delivering.”

With that in mind, Pearson Dunn Insurance was an early adapter of the IBAO/ingenie product focusing on young drivers. “We’re going to have an opportunity to attract a customer — that 18- to 25-year-old age group — where right now, the independent broker is getting less than 10% of the market share,” he explains.

Interacting with younger customers early on affords an opportunity to “round out the account, develop the relationship and have a long-term customer for many years to come.”

Measures are also being taken to help the brokerage comfortably play as personal and commercial lines change.

With regard to the former, George says the idea is to round out, for example, a

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Photograph: Patrick Thompson

homeowner’s policy to create a suite of products to match a customer’s needs.

That way, if there is a reduction in one part of the suite, the average spend will at least be maintained.

On the commercial side, George expects that telematics will “be a great tool” for making fleets safer by using data collected from monitoring specific aspects like maintenance, fuel mileage and driver behaviour.

Also on the commercial side, George envisions opportunities around integrated technology attached to such things as alarm, sprinkler and refrigeration systems. “You can bet insurance companies will look at that,” he says, wanting to underwrite the risk and provide discounts and credits when clients take steps to reduce exposure.

“We’re going to adapt in the commercial space as much as we’re going to adapt in the personal insurance space,” George says, in a bid “to help clients protect their people, their property and their profitability.”

The brokerage is also working to enhance customer interaction by agematching front-line staff and clients, and offering a touch point via newsletters to educate customers about what they can do to protect their property.

Need for buy-in George is high on the possibilities for brokers, envisioning a profitable future for those willing to evolve and adapt to the new circumstances.

Still, while a number of brokers are absolutely committed and focused on the evolution of the industry, he says, many others are not. “I think there are many, many brokers sitting on the fence and I’m not so sure that’s a safe place to be. There may have been a time when you could have been a very careful follower of change, but change is now coming so fast that you may be left behind,” he says.

It is not a matter of doom and gloom, George emphasizes, but brokers must acknowledge that now is the time to respond. Not that long ago, for example, people thought nothing of going to the local Blockbuster store to rent a video. Then Netflix came along.

“It didn’t take Netflix very long to totally eliminate and wipe out what was a very successful business and business model that doesn’t exist today,” says George. If brokers evolve and change, “we’re going to continue to be relevant in the marketplace,” he predicts, adding that, in fact, he thinks membership can continue to grow.

George knows a little something about both learning and growing.

Having started in the industry “at the bottom” after completing university — with just a table (not a desk) a phonebook for a prospecting resource and a telephone — he began working his way up. Within a week of receiving his licence, he enrolled in the CAIB program, becoming one of its firstever graduates.

George quickly gravitated to the commercial space and after building up his portfolio, became a shareholder.

He then purchased another firm, later sold that interest and bought Pearson Dunn Insurance seven years ago.

Though George still gets in front of the brokerage’s top commercial clients, he spends much of his time “building insurance relations, client relationships and trying to be the motivation and somewhat of a cheerleader around our office.” No doubt that enthusiasm will prove useful as changes unfold.

“I’m looking at what’s going on as an opportunity to create new ideas, create new processes, create a culture that differentiates us from our competitors,” he says. “There’s still a very bright future ahead for the independent broker network as long as we’re evolving.”

November 2014 / THE ONTARIO BROKER

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E&O CORNER Hugh Fardy Senior Vice President The CG&B Group Inc.

Points of Interest in Brokers E&O Recently, I gave some presentations on some of the current issues of note in brokers errors & omissions.

Perhaps, it is a good time to do the same in print.

There is plenty to go over, with items in my presentation including automobile and accident benefits, property insurance, new products, fraud and new modern tools.

1

Looking at the automobile product, a couple of points are front and centre. The change in Ontario’s accident benefits in 2010 was not a short-term issue — brokers must have an established renewal process in place to ensure client selections are current and informed.

In fact, RIBO is including this in its audit process. As such, we cannot rely on another broker’s work for those new accounts that we see.

It is anticipated that claims directly

related to this issue will continue to increase.

2

Property sees two issues of note: verification of insurance to value, and the changes taking place in the coverage provided.

Brokers must advise their clients on selecting proper values and keep the client current with respect to how coverage has changed. In particular, the changes in water damage must be made clear to customers.

3

New products are coming along all the time. Some are really not so new, such as cyber. However, some products are truly new and developing, including green property coverage.

Brokers need to keep pace with the coverages available to their clients and be ready to suggest and advise on the coverage.

Another “newer” feature is the coverage extension that seems to provide the coverage instead of a client buying the dedicated full coverage.

In many cases, clients mistakenly feel that they have cyber cover as an extension of their policies (D&O or other) and, as such, don’t need to make a dedicated purchase. Often, though, the extension has limitations and won’t provide all the cover that is required.

4

Insurance companies are committing a lot of time and effort in the fight against fraud. Brokers also

Brokers must advise their clients on selecting proper values and keep the client current with respect to how coverage has changed. In particular, the changes in water damage must be made clear to customers. need to do their part. Fraud issues can possibly result in potential E&O situations for brokers.

While efficiency makes things such as getting copies of documents more difficult, brokers need to make an effort. We can have a script for conversations that will raise red flags, including previous BI claims or a different insurer every year.

Gathering less information can lead to more potential issues, so it is important to get all the information that you can. Be sure to confirm who you speak with on the phone is the insured.

We can also consider newer tools, including call recording. However, brokers must participate with an eye to doing so cautiously.

Notes or comments taken out of context can appear other than they are, so we should always consult with our errors and omissions provider before producing documentation or commentary for others.

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Last, there are all kinds of new modern tools available to brokers — everything from e-signature to social media to the Internet sale.

These are all tools with which brokers must stay current and make use of in today’s environment.

That said, in a rush to use, we occasionally see some difficulties.

It is important that brokers still do their jobs as professional advisors dealing with clients. Brokers need to have a good understanding of any new tool before beginning to use it.

That will make the use not only safer, but also more effective.

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94TH ANNUAL CONVENTION

Exhibit Hall ribbon-cutting ceremony to launch the big event. Chris Floyd, IBAO President, is front and centre to welcome attendees.

An IBAO broker member enjoys education offerings at the 94th Annual Convention.

2015 IBAO President Michael Brattman delivers his inaugural speech during the Industry Luncheon during Convention.

Jeff Gatcke, Lola Thake, John Spence and Doug Barnett enjoying the Oktoberfest-themed Opening Night Party.

IBAO staffer Nadia Sartor shows off the fresh-looking IBAO booth beautifully.

Our IBRI friends, Gabriela Bejarano and Kevin Warren, at their booth in the Exhibit Hall.

14 November 2014 / THE ONTARIO BROKER

94TH ANNUAL CONVENTION

Evan Solomon once again plays host for the CEO Panel, featuring Greg Somerville, Aviva Canada; Karen Gavan, Economical Insurance; Jean-Francois Blais, Intact; Bob Tisdale, Pembridge Insurance; and Brigid Murphy, Travelers Canada.

The hilarious James Cunningham with 2015 IBAO President Michael Brattman, taking in some laughs at the Awards Banquet and Ball.

The lovely Brenda Duffy, Alanna Taylor and Monica Dale.

2014 IBAO President Chris Floyd offers his views during the Members’ Meeting.

The IBAO Executive Board and CEO panelists: Traci Boland, Evan Solomon, Chris Floyd, Greg Somerville, Randy Carroll, Wendy DaSilva, Karen Gavan, Michael Brattman, Jean-Francois Blais, Doug Heaman, Debbie Thompson, Bob Tisdale and Brigid Murphy.

The IBAO Executive Board in fine spirits: Chris Floyd, Debbie Thompson, Michael Brattman, Traci Boland, Doug Heaman and Randy Carroll.

November 2014 / THE ONTARIO BROKER

15

HR UPDATE Alex Gallacher Managing Director ENGAGE HR

Updating Compensation Constructs in Brokerages Compensation in brokerages is changing. This is because it must for the independent brokerage channel to continue to play its vital role in the communities of Ontario.

Let me explain. It used to be — and still is in some brokerages — that the producers brought in most, if not all, of the new clients. Once the producer landed the client, he or she would ensure the relationship was maintained moving forward, and that renewals took place on an annual basis.

A diligent producer would maintain contact with the client fairly regularly, building the relationship, but also keeping an eye out for new risks, additional sales opportunities and referrals.

For doing so, the producer would typically receive a new business commission, usually in the vicinity of

16 November 2014 / THE ONTARIO BROKER

50% or so, and in exceptional cases, some portion of ownership of the book as well.

Renewal commissions were also generous, often in the 40% to 50% range.

Fast forward to 2014, and many of these arrangements continue on.

However, there’s a problem.

The world has changed. More specifically, the competition has changed, meaning so have the financial dynamics of running an independent brokerage that will be able to effectively compete moving forward.

Although this is covered in much more detail in IBAO’s Beyond Best in Class (BBiC) Program, briefly here are some of the reasons why: • exceptionally well-armed competitors in the marketplace will do it for less — i.e. bank-owned insurers with substantially lower compensation structures, captive agents who don’t have to navigate the hassle of choice, and directs, which typically prefer to spend on marketing rather than commissions; • the cost of running a brokerage is — or should be — going up to meet increasingly sophisticated consumer needs, including the desire for anywhere, anytime insurance, instant response requirements and the need for online access; • meeting insurer requirements is requiring more effort, and client engagement versus satisfaction is the new norm; and

The cost of running a brokerage is — or should be — going up to meet increasingly sophisticated consumer needs, including the desire for anywhere, anytime insurance, instant response requirements and the need for online access.

• requirements for a differentiated brand — supported by a strong culture that resonates with clients — are increasing, requiring a significant amount of time, effort and investment to create and maintain.

Starved for investments Against this backdrop, something has had to give. And what is giving are what we call “legacy compensation constructs.”

It is not uncommon for a legacy producer to earn 80% or more of his or her income through renewals, rather than through generating actual new business. This has meant that new business has largely stagnated, and producers are being paid fairly well to simply maintain their books.

The result has been that renewal commissions in a significant number of brokerages have eaten up a significant piece of the compensation pie, effectively starving the rest of the brokerage from much-needed investments.

This must change in order to fund those much-needed investments, and to get everyone in the brokerage into the growth game. It is only this growth that will continue to support the relevance of independent brokerages in Ontario.

To that end, if your brokerage has not, or did not participate in the IBAO/ENGAGE HR™ 2014 Brokerage Compensation Survey, please contact Diane Aires at diane@engagehr.com, or 905.306.8111, Ext. 320 to do so now.

Better data means better results for everyone, and this is one area you can’t afford not to get right with your people.

LEGAL MATTERS Ian H. Gold Founding Partner Thomas Gold Pettingill LLP

Declaring No Coverage A recent decision by Ontario’s Superior Court of Justice highlights the importance of accurately describing business operations on the declarations page.

An insured’s business is often described on the declarations page of a commercial general liability (CGL) policy. However, there is some uncertainty as to whether an insurer can rely on this description to deny a claim that is outside of the scope of what it understood to be the business’ operations.

The recent Ontario Superior Court decision, Intact Insurance Co. v. Virdi, 2014 ONSC 2322, suggests that the description on the declaration page defines the scope of coverage under the policy.

In the decision, Harjit Virdi sought coverage for Multilamps, a business that imports and manufactures shades. In applying for the policy, Virdi described the business operations as “manufacturing and importing lamp shades.”

Intact inspected the business property and noted Multilamps was primarily a warehouse for shades that would be shipped to large retail stores. Intact determined that 85% of Multilamps’ business was importing shades from China and 15% was manufacturing.

However, Virdi had a second business on the same property, AIM, which sold heavy lathes to the automotive industry. This business was not mentioned in the application or on the declaration page.

During the course of a delivery of lathes to the property, a lathe fell from a forklift truck and landed on an individual. It was not clear whether

the employees involved in the incident were employed by Multilamps or

by AIM. Nevertheless, the injured individual commenced an action and named Multilamps as a defendant.

Multilamps requested that Intact provide it with a defence, arguing that there was a “mere possibility” that the claim fell within the scope of the policy.

Intact, on the other hand, argued that it had no duty to defend the action, as the description of operations on the declarations page did not refer to the lathe business.

The Ontario Superior Court sided with Intact, finding that there was no possibility that the claim would fall within the scope of the CGL because of the description of operations on the declarations page: The declaration that includes Multilamps’ stated business operations at the property forms an integral part of the policy and is highly relevant to whether or not there is

coverage under the policy.

The court’s view was that in order for there to be a duty to defend, there must be a “mere possibility” that the claim relates to the business operations described on the declarations page.

Analysis based on declarations page It is noteworthy that the court’s analysis was not based on any of the conditions or exclusions in the policy, but rather based on a separate document: the declarations page.

The Intact v. Virdi case highlights the importance of ensuring that full coverage is obtained for all of an insured’s business operations.

A declarations page often includes only a few sentences to describe a business’ operations, which can make it challenging to fully describe the business. Based on this case, it is important that brokers attempt to do so.

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www.InsuranceMarketer.com November 2014 / THE ONTARIO BROKER

17

COMMUNITY VIEW SAFE AND SOUND Haldimand Insurance Brokers and the IBAO donated 50 Bipper blankets to the Caledonia Fire Department, which is celebrating 150 years of service. Thank you to our local heroes for all that they do to keep our communities safe and sound.

Left to right: Dale Willson, district chief of the Caledonia Fire Department; Henry Vandoorn, firefighter; Kayla Sullivan, firefighter; Heather Hibbs of Haldimand Insurance Brokers; and Greg Shapton, firefighter

COMFORT AND CARE Understanding the value of comfort, the Insurance Protection Group has donated blankets to fire departments in Havelock-Belmont-Methuen, Asphodel-Norwood and Trent Hills to be used at fire and accident scenes. The departments each received 35 blankets, courtesy of IBAO, to offer a bit of comfort and to ease stress during times of need.

Left to right: Angela Yarrow, CAIB, account manager for Insurance Protection Group (IPG); Leslie Campbell, CAIB (Hons), account manager for IPG; Dwayne Day, president of IPG; Doug Irvine, a representative for Trent Hills Fire Department; Denise Moring, CAIB, account executive for IPG; Darryl Payne, fire chief, representing AsphodelNorwood Fire Department; Heather Chandler, representing Havelock-Belmont-Methuen Fire Department; and Lorraine Plumbe, RIBO, account manager for IPG.

18 November 2014 / THE ONTARIO BROKER

Our apologies An incorrect brokerage name was listed in the 2014-2015 RIBO Election page of the October 2014 issue. George Longo is with Towerhill Insurance Brokers Inc. We apologize for the error.

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AvivaPartner.ca Home | Auto | Leisure & Lifestyle | Business | Group | Surety Aviva and the Aviva logo are trademarks used under license by the licensor. †For further terms and conditions, visit AvivaCanada.com/claimsguarantee for details

T THANK YOU

would like to express recognition to those who bring our programs to life

To Our 2014 Facilitators

THANK YOU

Carol Andruszko, CAIB Lyall Bell, CIP Monica Cain, CIP Mark Campbell, CAIB Michael Carberry, BA, CAIB Michael Chan Susan Cotter, CAIB Chris Coniglio, BA, CAIB, CIP Crispin Daniels, CAIB, CPIB, CCIB Peter DaSilva, CAIB, CIP, FCIP Jenny Desroches, CAIB Ann An n DiBello, CAIB T a ya an a Diel, CRM, CAIB, CIP Tanya Hugh Fardy D kF l Derek Faulconer, BA, CAN, CAIB Alex Gallacher, MBA, CHRP, SHRP, ICD.D Paul Green, BA, FCIP Darrell Keezer Wendy Kindiak, CAIB, CIP Mario Laraia, CAIB, CPIB Debbie Levert Ann McDermott, CAIB Pamela McNichol-Smith, BA, CAIB Michael McQuaid, CAIB JoAnne Mitchell, CIP Bill Morris, BA Linda Papadopoulos, AIIC, CAIB, CCIB Gary Phelps Susan Rho Rhodes, CAIB, CIP R oss os s Ro R o Ross Robertson, CAIB B Beverly Russell Jeff Skelton, AIIC, CAIB John Spence Christiana Unruh, CAIB Kelly Waddell, CAIB Wendy Watson, AIIC, CAIB Miriam Weerasooriya, BBA, CRM, FCIP Glenn White, CAIB, CSP, AIPC Jennifer Willard, CIP A Ann Williamson, CAIB Bry y Yetman, CIP, CRM Bryan

THANK YOU THANK YOU

THANK YOU

THANK YOU

THANK YOU THANK YOU

THANK YOU

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THANK YOU

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