WWW.INSURANCEBUSINESS.CA ISSUE 1.1 | $6.95
ON BUSINESS How to turn your business into an empire the Virgin way
HUGHES’S HUB CEO: THE BEST IS YET TO COME
IT’S SINK OR SWIM CANADA NEEDS A REAL FLOOD POLICY
WIRED UP TO WIN TURN YOUR WEBSITE INTO A WINNER
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READ ALL ABOUT IT 2 | Editor’s Letter Insurance Business magazine becomes a reality 4 | The Big Two Looking at the tragedies and the triumphs in insurance news 5 | Leaders, Rising Stars Shining a light on some of the industry’s best 6 | Good News/Bad News The Happy Client and Fairfax to the rescue 8 | Survey Says Looking for the Top 30 Broker Elites 14 | The most overlooked opportunity Trade Credit insurance – a largely overlooked market 18 | You ain’t seen nothin’ yet An exclusive interview with HUB head Martin Hughes
MARKETING 24 | Wired up to win What brokers are doing right, and doing wrong, with their websites 28 | It’s sink or swim Canada needs a real flood policy – now
32 | The future is now The technology exists today, so what’s the hold up? 36 | Make more in 10 easy steps These tips will lead you to revenue growth, even in a mature market 40 | Life, liberty... and less tax Another way to sell clients on an essential product 42 | Statistics The view from the top 44 | Standing in their shoes Understanding your potential client’s world view 48 | Can we be all things to all people? Being all things to all people has a downside
LEGALLY SPEAKING 50 | Court clears up claims confusion New ruling on time limits for all-risk claims deserves a closer look
INDUSTRY NEWS 52 | Taking the reins Two vice presidents share their vision of where insurance is headed 54 | Manulife’s Master Plan Since the purchase of Benesure, the broker channel has been buzzing with speculation
BUSINESS STRATEGY 56 | Branding Everything we do and say impacts our personal brand 59 | Why manners matter Business etiquette is still a vital consideration for 21st-century brokers 62 | Favourite things Traci Boland of Ontario West Insurance Brokers shares her favourite things 64 | Events Moore-McLean Insurance Group helps raise money for diabetes research
Branson on Business How to turn your business into an empire, the Branson way
OCTOBER 2013 | 1
READ ALL ABOUT IT C
COPY & FEATURES SENIOR EDITOR Vernon Clement Jones SENIOR WRITER Donald Horne CONTRIBUTORS Laura Kupcis, Michael Neaylon, Roger Ellerton, David Porter, Mark Mason, Nikki Heald, Chris Karram COPY EDITOR Sophie Nicholls
ART & PRODUCTION GRAPHIC DESIGNER Joenel Salvador SENIOR DESIGNER Alicia Chin
SALES & MARKETING NATIONAL ACCOUNT MANAGER Jesse Rumm ASSOCIATE PUBLISHER Trevor Biggs GENERAL MANAGER SALES John Mackenzie MARKETING AND COMMUNICATIONS Claudine Ting PROJECT COORDINATOR Jessica Duce
CORPORATE PRESIDENT & CEO Tim Duce OFFICE/TRAFFIC MANAGER Marni Parker EVENTS AND CONFERENCE MANAGER Chris Davis
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It’s been a long journey, but Insurance Business magazine has just pulled into the station. Well, given the flooding that hit the industry this year, it may be better to say that we’ve just pulled into port. Regardless, what better way to get things started than on the strength of an exclusive interview with the ultimate businessman — Sir Richard Branson. He gets candid about the secrets to his success and what our readers need to do to chart a similar course (P. 10). Even before that interview, it was the success of Insurance Business online and the support we’ve received from the industry that got us to thinking: why not expand the experience to a magazine format? There are a lot of stories to be told. Certainly, Mother Nature’s wrath has once again reopened the debate on flood insurance and the blockbuster buyout of HUB International by Hellman & Friedman during the summer also got tongues wagging. So, an interview with HUB Chairman and CEO Martin Hughes was a natural jumping-off point for this inaugural issue of IB. The industry vet’s wealth of knowledge and experience are here for brokers and agents to assimilate. Start on page 19. No less useful are the observations of Sharon Ludlow, CEO of Swiss Re. She pulls no punches in addressing the industry’s flood preparedness, or lack thereof (P. 28). In all fairness, torrential storms in Southern Alberta and downtown Toronto have helped make her case. Even more certain are the exciting times ahead for us at KMI Publishing and for the insurance industry as a whole. We look forward to the journey that awaits us and to helping you navigate any rough waters along the way. Cheers, Vernon Clement Jones Senior Editor
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2 | OCTOBER 2013
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NEWS / ROUNDUP
The biggest headlines from insurancebusiness.ca INDUSTRY REACTS TO ACKERMANN STEPPING DOWN The resignation of Zurich I n s u ra n c e G ro u p Chairman Josef Ackermann, shocked the world – and elicited a personal story of tragedy from one Canadian industry consultant. InsuranceBusiness online interviewed Tim Herron, a governance consultant with Boardroom Metrics in Toronto, who offered guidance on the subject from not only a professional level, but a personal one. For Herron, the need to balance the emotional turmoil of losing a colleague and friend while maintaining the smooth flow of business was a difficult one. “How did it affect me from an operational standpoint? We didn’t see it coming from this individual when we were in the brokering business,” he told InsuranceBusiness online. “It’s been about 20 years, and I remember the man I worked with in 1987 compared to when he took his life in October of 1998 – he was a totally different person. I enjoyed being around this individual,
TORONTO AND CALGARY LOSSES COMBINED:
$490 million and counting
but there was something definitely different in his makeup when he took his own life.” Ackermann’s resignation came days after Pierre Wauthier, the insurance giant’s chief financial officer, was found dead at his home south of Zurich, Switzerland – in what has been determined to be a suicide.
PROVINCIAL BROKERS’ FLOOD MEETING GOES NATIONAL What started as a property insurance forum for members of Alberta’s insurance association ballooned to a national summit – a meeting of government and industry players, the likes of which the provincial industry had never seen before. It tackled the most controversial of all topics – the possibility of overland flood insurance in Canada, after two flooding events in Calgary and Toronto cost Canada’s largest insurer an estimated $490 million, with an industry-wide estimate of losses not yet complete. The ground-breaking conversation, held in late September, acknowledged the elephant in the room – that Canada’s property coverage is in desperate need of an overhaul. “Thirty-five years ago the three biggest costs were auto damage, fire damage, and property theft. These risks have declined,” Paul Kovacs, executive director of the Institute for Catastrophic Loss Reduction, told the Insurance Brokers Association of Alberta Property Insurance Forum delegates. “Sewer back up, wildfire, wind, hail, and other natural disasters have risen. In the last decade, we pay five times more for weather-related losses than for the other perils.”
“Obviously, we hope that you don’t go through suicides as a business,” says Herron. “I’ve gone through both. That is what sort of made me sit down and think about it when the suicide happened at Zurich Insurance; it made me look back at what happened all those years ago at the insurance brokerage I was working.”
4 | OCTOBER 2013
“This will be a ground-breaking conversation,” says the president-elect of the Insurance Brokers Association of Alberta, Gord Cowan. “I can’t remember the last time we’ve had all these high-level people in the same room. We’re getting the highest level of participation from insurance companies from across Canada and the home builders’ associations and government.”
LEADERS, RISING STARS
The Chartered Insurance Professionals’ Society has announced its five national leadership award honourees, shining a spotlight on the industry’s current leaders and rising stars Among the five was respected industry veteran Ginny Bannerman, vice president of Finance West, Intact Insurance in Calgary, who graciously accepted one of the two Established Leader honours, along with James Cameron, president of Cameron & Associates Insurance Consultants of Toronto, renowned for his years of education prowess. Those making the national stage were Emerging Leaders Anne-Marie Deschenes, a marketer with Aon Risk Solutions in Montreal, Lindsay Mackenzie, a commercial lines manager of Intact Insurance of Mississauga and Tammie Norn, CEO of ProFormance Group Inc. in Pickering.
“You do what you do, never really expecting people to take note of it. Being honoured like this – it puts a smile on your face; you feel like you are really making a difference. It is a great feeling.” “I’ve never thought of myself as a woman in the industry. I’ve just thought of myself as an insurance broker, doing the best I can. I think the key is to just get out there and do the best you can.”
“I’ve worked on both sides of the coin, for the reinsurer accepting the claim and as the insurer presenting the claims. Most have a total reinsurance background or a total insurance background. Not many with a combination of both.” “My efforts have been focused on finding solutions for brokers and supporting my team to ensure they can offer a high level of service to brokers and their peers. Looking forward, I remain committed to my personal and professional growth and giving back to the community.” “I’m really involved in LARAQ, an association for the young people. We need to get more youth involved in insurance. The young people should know more about the industry; it is a beautiful industry, and we need the young people to help it grow.” OCTOBER 2013 | 5
NEWS / EXTENDED COVERAGE
You’ve heard the news, but who’s really come out on top of the headline? Do you owe RSA a ‘thank you’? Sometimes it’s frontpage news and has the power to catapult the industry’s customer service into the spotlight.
HOWARD LEVITT AND HIS FLOODED FERRARI A bad day for a Toronto lawyer became a good one for the reputation of insurers. Now a poster boy for Toronto’s flooded downtown – Howard Levitt and his abandoned metallic-blue Ferrari – was made whole when his insurer settled his claim. Howard Levitt’s 2010 Ferrari California became a Internet sensation during the July 8 storm that hit the city’s downtown core, with pictures of it stuck in the rising waters of an underpass. Levitt had been forced to abandon his car after driving into the sewage-filled waters on his way to the airport. “The insurer and the person I dealt with there, Jennifer Hare (RSA Group), were absolutely a delight,” says Levitt. “She worked late in the office in the days after the flood to deal with her insured; she was friendly, reassuring, personal and accommodating.”
6 | OCTOBER 2013
WAS INSURANCE THE KEY TO TOM CLANCY’S SUCCESS? Fans are mourning 66-year-old Tom Clancy’s death, but few know what the best-selling author did before he took up a pen. Before he achieved international fame as a celebrated writer of Cold War and other military-based fiction, Clancy worked at a Baltimore-area independent insurance agency. Clancy joined the firm, which was operated by his wife’s grandfather, after graduating from Loyola University in 1969. Though he excelled as an independent agent and even went on to run the company, Clancy couldn’t help spending his weekends with that pen in hand. In a 1985 article on the success of The Hunt for Red October, the Associated Press described its author as a “37-year-old insurance broker and frustrated writer.” Clancy didn’t seem to look back on his insurance career with that sense of frustration, however. He told the New York Times the industry actually helped him become a better novelist. “In the insurance business, you have to pay attention to details or a client could lose everything,” he said. “A doctor has to, a cop, a fireman, why not a writer?”
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CANADA’S ELITE 30 BROKERS
Do you have what it takes to be among Canada’s Elite Top 30? Insurance brokering is one part confidence and two parts perseverance. It’s also the focus of the next issue of Insurance Business magazine, highlighting the accomplishments of elite insurers who took on the challenges of 2012 and overcame them. Insurance Business is searching for Canada’s Elite 30 Brokers – your chance to gain recognition for your hard work throughout the year, and your contribution to the insurance industry. And it all starts by applying online to the Elite Brokers Survey, on www.insurancebusiness.ca. The Insurance Business Elite Brokers survey is a great opportunity to give your business a boost and make sure all the major insurers and underwriters know who you are. Being recognized as an Elite Broker will not only raise your profile within the industry, it will serve as a valuable independent thirdparty endorsement that will be beneficial when marketing to new and existing clients. Despite stiff competition in the insurance industry, there are many success stories that need to be told – and brokers deserving of praise from their peers. Entries are now being taken for this prestigious award, where Insurance Business will recognize Canada’s Elite Brokers.
WHO IS ELIGIBLE?
8 | OCTOBER 2013
• Any Insurance Broker practicing in Canada • Authorized Representatives and/or Licensees
WHY SHOULD YOU ENTER? • Enhance your reputation and credibility within the market • Win clear recognition of your professional standing as a leading insurance broker • Gain significant endorsement from an independent source, supporting your individual efforts to attract and retain customers • See your name published in Insurance Business Magazine giving you recognition amongst fellow industry professionals
HOW TO ENTER Simply visit www.insurancebusiness.ca today to complete the form by supplying some performace metrics about yourself. All financial information provided is confidential and will not be disclosed within the magazine or shared with any third parties. Admittedly, what the numbers don’t capture are those deals that got away, or the hours brokers spend on files that simply failed to cross the finish line or just missed the Dec. 31, 2012, cut-off date. The Top 30 Brokers measures and recognizes the leading insurance brokers in Canada. Those that make it into the Top 30 will join an elite group of insurers, with the rankings appearing in the December issue of Insurance Business magazine. A place in the Insurance Business Top 30 Broker rankings is clear recognition of your professional standing as an elite in the insurance market.
Elite Brokers? Are you one of Canadaâ€™s
Entries for the inaugural Insurance Business Elite Broker ranking are now open.
In a first for Canada, Insurance Business will rank the top 30 individual insurance brokers based on criteria such as premium income, client retention, policies written and number of new clients introduced to the business during the 2012 calendar year. A place in the Insurance Business Elite Broker ranking is clear recognition of your professional
standing as one of the leading brokers in the Canadian insurance market, and by making a submission you are giving yourself a chance to be included in the rankings.
Those in the Insurance Business Elite Broker list will be able to use this ranking as a valuable marketing tool to enhance their reputation and credibility within the profession and the market.
Complete your online application form at insurancebusiness.ca SUBMISSIONS CLOSE November 15th
COVER STAR / BRANSON ON BUSINESS
Like him or loathe him, Sir Richard Branson is one of the most successful entrepreneurs in the world. In this exclusive interview, Insurance Business probes the Virgin mastermind about the secrets to his success Insurance Business: Many of our readers run small- to medium-sized businesses. What’s the difference between a business that chugs along at a happy medium and one that develops into a world-leading, global empire? How do you go about building an empire rather than just a business? Sir Richard Branson: Big or small, I believe that all successful and innovative companies need to have an excellent product or service, they need strong management to execute the plan and a good brand to give it the edge over competitors. Often entrepreneurs can create a good product and a brand but lack the management to help expand and create a truly great company – people are the core differentiator between a business that just chugs along and one that grows into an empire. An entrepreneur needs to build up a very strong and capable management team and delegate out the responsibility to run the existing companies to them, so that he or she can focus on new ideas and finding the next business to start up. Just remember that it is impossible to run a business without taking risks. Virgin would not be the company it is today if we had not taken risks. I couldn’t tell you which was the riskiest – there has been quite a few! 10 | OCTOBER 2013
IB: Both Virgin and Sir Richard Branson are names that are known the world over. How important is a strategic approach to branding – personal and/or corporate? Can they be separated? What are the must-do’s when building a brand? RB: Brands ultimately belong to the consumer. While a business can influence its brand by what it does and how it behaves, it is what the customer thinks at the end of the day that is the only important thing. With this in mind, I think that it is important to try and identify early on what attitude you would like your brand to convey, and then go about building it! Brands need to be constantly nurtured, to be kept fresh and be seen. When I was thinking about setting up my own airline, the late Freddie Laker said to me: “You’ll never have the advertising power to outsell British Airways. You are going to have to get out there and use yourself. Make a fool of yourself. Otherwise you won’t survive.” I’ve been following his advice ever since and used myself to get the Virgin brand in the headlines and become more visible.
“People are the core differentiator between a business that just chugs along and one that grows into an empire” OCTOBER 2013 | 11
COVER STAR / BRANSON ON BUSINESS
BRANSON ON… RELAXING IB: It’s all too easy for an entrepreneur to get stuck dealing with the daily workings of a business. How important is it for an entrepreneur to get out of the office and do other things? What helps you refresh yourself mentally and physically? RB: I do try to keep fit – anytime I’m near a Virgin Active club I make sure I get in there and work out. I love tennis and kite-surfing and pretty much do some sort of exercise every day, without making it too rigid, as that just doesn’t work for me. I enjoy being outside and being active – keeping fit as a result is almost a by-product of doing something I enjoy! I recently completed the Pick n Pay Cape Argus Cycle Tour, a wonderful 109-kilometre ride with 36,000 cyclists, and an extraordinary atmosphere with breathtaking views. I have always believed that I needed to find good people to run my businesses and to delegate day-to-day management to others. I did this from a very early age and, importantly, that has allowed me to go and set up new ventures, sometimes in a new sector or country.
IB: Our readers’ businesses deal with intangible services in the financial sector. What are your tips for effectively marketing and selling intangibles? What have you learnt from ventures such as the Virgin Money companies? RB: Even today, the Virgin brand is not a product like Coca-Cola or McDonald’s; it’s an attitude and a way of life to many. At Virgin Money, we’re building a better kind of bank. A bank that genuinely cares about the customer and provides a better experience and better-value financial products in a straightforward, transparent way. I think that it is important to build up a strong brand when selling an intangible service as it makes your service distinct and different from anyone else’s.
IB: You’re famous for your ‘Screw it, let’s do it’ approach, which has led to missteps, as well as successes. What is your biggest business failure, and why? How do you pick yourself up from mistakes – both personally and financially? RB: Whenever I experience any kind of setbacks, I always pick myself up and try again. I prepare myself to have another stab at things with the knowledge I have gained from the previous failure. My parents always taught me never to look back in regret but to move on to the next thing. The amount of time people waste on failures rather than putting that energy into another project always amazes me. I have fun heading the Virgin group of businesses, so a setback is never a bad experience, just a learning curve.
IB: Part of the skill of a successful entrepreneur is identifying tomorrow’s growth sectors and opportunities – Virgin Galactic being one of the most high-profile examples of this. How do you discover tomorrow’s opportunities today? RB: There are many different reasons for entering new businesses. It can be as simple as a business sector really interests me or one of our directors at Virgin, and we see areas in that sector where our brand can make a real difference to the consumer. Sometimes it is as simple as the fact that an existing service has frustrated us and we believe we could do it better. Having the will to say ‘screw it, let’s do it’ and make things happen is what sets entrepreneurs apart. It takes bravery to start a business, but 12 | OCTOBER 2013
people with enterprising spirit who seize chances when they come along will be the ones who drive the economy and make a difference in the future.
IB: Another aspect of business that every entrepreneur understands is getting the right people around you. How do you find the best talent for your businesses – and how do you keep them interested and engaged? RB: We don’t really have a general recruiting process at Virgin – it depends on the type of business and the position we are looking to fill. However, as a rule we tend to pick out employees who are inquisitive about the bigger picture, and have a ‘can do’ attitude, are positive and enthusiastic and, most importantly, have a strong sense of fun! I have found that choosing enthusiastic, talented and positive people has helped to shape a positive character for our businesses.
IB: Innovation is clearly something that is central to the Virgin ethos. How do you unlock this, both personally and in your business teams? Can you create a culture of innovation and, if so, how? RB: I believe our culture of innovation is a result of our ability to adapt to changes quickly. We run our companies small; there is very little red tape and certainly no bureaucracy – we make decisions quickly and implement them, before our competitors in the market have held their fifth meeting on the same issue. Additionally, Virgin has many, many entrepreneurs within the organisation. In business, the picture is constantly moving and changing so I try to employ people who enjoy thinking outside the box and are constantly creative and inspiring. Our people don’t just think about the numbers but think about how a deal will enhance the whole brand.
IB: You’re a globally recognised philanthropist and supporter of charities. How important is it to devote time and capital to not-for-profit work as a businessperson? Does it matter what size your business is? Is it more important to donate time or capital? RB: I believe that today’s businesses – regardless of their size – must be prepared to do good in societies around the globe. I am optimistic that we
BRANSON ON… TECHNOLOGY IB: From big data to social media, the digital revolution is disrupting industries across the world, with business models being forced to change, whether they want to or not. As an entrepreneur with a history of disrupting established industries, does the potential of digital excite you? What’s your advice on how to make the most of emerging technologies? RB: The mobile revolution has allowed entrepreneurs to better talk to their customers, suppliers and staff in real time to determine exactly how each one is responding to particular situations, and determine exactly what they want and need. An entrepreneur who takes full advantage of this is well on the way to making himself a success, because he knows how to approach his consumers and how to deliver his offer in just the right way. I know it’s a cliché, but knowledge is power. Virgin is a major advocate of social media and the power it can hold for companies. My advice to the businesses of the future would be to improve their social media presence and use it as a way of knowing their customers more intimately. It can act as a wonderful warning system for businesses as well as a cost-effective way to get your message out.
“The amount of time people waste on failures rather than putting that energy into another project always amazes me” can make the world a far better, safer and more equitable place, but business and enterprise must sit at the heart of this process. We need government, business and the social sector to work together for the benefit of everyone. It should no longer be just about typical ‘corporate social responsibility’ where the ‘responsibility’ bit is usually the realm of a small team buried in a basement office – now it should be about every single person in a business taking responsibility to make a difference in everything they do, at work and in their personal lives. Virgin Unite, the non-profit arm of the Virgin Group, call this approach ‘Capitalism 24902’ because it’s focused on getting business leaders all over the world — all 24,902 miles of it — to look at how we can do what is right for people and the planet. Virgin Unite also helped incubate a recently launched not-for-profit organisation called ‘The B Team,’ which is framing a new approach to business where people and the planet are priorities, alongside profit. OCTOBER 2013 | 13
FEATURE / NICHE PRODUCTS
Is this the most
OVERLOOKED line in INSURANCE? Michael Hartsman, the manager of Trade-credit at Firstbrook, Cassie & Anderson Insurance, explains the intricacies of this product – a lucrative and largely overlooked market Michael Hartsman brings a unique background to the insurance industry – a talent for finances that has served him well in the world of trade-credit insurance. “I am probably one of the very few insurance guys around with a financial background,” says the manager of trade-credit at Firstbrook, Cassie & Anderson. “My whole experience has been in credit. I was a director of a billion-dollar company, handling their accounts receivable on a national basis for years. But I felt like I was at the top of my career there, so I decided to do some freelance work in trade-credit insurance, while I applied for my RIBO licence.” When Hartsman entered the world of trade-credit insurance, it wasn’t exactly a spectacular start. “When I studied for my RIBO, there wasn’t one question about trade insurance,” he remembers. “When I failed the exam – I think you need 75 per cent to pass – I phoned RIBO and asked what I needed to do to improve.” It didn’t take long for Hartsman to get a tutor and pass the RIBO exam, joining FCA Insurance. It has been 15 years and he has never looked back. “When I started with FCA I had to start from scratch. I had zero customers,” he says. “Today I make a decent living – believe me.” Although a lot of people entering the insurance field tend to steer clear of the trade-credit field, it is 14 | OCTOBER 2013
a natural fit for Hartsman. “I know a lot of people in the industry, and there are a lot of people out there who won’t get into it because they don’t understand it,” he says. “They will send out an application and it will come back declined. I know how to put together a policy, and I have good relationships with the credit insurers. I know how to structure a policy that makes sense to them and works for them. You’ve got to understand credit – it really has nothing to do with insurance.” Hartsman’s years working as a national credit manager with Merisel went a long way to his becoming a top-flight Trade-credit insurance broker. “I can read credit reports; and a background in credit administration has really helped me,” he says. “Understanding how a credit department is run has proven invaluable.” And that can be a tough wall to scale to understand the business, says Hartsman – for those just entering the business, trying to understand how credit works without an ‘insurance bible’ to use as a reference. “There’s no book out there,” he says. “In the case of a house fire, and the cat dies, and somebody asks ‘How is the cat covered under my insurance policy?’ they look it up in the book. But with credit insurance, it really helps to know how the credit and collection industry works. It is really a non-insurance business.”
PROTECTION AGAINST OUTSTANDING RECEIVABLES Trade-credit insurance can best be described as protection against outstanding receivables. Trade-credit insurance protects suppliers against the risk of nonpayment of goods or services by their buyers. This may be a buyer situated in the same country as the supplier (domestic risk) or a buyer situated in another country (export risk). The insurance covers non-payment as a result of insolvency of the buyer or non-payment after an agreed number of months after the due-date, often referred to as protracted default. It may also insure the risk of non-payment following an event outside the control of the buyer or the seller, for example political risk cover, or the risk that money cannot be transferred from one country to another. Trade-credit insurance ensures against the risk that a buyer does not pay. It can also cover the risk that a buyer pays very late. A buyer will not pay after he has been declared bankrupt, insolvent or has a similar legal status. Similarly, buyers sometimes opt for a bankruptcy protection arrangement, which allows them to delay payments for an extended period. Both instances are covered under a trade-credit insurance policy. These policies can include a wider range of cover, depending on the circumstances. Some policies consider a delay in payment also to be an insolvency (so-called Protracted Default cover). If a buyer does
not pay, the trade-credit insurance policy will pay out a percentage of the outstanding debt. This percentage usually ranges from 85 per cent to 90 per cent of the invoice amount, but may be higher or lower depending on the type of cover that was purchased. Trade-credit insurance policies are flexible and OCTOBER 2013 | 15â€‚â€‚
FEATURE / NICHE PRODUCTS
allow the policyholder to cover the entire portfolio or just the key accounts against corporate insolvency, bankruptcy and bad debts. The most common type of cover is so-called Whole Turnover Cover, which covers all buyers of the policyholder. One of the advantages of insuring receivables is the higher percentages that can be obtained from the banks.
“The beauty of credit insurance, is you can be selling anywhere in the world, and you can be covered. If you are selling in China, you can be protected.” Michael Hartsman “A lot of banks today want their clients to have insured receivables,” says Hartsman. “A lot of people out there when they go to their bank for a loan or a line of credit, the bank gives them about 75 per cent of their receivables on their line of credit. But if you insure the receivables, you can get about 90 per cent. I have a lot of clients who don’t care if they lose money, because they are getting more with their line of credit at the bank with insured credit.”
DISCRETIONARY CREDIT LIMIT Like other brokers – be it insurance or even mortgage – their true value is their insider knowledge, connections and ability to get the best deal. “Take the discretionary credit limit, for example,” says Hartsman. “Insurers can grant credit up to that limit without approval from the insurance company. Certain companies require a higher limit. Certain companies won’t even give that limit. A broker can ensure that limit is in the policy.” And Hartsman is all too familiar with the argument that dealing directly with a credit insurer will “cut out the middleman” and save money. “A lot of people think it is a better deal because of price, but they may not necessarily get the same policy that I can give them. I can actually give them more, because when I go in there they know that there are other insurance companies fighting for that price,” he says. “Sometimes the insurance companies don’t tell you everything. They don’t lie, but they don’t tell you everything.” A good example of this is non-cancellable credit 16 | OCTOBER 2013
limits, says Hartsman. “I have some companies that will give noncancellable credit limits, which is a really great feature for a credit manager. Any account that they approve they can’t cancel. It can go bad, it can go bankrupt, but they can’t cancel,” he says. The way it is priced out, says Hartsman, the customer will anticipate his sales – say $10 million. But if they make $11 million, then they are charged for that extra million. “But that is if they buy a policy like that,” he points out. “I can find them a policy that has a flat premium, that has no upcharge. A lot of brokers may not do that, but I am able to find that policy. So going direct is really not the best thing to do.” A rich vein of clients Hartsman has mined over the years has been those who have signed up with the Export Development Corporation (EDC). “A lot of people are not aware that the EDC are typically 30 to 50 per cent higher in premium,” he says. “If I had the EDC list, I’d be a millionaire.” Hartsman says he’s pulled more clients away from the EDC than anywhere else. “They used to be really good, because they took risks far greater than other companies,” he says. “But I’m finding now that they aren’t, but still charging oodles of money. People trust EDC because it is run by the Canadian government.” A true test of trust came during the American economic meltdown five years ago, says Hartsman – and one lender that shone was AIG. “During the crisis of 2008, a lot of my clients were with AIG. Not one single client changed (left AIG) – and I had customers who had claims of seven figures, and they were paid without a hiccup,” says Hartsman. “And they are still one of the largest financial companies in the world, and their stock is doing great today – and they’ve paid back the government. “AIG proved they had enough reserves to handle that crisis.”
POPULAR IN EUROPE Credit insurance is still a relative newcomer to North America, but has taken off in the last few years, says Hartsman. “Credit insurance is very popular in Europe. Probably 80 per cent of companies credit insure,” he says. “Maybe 30 years ago it started here. It is not that old of a product in the U.S. and here, but growth has been double digit as of late.” Growth that was spurred by the recession of 2008.
WHAT IS TRADE-CREDIT INSURANCE? Trade-credit insurance, also called accounts receivable insurance, provides your business with protection against the failure of your customer to pay trade debts. This can arise because your customer becomes insolvent or because your customer does not pay within the set timeframe. These risks are usually described as commercial risks. Companies that export can also protect themselves against a range of political risks that may prevent or delay payment. This arises when payment is not received as a direct result of a war in the buyer’s country, cancellation of a contract by the government of the buyer’s country, or when a government implements regulations which either prevent the export or import of the goods - or prevent or restrict the transfer of hard currency - from the buyer’s country. WHO USES TRADE-CREDIT INSURANCE? Any business selling on open-account terms to other businesses can benefit from trade-credit insurance. From a practical standpoint, you generally need annual sales of $2 million to make the program cost effective. WHY SHOULD I CONSIDER TRADE-CREDIT INSURANCE? On average, 40 per cent of a company’s assets are in the form of trade debts. Sometimes the figure is far higher. It is very difficult for a company to predict which client will default on payment. Close to 50 per cent of all payment defaults arise from vendors with whom stable and long-term trade relationships have been established. The cost to a business of non-payment can be considerable. For example, if a company’s profit margin is 5 per cent and one of its customer defaults on a debt of $100,000, the company will have to achieve additional sales of $2 million to make up for the lost profits. More importantly, the lost cash flow could be devastating. Non-payment weakens your company and lowers its investment capacity. A trade-credit insurance policy helps in the management of
“Especially when you go through a financial crisis – everybody is looking to protect their receivables. It has grown quite a bit from 2008,” says Hartsman. “Once they take it, it is very rare that they ever drop it. It is like house insurance – when they get it, they want it forever, because they see the value of it.” One of the selling points of credit insurance is that it can be sold to just about everyone in every type of business. “Every single industry pretty much credit insures,” he says. “From jewellery – I even have a company that sells natural gas to the flower growers. I’m in the printing industry, in clothing; I’m in so many different industries. Every industry qualifies. Manufacturing is big, the computer industry, and companies that sell into retail are big.” One of the biggest names that keeps coming up for insurance is Walmart. “Walmart is still one of the most asked about
your accounts receivables and compensates you in the event of non-payment. WHAT ARE THE BENEFITS OF TRADE-CREDIT INSURANCE? Cover is provided for investigation costs, defence costs for damages claims and OHS matters. Risks include breaches of D&O and/or fiduciary duties, trust, negligence, misleading or deceptive conduct and omissions.
• Better credit control and protection against catastrophic bad-debt losses.
• Better risk management through an early warning
system bolstered by the insurance company database.
• Improved business planning through the elimination of unknown risks.
• Improved working capital from your lender because you have enhanced the quality of your accounts receivable with trade-credit insurance.
• Improved cash flow, because you receive payment for unpaid invoices that are insured.
• Mitigates concentration risk when large portions of a company’s sales are concentrated among a few customers.
• Increase sales to new and existing customers. • Helps establish new foreign markets to increase export sales.
• Reduce bad-debt reserves. • More confidently achieve financial objectives. • Provides cost-effective collection agency services.
companies for insurance,” says Hartsman. “Banks want the insurance on Walmart. For a lot of clients, 60 per cent of their business is Walmart.” Companies that have overseas clients should definitely look at credit insurance, he says. “The beauty of credit insurance, you can be selling anywhere in the world, and you can be covered. If you are selling in China, you can be protected.” And for those who deal with overseas clients, pre-delivery insurance is a sound purchase, reimbursing the exporter for production expenses, due to his inability to supply the goods agreed by contract because of non-commercial risks, including the interruption of transport lines and/or certain commercial risks, such as the cancellation of contract and the bankruptcy of the buyer. “It covers what POs (purchase orders) you have on hand that you were going to ship to them,” says Hartsman.
Michael Hartsman is the manager of Trade-credit at Firstbrook, Cassie & Anderson Insurance in Toronto, Ont.
OCTOBER 2013 | 17
THE BIG INTERVIEW / MARTIN HUGHES
NOTHIN’ YET An exclusive interview with HUB head Martin Hughes, who’s not only sharing his thoughts about the company’s future but also the future of independents All eyes were on HUB International this summer, as the hunter became the hunted, and U.S. private equity firm Hellman & Friedman snatched up that insurance giant. But, eyes were also trained – and still are – on the head of HUB, Martin Hughes, in an attempt to track his plans for the company, and by extension, the industry. Insurance Business magazine sat down for an extended conversation with that leading player. And it’s clear he isn’t slowing down and has more plans for HUB, including expansion.
IB: Forgive us for starting with a biggie, but what big changes do you see on the horizon for insurers, specifically? MH: There continues to be broker consolidation. We’re not the only company out there doing 18 | OCTOBER 2013
acquisitions. There is and will continue to be consolidation. The carriers have to recognize that their world is shrinking; they will be dealing with fewer but larger brokers, and it will cause them to shift their strategy a little bit. I think one of the things insurance companiess have missed is a seamless technology play. I know that it is coming. Some have made the investment, but the ones that haven’t are still clinging to the investment they made in proprietary systems a few years ago. But insurers need to just get on with it to improve their modeling capabilities and how they do their PMLs. You see what is going on in Colorado. They had all these massive wildfires in the summer that destroyed so many homes a while back, and now they’ve had 20 inches of rain. It has devastated that state. These catastrophic losses are causing insurance
“There is so much opportunity here in North America, you have to make a compelling case to reach out globally.”
OCTOBER 2013 | 19
THE BIG INTERVIEW / MARTIN HUGHES
$4.4 BILLION HUB VALUE
Hellman & Friedman: raised & managed over $25 billion of committed capital since its founding HUB employs more than 6,500 people HUB estimated revenue for 2013: approximately $1.2 billion in 2013
companies to recalculate their PMLs, as well as how they price their products.
Now that’s out of the way, can you tell us how you got your start in the industry? My background was in accounting. The accounting firm of Price Waterhouse had accepted my application and wanted to send me to Omaha. This was 1973; I had just gotten married and I told my wife “we’re not going to Omaha.” So I got an interview with another company, Mack & Parker; but once I settled in for the interview, I realized that the ad was supposed to have said “account executive position” and not accountant. We immediately concluded that we were both there for the wrong reasons. But the interviewer said to me, “We’ve got the hour set aside, do you want to go on with the interview?” I said sure. But I didn’t know anything about insurance. I did the interview, and I was intrigued. They invited me back for a second interview, and I was eventually hired on as a sales trainee. I went off to Hartford, Conn., to the Aetna Casualty & Surety home office for what they called the casualty and surety sales training program – but there was very little sales training. It was mostly technical training for two months: how to read rate, quote policies – I didn’t learn how to sell anything. But I did learn a lot of technical stuff. Then I came back and started making a lot of cold calls. I stayed with that company and I ended up buying Mack & Parker in 1984, along with one of the Mack family sons, Ed Mack, and he and I ran it and grew it – eventually merging that into HUB International in October of 1999.
What changes have you seen over the years? Obviously there has been a tremendous amount of consolidation within brokerages and insurance companies. If you look back at who the Top 10 brokers were 15 years ago, you’ll see a lot of change in that list. One thing that has changed is the dynamics around selling — clients are becoming much more valueproposition oriented. When I started in the business, 20 | OCTOBER 2013
it was completely a relationship business. People didn’t need to have a lot of skills; they just had to be likeable. Today, clients still want to do business with who they like, but you’d better have expertise. Selling insurance today is a proposition-driven strategy, as opposed to just pure price or relationship. Here in the U.S. where we have the health-care debate going on, what I think one of the big changes is that the CEOs and CFOs have in the past tended to exclusively deal with the property and casualty lines. But today they want to understand the cost drivers in employee benefits and they want to have a voice in how their program is put together, because it is a big-line item.
What is the greatest threat facing the industry today? The coming threat that I see for insurance is how insurance companies have been very aggressive in buying brokers – they have been cannibalizing their own broker relationships by buying these brokerages – and for me, it is an inherent conflict. I just wonder how that strategy is going to play out. It is one that they need to be thoughtful about, and I just don’t see that ending any other way than badly for insurers.
Are they eating their own? No doubt about it. It causes problems with the good brokers they are doing business with, and it will cause problems for them internally. The business planning model is suspect, I think, on this one.
How about the mom and pops? (Mom-and-pop) Brokers will use that against them every day of the week. They will say to clients, “Wouldn’t you rather be with someone who owns, rather than being with a representative?”
What opportunities for success are out there for the taking? Is there any low-hanging fruit for the taking? No. This is a fiercely competitive business. But I will say this: companies that I see doing well outperforming everyone else are the ones that specialize. If you specialize in a segment, and speak
intelligently about it, know the plusses and minuses – you have an advantage over others who can’t. Specialization for brokers is really important. In Canada, it is voluntary benefits. For our brokerages that is all we have. That is an area that is there for the taking right now. And in Canada, universal health care doesn’t cover everything – there are opportunities to specialize and succeed there.
HUB has been known as the buyer of brokerages for many years. How did you come to the decision to sell to Hellman & Friedman? I spent quite a bit of time with them, they have a sterling reputation – the highest reputation in the private equity world, I think. They have a track record of buying elite teams, and I felt that for us, it was a chance to be with a company that has really stood out. This gives us a chance to transform ourselves to go from being a really, really good company to a really, really great company.
What is the greatest challenge you’ve faced at HUB? What did you learn from it? In 1999, we started with $36 million in revenue. Today, we do well over a billion dollars in revenue. We’ve done that through growing the business and a lot of M&A (acquisitions). The thing that we’ve learned, the greatest challenge, is that if you do bad acquisitions, you put the whole culture of the company at risk. You can screw up the financials, you can screw up the company, the culture… you can do a lot of damage. I’ve found we’ve made mistakes when we fell in love with geography, instead of falling in love with people. If you decide “I have to be in this specific geographic area,” you may end up with something that will become a liability. You don’t buy businesses that you don’t understand. You don’t buy businesses that you can’t step in and run. We don’t make those mistakes any more. We’ve learned from them.
How is the relationship with H&F working out for you personally, and the employees at HUB? It has worked out great, absolutely. They are the kind
of people who have lots of integrity. They have done what they said they would do. Everything they had done I have found to be constructive. In some quarters, private equity has a bad reputation, but our experience with Apax Partners for the past six years and now Hellman & Friedman has been constructive. This is not a hard-assets business – this is a people business. I am delighted with the relationship and to be working with these guys.
“If you are willing to specialize, in a particular niche, I think mom-andpop businesses can do great.” Martin Hughes Does the sale to Hellman & Friedman signal your stepping back from HUB? I’m not stepping back; in fact I’ve made a five-year commitment. Our whole team is on board and excited about it. My commitment signals to the staff that it is business as usual, and it is a chance to take the company to a newer and higher level.
You mentioned mom-and-pop brokerages earlier. Is there still room for the mom-and-pops to succeed today? Yes, I think they can. They are going to have to deal with the smallest elements of the smaller lines of P&C, but if you are willing to specialize, in a particular niche, I think mom-and-pop businesses can do great. It is a wonderful business, and it is one that not many people understand. We’ve not done a good job in attracting the best people to it – they all want to be investment bankers – but this is a wonderful business. I’ve personally gone to college campuses to recruit kids, and I’ve wanted to know what they think and what their observations were about the industry – and they don’t have a clue. Their impression is that we are life insurance. They don’t know any more than I knew back then. OCTOBER 2013 | 21
THE BIG INTERVIEW / MARTIN HUGHES
HUB’S 2013 HIGHLIGHTS:
It is important to introduce quality people to it. Once they understand that insurance is absolutely fundamental to the world, they get excited about it.
Where do you see Hub in the next 10 years? The next 20 years? We’re going to continue to execute on our fundamental business plan. Grow the business organically and do acquisitions in geographic areas where we don’t have a footprint and with brokerages who share our philosophy. Yes, it may lead us to global expansion. But truthfully, there is so much opportunity here in North America, you have to make a compelling case to reach out globally. We did buy a brokerage in Brazil in 2011. We are very cautious of expansion in other areas. Boots on the ground, leadership on the ground – people who have completely bought into our strategy – those things have to be consistent, because they are the ones running our local offices. We are and we need to be very methodical and cautious expanding the business, just to ensure there is compatibility.
If you could offer one piece of advice to a fresh face in the insurance game, what would it be? Funny you should ask that. We do a lot of recruiting of new people that we bring into the business, and it was while speaking to the latest group just a few weeks ago that I was asked that question by one young person. I’ll tell you what I told him. I’ll give you two pieces of advice: One – get comfortable talking in front of large groups, and learn to be articulate. If you can speak well, and you are comfortable in front of groups, you are more than half way there. It is amazing to me the people out there who have no grasp of the English language and are not articulate enough to present their thoughts and express them to people in a coherent fashion. Not everybody is going to be a great speaker; I get that. And not everybody is comfortable speaking in front of a large group – I know I wasn’t. But you make yourself get good at it. Two – you need to specialize. Learn how to present your value proposition and the solutions you can provide. But again, that is part of being articulate.
22 | OCTOBER 2013
March, HUB Financial (a subsidiary of Hub International) acquired Complete Brokerage Services (CBC), a Richmond, B.C. — based life insurance managing general agency (MGA) firm. The principals of CBS, Tony Bosch and Chris DiSalle joined HUB. June, HUB International acquired the shares of Nunavut Insurance Brokers, a full-service brokerage operating in the territories of Nunavut and Northwest Territories. The Nunavut operation became part of HUB Horizon, adding three new office locations. July, HUB expanded again in Ontario and Manitoba, acquiring The Dorsey Group in Brantford, Ont. and shares of Southeastern Insurance Services in Steinbach, Man. The Ontario operation offers personal and commercial products and services, while the Manitoba brokerage is a full-service insurance firm. August, Hub agrees to be acquired by funds advised by Hellman & Friedman, making it the largest takeover of a U.S. insurance broker on record, according to data compiled by Bloomberg.
Everyone knows the corporate side of Martin Hughes – what might people not know about the personal side – the man himself? Well, I like to practice what I preach. I exercise regularly, I diet and eat well; I like to play golf when I can. I don’t get out that often, but when I can, I get in about 12 rounds. I’ve been married to the same girl for 43 years – got married when I was 22 years old. I’ve got three kids (well, they aren’t kids anymore) and 10 grandkids, and the oldest is six. It can be a real handful when we get everyone together! My son is in the business; he is the president of our Midwest operations. One daughter is a Chicago public school teacher and the other is a stay-at-home mom.
The eternal golf question: Ever have a hole in one? Yes! I had my first hole in one on December 28 in 2010. I hit a four iron; it was about 180 yards and it was fabulous. I never thought I was going to have one. Before that, there was one weekend I played both days, and it was a par 3 and I hit a 2 iron on the same hole on the Saturday and Sunday (there were no hybrid clubs then). I hit my iron and the ball rolled up and hit the pin and never went in – both times! I thought I would never have one.
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MARKET MATTERS / THE VIRTUAL STOREFRONT
TO WIN Is your website drawing attention – but for all the wrong reasons? Industry experts Bill Morris and Burt Campbell speak to Insurance Business magazine’s Donald Horne on what brokers are doing right — and, ahem — doing wrong with their websites
24 | OCTOBER 2013
OCTOBER 2013 | 25
MARKET MATTERS / THE VIRTUAL STOREFRONT
The numbers show brokerages continue to hemorrhage market share to consumer-direct insurers, and some of that ground is being lost online. So, as brokers invest tens of thousands of dollars on improving the façade of their businesses and the décor of the offices, they may be ignoring the elephant in the room. Now more than ever, says Bill Morris, partner at Navicom, brokers need to reclaim that business online – the new battleground.
“Businesspeople don’t have trouble getting people to a page – the real problem is getting them to take action once they are there,” Burt Campbell “Eighty per cent of consumers start online and are using some sort of Internet-based search tool,” says Morris. “Reaching new consumers and customers, different segments of the market that they traditionally have never been able to reach – that opportunity is there to re-engage existing customers and grow market share.” Morris holds seminars throughout Ontario on behalf of the Insurance Brokers Association of Ontario on how to connect brokers with the 21st century consumer. He’s convinced the opportunity for independents to reach clients and capture new clients online is there for the taking. “As much as brokers do a great job in meeting customers’ needs, they are not taking advantage of fully engaging the client by investing in their online presence.” Morris stresses that brokers have to realize that the customer has evolved as the Internet as grown. “The customers that are buying insurance have different expectations and different needs than they would have had 10, 20 50 years ago,” he says. “Today, brokers have to compete with all the competition that is out there, not just other brokers in the community. They have to re-engage the customer.” Part of this re-engagement is the development and ongoing maintenance of attractive, interactive websites – the virtual storefront of any brokerage. “The biggest mistake businesses make is a lot of the websites out there today went up 10 years ago 26 | OCTOBER 2013
when it became obvious the Internet was here to stay, and those websites haven’t evolved in the last five years,” he says. “When customers go online, and they do, they will invariably end up on brokers’ websites. They will land on it, and move on.” The need to maintain the website, to keep it current and fresh, must be done on a daily or weekly basis. “You can’t just have your website updated and say, ‘There, done!’ and forget about it for months on end,” says Morris. “You need to work at it daily or even weekly. You have to keep it current and fresh, so that people will keep coming back.”
CREATING STICKINESS “Website stickiness” is the glue that holds potential clients and without it, Morris says, they’ll move on. “That is the critical key of creating a website,” he says. “Once a person lands on the website, you can keep them there by using vibrant colours, using the brand and ensuring the navigation is easy to follow. Customers may not be able to explain what they like, but they know what they like – and that shows by how long they stay on a website.” Market share erosion for independent brokers and the move by consumers to start their search for products online can be linked. With some 80 per cent of all consumers starting their search online for insurance, that is where brokers need to make their best first impression. “We have been spoiled by the banks and the big retailers when it comes to websites and consumers expect more,” says Morris. “You need eye candy on a website, as we are wired that way; it is usually how we judge people. If you cringe every time you look at your website, you are already losing business. The customer looks at a boring, confusing or unattractive site, and they think, maybe they don’t want my business.” One freelance website analyst who specializes in design and creating that consumer “stickiness” that online businesses crave is Burt Campbell, who sees all too often how a bad website can turn off a potential client in literally seconds. “Businesspeople don’t have trouble getting people to a page – the real problem is getting them to take action once they are there,” says Campbell, a freelance marketing consultant based in Calgary, Alta. “You’ve got four seconds to convince people you have what they are looking for and to then click further and deeper into your website.”
USING ANALYTICS The best way to know if your website is a success is through Google Analytics, says Campbell, who likens people who create business web pages without analyzing and tracking the data of those visiting the site, to pouring water into a bucket with holes in it. “You need to know if you are succeeding,” he says. “Without Google Analytics, it is like driving without looking in the rearview mirror.” Beyond using Google Analytics to study your own website’s success, Morris urges independent brokers to take advantage of examples of what already works – the websites of the big banks. “The direct writers, the big banks have deep pockets. They can focus their resources in key areas, like website strategies,” says Morris, who also points out that the popular websites are out there for anyone to see and use – and, indeed, emulated. “The beauty of having any product in the public sector, you can see it and see if it is working,” he says. “They (the banks) are paying some of the best in the business to develop websites; and everybody can see. I would argue that with more collaboration, more vigilant attention to seeing what is out there – the average broker can compete effectively.”
BEYOND THE WEBSITE Looking beyond the website, there are opportunities to spread your brand to Facebook and Twitter, and allow the social media sites to do the advertising for you – for free. But you must be judicious in how you do it, Morris cautions. “Facebook and Twitter are easy to overlook, and a lot of brokers are still skeptical of social media, given that it has a personal nature,” he says. “But can you afford not to have a social media strategy? The bottom line is the client is using social media to share relevant experiences – but there is a danger that you might use it to sell, and that turns people off big time.” The best technique is to “friend” your clients on Facebook, and “like” their status or photos and such, and then allow those friends to “like” your community events or status that you post – without pressuring them to do so, says Morris. For Twitter, retweet your clients’ tweets and tweets from companies that are of interest to your clients. “A passive approach works well,” says Morris. “Tweeting insurance stories, great rate offers, and then sitting back and watching others retweet it, that
SWEETENING YOUR SITE: “You need eye candy on a website, as we are wired that way; it is usually how we judge people. If you cringe every time you look at your website, you are already losing business. The customer looks at a boring, confusing or unattractive site, and they think, maybe they don’t want my business.” - Bill Morris
is the real power of social media – amplification. Even a few customers can share, and soon 10 times 10 times 10 is a thousand.” Some brokers harnessed the power of social media during the recent flooding, says Morris, connecting with clients in real-time, informing those clients who were affected of their coverage options. “One of the big benefits of email and social media is that they are real-time devices,” he says. “Given the speed of events happening, brokers that were properly set up, knowing who their customers are, they had the ability to share timely information and help clients know how to deal with the situation.” The ability to connect and reach clients through today’s media is how independent brokers can compete for the 21st-century consumer. “The key is being able to connect with customers,” says Morris. “It does take some organization to deal with that, but brokers need to understand that is an operating reality today.” OCTOBER 2013 | 27
MARKET MATTERS / FLOOD INSURANCE
Let’s get real. Canada needs more than just better flood insurance, says Sharon Ludlow, leader of one of the country’s biggest reinsurers. It needs a real flood policy! Flood insurance has become the hot topic once again after a record-setting summer for damage claims recorded in Alberta and Toronto. Sharon Ludlow, president and CEO of Swiss Re, the reinsurer most active in that market, outlines why clients and the industry need to stop skirting the margins and embrace flood coverage.
Let’s face this head on: Brokers complain that the industry doesn’t seem that interested in moving forward with a comprehensive flood insurance plan. Make your case for why we need proper flood insurance now. SL: Not only do we need flood insurance, we need a flood program, which goes more broadly. We need to address the resilience of our urban centres – as clearly was shown in the case of Calgary 28 | OCTOBER 2013
where most of the damage occurred. Building resilient cities is something we need; a proactive approach to infrastructure that may be missing in urban centres right now. Following Hurricane Sandy, we did some research on behalf of Mayor Bloomberg in New York City, and the report provided a long list of recommendations on infrastructure. We need, as an industry, to focus more on infrastructure to mitigate damage, as ultimately that helps Canadians.
Cannot sewer backup cover such flooding? SL: Sewer backup, as you’ve seen in the events in Alberta and Toronto, means different things for different insurers, so it is clearly not consistent. It is solely dependent on where the water hits your busi-
here at Swiss Re, and those in the industry have looked at as well. Each have some pros and cons – for example, whether or not it is mandatory, and whether it is bundled with other coverage. We need to be mindful of anti-selection. I believe you can have a subset of flood insurance for each particular region. We have a category for highest risk drivers in auto coverage; we could have something like that to address high-risk locations. Clearly, you need to have the right premium to match that type of risk.
What should the pricing model be for flood coverage? SL: Again, it clearly has to reflect the underlying risk. I would broaden that to have the right-risk model; we have to have adequate risk mapping. We do have some, but not at a granular level. We need to be able to compare and determine what the risk looks like, what the right risk and premium should be. After the Calgary event, we at Swiss Re distributed a CAT-NET model – something we had done jointly with the European Space Agency during the flood and immediately after using satellite images to map the affected regions and area. We distributed these images to our clients. Some of the larger, more sophisticated companies already use this technology. By applying it across Canada, we can use that technology to produce the right models and be able to price for the risk.
ness or home, which is different from overland flooding. Tacking flooding onto an already inconsistent policy is not the solution. What we need to do is step back and examine what is the right coverage for overland flooding. The recent flooding has driven those inconsistencies out into the public domain, for example, Calgary. There are going to be different risks and differing coverage. There are very, very different risks depending on locations, so you can’t just tack flooding on sewer backup.
Should flood insurance be mandatory on a general policy? SL: There are a number of countries in the world that have flood programs. The U.K. has one, the U.S. has one, Germany, Australia... The ones I listed are the ones we’ve looked at and studied
What does the industry need to do to sell consumers on flood insurance? SL: We need to have a very simple, transparent policy that states this is what is covered. Ultimately, that is needed to get consumers comfortable with the coverage they have. The result of the post-Calgary public outcry, or perhaps sentiment is a better word, was that the differences in coverage and the absence of overland coverage did not sit well with consumers. It is something we need to address. If we could show through granular mapping that “yes, my house is 10 feet from the river,” or “yes, it is atop a hill, so that is why I am charged this premium,” I believe it would be of benefit. In the U.K., that information is basically available for anyone who wants to see it. We need to be proactive with municipalities, and at the provincial and federal levels, on infrastructure. OCTOBER 2013 | 29
MARKET MATTERS / FLOOD INSURANCE
A different or more rational look might be: we have the ability to assess the pros and cons of those programs and see how they’ve improved on those programs. The U.K. has just announced its recent rounds of improvements. We can pick and choose the best for our program. We aren’t starting from scratch here.
Is water damage truly the “new fire”? SL: We have statistics at Swiss Re that show some-
“We are the only G8 country without a flood program, which makes us an anomaly. We would like to see all the stakeholders move forward to get the right solution for Canada.” Sharon Ludlow Is there consideration that where we are building is in an appropriate area, or in a zone of potential flooding? Having up-to-date accurate flood mapping at that level will help the land-use planners to identify a “no go zone.”
Is there a downside to incorporating flood insurance on a general policy? SL: As long as we the industry can understand the risk and have the right data to underwrite the risk, then we would charge an appropriate premium for it. If you have high-risk areas, and they are populated, then we need to address that in a different fashion. For the population at large, whether it is homeowners or commercial, I don’t see it as a downside – but I don’t think we bolt it onto an existing coverage. We need a fresh, clean sheet of paper: Here’s what it looks like, let’s make it consistent across the industry. A consistency in the principles of what is covered – it is hard to find a downside when you design it that way. Canada is the only country that doesn’t have a flood program. The National Flood Insurance Program (NFIP) in the United States has not been overly successful, and some people point to that and say, “Do you really want that?” 30 | OCTOBER 2013
thing like 500-million people are affected by water damage each year. We look at that and say, is that the new fire? The risk of fire in this country has literally dropped off the charts, whereas losses from water damage have risen dramatically – the chart looks like a hockey stick – to the right and sharply up. Fire has been effectively addressed by building codes. We haven’t done that with water, and with an aging infrastructure, we need protective measures put into place. But these measures have been viewed as too expensive.
Why hasn’t flood insurance become as necessary as fire coverage? SL: The lack of available data on flooding. Insurance companies love data and modelling so they can evaluate to determine risk, and the lack of accurate flood mapping on a granular level is the single biggest obstacle to date. Certainly this problem is not insurmountable. We know the technology is there, and it is even better than what we had only a few years ago, but it does come with a price tag. As a general statement, the lack of data makes it difficult for an insurer to provide a coverage – we wouldn’t provide a coverage for a risk that we don’t have data on. The fact that the NFIP has had less than desirable success hasn’t inspired confidence. And looking around the country, the stakeholders here haven’t turned their attention to the issue of flooding. But events such as those in Calgary become a catalyst and instill a sense of urgency.
Can the industry sustain another summer of flooding next year? SL: The final tally is still not out. Swiss Re issued its report on the first half of the year, which did not include the Toronto floods. Right now, we estimate a $2-billion insured loss, $4 billion in economic loss. I don’t know if our numbers are exactly right, but we anecdotally think most companies will find
the floods of this summer the single largest event in Canadian industry. Clearly, we have seen the companies report their losses and results – and those losses have had an impact – but the industry is still moving along, paying its claims, and everyone is still here and the doors are open. I don’t know if they can do that year-after-year, but most of the companies have a global reach, and they have sustained larger losses to date, like earthquakes and natural catastrophes around the world. But I don’t think anyone wants to re-live an event like that from a personal or an insurance point of view!
Analysts are predicting an uptick in premiums. Can this be avoided?
SL: It is for the insurance companies to deter-
mine the appropriate premium for the risks they have. The market will come into play to determine what the rate will be. It’s not necessarily just premium that may be impacted. There are a number of factors that an insurance company would take into consideration before the final premium is set, such as changing coverage.
In conclusion… As a reinsurer, Swiss Re is actively involved in the assessment and research in the models of countries around the world. We are the only G8 country without a flood program, which makes us an anomaly. We would like to see all the stakeholders move forward to get the right solution for Canada. We are literally cherry picking the pros and cons of programs around the world, and seeing what is best for Canada.
OCTOBER 2013 | 31
FEATURE / TECHNOLOGY
FUT Accurate and granular mapping data can turn reaction times from weeks and days into hours and seconds for insurers. The technology exists today, so what’s the hold up?
The granular mapping information insurers have so longed for is already here, says one of Canada’s leading location-based information companies. “We have the data and a wealth of information,” says Phil Kaszuba, vice president and general manager of DMTI Spatial Inc., based in Markham, Ont. “When catastrophes happen, it becomes evident that the correct data, partnerships and timelines are crucial to efficiently and effectively help people in need.” Kaszuba says that DMTI Spatial has a wealth of granular location information available from across Canada – information that was put to good use by First Calgary during the Alberta flooding. 32 | OCTOBER 2013
“In the case of the Calgary flood, we were able to provide our clients with all the addresses within the impacted area, so that they could cross reference it against their existing customer base,” he says. “First, Calgary Financial was then able to quickly respond to their members and employees with financial-relief assistance and advice.” In fact, DMTI’s client list reads like the who’s who of corporate North America, with names such as TomTom, Apple, Nokia, Google, Garmin, OnStar, Genworth, and the list goes on. In the aftermath of the Lac-Megantic rail disaster, DMTI Spatial had a geographical layout of the impact zone, and through its partnership with ERIS
OCTOBER 2013 | 33
FEATURE / TECHNOLOGY
The Downtown East Village of Calgary, Alta., on June 21.
“We can provide a model of potential risk using this data anywhere in Canada – and have it available in literally milliseconds.” Phil Kaszuba (Environmental Risk Information Services) was able to provide a comprehensive model of what had happened. “We have a database of all the train lines, power lines and cell towers in Canada – and through our partnership with ERIS, a holistic picture of the environmental situation,” said Kaszuba. “We can provide a model of potential risk using this data anywhere in Canada – and have it available in literally milliseconds.” The need for accurate, granular mapping of population centres is crucial for insurers. Sharon Ludlow, president and CEO of Swiss Re, has stated that not only is flood insurance needed, but so is a flood program, specially tailored to the needs of specific regions.
34 | OCTOBER 2013
“I believe you can have a subset of flood insurance for each particular region,” says Ludlow. “We have a category for highest risk drivers in auto coverage; we could have something like that to address highrisk locations.” And the only way to do that is through the type of detailed mapping that a company like DMTI can provide. “We have to have adequate risk mapping. We do have some, but not at a granular level,” says Ludlow. “We need to be able to compare and determine what the risk looks like, what the right risk and premium should be.” Swiss Re distributed a CAT-NET model of Calgary during the flooding – a joint project with the European Space Agency – that used satellite images to map the affected regions and area during and immediately after the flood. “We distributed these images to our clients. Some of the larger, more sophisticated companies (like DMTI Spatial) already use this technology,” Ludlow says. “By applying it across Canada, we can use that technology to produce the right models and be able to price for the risk.” “We have quite a few banking and insurance clients, and when the crisis hit, they started working together with us,” adds Kaszuba. “Especially our
STATS: • The flood impacted over 100,000 Albertans in 30 communities • More than 14,500 homes were damaged • More than 8,000 applications for disaster recovery support • Payments of more than $7 million have so far been made.
relationship with the insurance mortgage underwriter Genworth, one of our major clients. From a customer service perspective, First Calgary was reaching out to people within a day. Being able to understand what the potential risk is as far as a disaster like that, with that level of detail, and getting that information within a day, saved them weeks and weeks of work.” The $64,000 question is: With all of this information that DMTI Spatial has, can it be made available to insurers across Canada today – and more importantly, how much would it cost? “We want this information available to all companies across Canada,” says Kaszuba. “Cost? The cost structure is not the question. Is the computing power and the information available? That is the real question.” It is the investment in information that DMTI Spatial has to offer. “We have over 270 geospatial layers of information available,” Kaszuba says. “We refer to it as an ecosystem. Through our partnership with ERIS, we are able to determine the proximity of environmental perils. For example, if you are 50 metres away from a buried oil tank that could be leaching, we can provide not only our information, but that of our third-party partners, ERIS, as well.” In addition to the environmental and elevation information available, DMTI Spatial also has access to earthquake information. “With our comprehensive high precision location information and our partnerships, we can deliver value to many industries including insurance companies and banks,” he says. “It is the information that Genworth uses for their mortgage model, an automated process that takes into account 27 different variables to create a neighbourhood score. Threequarters of every insurance request can be approved by having this information.”
A topographic map portrays and identifies features of the earth’s surface as precisely as possible within the limitations imposed by scale. Topographic maps depict relief, drainage, forest cover, administrative boundaries, populated places, transportation routes, and other cultural features.
The National Topographic System (NTS) provides topographic map coverage of Canada at the following scales: 1:500,000, 1:250,000, 1:125,000, 1:50,000 and 1:25,000. Granular mapping goes into much greater detail, with DMTI having over 270 geospatial layers of information through its partnership with ERIS.
Phil Kaszuba Phil Kaszuba is vice-president and general manager of DMTI Spatial Inc., based in Markham, Ont.
OCTOBER 2013 | 35
BUSINESS STRATEGY / BUSINESS BUILDING
MORE IN EASY
10 STEPS Ten steps to a better you. Sounds cliché, but following these tips from the industry’s brightest will lead you to revenue growth, even in a mature market. By Laura Kupcis
Brokers need to adapt to new technology to improve their customer base and maximize profit, or risk seeing that customer base wither and die, say some of Canada’s insurance industry leaders. “We have let the customer expectation change without keeping up to the pace of that change,” says Randy Carroll, CEO with the Insurance Brokers Association of Ontario. “We’ve got a little bit of catching up to do.” When the direct writer came on scene seeking the online customer, brokers remained steadfastly traditional. This has proven not to be beneficial over the long-term. Customers are purchasing from other intermediaries because they are being offered a way to conduct business that appeals to them — mainly online. Brokers need to look at ways to transition into 36 | OCTOBER 2013
the 21st century, all the while maintaining an eye on the core piece of business: the traditional customer. “If you set a target in regards to attracting new business to the channel,” says Carroll, “then brokers will be forced to look at ways in which they change the way they do business on a day-to-day basis to attract that new business to the channel.” While change can be daunting, brokers are clearly headed on the right track: For the first time in more than 15 years, independent insurance brokers in Ontario did not see a decline in market share in 2012 over 2011.
ADOPTING NEW TECHNOLOGY Incorporating new technology will by its very nature increase client communication,
says Ted Harman, secretary-treasurer for the Regroupement des cabinets de courtage d’assurance du Québec. “We are not at the forefront of adopting new technologies and new means of communicating with clients,” Harman told Insurance Business magazine. Cory Young, chief operating officer at Rhodes & Williams Insurance Brokers, agrees that brokers need to take advantage of what is available in order to compete, or risk being left behind. “You don’t have to take on every new technology,” says Young. “But if they make sense, they are positive and mean better business, you owe it to yourself to at least look into them and see if they can help you improve your business.” A brokerage needs to adapt and embrace available technologies in ways that are most appropriate to its customer base, points out Sheldon Wasylenko, technology champion for the Insurance Brokers Association of Canada. Technology has a big role to play in helping brokers create efficiencies, but it cannot be technology just for the sake of technology.
WEBSITES AND SEARCH ENGINE OPTIMIZATION
Websites need to be updated to include making the site not only easier to navigate, but also easier to find. If a brokerage is unsure of what changes to make, hiring a third party to come in and perform an audit of the online presence is helpful. Brokerages need to ensure their website — and what is being offered on the landing page — showcases what the company has to offer and gives a positive reflection of the office. Young of Rhodes & Williams Insurance Brokers says his brokerage looked at studies conducted by the IBAO to establish what clients need and want from a company, then determined the best way to work that into the website. Through the website, social media and any other available means, the company is continually creating and sharing insurance content. This includes video, which, according to Young, is a key piece of the online puzzle, as video draws people’s attention and provides them with information in an easy to consume and understand medium. Furthermore, adds Carroll, brokerages should pay attention to who is visiting the site, where they are coming from and when they are leaving. Then they
can use those analytics to improve the customer experience.
MOBILE APPS AND MOBILE OPTIMIZED WEBSITES
Improving that website experience also means a mobile-optimized site. More customers are using phones and other handheld devices to surf the Internet — and obtain information about insurance coverage. This means setting up a website geared specifically for easier navigation on these devices is essential. Additionally, as more customers download applications onto their smartphones, having a direct link with customers through a mobile app can be a value added. A mobile application increases interaction between the customer and the broker, says Carroll. Furthermore, it gives the customer peace of mind that they have a broker in their pocket when needed, he adds. IBAO offers at a reduced cost, through Independent Broker Resources Inc., a mobile app to any member of a provincial broker association across Canada. The application is branded to the individual brokerage and is available in English or French. Through the mobile application, a customer can fill out a claims report in the event of an accident. Further enhancements are slated to come over the next few years, including the ability to push information directly to the client.
Scott Treasure Chief executive officer of Treasures Insurance
Cory Young Chief operating officer at Rhodes & Williams Insurance Brokers
Another method of connecting with both existing and potential clients is through social media. While it can be daunting to add one more task to a day already filled to the brim, there are many would-be clients who rely heavily on social media for information and referrals. “If a broker is serious about building and maintaining a broad-based social media presence, there will be positive dividends that flow from that activity,” says Harman. For Young, being able to help somebody as it relates to insurance will result in them seeing the industry in a better light, which bodes well for a brokerage. He reflects on a time where he noticed someone lamenting on Twitter that her “insurance company sucks.” He responded, learned the entire story, and OCTOBER 2013 | 37
BUSINESS STRATEGY / BUSINESS BUILDING
“Some brokers have really nailed it down and are making it fun, they are making it interactive,” says Carroll.
Randy Carroll CEO with the Insurance Brokers Association of Ontario
tried to find a way to help. Within 20 minutes, he had her on the phone and had secured her a new insurance policy. This client has since recommended the brokerage and tweeted about how pleased she is with the quality of service. “I know I have clients that weren’t here (on Twitter) otherwise,” says Young, “that have never heard of us, and now they are excited clients of ours.” Social media experts agree you need a strategy: build it, schedule it and maintain it; do not create a profile and then simply let it lie fallow. At the same time, there is no need to be competing with mainstream news. Keep the information up-to-date, relevant and tied to the brokerage or broker. For some brokerages this will mean posting solely about insurance-related items, for others more personal items will also flow into the mix. “Some brokers have really nailed it down and are making it fun, they are making it interactive,” says Carroll. “Then you get a good solid base of followers from your existing book and it’s a lot easier to get a referral as a result of that.” The audience — and potential client list — is increased every time a follower reposts the information a brokerage has shared. “You just interact with people,” says Young. “It’s not that different from what we’ve always done. We’ve always networked. This is just a different way of doing that exact same thing.”
BROKER MANAGEMENT SYSTEMS AND REAL TIME POLICY CHANGES
Cost savings, and increased revenue to a brokerage, does not always come from the clientbroker relationship. Being able to transact business from one operating system — the broker management system — would be a large benefit to brokers. Wasylenko says that currently, brokers have to leave their broker management system (BMS) and log into a carrier system to complete a transaction. This creates inefficiencies given a broker deals with
38 | OCTOBER 2013
multiple carriers. The data exchange program, run by the Insurance Brokers Association of Canada, is intended to be a solution to this concern and ultimately make transactions between brokers and carriers seamless. The ultimate goal is for transactions generated within the BMS to be sent over to the carrier electronically. The carrier would then capture that transaction, process it and, ideally, send back an answer in real time — without ever having to leave the BMS, says Wasylenko. The project was split into three phases, with the first two already complete. Currently the project is in the third phase, which is testing between BMS vendors and carriers. “This is going to create some efficiencies within the broker distribution channel and allow us to more effectively compete with the direct writers,” explains Wasylenko.
FORM OR JOIN A GROUP
When it comes to competing, joining forces with colleagues is another way, brokers can potentially see increased revenue to their brokerage. As a commercial broker, it might be beneficial to look for existing groups or to create a group with other like-minded brokerages. Pooling resources, or having insurance companies recognize the books as a larger book, can have direct implications on contingent commissions and some of the profits that can be made on the back end, says Scott Treasure, chief executive officer of Treasures Insurance. “If you join up with a group, potentially you could see CPC on dollar one of your premium volume with any one carrier,” says Treasure. “The volumes of the group support the contracts that the insurance companies want.” Pooling volumes could lead to having a larger volume recognized and, ultimately, improve a brokerage’s rates and contracts. A smaller brokerage might have smaller books that do not qualify for contingent profit commission (CPC) — and the numbers just keep increasing. In the group that Treasure has recently formed with other brokerages, each company maintains its own independence. They own their own book, but have put the control mechanism in a board at the top that will handle the books of business. “For us, that’s a democratic board, one vote per member,” says Treasure. “We maintain that voice,
and our own operations, while getting more revenue out.”
AVAILABILITY AND COMMUNICATION
All these changes are well and good, but if a brokerage is not available to speak to clients or potential clients it could be all for naught. The traditional broker model is Monday to Friday, 9-5. This means a broker is losing the customer who wants to take the next step of a transaction after hours. A direct writer is currently available to offer up that information, where many brokers are not. “We’ve got to open up new ways of communicating and open up new ways of giving customers the ability to access us,” says Carroll. “That could be opening up a true online experience; it could be extending our hours. You need to be accessible.” Being accessible also means responding to a request for information quickly. In a world when information is readily available, people move on quickly. A potential customer has forgotten about a brokerage if it hasn’t provided the service they need, Young said. Forms of communication have expanded to include social media, email, text messaging, etc. Customers are using all these avenues day in and day out. To keep pace, brokers need to connect with clients in ways that are not traditional.
Competing in an online world, in addition to maintaining a physical brokerage, can come with additional costs. This means that improving workflow and efficiency is integral to cost savings. “There are a lot of workflow efficiencies that are there for the broker to take advantage of today,” says Carroll, “and there are workflow efficiencies around the corner that the broker is going to have to be ready for.” By finding ways to better use employee time, costs can be curbed simply by shifting talent. This can be done through software that allows the electronic sending of documents from the insurance company to be attached to a customer file. From there, a brokerage can deliver that same document in electronic format to the customer. Brokerages need to look at managing electronic signatures on applications or endorsements, adds Carroll, transitioning website and policy offerings
to online quoting, moving the customer from a paper application to an electronic one, etc. The savings costs to a brokerage from reduced mailing costs alone can be monumental.
CUSTOMER LOYALTY/REFERRALS/ VALUE ADDED
In embracing all of this new technology and changing business landscape, it is imperative to not lose sight of what a brokerage can offer to a customer: independence, advocacy and the increased significance during a client’s time of need. “All of that value proposition is what should be selling our broker channel,” says Young. “Our value proposition stands for itself.” Brokers have a physical presence and customers know that if they have a question, they can walk in the front door or pick up the phone and have it answered, says Harman, adding that a large proportion of new business to a brokerage comes from referrals, while existing clients who are happy with the value proposition brokers offer turn around and refer the brokerage to family and friends. “(This) will remain one of the primary sources of business for insurance brokers across the country,” says Harman.
Ted Harman Secretary-treasurer for the Regroupement des cabinets de courtage d’assurance du Québec
Sheldon Wasylenko Insurance Brokers Association of Canada technology champion
Brokerages also need to be going back to the customer to determine where else they can improve, and ultimately, maximize returns to the brokerage. “One of the things that we lack as an industry is a good benchmark as it relates to brokerage operations and customer satisfaction,” says Carroll. In Ontario alone, brokers deal with six million policy holders, but very few are asking customers questions regarding the claims experience, satisfaction, customer service, quality of coverage, etc. “Once I set the benchmark as to what that customer satisfaction scale looked like, then I could actually go back and improve on that year-over-year,” Carroll says, adding that brokers are starting to better understand their customers and are beginning to offer new ways of doing business with the customer. “Hopefully that trend of not losing business either continues, or we end up getting market share back,” says Carroll. “But at least putting a stop to the bleeding would be a minimum benchmark that I would like to see at the end of 2013.” OCTOBER 2013 | 39
FEATURE / LIFE INSURANCE
LIFE, LIBERTY… AND LESS TAX
Many of Canada’s wealthy have used insurance to reduce the tax exposure on investment income. Chris Karram, of the Safebridge Financial Group, offers another way to sell clients on that essential A very common discussion around a kitchen table is “I can’t believe how much tax the government took from my paycheque this month.” That’s because Canadians are used to paying upwards of 50 per cent of their annual income back to the government, which means less money in their own pockets. What makes it worse is when one is able to build an asset base that starts to earn interest, dividend or capital gain income on the money they’ve invested. Despite the fact that it feels good to know your portfolio is growing, it is easy to become disheartened when you realize that a good chunk of your profit is going to disappear forever. The best known way to minimize the tax bill incurred on the growth of one’s portfolio is an RRSP. Just about every Canadian understands how their RRSP works, or at least the concept of how it works, but their tax planning seems to stop there. A very common misconception is that an RRSP
Savings in 46.41 per cent tax bracket UNIVERSAL LIFE POLICY $1,068,282
Those choosing a Universal Life Policy stand to put away over $1 million, compared to the traditional RRSP route of $601.547.
40 | OCTOBER 2013
is the only option when it comes to saving towards one’s retirement in a tax-preferred way. Thankfully, Canadians have more then one tax-preferred vehicle available, but choosing the best financial product for your situation takes some planning since different types serve different functions. One specific vehicle that has been around for many decades is a permanent life insurance policy such as whole life or universal life. These two forms of life insurance have been used by many Canadians to protect their families from an unexpected death, the same way other life insurance products do. But what can be amazing about these policies are the tax advantages that come with owning them. In fact, many of Canada’s wealthiest people have used these types of insurance policies to shelter their investment income from tax despite the fact that they already had enough life insurance.
HOW IT WORKS A permanent life insurance policy is generally made up of two components. The first is the obvious death benefit, which is the value that is paid out to the beneficiary upon the death of the life insured. The second component is the cash value, which is very similar to that of a traditional mutual fund. The difference, however is that any money invested inside of a life insurance policy can allow the policyholder to accumulate cash values, within certain regulatory limits, without paying income tax on the growth. What’s more, the cash values inside of your policy can be accessed to supplement a retirement income through a policy loan, partial surrender or loan strategy that can actually create
the equivalent of a tax-free income stream when needed. There are no age limits as to when or if you have to withdraw your cash value, and the “MTAR,” or “contribution limit,” is in no way connected to your income, but rather to your actual “cost of insurance.” If you want to invest more than the contribution limit allows, simply increase the size of your death benefit and away you go. However, it is important to note that straight cash withdrawals are subject to taxation based on the rates and rules in effect at the time you withdraw the funds.
WHO BENEFITS? Canadians who have maximized their RRSP contributions and are looking for an alternative method to save for their retirement are in a great position to take advantage of this tax-preferred life insurance vehicle. As well, those who are interested in protecting their assets from creditors or personal liability could very well be a great fit for a taxadvantaged life insurance policy.
HOW ABOUT AN EXAMPLE? There are different types of structures and products available within the permanent life insurance category. For the purpose of our example, we will
look at a non-smoking male, age 35, who is looking to a buy a $1-million universal life insurance policy, and we will assume an annual return of only 6 per cent (if the markets perform better than that, your cash values will be even higher). Let’s assume this individual was in a position to save $1,000 per month in addition to his monthly or annual RRSP deposits. If he were in a 46.41 per cent tax bracket, he would be left with a total of $601,547 after taxes at the age of 65. In comparison, if he were to invest that same $1,000 per month into the above mentioned universal life insurance policy, he would end up with a whopping cash value of $1,068,282! What’s more, if he wanted to prolong when he would start to withdraw his RRSP savings until the age of 69, he could draw an annual income of $85,808 from age 60 to 69. Let’s not forget that this is while time our “client” owned and continues to own a milliondollar life insurance policy. As demonstrated, there are definitely many unique strategies available to Canadians when it comes to saving for their retirement, while minimizing their tax bill. The key to finding the right solution is to walk through the appropriate financial planning process to better define which product, or combination of products, is best suited for you.
Chris Karram (far right), partner Elisseos Iriotakis (centre) and Drew Donaldson advise some of Canada’s wealthiest individuals on tax savings. About the writer: Karram is the founding principal and financial consultant with Safebridge Financial Group.
OCTOBER 2013 | 41
INSURANCE BROKERINGG INDUSTRY
THE VIEW FROM THE TOP:
42 | OCTOBER 2013
THE CIO VIEW...
CHIEF INVESTMENT OFFICERS THINK CENTRAL BANK POLICY FIDDLING IS THE BIG ISSUE FOR THE NEXT YEAR, ESPECIALLY IN THE AMERICAS AND EUROPE WHICH ISSUES POSE THE GREATEST RISK TO INSURANCE COMPANIES’ INVESTMENT PORTFOLIOS? 25
of insurers believe investment opportunities are improving
Accommodative monetary policies
European debt crisis
of CIOs intend to increase overall portfolio risk
Credit and equity market volatility
Slow U.S. economic growth
of insurers believe interest rates will increase significantly in the next two years
INCREASED VOLATILITY LOOKS TO BE THE WATCH-WORD ACROSS THE BOARD DO YOU EXPECT VOLATILITY IN THE FOLLOWING MARKETS TO INCREASE, DECREASE OR REMAIN THE SAME OVER THE NEXT 12 MONTHS? Currency markets
Remain the same
A GLOBAL LOOK AT TOMORROW’S BIG ISSUES
Source: GSAM Insurance Survey, Goldman Sachs Asset Management, April 2013
...THE CFO VIEW
THE SURVEY SAMPLE 252 insurance industry financial executives, made up of:
CHIEF FINANCIAL OFFICERS ARE MORE CONCERNED WITH MARKET VOLATILITY THAN THEIR INVESTMENT-FOCUSED COUNTERPARTS WHICH ISSUES POSE THE GREATEST RISK TO INSURANCE COMPANY BALANCE SHEETS?
of CFOs believe insurers are adequately or overcapitalized
chief investment officers
of CFOs think excess capital should be used to support organic growth
chief financial officers
14% European debt crisis
Slow U.S. economic growth
Accommodative monetary policies
who serve as both the CIO and the CFO
of CFOs expect M&A activity to pick up in the next three years
Credit and equity market volatility
Where are they based?
WHICH OF THE FOLLOWING DO YOU CONSIDER TO BE THE GREATEST ENTERPRISE RISK IN THE NEXT 12 MONTHS? (%)
Europe, Middle East and Africa
9 9 9 Life
10 10 10 10 0
P&C/Non-life Underwriting risk
Multi-line Regulatory risk
Reinsurance Credit risk
in insurance balance sheet assets
CFO’S CONSIDER INTEREST-RATE RISK AND UNDERWRITING RISK TO BE THEIR BIGGEST CONCERNS ACROSS A NUMBER OF LINES
In total, the respondents represented over
0 0 0 Health Inflation risk
OCTOBER 2013 | 43
BUSINESS STRATEGY / COMMUNICATION
STANDING IN THEIR SHOES Making sure you understand a potential clientâ€™s world view is often the best way to effectively influence them, argues Roger Ellerton
44 | OCTOBER 2013
People may not remember exactly what you did, or what you said, but they will always remember how you made them feel - Maya Angelou As an insurance broker, you are constantly influencing others to accept you, your ideas, products or services. Many people have difficulty influencing others because they tend to use the same strategies and emphasize the same needs and values with other people that they would like other people to use with them. Alternatively, they take the ‘spray and pray’ approach, hoping their clients will find something useful in the information provided. Each of us has different needs and different strategies for buying. To be truly effective at influencing others, you need to view the situation from their perspective; that is, to determine what is important to them and how they like to purchase. Take me, as an example: I am not an insurance broker. From my perspective, all insurance brokers are the same – you have access to insurance policies with various types of coverage and premiums. It is up to you to be the difference that makes the difference. I want you to help me feel good about the process, and to allow me to buy the insurance that I need rather than sell me insurance.
DETERMINE YOUR CLIENT’S NEEDS AND VALUES Far too often we think it’s the product or service that people want to buy. In reality, people buy the benefit that the product or service provides. If you are not certain what is important to your client, you will not be able to present your products or services clearly. Having an understanding of your client’s needs and values can:
• shorten the whole influence process • provide a better understanding of how to present your offering • lead to a better agreement for both parties • give you an opportunity to suggest something the other person forgot, did not think was possible, or were unaware of • create a firmer foundation on which to positively conclude this and future interactions How do you become the difference that makes the difference? Begin by asking questions. Listen for what is important to your client and how they express what is important to them. Some clients will come to you with their minds already made up as to what is the best insurance for them, having usually obtained ‘expert’ advice from their friends or an Internet search. They may be incorrect, but rather than telling them why their choice is not a good idea given the current financial climate, or simply offering the best available premium, acknowledge their choice and explore the reason behind it. Once you have clearly identified the underlying need or value, you can raise the possibility that this need could be addressed in ways that provide additional benefits. With some people, you may have to ask lots of
Each of us has different needs and different strategies for buying. To be truly effective at influencing others, you need to view the situation from their perspective
OCTOBER 2013 | 45
BUSINESS STRATEGY / COMMUNICATION
The words and phrases we use give away our world view. By listening carefully to a client’s communication style, we can work out what’s important to them, and adjust our responses accordingly questions. With others, you may have to interrupt politely to ask questions to get them back on track. A client’s needs and values can be intangible, such as respect, or tangible, such as a monthly payment that is within their budget. Having an understanding of your client’s specific needs and values provides clarity on what is truly important to them and will help you recognize where you can compromise, suggest trade-offs or hold firm. I have found that specifying your client’s most important needs and values in terms of the acronym ‘RIGHTS’ (see box opposite) can stimulate your thought processes, encourage you to take a more concerted look at their needs and values, and help you remember what is important to your client.
SPEAK TO ME IN A WAY THAT MAKES ME FEEL UNDERSTOOD Equally important is how your client expresses their RIGHTS. Each one of us experiences the world around us in our own unique way; that is, we tend to focus on certain types of information to the exclusion of others. For example, some people focus on what they want to achieve; others are more interested in avoiding potential problems. With the former, you would emphasize how your
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proposed solution would help them to achieve what they want. With the latter, you would point out how your proposed solution would allow them to avoid potential problems. The words and phrases we use give away our world view. By listening carefully to a client’s communication style, we can work out what’s important to them and adjust our responses accordingly. And these are exactly the words you can use to motivate them. Listen for the key words and phrases that betray your client’s views, and use the same words and concepts to explain your offering. The added advantage is that these words also have a clear meaning to your clients, reducing the risk of misunderstanding. Therefore, if they talk about ‘avoiding a potential problem,’ then say that when presenting your offering, instead of referring to ‘mitigating undesired consequences.’ 1. TOWARDS VS AWAY FROM Towards people are focused on their goals. They are motivated to have, achieve and attain. They are clear about what they want. Key phrases: accomplish, attain, get, achieving, goals, results and outcomes. Away-from people often see only what may go wrong in a given situation; they notice what should be eliminated, avoided or repaired. They are motivated when there is a problem to be solved or something needs fixing. Key phrases: avoid, steer clear of, prevent, eliminate, solve, get rid of, fix, prohibit. 2. INTERNAL VS EXTERNAL Internal people have internal standards and use them to make their own judgments about you or your offering. They have difficulty accepting other people’s
FIGHT FOR YOUR RIGHTS
opinions. If they receive negative feedback regarding something they believe to be correct, they will question the judgment of the person giving the feedback. They assess the validity of information from outside sources according to their own internal standards. You can motivate this type of person with the following phrases: Key phrases: I just know, it feels right, I’ll be the judge of that, I know what’s best. External people need outside direction and feedback to decide on the insurance that is best for them. Without external validation, they may feel confused. They will turn to you as an expert for your opinion. Key phrases: according to the experts, your friends will think highly of your choice
Use this profile to refresh your memory about each client, and modify it as you repeatedly meet and focus on their specific needs. By refining this profile, you will improve the way you interact with your clients, increase your closing success rate, and receive more referrals.
Procedures people like to follow established rules and processes. They are more concerned about how to do something than about why they should do it. Bending the rules is sacrilege. A procedures person will be interested in the process, rather than the outcome. To motivate a procedures person, for example, state that there are five critical steps to acquire an insurance policy. Tell them what these five steps are. Then lead your client through these steps in the order you specified. Key phrases: correct way, tried and true, first, then, lastly, proven path.
Reputation Risk (minimization) Reduce (costs) Respect (their viewpoint) Respond (to their needs)
Information (on premium or how to better handle their coverage)
Guarantees (premium for a specific period of time) Green (environmental priorities, such as electronic rather than paper documents)
Health (reduced stress) Helpful (quality service) Heard and feels understood
Time (meetings are convenient) Time (to procuring cover) Timely (response to requests)
Safety (affordable payments) Savings (money) Satisfaction (with process and results)
3. OPTIONS VS PROCEDURES Options people are motivated by the possibility of doing something in an alternative way. They enjoy bending the rules or exploring new ideas and possibilities. An options client may continue to explore other alternatives, even when the best one for their situation has been identified. Key phrases: alternatives, bend the rules, flexible, unlimited possibilities, expand your choices, options.
Assessing your clients’ needs using the acronym RIGHTS can help you understand their point of view. For each client, identify at least one key need or value for each letter that is most important to your client. By doing this, you can build up a quick profile of that client.
Roger Ellerton is a public speaker, coach and author. This article is based on his book, "Win-Win Influence: How to Enhance Your Personal and Business Relationships.” For more information, see www.renewal.ca.
OCTOBER 2013 | 47
COMMENT / ADJUSTER’S CORNER
CAN WE BE
In the drive to efficiency, generalists are being called upon to do some very specific adjusting. That may have its downside, writes David Porter of Granite Claims Solutions As I made my way to another appraisal recently, I gave thought to the rise in the number of files that go sideways. I’m not complaining about the work, but as a student of our business and product, I gave pause for thought. Allow me to muse; and as I do, I invite you to ponder and form some thoughts of your own. I’m not sure we’ll reach any conclusions in this modest space, but it may lead to a different perspective. I started my examination with demographics from two angles. The first is easy: the consumer has developed high expectations, sometimes sprinkled gingerly with some cynicism. But that seems to me to be more a symptom, or a consequence, of some of our futility in managing those expectations. More so, I see a workforce that is different. Not better or worse than 25 years ago, just different. One that values life away from the job. One that is prepared to do the work, but is perhaps less likely to be a full-fledged student of insurance. Combined with losses of increasing complexity and a drive to control expense, perhaps we are pushing beyond common sense. Are we asking too much of the general adjuster to handle a loss of a niche level of difficulty? Invariably, mistakes occur but their frequency will increase when we turn to a normally competent professional who isn’t equipped with the skill set required for the loss. Lawyers don’t step outside their area of expertise and by commoditizing too much of our industry, we lose the ability to satisfy our customers and properly control indemnity simultaneously. The trend to turn to a single provider of service 48 | OCTOBER 2013
is a natural response to increasing pressure to control costs and to reduce the burden on insurers by making one call to the vendor for all wrinkles. This leads to delegation of responsibilities, but do we do so blindly to our own detriment? I had an adjuster bring me a niche claim file the other day where the adjustment was handled by a preferred national firm, despite their lack of expertise in the market. The result was wasted indemnity to the tune of $30,000. And the insurer is none the wiser — they don’t know because their own staff aren’t experts in the field. In this instance, the policy holder hasn’t directly suffered (although we all do through increased premiums). But I see it on first-party losses where the adjuster (who might otherwise be good and clearly means well) is simply over their head. It’s soon too late to rectify the insurer’s view that the claim is inflated and lines in the sand are drawn. It’s a nasty circle. There is insufficient time to learn all there is to know to be able to efficiently handle every file that comes in a world of consolidation. And the time taken to learn is often seen as a hindrance to dealing with files and earning an income. I applaud the individuals who invest in themselves and the companies (insurers, brokers and adjusting firms alike) that make the commitment. But some of that education is wasted when we don’t get the risks and the losses to the right professionals. Which brings me to the question begged throughout: If we slowed down a bit and handled these losses properly, would we return to a world with fewer appraisals and would the savings justify the cost? Anyone know an actuary?
David Porter is the VP Western Region, Granite Claims Solutions.
Granite Claims Solutionsâ€™ Complex Loss Team
Complexity Made Simple.
www.graniteclaims.com/gcstech For more information, please contact: 1.800.668.6100 firstname.lastname@example.org www.graniteclaims.com
LEGALLY SPEAKING / CLAIMS LIMITS
COURT CLEARS UP
The Ontario courts may just have thrown out everything you thought you knew about time limits for all-risk claims, writes Mark Mason, with McCague Borlack. But don’t forget to read the fine print It’s a case that would otherwise have slipped under the radar screen of most brokers, and rightfully so. After all, Boyce v. Cooperators General Insurance, 2013, focused on what appeared to be a straightforward case of damage – in this particular instance, a clothing store. On Oct. 30, 2010, the owners – Mr. and Mrs. Boyces – were confronted with a foul stench after entering the women’s boutique. That smell came courtesy of a skunk and was powerful enough to send the couple running for the phone and their insurer, the Cooperators. The business was immediately closed for cleanup, with costs also stemming from the loss of inventory
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deemed beyond salvage. Cooperators took the position that the smell was caused by a skunk and that the damage was not covered by the policy. The Boyces claimed the business had been vandalized, a peril covered by the policy. The Boyces issued a Statement of Claim against Cooperators more than one year after they discovered the foul odour, but less than two years after the incident. Cooperators moved for summary judgment claiming that the action was time-barred by a oneyear limitation period. The judge dismissed Cooperators’ motion. Cooperators appealed the decision to the Ontario Court of Appeal.
On appeal, the Court of Appeal framed the central issues: Is there a term in the contract of insurance that provides for a one-year limitation period? If there is a term in the contract imposing a oneyear time limit on claims, is that term capable of overriding the otherwise applicable two-year limitation period set out in the Limitations Act, 2002? Is the contract of insurance a “business agreement” as defined in s. 22(6) of the Limitations Act, 2002? The insurance contract contained the following provision: “Every action or proceeding against the insurer for recovery of any claim under or by virtue of this contract is absolutely barred unless commenced within one year next after the loss or damage occurs.” The wording of this provision is the same as statutory condition 14 as set out in s. 148 of the Insurance Act. The court agreed with Cooperators that the one-year limitation period in the policy was clear and unambiguous The second and third issues turned on the interpretation of section 22 of the Limitations Act, 2002. The section provides that a limitation period under the Act could be varied by a “business agreement,” which was defined in the Act as “an agreement made by parties none of whom is a consumer, as defined in the Consumer Protection Act, 2002” (“CPA”). A “consumer” in the CPA is defined as “an individual acting for personal, family or household purposes and does not include a person who is acting for business purposes.” Based on this definition, the court had no trouble concluding that the insurance contract was a “business agreement” capable of varying the statutory limitation period of two years. As a result, the court allowed Cooperators’ appeal and held that the Boyces’ claim was barred as they had commenced the action after the one-year limitation period as set out in the policy. The Boyces decision establishes important principles for claim handling. The case stands for the following propositions: If the subject matter of the insurance relates to business purposes, a one-year limitation period will apply if the language in the policy adopts the wording of or is similar to statutory condition 14. If such a policy is otherwise silent about the limitation period, the two-year limitation period in the Limitations Act, 2002, will apply. If the subject matter of the insurance relates to “personal family or household purposes,” such as homeowner’s insurance, the two-year limitation
period in the Limitations Act, 2002, will apply. The decision also has significant implications for subrogation. An insurer’s right of subrogation is derived from and dependent on the insured’s right of action. If the insured’s right of action is limited by contract, the subrogating insurer’s claim will also be limited. Following the Boyces decision, if the insured enters into a business contract with a third party in which there is a clause that purports to vary the limitation period for any right of action, the subrogating insurer will be bound by the terms of the contract. A subrogating insurer can no longer assume that the limitation period for commencing a claim involving business or commercial entities is two years from the date of the occurrence. When investigating such claims, insurers should take immediate steps to review any business agreements or contracts entered into by their insureds and potential third parties which may impact on the insurer’s right to pursue subrogation. This has always been the case with hold harmless clauses and waivers of subrogation. The decision in Boyces case should alert insurers that subrogated actions could also be contractually barred in circumstances where the limitation period has been varied in a business agreement.
Mark Mason Partner, McCague Borlack LLP
BROKER BULLET POINTS The Boyces decision lays out key principles for claim handling: • It’s all about business. A one-year limitation period will apply if the language in the policy adopts the wording of or is similar to statutory condition 14. However, if otherwise silent about the limitation period, the two-year limitation period will apply. • If the subject matter of the insurance relates to “personal family or household purposes,” such as homeowner’s insurance, the two-year limitation period will apply. ...and on subrogation: • If the insured enters into a business contract with a third party in which there is a clause that purports to vary the limitation period for any right of action, the subrogating insurer will be bound by the terms of the contract.
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FEATURE / PRIVATE PERFECTION
TAKING THE REINS The departure of Shawn DeSantis from RSA meant the dual promotion of Donna Ince and Martin Thompson to senior VP roles
RSA’s Donna Ince and Martin Thompson have each moved up the ranks since the departure of Shawn DeSantis, former executive vice president, RSA Insurance, this summer. Ince was appointed senior vice president of Personal Insurance and Commercial Insurance in July, while Martin Thompson took the reins as senior vice president of Global Specialty Lines in August. They each sat down with Insurance Business Magazine to discuss what their visions are for these lines of insurance.
IB: Donna, P&C is arguably Canada’s most hotly-contested segment. What is on your agenda in terms of strengthening the hands of brokers within your network as they compete with consumer directs? DI: We’re committed to supporting brokers in building a differentiated value proposition so they can compete effectively against direct players. This includes investments in tools to drive efficiencies; to-date we have invested over $30 million in eBusiness initiatives to deliver ease of doing business for brokers (including EZ Docs, ePolicy, BRAVO, WebBusiness). To RSA, the differentiated value proposition also means a greater focus on the Advice Based Customer: working with brokers to attract and retain clients who place a high value on the expert advice of a broker. Education is another important piece of our broker investment. This includes valuable opportunities such as our flagship Making Partner program with Queen’s University as well as ongoing broker bootcamps and deeper technical training. 52 | OCTOBER 2013
IB: Your responsibilities are in P&C. How have you seen the product offer evolve in P&C over the last 10 years? Where would you like to take it? DI: In line with the industry, RSA has continued to evolve towards very comprehensive offerings as well as higher end offerings for our Personal Insurance customers. However, with the strong emergence of non-fire perils, we need to examine how we move forward with these propositions in light of changing weather patterns and sensitivities to certain exposures. For example, how should we view guaranteed replacement costs when it comes to earthquake coverage? Or how can we continue to protect our customers on water losses, but also manage the volatility within our performance? A second consideration for us is to further focus our Personal Insurance offering increasingly towards the specific needs of our target customer segments, as opposed to using the traditional “mass appeal” approach. As new loss trends continue to emerge, we will need to be more conscious and selective in our offering enhancements. This will help ensure our propositions add value to the customer but are also sustainable for us as an insurer. In Commercial Insurance (small-to-medium sized business), we’ve seen that an ease of doing business approach to service has become table stakes for insurance in this space. The Commercial Insurance product is becoming increasingly commoditized and direct insurance is on the rise for this business segment. We recognize the importance of the broker in this space. IB: Martin, your responsibilities are in global specialty lines. How important is this product for RSA today? How has it grown as a product in the industry? MT: Global Specialty Lines (GSL) is a segment defined as upper mid-market, large, complex domestic and multinational risks, with premiums of more than $25,000. GSL is a major strategic priority for RSA globally. We’ve seen high double digit growth over the last three to four years and the business has delivered strong profitability. We will continue to focus on specialization in areas where we are experts, including energy, marine, cargo, E&O/D&O and excess casualty, and on our core strengths in general P&C business. GSL is headed in a great direction; we’re a leading player
in Canada and continue to invest in the deepening our customer relationships, leveraging the strength of our people and our broker relationships to continue to build on this already strong proposition.
IB: Donna, you have been a traditionally strong role model for women in the industry. Is role modeling important for women? DI: I see a lot of women leading in the industry and I think it’s very impressive. I do believe that as a culture, there is a lot more work to be done in terms of encouraging women to take on senior leadership roles. We need to look at how we can make the executive office a more comfortable and welcoming place to be for women. How do we re-think executive roles with women in mind so that we’re not creating subtle or unconscious barriers to growth and progression? Within RSA, I’ve been very fortunate to have opportunities to move laterally within the organization and take on a number of different roles across different functions. This has really enabled me to broaden my knowledge of the business and develop the necessary skills to take on a senior leadership role. I’ve worked in Personal Insurance, Commercial Insurance, Billing, Financial Planning, Integration, Internal Audit, the Executive Office and Corporate Services. The opportunity to gain hands on training in each of these areas has been invaluable experience. I believe the progression to an executive role isn’t necessarily about climbing a ladder but more like playing on a jungle gym, as Sheryl Sandberg says in “Lean In.” She suggests that we not look at our careers as a single trajectory, but rather explore different avenues and possibilities along the career path as we move toward our goals. I also attribute much of my success to having a very supportive husband whose schedule accommodates mine and allows me some flexibility, for instance to travel for work. I suspect you would find that most successful executives have that same level of support from their partners – I believe it’s absolutely integral to success. IB: Martin, you are known for a strong work ethic. What was your work ethic to bring you where you are today? Any role models of your own? MT: I believe the key element that brought me to
How do we re-think executive roles with women in mind so that we’re not creating barriers to growth? Donna Ince where I am today has been my willingness to stretch and challenge myself and to be uncomfortable sometimes in order to keep growing and developing. I also bring a strong underwriting background and business sense to the role, along with a willingness to take personal risks. I’ve made a number of decisions about moving around the globe to work in different countries, including the U.K., Denmark and Canada. I’ve stayed focused on increasing my skills and capabilities and I’m very results-focused. I’m also committed to supporting people’s development, which has been personally rewarding and has contributed greatly to my own success. I’ve been fortunate to have many role models in my 16 years with RSA. I’ve had the opportunity to work with some of the best leaders and technical people in the industry. I’ve tried to look at what these individuals do well and also areas of improvement, and look at how I can learn from both.
IB: Martin, is there a difference when operating from a global perspective, as opposed to just a domestic focus? How important is it for a company to have a global presence in the insurance market? MT: When you are operating on a global scale, there are a number of unique considerations and requirements that you need to factor in. For example, you need to have an understanding of what customers’ needs are in different territories, and make sure you have the ability to deliver on those needs. Having access to the local knowledge and capability to trade in these areas is crucial, and you need to have a strong global network to support you. There are compliance issues and the ability to manage the flow of cash around the globe, which need to be in place. The strength of that network is absolutely critical. Global businesses need insurance companies to operate in that way as well. RSA brings a diversified portfolio, a strong global network and set of capabilities, which makes our offering compelling for our customers.
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PROFILE / INSIGHT
MANULIFE’S MASTER The broker channel has been abuzz with speculation since the insurance giant’s 2012 purchase of Benesure — Canada’s biggest creditor insurance player. Will Manulife change that product lineup?
IB: Manulife’s purchase of Benesure made headlines across the country. What if any changes have now resulted to MPP offerings? MF: We are now able to provide more opportunities for brokers to generate increased ancillary revenue through a broader range of insurance-referral opportunities and by leveraging Manulife’s strong branding and awareness in the consumer market. The MPP offerings are strong as they exist today, but we continue to add enhancements to improve their competitiveness. IB: Manulife has suggested that it will look to deepen its relationship with mortgage brokers in the coming years. In what areas specifically? What is the timeline? MF: We are and always have been looking for ways to deepen the relationship with the broker channel and several of those initiatives are targeted for fall launch…including the introduction of our Term Insurance Referral program. This program will now allow brokers to provide their clients with access to professional-insurance advisers who can provide term insurance in addition to Mortgage Protection Plan Life and Disability Insurance. We will also be introducing an innovative Direct Marketing Program that has been developed for the brokers, helping them with their efforts in targeting customer retention and renewal (which has long been statistically weak for the channel). The program also provides brokers with the opportunity to
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generate increased compensation with respect to insurance from their existing client database. IB: What would be the benefit of originating mortgages through the broker channel? MF: Manulife Financial is committed to offering superior banking products to Canadians in the way that best fits their needs and preferences. To this end, we work with a variety of referral agents, including financial advisers, real estate agents and mortgage brokers to serve the needs of our clients. IB: What is Manulife’s vision for the future of creditor insurance against the backdrop of an increasingly competitive and mature life insurance market? MF: Creditor insurance, distributed by the broker channel, continues to be a strong opportunity to grow insurance sales within the Canadian market place. A vast majority of Canadians are either underinsured or not insured at all. In addition, the consumer knows they need more insurance but has either not gotten around to, or has not been approached to purchase it. Providing insurance options to Canadian consumers at the exact time of the initial transaction is a perfect opportunity to remind them of the importance of insurance…and in many cases based on younger firsttime buyers, a very economical time to do so. By providing creditor insurance and giving their clients access to professional advice on additional insurance needs, brokers understand they are building and strengthening their value to the client and at the same time helping to protect them. IB: How have brokers responded to the Manulife purchase of Benesure? MF: The purchase has been very well received based on the discussions we have had with our broker-channel clients. We continue to enjoy strong and growing support and now that Manulife has acquired Benesure, we see this as a catalyst for even stronger confidence in our ability to provide clients with the protection they deserve.
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BUSINESS STRATEGY / PERSONAL BRANDING
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We all have a personal brand, whether we’re working for others or for ourselves. A personal brand can sometimes be seen as lightweight, but it’s not just about your image, as important as that is. Personal branding is also about how you manage who you are, how you lead your clients, and how effectively you partner with your associates. Truly effective personal branding is about how you’re perceived, because all brands exist in the minds of their market. Sounds a little lofty? Let’s get tangible.
Everything we do and say, display, drive and wear, tweet, blog or video – even the company we keep – impacts our personal brand
One place I see this in spades with clients is in their marketing copy. Look at yours right now. Is it about your clients and the results you achieve for them? Is it superfluous or does it purposely position you as trusted adviser to your prospects and clients alike? If your current marketing is all about you and not enough about how you can benefit your clients, there are some simple ways to remedy the situation.
Let’s say you’re a real estate agent. You’re judged by your vendors, prospects, and associates on the way you manage the sales process, the value you add to your vendor through expert advice and superior negotiation skills, the integrity you bring to the sale process, and the manner in which you handle expectations. Add to that the cut and style of your clothes, your promptness (or lack thereof ), your emotional and social intelligence, the car you drive, and your grooming. Now add to that your online presence: your website and your social media profiles. They all tell a story. The more they align with who you are and the value you bring face-to-face – the more ‘on brand’ your digital channels are – the better they serve you. If any of these don’t match, however, you’ve just spent a lot of time and effort on putting out mixed messages that could cost you business. Everything we do and say, display, drive and wear, tweet, blog or video – even the company we keep – impacts our personal brand. That has a direct impact on our bottom line, whether we assess that by the number of sales we make, the influence we wield, or the career milestones we achieve. Here is the one biggest mistake I see people make with their personal brand:
IT’S ALL ABOUT THEM Yes, your social media, marketing material, website, personal appearance, character, reputation and style all play a huge part in your personal brand. But is it all about you?
1. KNOW YOUR VALUES AND VISION The more aligned with these you are, the easier it is to attract your ideal clients. Is it integrity, wealth creation, reliability, or perhaps a combination of all three? In fact, three is the number I often ask people to give, as one is rarely enough, and any more than three dilutes our impact and focus. Some people say ‘courage, clarity, and integrity.’ For others it is ‘joy, responsiveness, and detail.’ There are no right or wrong ‘three values.’ They must be yours, and must be something you believe in and know you can deliver on. If you could define your three main values, what would they be?
2. WHAT DOES THAT MEAN FOR YOUR CLIENTS? Now that you’re even clearer on what you stand for, this is just the tip of the iceberg, because no matter how clear you are, if those values aren’t ‘valued’ by your clients or colleagues then you’ll be stranded on your own personal branding island. So, picture your ideal client and ask yourself OCTOBER 2013 | 57
BUSINESS STRATEGY / PERSONAL BRANDING
the following questions: • What specifically do they gain from doing business with me? • Is it less stress? More money in their pockets? More time with their family? • Can you be even more specific than that? The more you know these benefits, the easier it is to capitalize on them in your marketing copy, on your website, and on social media. You can even work them into your business conversations. It makes you much easier to buy and recommend because people know what they’re getting by doing business with you. Even more than that, they know whether it’s something that matters to them or not. It’s easier to become known as the go-to person in your industry or office, not only for what you do, but also for the way in which you do it. It’s also healthy to remind yourself of these statements as much as you can, because for all of us in sales (whether that’s selling products, services, or an idea), the first sale is often made to ourselves.
3. ASK YOUR CLIENTS OR COLLEAGUES WHY THEY LIKE WORKING WITH YOU
Michael Neaylon is a speaker, author, and consultant specializing in sales, marketing, and branding for service professionals who want more business, greater profits, working with more of their better clients. He is the author of True Brand Toolkit: How to Bring in Big Money for Your Small Business
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This is vital 360-degree feedback on your brand. You’re often so close to your own work or appearance that you can’t see how you’re being perceived. Ask your clients why they keep coming back. You can do this casually or formally: over the phone, at the end of a meeting... wherever. The beauty is that the sheer exercise of asking them to do this will also help your clients remind themselves why they keep coming back to you. You can also reread your referrals and testimonials. There will undoubtedly be words and phrases that keep coming up again and again. Highlight the words that reinforce your brand and, more importantly, the benefits it brings to your clients.
4. LEVERAGE SOCIAL MEDIA TO AMPLIFY YOUR BRAND If you’re not already using social media to leverage your brand, I highly recommend you do so. But, as with any branding, you’re better off going deep into two or three channels than diluting your efforts across multiple networks and not gaining any real traction in any. My personal top three for service professionals are LinkedIn, Twitter and YouTube.
TOP THREE SOCIAL NETWORKS LinkedIn is a powerful search engine that connects you to a global community of professionals and has ever-increasing functions. One function we’ve begun using more and more in one of our businesses, Presentability, is a private (closed) forum. Just like hosting your own mastermind group can be good for your reputation as a serious player who’s also a seriously good connector, the same impression can be made in an online forum, as long as you give value. If you have a blog, post it to the forum, or simply contribute articles and questions for your audience, further establishing your ‘go-to’ value, with the added benefit of being a connector. Twitter is more than just about tweeting about the incidental moments in your life, or self-promotion. One of the most underutilised aspects of Twitter is its use for research. By staying focused on who you follow and how ‘on brand’ you are with what you post, you gain much more credibility here too. Always leave enough room for your followers to have an opinion when they retweet (say 10–20 characters). If you’re retweeting an article yourself, have an opinion of your own. That way you strengthen your status as a trusted adviser. YouTube is owned by Google. That means it’s powered by the most powerful search engine in the world. If you’re not already getting video content up, consider it. As a service professional we want to know about you. Personally, I’m a professional speaker, so for me it’s vital. However, even clients who don’t speak for a living gain so much more traction by allowing people in to see who they are and the passion behind what they do, not to mention their own personal style.
5. STAY ON BRAND WITH SOCIAL MEDIA Where many people fail to gain momentum in their social media is in failing to have an authentic voice in the channels they choose. If you’re new to social media, then play with it, keeping an eye on who follows you and the impact you have on the market. Follow people in your industry who have many followers or connections, and observe what they do, then infuse those practices with your own style and – most importantly – your own opinions.
Business etiquette is still a vital consideration for 12st-century brokers, and the way you conduct yourself at work can have a huge effect on how successful you are, argues Nikki Heald
Have you ever been in a business situation and witnessed an event that was so cringe-worthy it left you saying “Really?” If so, think about the impression that behaviour left on you and the negative connotation attached to it. Perhaps you think that the way you conduct yourself at work doesn’t really matter too much. Well, think again! Understanding correct etiquette (or protocols) not only provides you with an edge over competitors, but also influences whether or not you eventually make the sale. Your conduct can also mean the difference between whether you stand in line to receive a promotion or not. Savvy businesspeople appreciate this and incorporate business etiquette into their daily interactions to ensure success.
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BUSINESS STRATEGY / ETIQUETTE
While the word ‘etiquette’ may seem out of date or even old-fashioned, the simple fact is that common courtesies still prevail. Etiquette is about respect, good manners and good behaviour. It is not just about one of these, but a combination of all of them rolled into one. Clients and colleagues have an expectation that you will conduct yourself professionally, civilly and appropriately. Bad manners leave an unfavourable impression and this can often be difficult to shake.
While the word ‘etiquette’ may seem out of date or even old-fashioned, the simple fact is that common courtesies still prevail
MAKE TIME FOR MANNERS Unfortunately, in today’s high-tech, fast-paced world, our belief may be that we are too busy or have more pressing things to do than practise correct protocol. Sending a simple ‘thank you,’ replying on time, exchanging business cards correctly or returning a call appear to have gone by the wayside. You might assume that manners are automatic or ingrained in us by the time we become adults, but that may not always be the case. Some do not place a high priority on implementing common courtesies. Of course, we all know to use ‘please’ and ‘thank you’; however, people in the business world need to appreciate that there’s more to business protocol than that. During the first few seconds of meeting someone, perceptions are formed, and first impressions can be long lasting. Presentation, body language and behaviour are critical as there’s only a small window of opportunity in which to impress. Do you have confidence and integrity? Are you friendly and selfassured? Are you capable and knowledgeable? Do you appear trustworthy and ethical? These are just some of the assumptions clients and colleagues will form about you. Indeed, Sir Richard Branson (interviewed on page 10) in his book Losing My Virginity says: “I tend to make up my mind about people within thirty seconds of meeting them.” Interestingly, a lot of research has been conducted that supports Sir Richard’s proposition. Etiquette is also essential at work functions. From a management perspective, employees are professionally on display when they are networking, attending client meetings and conferences. Senior managers often observe the way staff conduct themselves at these gatherings, as behaviour may reveal 60 | OCTOBER 2013
true character. In this day and age, many business functions are surrounded in social occasion; however, they are not social events. For those seeking career progression,
Business etiquette tips Let others speak, and don’t monopolize conversations. No one appreciates a whinger, whiner or bragger. Stick to appropriate eye contact. Flirtatious and intimate glances may lead to trouble! Avoid getting intoxicated at business functions – it can be career limiting! No one likes a bone-crusher or wet fish. A firm, professional handshake will do! Avoid brandishing cutlery when speaking during a meal. Your companions may become scared of where it might end up!
Professional conduct is by no means limited to face-to-face transactions, but also extends to your online behaviour or ‘netiquette’ be mindful that work functions are strictly business and not the time to gain a reputation as the office stripper or party animal.
Nikki Heald is a corporate trainer, presenter, businesswoman, founder of Corptraining, and co-author of “Views on the Way to the Top.”
What about workplace etiquette? Perhaps you have a team member who likes to shout across partitions, talk loudly on the phone or constantly interrupt others. Alternatively, you might know of the serial CC’er – the team member who likes to copy all staff into their emails? Thankfully, such behaviours can be fine-tuned and refined. Professional conduct is by no means limited to face-to-face transactions, but also extends to your online behaviour or ‘netiquette’. The use of social media in business is ever-increasing, so knowing the correct rules in this arena is just as crucial. Websites, Twitter, blogs and LinkedIn are an extension of your brand, and again, any content
FROM WORKPLACE ETIQUETTE TO ‘NETIQUETTE’
or comments must be appropriate. Unfortunately, most behaviour that is perceived as disrespectful is actually unintentional, and the person who practised it didn’t quite understand the rules for that situation. I really believe that most people don’t purposely set out to embarrass themselves or others. Implementing the correct rules for networking, client entertainment, meet-and-greet, handshaking and distributing business cards may seem a little daunting if you’re not sure what to do. However, the great news is that business protocol can be learned and, with practice, will become second nature. Good manners costs you nothing; however, the value is that you will gain in credibility, confidence and ultimately your bottom line.
Nikki Heald’s to p 10 tips for correct busine ss protocol: 1. De
liver a well-exe cuted, firm han dshake 2. Ensure you introduce yours elf and others 3. Be well groo for your rolemed, and dress suitably
4. Learn the art of conversatio n and small talk 5. Carry suffici e business cardnt, clean-looking s 6. Be mindful o f your table ma nners 7. In business, if you invite, yo u pay 8. Switch off m during meetiobile phones and put away ngs 9. Keep emails short and to th e point 10. Avoid the h ard-sell or bein g too pushy OCTOBER 2013 | 61
FAVOURITE THINGS / TRACI BOLAND
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Traci Boland, CAIB, Ontario West Insurance Brokers Favourite sport or pastime: My favourite sport is synchronized skating; I grew up competing then moved into coaching this sport. I love the artistry about it, the speed and danger in it and the fact that it is a team sport. Canada has always been a leading contender on the world level in this sport and if you are able to attend one of the competitions you will love the team spirit and excitement. My favourite pastime is catching up on my PVR shows (Once Upon a Time and Castle); they are aired on football nights, so I usually have to watch them later in the week, as our home is a football shrine from September to Super Bowl.
Book: Reading for work and for pleasure are two extremes for me. I will read anything for work about generations in the workplace, better communication and biographies on leaders that I look up to. For personal past time, investigative dramas or make believe (Harry Potter), anything that will take me away from reality for a couple of hours.
Music: All Canadian! I love Hedley, Metric, Sarah McLachlan and The Tragically Hip. When I moved to Finland and then the U.S., listening to Canadian music made me feel better and not so homesick. It has stuck with me all these years and anytime any of these artists are in or around my city I will be there to cheer them on. If I am cleaning my house or on the road, you will find anything ‘80s blaring.
Best Thing about working in insurance: Getting to know my clients and their families, it is great being able to relate to them and having honest conversations about life with them. Being part of the community is also one of the best things about being involved with insurance. Our brokerage staff are very interested in being involved and participating in community events. We have done flash mobs for the city, volunteered time for Toys for Tots, sponsored volleyball, soccer teams and figure skaters and attended countless city events for great charities. It is a great feeling to be proud of your work and of getting involved.
Movie: My favourite movie is hard to pin down. There are so many that I enjoy. For my artistic side it would be Moulin Rouge, my girl power movie would be Fried Green Tomatoes and my ‘80s throwback would be Breakfast Club.
Favourite Food: Sushi! I just started eating sushi about a year ago and now I can’t stop! The all you can eat sushi restaurants on every corner are not helping with this slight addiction.
Vacation spot: Best place I have been in my travels so far is Day Dream Island located within the Whitsunday Islands group located on the North Eastern coast of Queensland, Australia. It is a spa vacation island that allows you to enjoy beaches, pools, the rain forest, food and spas. Where else can you watch a movie sitting on the beach and have kangaroos jum p in front of the screen?
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The Moore-McLean Insurance Group dunked, dined and donated their way to raising money for diabetes research this summer. The backdrop was Toronto Centre Island on August 23, with employees participating in volleyball, badminton, and a three-legged race with a barbecue lunch. One of the more popular attractions was the dunk tank â€“ where employees had the chance to dunk executive staff, with a donation to the Juvenile Diabetes Research Foundation. All told, $3,000 was raised that day for the Juvenile Diabetes Research Foundation, through employee dunking and donations from sponsors, including RSA, The Guarantee, Encon, Intact, Economical, Northbridge and Aviva.
Emina Rahic & Laura Curran
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Trevor Craig & Melissa Cleary
WE’RE LEADING THE WAY FOR MORE THAN 30 YEARS, APPLIED HAS POWERED THE BUSINESS OF INSURANCE WITH LEADERSHIP, INNOVATION AND SERVICE. TO ALL OUR EMPLOYEES, CUSTOMERS AND INDUSTRY PARTNERS, THANK YOU FOR CHOOSING APPLIED AND ENABLING US TO CELEBRATE THIS IMPORTANT ACHIEVEMENT AND FUTURE SUCCESS TOGETHER.