WWW.INSURANCEBUSINESS.CA ISSUE 8.02 | $12.95
INSURING THE SHARING ECONOMY Peer-to-peer platforms promise a quick, easy and seamless experience. Is insurance keeping pace? COMBATING CLIMATE CHANGE
How global insurers are using their influence to advocate for sustainability
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BEHIND THE SCENES OF AN IPO
Inside Economical Insurance’s transition from mutual insurer to public company
THE DEVIL IN THE DETAILS
What brokers need to pay attention to when arranging pollution liability coverage
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With an experienced global claims team and a large, stable balance sheet, BHSI has the ways and the means to help customers successfully navigate even the most complex claims. We also have a commitment to claims excellence, and to doing the very best for each customer – so they can face down the worst days with confidence and peace of mind.
Claim on.
www.bhspecialty.com The information contained herein is for general informational purposes only and does not constitute an offer to sell or a solicitation of an offer to buy any product or service. Any description set forth herein does not include all policy terms, conditions and exclusions. Please refer to the actual policy for complete details of coverage and exclusions.
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ISSUE 8.02
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CONTENTS
26
twitter.com/InsuranceBizCA facebook.com/InsuranceBusinessCanada
UPFRONT 04 Editorial
What can the industry learn from the coronavirus fallout?
FEATURES
24
EXPERT ADVICE
How to help clients prevent water damage once the snow starts to thaw and spring rains arrive
36 SPECIAL REPORT
PEOPLE
INDUSTRY ICON
2
08 Head to head
How to convince small businesses that cyber coverage is crucial
10 News analysis
What global insurers are doing to move the needle on climate change
12 Intelligence
This month’s big movers and shakers
14 Technology update
How to use automation as a foundation for better relationships Where MGAs fit into the M&A picture
18 Opinion FEATURES
SWEAT THE SMALL STUFF
Why every detail matters when arranging pollution liability for large-scale construction projects
How good risk management can keep a reputational crisis from tanking a company’s share price
FEATURES 42 How to run successful virtual meetings
Tips for keeping remote meetings engaging and effective
Economical Insurance president and CEO Rowan Saunders walks IBC through the insurer’s landmark transition to a public company
20
Key data that should be on your radar
16 MGA update
INSURING THE SHARING ECONOMY
IBC takes a closer look at how the industry has responded to the onslaught of peer-to-peer platforms that blur the line between personal and commercial insurance
06 Statistics
44 Why can’t we focus anymore? Distraction is rampant in the modern world – here’s how to fight back
FEATURES
40
CONTINUING A LEGACY IN ATLANTIC CANADA The leaders of Nova Scotiabased AA Munro Insurance reveal how they’ve maintained their brokerage’s community roots
PEOPLE 46 Career path
Kevin Neiles’ time in the CFL taught him a thing or two about teamwork
48 Other life
In the fast lane with motorcycle racer and executive coordinator Angela Hiba
INSURANCEBUSINESS.CA CHECK IT OUT ONLINE
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Members of #TeamEconomical from the Claims department
TEAM PLAYERS WITH TEAM PURPOSE Evolving our customer and broker experiences…and supporting each other along the way… is the core of our team DNA. This is why our quest to grow our team, and look for innovative ways of working together, is so important to us. From the launch of Vyne™, to sophisticated pricing and analytics, to our claims transformation, and our plans to become a publicly traded company — we tackle the big things to show brokers, customers, and employees they can rely on us — now and into the future.
Interested in helping us make insurance better? You’ll find current career opportunities at: economical.com/careers
property | auto | business Economical Insurance includes the following companies: Economical Mutual Insurance Company, Family Insurance Solutions Inc., Sonnet Insurance Company, Petline Insurance Company. ©2020 Economical Insurance. All Economical intellectual property, including but not limited to Economical® and Vyne™ related trademarks, names, and logos are the property of Economical Mutual Insurance Company and are registered and/or used in Canada. All other intellectual property is the property of their respective owners.
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UPFRONT
EDITORIAL
Lessons from the coronavirus
C
ountries in lockdown, travel bans enforced and a massive slowdown in trade: The impact of the COVID-19 outbreak has been massive, even without considering the incredible loss of life. For the insurance industry, a pandemic on this scale has far-reaching consequences. First, questions swirl about payouts, particularly among those with manufacturing outlets across the globe. Travel insurance claims spike as flights and trips are cancelled, business insurance absorbs a blow as events are halted and operations are disrupted, and life insurance naturally comes under the spotlight as the death toll increases. Then there are the more unusual impacts that the resultant panic has had on the insurance industry. In the cyber realm, for example, hackers have used fears surrounding the illness to lure people into clicking on links and inadvertently spreading malware. Meanwhile, marine insurers are being called into action to assist shipowners with chartering and operations and to help prepare staff for what to expect when arriving in port.
Just as a cyberattack draws attention to cyber insurance, brokers and insurers can use incidents like the coronavirus to focus minds on risk mitigation When pandemics like this arrive, they naturally cause fear and confusion, despite the fact that we’ve been in similar circumstances before with the outbreaks of SARS and Ebola. Yet just as a cyberattack like WannaCry draws attention to cyber insurance or a horrific terrorist attack makes the world think about terrorism cover, brokers and insurers can use incidents like the coronavirus to focus minds on risk mitigation. “This is an opportunity for all organizations to really put that working group together internally and start looking at some of these scenarios of how it would impact their organization, and then put plans and procedures in place,” Renata Elias, of Marsh’s strategic risk consulting practice, told IBC in February. A broker’s role is no longer about simply selling insurance policies – it’s now about being the risk expert who ensures clients are prepared for all eventualities. The time to prepare for the next crisis is now so that when panic hits, the insurance industry has the chance to do what it does best: be the calm amid the storm.
The team at Insurance Business Canada
www.insurancebusiness.ca EDITORIAL Managing Editor Paul Lucas Editor Bethan Moorcraft Writers Lyle Adriano, Tom Goodwin, Alicja Grzadkowska, Kasi Johnston, Libby MacDonald, Ryan Smith, Ksenia Stepanova Copy Editor Clare Alexander
CONTRIBUTORS
Nir Kossovsky, Donna McGeorge, Aytekin Tank
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UPFRONT
STATISTICS THE YEAR IN NATURAL DISASTERS
MISSOURI BASIN FLOODS $10 billion $2.5 billion
MISSISSIPPI BASIN FLOODS
409
Total number of natural disaster events worldwide in 2019
$232 billion
Economic losses from all natural disasters in 2019
$71 billion
Insured losses from all natural disasters in 2019
HURRICANE DORIAN
$10 billion $4 billion
$10 billion $3.5 billion
THE TOP 10 NATURAL DISASTERS OF 2019 Typhoons and flooding were the main sources of economic loss from natural disaster events around the globe last year. Of the US$126 billion in economic losses recorded across the top 10 disasters in 2019, only US$44 billion was insured. Although no Canadian disasters made the top 10, the flooding that occurred along the St. Lawrence, Ottawa and St. John rivers in May cased US$800 million worth of economic losses; only US$210 million of that was insured.
ECONOMIC LOSSES INSURED LOSSES
AVIATION CLAIMS RISE … The loss of two almost brand-new Boeing 737 Max 8 aircraft in 2018 and 2019 – and the 300-plus fatalities that resulted – had serious implications for both Boeing and the insurance market, triggering grounding of the airliner and an uptick in product liability claims. Premium
Claims
2014
2015
$2.5bn $2bn $1.5bn
69%
Proportion of 2019 natural disasters not covered by insurance Source: Weather, Climate and Catastrophe Insight, 2019 Annual Report, Aon; all figures in US$
$1bn $500m $0
2010
2011
2012
2013
2016
2017
2018
2019
Source: Plane Talking, Q4 2019, Gallagher
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WHERE INSURTECHS ARE FOCUSED
CHINA MONSOON FLOODS
IRAN FLOODS
Willis Towers Watson’s breakdown of the 760 insurtechs operating within the functional insurance chain reveals that the lion’s share of firms are dedicated to quoting, binding and issuing coverage.
$15 billion
$8.3 billion
$700 million
$200 million
TYPHOON FAXAI $10 billion $6 billion
TYPHOON LEKIMA $9.5 billion $800 million
8% TYPHOON HAGIBIS
CYCLONE FANI
$15 billion
$8.1 billion
$9 billion
19% Quote, bind, issue Policy administration and central systems
$500 million
INDIA MONSOON FLOODS
Claims and settlement
$10 billion $200 million
45%
Source: Quarterly InsurTech Briefing Q4 2019, Willis Towers Watson
Source: Weather, Climate and Catastrophe Insight, 2019 Annual Report, Aon; all figures in US$
… BUT THE SKIES ARE SAFER Despite the headline-grabbing crash of a 737 Max jet in Ethiopia in 2019, the year was one of the safest on record in terms of airline fatalities, according to the Aviation Safety Network, which reported a total of 283 fatalities from 20 airline accidents, compared to 556 fatalities from 15 accidents in 2018.
NUMBER OF FATAL ACCIDENTS
INSURTECH INVESTMENT HITS NEW RECORD According to Willis Towers Watson, global insurtech investment topped US$6.3 billion in 2019. The year accounts for around 33% of the total global investment in insurtech to date.
NUMBER OF FATALITIES
30
28%
Pricing and underwriting
TOTAL GLOBAL INSURTECH INVESTMENT
1,000 $6bn 800
20
10
$5bn
600
$4bn
400
$3bn $2bn
2019
2018
2017
2016
2015
2014
$1bn 2013
0
2012
2019
2018
2017
2016
2015
2014
2013
0
2012
200
Source: Aviation Safety Network
$0
2012
2013
2014
2015
2016
2017
2018
2019
Source: Quarterly InsurTech Briefing Q4 2019, Willis Towers Watson; all figures in US$
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UPFRONT
HEAD TO HEAD
What can be done to close the cyber coverage gap? Despite a growing awareness of cyber threats, businesses – especially small ones – remain underinsured in this area
Senior vice-president and sales leader, Central region Aon
North American regional head of product development, financial lines Allianz Global Corporate & Specialty
Kelly Castriotta
Graeme Newman
“Given the ever-changing nature of cyber risks, brokers must be diligent in staying current on trends and areas of emerging risk and must be able to articulate those risks to clients. With the Internet of Things, cyber risk can impact supply chains and shut down entire organizational ecosystems. Medical devices might be hacked, with ransom demands connected to human life. Brokers must not ‘dabble’ in cyber insurance; it’s a broker’s job to articulate the cyber exposures clients face and then develop an appropriate risk transfer plan. Ongoing education from both brokers and insurers is critical to closing the cyber gap.”
“Two issues dominate: companies that don’t view insurance as an effective risk mitigation tool for cyber incidents and companies that buy the wrong products. On the first point, get both the CISO and risk manager talking to the insurance team to break the silos of purchasing insurance. Second, cyber insurance was viewed as a gap-filler, and that paradigm needs to shift. The product has grown from managing exposure from web content to a privacy security tool to protecting businesses from supply chain interruptions and attacks on critical infrastructure, and it can provide a host of services to manage such attacks.”
“It’s not a coverage gap; it’s an awareness gap. People don’t tend to purchase a new line of coverage until they have experienced an event themselves or seen it happen to someone close. The media focuses on large events affecting well-known businesses because that’s what makes headlines. Thus, some infer that cybercrime is something that only affects large businesses. Most businesses are targeted not because they are valuable, but because they are vulnerable. Most small businesses don’t have the resources to protect themselves and therefore are hit more often than large businesses; it just doesn’t make news.”
Kelly MacDonald
Chief innovation officer CFC Underwriting
HITTING A SMALLER TARGET Cybercrime is set to be a US$6 trillion problem by 2021, according to Cybersecurity Ventures – and despite the large-scale breaches continuing to make headlines, cybercriminals tend to have a penchant for more modest victims. “A cybercriminal has a much greater opportunity for success in attacking a small business because small businesses are very weak in their security countermeasures,” Cyrus Walker, managing principal at Data Defenders, told Forbes. According to global malware prevention provider Malwarebytes, ransomware attacks halted operations for almost 40% of the small and medium-sized businesses hit in 2017. Of those, around 60% never successfully reopened.
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UPFRONT
NEWS ANALYSIS
Fuelling climate change action In an effort to combat climate change, global insurers are increasingly taking a stand against coal in both their investments and underwriting policies
SINCE THE 2015 Paris Agreement on combating climate change, the number of institutional investors committed to cutting fossil fuel stocks from their portfolios has risen from 180 in 2014 to more than 1,100, according to climate advocacy group 350.org. Leading insurers have been a key part of this movement: A recent report from global research and strategy consultancy Sigwatch found that the insurance sector accounted for four out of 10 of the brands most praised by NGOs and activist groups, due in large part to insurers’ pledges regarding coal divestment. “The bigger NGOs recognize that the financial sector is the linchpin of fossil fuel development due to the importance of insurers as institutional investors,” says Robert Blood, founder and managing director
institutional investors, insurers are increasingly embracing sustainability in their underwriting efforts, too. Both Zurich and Swiss Re have signed the UN Business Ambition for 1.5° C, which calls on businesses to set science-based targets with the goal of limiting the worldwide temperature increase to 1.5° Celsius. Both insurers, along with Allianz, have also joined the Net-Zero Asset Owner Alliance, committing to ensuring their investment portfolios represent net zero greenhouse gas emissions by 2050. Swiss Re also refuses insure or reinsure any business with more than 30% exposure to thermal coal across all lines of business. According to Martin Weymann, head of sustainability, emerging and political risk
“Coal is, from an insurance perspective and from an investment perspective, no longer an asset that we want to support” Martin Weymann, Swiss Re of Sigwatch. “Corporations exist far longer than governments, and in many ways, their decisions have far more long-term impact.” As institutional investors and holders of substantial capital, Blood says, insurers can play a major role in directing the development of the renewable energy sector. He adds that, in addition to wielding their power as
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management at Swiss Re, this threshold allows the company the flexibility to work as a partner in the transition to a low-carbon economy with organizations that are making substantial efforts in this area. “We believe that, in the very long term, coal is, from an insurance perspective and from an investment perspective, no longer
an asset that we want to support due to its environmental footprint, but also because we believe it is not attractive from an economic perspective,” Weymann says. “Wherever possible, we bring the economic and the sustainability perspectives together.” According to Zurich’s head of sustainability, Linda Freiner, Zurich’s position on thermal coal, oil sands and oil shales was a first step in addressing carbon-intense industries. In addition to refusing to insure companies that generate more than 30% of their revenue from those industries, Zurich also pledged to work with companies that don’t meet that threshold on a transition plan. Freiner notes that thermal coal in particular is not essential to the energy mix anymore, as it can be replaced with cheaper renewable energy. “The reality for insurers is that we cannot move faster than the real economy because we invest in the real economy and we insure the
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A CLOSER LOOK AT COAL DIVESTMENT
20,000% Increase in assets committed to divestment since 2014
9.5% Proportion of the primary insurance market controlled by companies that have ended or limited cover for coal projects
37% Proportion of the insurance industry’s global assets covered by coal divestment policies
4 Number of global insurers/reinsurers among the 10 brands most praised by activists and NGOs in 2019 real economy,” she says. “So, where our role then becomes really important is in engaging with the carbon-intense industries to really try to help facilitate their transition.”
moving quickly to transition, Freiner says. “From a risk perspective, we have to ask ourselves if [these are companies] we want to do business with in the long term,” she
“Where our role becomes really important is in engaging with the carbon-intense industries to help facilitate their transition” Linda Freiner, Zurich Freiner adds that the threshold introduced by Zurich has been an effective means of engaging with these companies to help them work through transition plans and understand how to diversify their businesses so Zurich can insure and invest in new types of business with a much lower carbon footprint. It was apparent which companies were
says. “Stranded assets are a risk from both an investment and underwriting point of view.” With regard to Swiss Re’s initiatives in responsible investing and underwriting, Weymann says the company has seen clients and peers starting to make similar moves, which he believes is creating a momentum that highlights the positive impact sustaina-
Sources: 350.org, Unfriend Coal, Sigwatch
bility initiatives can have on clients, investors and society at large. “I think the whole (re)insurance industry plays a very important role by providing solutions to sustainability challenges and thus creating long-term value for its stakeholders,” he says. Freiner likewise feels that insurance companies have an essential role to play in the move away from a carbon-centric economy. While insurance might not be feeling big pressure from consumers yet, she says, it’s just a matter of time before consumers expect more sustainable practices and more sustainable solutions from their insurers. “Our role as an insurance company is really to be able to engage with our customers and incentivize them to transition and help them be part of that journey,” she says.
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UPFRONT
INTELLIGENCE CORPORATE ACQUIRER
TARGET
PRODUCTS COMMENTS
Aon
Willis Towers Watson
The merger of the two brokerage giants will result in an implied combined equity value of about $80 billion
BrokerLink
HDF Insurance
HDF is an independent brokerage that has operated in Alberta and British Columbia for more than 20 years
Hub International
LSM Insurance Services
Markham, Ontario-based LSM specializes in the hard-to-insure market
Navacord
Brookstone Insurance Group
Brookstone is a boutique insurance brokerage that services commercial clients and high-networth individuals
NFP
Indemnis Trade Risk Management
Headquartered in Toronto, Indemnis is a P&C broker operating in both the US and Canada with a focus on trade credit and political risk
a
The Edge Benefits launches farmers’ compensation
Aon and Willis Towers Watson’s mega-merger moves forward
A year after Aon first considered making a bid for competing global brokerage Willis Towers Watson, the mega-merger is finally moving forward. The two companies have announced plans to merge their operations in an all-stock transaction with an implied combined equity value of approximately $80 billion. The newly merged company will retain the Aon name and will maintain Aon’s current headquarters in London. The deal is estimated to provide annual pre-tax synergies and other cost reductions of $800 million by the third full year of the merger. “The combination of Willis Towers Watson and Aon is a natural next step in our journey to better serve our clients in the areas of people, risk and capital,” said WTW CEO John Haley, who will serve as executive chairman of the combined entity. “This transaction accelerates that journey by providing our combined teams the opportunity to drive innovation more quickly and deliver more value.”
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The Edge Benefits has begun offering workers’ compensation coverage to farm owners and their employees in Alberta. The decision comes after Alberta adopted the Farm Freedom and Safety Act, also known as Bill 26, which dropped the previous mandatory requirement for workers’ comp benefits for small farms. Large farmers are still required to have workers’ comp cover, but they can either opt for the province’s program or private insurance. The Edge packages are designed to provide essential protection that can be customized to meet the needs of farm owners and workers.
Zurich partners with CYE to expand cyber offering
Zurich Insurance Group has teamed up with cybersecurity company CYE to launch Zurich Cyber Security Services, an offering designed to protect businesses against cybercrime. The offering combines Zurich’s specialty cyber insurance and risk engineering with CYE’s artificial intelligence-based technology, services and expertise to help businesses define and implement effective cyber risk management programs. Zurich’s Sierra Signorelli said the collaboration “will give customers a state-ofthe-art cyber solution that combines the benefits of insurance with a boost to their cyber defences.”
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PEOPLE Lloyd’s introduces new cryptocurrency cover
Lloyd’s of London’s product innovation facility (PIF) has announced its backing of a new insurance policy for cryptocurrency. Created by Lloyd’s syndicate Atrium for Coincover, the new liability insurance policy is designed to protect cryptocurrency held in online or hot wallets against theft or other malicious hacks. Limits start as low as £1,000 (around C$1,750) and are flexible to take into account the price changes of crypto assets. The product is the second to gain support from Lloyd’s PIF, whose members include Tokio Marine Kiln and Markel.
CFC rolls out new event insurance package
Specialist insurance provider CFC has introduced a new product for event organizers that combines cancellation coverage, general liability and commercial property under one policy. Designed to protect against a broad range of liability exposures, the commercial property component includes coverage for contents that have been lost or damaged in transit, as well as expenses like temporary repairs. The policy will also reimburse costs associated with event cancellation, abandonment, curtailment, postponement or relocation for reasons outside the organizer’s control.
Willis Towers Watson tracks COVID-19 property risk
Willis Towers Watson has introduced a new risk and analytics feature that enables risk managers to assess their COVID-19 property exposure, providing them with real-time developments of the pandemic as it relates to their property assets around the world. Part of WTW’s Global Peril diagnostic modelling tool, which evaluates clients’ property portfolios and assesses their exposure to comprehensive catastrophe risk, the new feature provides up-to-date information about confirmed global COVID-19 cases alongside clients’ property total insured values by location.
NAME
LEAVING
JOINING
NEW POSITION
Inga Beale
N/A
Crawford & Company
Independent director
Chris Downey
N/A
Everest Re
Managing director and CEO, Everest Re Bermuda
Brian Hanuschak
N/A
Victor Insurance Holdings
CEO
Barbara Haynes
DAS Legal Protection
ARAG Services Corporation
CEO
Paul Jackson
N/A
Gore Mutual
COO
Al Miralles
N/A
CNA
Executive vice-president and CFO
Daniel Moses
N/A
Merlin Underwriting
President and CEO
James Rayner
N/A
Crawford & Company
Global relationship leader for multinational clients
Kathryn Sinclair
Aha Insurance
Centre for Study of Insurance Operations
Vice-president, strategy and operation
Andy Taylor
N/A
Gore Mutual
CEO
Chris Williams
Brit Syndicates
AXA XL
Global head of equine, livestock and aquaculture
Gore Mutual appoints new CEO, COO
Gore Mutual had named Andy Taylor as its new CEO to replace outgoing president and CEO Heidi Sevcik when she retires on July 1. Taylor has been with Gore Mutual for 15 years; since 2012, he has been the insurer’s chief financial officer, in charge of strategic finance, investments, reinsurance and risk management. In addition to Taylor’s appointment, Gore Mutual named Paul Jackson as chief operating officer, responsible for integrating broker and retail distribution, underwriting, pricing, and claims to support Gore Mutual’s approach to operating and transforming the insurance business. Jackson was previously responsible for the insurer’s marketing and distribution, a role he held for six years.
Merlin Underwriting gets new president and CEO
Toronto-based MGA Merlin Underwriting has named Daniel Moses as its new president and CEO. Moses most recently served as Merlin’s EVP and chief underwriting officer, a role he took on in 2018. Prior to joining the MGA, Moses was vice-president of P&C at Everest Insurance Company of Canada and oversaw Central region operations for Totten Insurance Group. According to Merlin, Moses’ “prior experience and direct responsibility for implementing national underwriting strategies … particularly with a focus on construction exposures, will complement Merlin’s specialized approach in this market.”
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UPFRONT
TECHNOLOGY UPDATE NEWS BRIEFS Foxquilt expands into Alberta and British Columbia
Foxquilt, a company that uses machine learning and ‘social grouping’ to make insurance more affordable, has expanded to Alberta and BC. The move comes as Foxquilt consolidates its presence and client base in Ontario. The company said this expansion will allow more customers to access its unique take on home and business insurance. Foxquilt allows customers to join social groups based on their profession, hobbies or even lifestyle passions to take advantage of group discounts. For instance, small business owners can join a group composed of other small business owners to enjoy group savings.
Insurtech Briza raises $3 million in seed funding
Toronto-based insurtech Briza has raised $3 million in seed financing for its insurance-as-a-service API, which connects insurance agencies with underwriting systems, allowing them to quickly quote, bind and issue commercial insurance policies online. Briza’s system also allows commercial insurance clients to pay for coverage online. “Briza is creating the infrastructure that underwriting systems will use to talk to insurance agencies, consumer apps and anybody who wants to instantly sell insurance with just a few lines of code,” said Briza CEO Ben Munro.
Peel Mutual leverages text messaging platform
Peel Mutual has launched a new customer communication platform by way of a partnership with software provider Hi Marley. Peel Mutual is leveraging Hi Marley’s platform to assist
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its auto, home and business claims teams. The platform uses insurancespecific artificial intelligence and connects carriers and customers via two-way texting, allowing both sides to exchange pictures and documents. “We are so excited to start the new year off with a better communication commitment to our policyholders,” said Peel Mutual CEO Irene Bianchi. “We strive to leverage cutting-edge technology in a simple way that today’s customers just expect.”
ICBC partners with US-based telematics provider
The Insurance Corporation of British Columbia (ICBC) has selected US-based OCTO Telematics to serve as its exclusive telematics provider as it tests a new insurance program. ICBC’s Techpilot initiative is targeted at newly licensed drivers and aims to assess whether telematics can help modify driving behaviour for the better. Participants in the Techpilot initiative will use a combination of their smartphone and OCTO’s Smart Tag device to detect and score their own driving behaviours, including speeding, braking and cell phone use.
SkyWatch.ai brings on-demand drone insurance to Ontario
On-demand telematics-based insurance platform SkyWatch.ai has introduced a drone insurance product in Ontario, which will be underwritten by a member of Starr Insurance Companies. The SkyWatch.ai platform can be accessed via mobile or desktop devices and offers flexible liability insurance by the hour, month or year. The platform also offers a risk map that helps pilots plan their flights, get insurance quotes in real time, avoid any potential operation hazards and analyze their flight performance.
Balancing automation and human interaction How automation can help brokers and insurers focus on interacting with clients and building relationships As insurers look to take advantage of innovations like robotic process automation, machine learning, artificial intelligence and blockchain, insurance technology investment has skyrocketed in recent years, from US$140 million in 2011 to a whopping US$4.9 billion in 2019, according to a report by QBE North America and Village Capital. Quebec-based MGA GroupAssur recently jumped on the automation bandwagon by adopting the Element AI operating system. GroupAssur president Jean-François Raymond said he hopes the system will improve underwriting efficiency and increase the volume of business written as the MGA strives to not only meet customer expectations, but also “balance the appropriate amount of automation and human interaction.” But what does it mean to automate processes? And how can insurers find the correct equilibrium between automation and human interaction when AI threatens to replace certain jobs? According to Carlos Benfeito, head of insurance AI products at Element AI, automation should “free up insurance specialists to focus more on personal interactions with customers and distribution channels,” particularly those moments when insurance matters most. “Insurance moments impact lives, either by providing peace of mind when buying insurance or assisting people in
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moments of distress. Providing human assistance and empathy in those moments is key.” Benfeito also shared Element AI’s approach to integrating technology and human interaction. “We believe a fair balance is achieved when AI enables insurance service providers to meet and exceed their customers’ expectations in these important moments through the combination of human interaction and automation,” he says. “The distribution of that depends on the insurance service provider’s context and philosophy.”
“Insurance moments impact lives … Providing human assistance and empathy in those moments is key” The growing consumer desire for selfservice options will drive insurance automation development, Benfeito believes. “The consumer shift to ‘smart things’ – things like self-driving vehicles, smart homes, smart cities, etc. – will greatly increase the use cases and opportunities for automation, particularly with AI,” he says. “Understanding the signals and correlating them into something valuable for the consumer will, again, only be possible with technology that can learn and adapt, such as AI.” Another key trend Benfeito has identified is the change in consumers’ mindset, particularly the shift from owning ‘things’ to investing in experiences. “Artificial intelligence technologies that learn, adapt and predict will enable different business models,” he says. “An example would be on-demand insurance for experiences that can be instantly available for spur-of-themoment impulse events or even pre-planned life experiences.”
Q&A
Stacey Miranda Director of product management KEAL TECHNOLOGY
Years in the industry 21 Career highlight Miranda spent the first 10 years of her career on the insurer side as a senior underwriter, insurer portal trainer and business development rep
Don’t go digital for digital’s sake How would you describe the current insurtech landscape in Canada? In my 21 years in insurance, there has never been a time so rife with opportunities. As an industry, we are often accused of moving at a glacial pace when it comes to technology. Perhaps that’s been a fair accusation in the past, but as consumer expectations change and broker consolidation turns up the heat on competition, the sense of urgency to leverage technology across all stakeholders means we are perhaps, for the first time, all on the same page. I still remember some painful conversations in 2008, trying to convince people to “go paperless.” Now it’s not a matter of “Should we use technology?” It’s a matter of “What solutions should we use first?” Those are exciting decisions we get to help our broker partners navigate.
What benefits have you felt at Keal since the Vertafore acquisition closed in 2016? Joining the leader in modern insurance technology has been a fantastic benefit to our team and our clients. We are fortunate to be in the unique position of having incredible resources available to us that we would not have had on our own, yet there is a firm belief that the Canadian product suite should continue to be driven by Canadians, for Canadians.
What advantages can independent brokers gain from insurance technology? As we all know, insurance is a business built on relationships. An important link in the broker value chain is the tailored advice and advocacy they provide to their clients. By simplifying and automating as much of the insurance life cycle as possible, brokers can spend more time on meaningful human interactions. While that sounds nice, there are tangible financial incentives to be won via referrals, increased retention, etc., by the brokers who can demonstrate a unique experience that resonates with their clients.
Where should brokers start on their digital journey? Digital for digital’s sake serves no one well. Have an honest conversation with your team about what you want your brokerage to look like. Forget any challenges currently in your way, and just take a moment to dream. In your ideal world, what does your client experience look like? What does your employee experience look like? What sales and retention objectives do you want to achieve? Don’t accept any cop-out answers like “to provide the best customer service”; instead, define exactly what that means and how you will measure success. Once you have your answers, you can explore digital solutions to support your vision. Talk to your BMS partner, talk to your insurer partners, talk to your broker association – but beware of the danger of analysis paralysis. The COVID-19 pandemic has forced many to accelerate their digital journey. Pick something with the highest customer impact, implement, learn from the successes and failures you experience, and adapt.
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UPFRONT
MGA UPDATE
Investing heavily in expertise Why MGAs should focus on playing up their specialist knowledge in an M&A-hungry landscape
with more technical expertise and product offerings in its chosen segments, while Intact can help solve the talent, legacy system, capacity and partnership problems Frank Cowan was facing. However, Ryan cautions that before MGAs start dreaming about being acquired by a major insurer, they first need to develop their expertise and specializations to make a name for themselves in the industry.
“Become entrenched in what keeps your clients up at night”
Merger and acquisition activity in the insurance industry has been ramping up. A recent Clyde & Co. study found that the volume of M&As rose by 10% between 2018 and 2019 – and MGAs certainly aren’t exempt. “All MGAs, insurance companies and brokerages have similar challenges – talent management, legacy systems, capacity and maintaining strong partnerships,” says Larry Ryan, president of Canadian MGA Frank Cowan Company, which was recently acquired by Intact Financial. While some may bristle at the idea of a large insurance outfit buying out
NEWS BRIEFS
its much smaller competitors, Ryan believes the deal ultimately benefits both parties. “Frank Cowan Company is known for its industry expertise and strong relationships with customers and brokers across Canada,” Ryan says. “Intact acquired an MGA that is a leader in providing specialized insurance programs to public entities, including municipalities; healthcare; education; and community, children’s and social service organizations.” Ryan adds that Frank Cowan is a “strong strategic fit” for Intact, as it can provide Intact
CHES Special Risk launches subsidiary
CHES Special Risk has launched CHES Financial Services, a subsidiary specializing in life, health, critical illness and travel insurance, as well as employee benefits solutions. According to CHES Special Risk president and CEO Gary Hirst, the MGA launched the new arm in response to demand from P&C brokers who want to compete in these segments of the market. CHES Financial Services is currently only operating in Ontario, but the company has plans to expand into other provinces.
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“MGAs should invest heavily in their areas of expertise,” he says. “Become entrenched in what keeps your clients up at night. Sharpen your focus on problem-solving, provide an exceptional customer experience, anticipate needs, and differentiate your product and service offering so that it acutely resonates with clients.” Ryan believes that MGAs with strong relationships with their subscribing markets have the footing to remain independent – but that particularly successful ones will also attract the attention of acquirers. “If carriers are slowly taking over MGA responsibilities, it must mean MGAs are onto something good,” he says. “Rather than waiting for the line between carriers and MGAs to blur, MGAs should look to go further and really examine what else they can be doing to stand out from the crowd.”
Signature Risk Partners introduces online golf waiver
Signature Risk Partners has rolled out a cloud-based waiver solution for the golf industry, which streamlines the process of obtaining a waiver while allowing golf courses to easily manage and access completed forms. Launched in partnership with Smartwaiver, the new online waiver system is available exclusively to Signature Golf customers. According to Signature Risk Partners president and CEO James Grant, the simplified Smartwaiver process will provide “tremendous value” to Signature Golf members.
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Q&A
Brett Graham Executive vice-president AGILE UNDERWRITING SOLUTIONS
Years in the industry 20 Fast fact In January, Nova Scotia-based Agile Underwriting Solutions opened its first office in Western Canada, in Burnaby, BC
Bridging the gap between east and west What is Agile Underwriting’s core focus, and what sets you apart from other MGAs? Agile Underwriting Solutions – formerly UCAI – is celebrating its 25th anniversary this year. As an employee-owned, Atlantic Canada-based company, we have the collective mindset that we are “small enough to care and yet big enough to deliver.” Our niche market is in providing solutions for hard-to place personal lines and commercial property & casualty business, as well as professional lines coverage. We also specialize in generating unique programs to fill gaps within the marketplace.
What was the primary motivation behind your expansion into Western Canada? Agile has always had a virtual presence in Western Canada; however, we have a long-term goal of becoming a nationally recognized MGA. This cross-country office expansion is taking us one step closer to that evolution. We saw an opportunity and gap within the Western market, so we positioned ourselves to capitalize on that with the addition of on-site technical expertise in the form of a regional VP.
Are there any trends that are more common in Western Canada than in Eastern Canada? In Western Canada, we’re seeing a substantial reduction in competition among carriers, along with reduced capacity and lower limits being offered on a number of classes of risks – for example, hospitality and realty. This divergence of supply and demand is where Agile
Node International gets new cyber director
H.W. Kaufman Group has appointed Matthew Lefchik as director of cyber risk management services for its UK-based MGA Node International. Lefchik’s appointment comes amid H.W. Kaufman Group’s plans to expand Node International’s presence across North America. Lefchik will manage Node’s North American expansion, setting strategic direction for the unit’s growth in both Canada and the US. Lefchik joins Node from Avertium, where he served as global director of strategic partnerships and sales.
excels. In applying our underwriting expertise, we’re able to offer solutions by identifying and quantifying the risks, then dispersing or sharing them so no market is overly exposed or vulnerable. Our focus is on implementing strong underwriting discipline within our team and applying rating adequacy to reverse the effects of the reductions in premiums over the course of the soft market. The net result is broker growth and maintained profitability for our markets. We see this trend migrating across the rest of the country, so Western Canada is helping model strategies that create a roadmap or blueprint for sustainability and success in all regions.
What challenges have you encountered in scaling your operation nationally? Like most MGAs, we’re adapting to the technological advances with digitalization. It’s about matching the fast pace of application inflow and automation with that of responsible business practices and diligent underwriting to find optimal capacity – or, in more broad terms, monitoring accelerated and modest growth to ensure harmonization with governance and greater loss control. At the same time, risks are becoming more complex, which creates opportunity to harness the massive amounts of data analytics to transfer and share risks. The industry is rooted in a long history of manual business processes that, collectively, we’re all slowly reconstructing to evolve in this new era. While it may not be as epic as Lloyd’s transformation from paper to digital, it is still a significant adaptation that represents an exciting and dynamic future.
Brown & Brown welcomes new leader
Brown & Brown has added Mark Woodall, president and CEO of Special Risk Insurance Managers (SRIM), to the leadership team of Brown & Brown’s national programs division. The move comes as part of Brown & Brown’s acquisition of SRIM, which was finalized in January. Woodall continues to lead SRIM in addition to his new responsibilities within the national programs division. SRIM director and chief underwriting officer Tom Willie also remains in place as head of SRIM’s underwriting division.
Euclid Transactional makes promotions
Euclid Transactional has announced four promotions in its North American underwriting team. Shawn O’Neill and Manuel Giner have been promoted from senior vice-president to managing director, while Jake Filak and Jon Friedman have been promoted from vice-president to senior VP. The promotions come on the heels of Euclid Transactional’s considerable growth over the past two years, including the launch of new practices in EMEA and Canada, as well as a tax-focused New York practice.
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UPFRONT
OPINION
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Safeguarding share price Insurance and other risk management strategies are key to protecting a company’s share price during a reputational crisis, writes Nir Kossovsky DURING A reputational crisis, equity pricing is especially sensitive to investors’ cognitive biases. According to a survey published in early 2020, global executives attribute 63% of their stock value to their company’s overall reputation. Informational and behavioural economic principles, along with the findings of a study of a dozen reputational crises, suggest how insurance and other risk management strategies can protect share price. Reputational risk is the peril of impaired cash flow due to behavioural changes by angry and disappointed stakeholders, usually following an adverse event. When emotionally charged, people often make very different decisions than they would otherwise. While the emotional intensity may diminish, the economic effects of decisions made in the heat of a crisis can persist for weeks, months and even years. A recent Steel City Re study shows that while crisis communication is an important tactic, positioning risk management and reputationally relevant corporate financial information (such as corporate asset structure, reputation value volatility and share repurchasing volume) before and during a reputational crisis can impact up to 80% of the direction and magnitude of a company’s equity price change following an adverse event. The high-profile cases studied included Boeing, Bausch Health, BP, Equifax, Facebook, Johnson & Johnson, Samsung, Target, United Airlines, Volkswagen, Wells Fargo and Walmart, all of which suffered from a crisis that threatened their reputation at some point in the last decade.
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Managing reputational risk is both a governance and enterprise-wide endeavour involving all aspects of a firm’s risk management apparatus. Our study found that more than 60% of equity damage can be mitigated through the following governance and risk management strategies: • Using financial instruments such as insurance to communicate governance and enterprise risk management strategies to stakeholders in simple and credible terms
not risk management. Trying to manage crises purely through marketing is rarely effective, and companies that delegate their reputational risk management to marketing are doing themselves a disservice. That’s not to say that the marketing department shouldn’t be involved in the aftermath of a reputational crisis. Crisis communication can help mitigate the consequences of a reputational crisis. But as critics have observed, post-event marketing/crisis communication alone is not risk management. Any and all marketing efforts should be deployed in concert with strong risk management, finance and governance controls. We are in an age when information – both accurate and inaccurate – can be spread instantaneously and a generalized sense of anger and distrust in large institutions makes stakeholders quick to lash out with unease, disappointment and fear. Now more than ever, it’s imperative that companies constantly monitor the ever-changing expectations of stakeholders. While the speed at which information travels may make the collapse of a company’s reputation appear sudden, it’s actually the
“Corporate leaders often make the mistake of thinking that reputation is a product of media coverage. It is not – and marketing is not risk management” • Reducing the percentage of the firm’s balance-sheet assets that are intangible to minimize equity losses in the first days after a crisis occurs • Buying back shares with some of those liquidated assets to minimize equity losses in the first year after a crisis occurs • Managing enterprise reputational risk and the firm’s reputational value volatility to mitigate risk and reduce equity losses by the second year after a crisis Corporate leaders often make the mistake of thinking that reputation is a product of media coverage. It is not – and marketing is
result of numerous compromises to governance protocols that gradually changed company culture over time. Governance and risk management professionals can take this message to the bank. For effective reputation crisis prevention and reputational risk mitigation, leaders must implement pre-emptive strategies that are keyed to the protection of corporate cash flow. Dr. Nir Kossovsky is the CEO of Steel City Re, which analyzes the reputational strength and resilience of companies and provides tools and insurance to mitigate financial losses when reputational crises occur.
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The Board of Directors of Merlin Underwriting Inc. are pleased to announce the appointment of Daniel Moses to President and Chief Executive Officer. Mr. Moses’ qualifications span two decades and include commercial underwriting and leadership roles at a national MGA, brokerage experience in the Lloyd’s market, and most recently, strategic management for a large global reinsurer. In 2018, Mr. Moses returned to his MGA roots and joined Merlin, where he quickly engaged his underwriting credibility, industry relationships and management expertise to lead Merlin’s Commercial Lines practice through rapid growth. Mr. Moses is looking forward to working with Merlin’s Executive Team, consisting of Sarah Gibson, Executive Vice President & Chief Operating Officer, and Ryan R. Seager, Vice President & Head of Operations.
Merlin Underwriting is a Toronto-based specialty Managing General Agent (MGA) focused on delivering tailored insurance solutions to the Canadian mid-market. It offers disciplined underwriting of various property and casualty, professional and financial lines products, and provides a wealth of experience with high-hazard industries.
merlinunderwriting.com 150 King Street West, Suite 316 Toronto, Ontario M5H1J9
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PEOPLE
INDUSTRY ICON
HISTORY IN THE MAKING Economical Insurance president and CEO Rowan Saunders opens up about the P&C insurer’s landmark demutualization ONE OF Canada’s oldest P&C insurance companies, Economical Insurance is steps away from becoming the first Canadian mutual insurer to transition to public ownership. Steering the ship on this transformational journey is president and CEO Rowan Saunders, who has thrived on change during the course of his 32-year insurance career. In 1984, Saunders made the first big change of his life, immigrating from his native South Africa to Toronto. While studying at York University, Saunders followed in his father’s footsteps and took a summer job as an insurance broker. This piqued his interest in the business, and after university, he became a management trainee at RSA Canada. What followed was an incredibly diverse 29-year tenure with the Canadian general insurer, which saw Saunders progress from management trainee to CEO, a position he was appointed to in 2003 and held for 13 years. During that time, RSA Canada grew from the 10th largest to the third largest P&C insurer in Canada. During his time at RSA, Saunders held positions in commercial lines underwriting, personal lines leadership, corporate marketing and corporate finance, all while working in different regions across Canada. He even took a secondment to the UK, where he focused on the life insurance business, and was a member of RSA’s global executive committee. “All of these broad and varied experi-
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ences prepared me for the significant role I’ve undertaken by joining Economical,” Saunders says. “When I was approached by Economical in 2016, I said to myself, ‘This is such a unique opportunity in the Canadian marketplace to do something transformational.’ Economical is a Canadian business that has been dedicated to the Canadian market for 148 years. What was unique about the opportunity was the prospect of leading the company through demutualization. Economical’s demutualiza-
traditional in its methodology, its approach to the market and its distribution strategy – and transform it into an innovative and forwardthinking company fit for an IPO. “This is a story about transformation,” Saunders says. “We set about with two key themes of work. The first was around how we could improve the financial performance of the business and build the right capabilities for a high-performing public company. There was some tough work that had to be done.
“What does demutualization mean for our broker partners? From a trading perspective, it’s very much business as usual. But it does mean we can be more ambitious and we can open into new segments” tion is the first time a P&C mutual insurance company in Canada has ever demutualized, so we are making history.”
The road to demutualization When Saunders joined Economical as president and CEO in November 2016, the plan and process for demutualization had already been determined. His task as the new leader was to take the company – which was very
We have reshaped our portfolio, primarily in commercial lines, by exiting volatile and habitually underperforming lines of business. We have repriced our entire portfolio and modernized the sophistication of our pricing methodologies. “The second theme is around our transformation agenda. As a mutual company with no shareholders, we have not been paying dividends, and we have been able to
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PROFILE Name: Rowan Saunders Title: President and CEO Company: Economical Insurance Based in: Waterloo, Ontario Years in the industry: 32 Career highlight: “I consider it a great privilege to be a leader at Economical, as the first Canadian property & casualty company to pursue demutualization. We have a vision to change the industry as we become a public company and a top P&C insurer.�
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PEOPLE
INDUSTRY ICON
accumulate capital over many decades. The board has chosen to strategically deploy that excess capital to modernize Economical and build out new capabilities. I truly believe our industry is on the cusp of fundamental change and a significant amount of digitization. At Economical, we want to be at the front end of that digitization trend.” Under Saunders’ watch, Economical has made two major transformational investments. One was the launch of Sonnet, a 100% online home and auto insurance company. It marked a big shift from Economical’s 148-year history as a broker-intermediated business and turned the firm into a multichannel insurer – something Saunders says
our turnaround phase, we have purified our portfolio, we have dealt with habitually underperforming segments, and we are comfortable now with the quality of our portfolio leading into demutualization,” Saunders says. Still, the question remains: Why go through demutualization when Economical is already one of the leading P&C insurers in Canada? “Demutualization fulfills our aspirations of being a top-five player in this business,” Saunders says. “One of the fundamental strategic questions is: Do we take a scale approach, or do we take a niche approach? In order to take a scale approach and be a leader in the market, we need access to capital because that will allow us to participate in
“I truly believe our industry is on the cusp of fundamental change and a significant amount of digitization. At Economical, we want to be at the front end of that digitization trend”
A BRIEF HISTORY OF ECONOMICAL INSURANCE
1871 Economical Mutual Fire Insurance Company issues its first policy
1937-1947 Economical purchases Merchant’s Casualty and Northwestern Mutual to expand into Quebec and the Maritimes
1956-1968 Economical purchases Mississquoi and Perth Mutual
1980-2000 Economical purchases The Waterloo Mutual Insurance Company to provide group insurance, amalgamates with Western General to provide farm insurance, and purchases Federation Insurance
2015 “was necessary in order to be a top five P&C player in Canada.” The second major investment was the introduction of Vyne, a re-engineered broker offering with sophisticated pricing, updated products, and a policy administration and billing solution. Underpinned by Guidewire technology, Vyne offers faster service and more streamlined contact between the broker, carrier and customer. According to Saunders, Vyne improves administrative efficiency and enables Economical to drastically improve its speed to market, thereby accelerating its competitive capacity and adaptability to rapidly changing market conditions.
The finish line In preparing for demutualization and an IPO, Economical has unintentionally found itself ahead of the market, which is trending toward difficult remediation decisions in response to hardening conditions. “We have been through
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faster growth than otherwise organic capital generation would enable. It allows us to raise funds and make acquisitions in a Canadian environment that is consolidating and make some of these bigger investments around technology that are required to be relevant to customers over the decade ahead. “What does demutualization mean for our broker partners? From a trading perspective, it’s business as usual. But it does mean we can be more ambitious and we can expand into new segments. We have just built out a specialty team, which will expand our products into D&O insurance, E&O insurance, energy and excess property. That’s an example of how we can become more relevant to our broker partners, and that will only grow as we become a public company. “We’ve seen a ton of great momentum, and we’re very excited for the next phase of our journey, which is the completion of demutualization and becoming a public company.”
The demutualization process begins
2016 Economical launches Sonnet, Canada’s first fully digital, direct-to-consumer insurance offering
2017 Economical acquires Petline, Canada’s largest pet insurer
2018 Economical launches Vyne, an innovative new broker offering
2019 Economical shares the details of the demutualization conversion plan, and eligible policyholders overwhelmingly vote to continue with demutualization
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We click.
The future is digital. Let’s explore it together. Find out more about our specialty insurance and surety solutions.
Trisura Guarantee Insurance Company is a Canadian owned and operated Property and Casualty insurance company specializing in niche insurance and surety products. We are a proud supporter of the Insurance Brokers Association of Canada. www.trisura.com
a step above
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FEATURES
EXPERT ADVICE
The big thaw Amy Graham of RSA Canada tells IBC how Canadians can protect their properties during fluctuating weather conditions AFTER SEVERE blizzards, ice storms and other extreme winter weather, it’s important for homeowners and business owners to take appropriate steps to protect their properties before the great spring thaw. Across Canada, property damage caused by water is on the rise. Given the reality of accelerated global climate change, all signs point to water damage becoming an increasingly prevalent issue for home and business owners across the country. The issue is amplified tenfold in the spring months, when temperatures fluctuate, winter snow and ice start to melt, and the levels of rainfall increase. “Spring brings an abundance of rainfall and unpredictable weather,” says Amy Graham, national property underwriting manager for personal insurance at RSA Canada. “Rain events can happen quickly, and increasingly in the last few years, we’ve seen them occurring over much larger geographic areas and for a longer duration. Most of the homeowner’s insurance claims we see in the spring are related to overland water getting into the home, whether from rapid snowmelt or heavy rains.” Brokers are key to ensuring that Canadians are equipped with the appropriate knowledge, tools and insurance coverage to protect their properties during fluctuating weather conditions or excessive rain. To help, RSA Canada has released an Extreme Thaw tip sheet, which is
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available to brokers alongside multiple other climate-related resources on RSA Canada’s Climate Smart page at rsabroker.ca/climatesmart. Property owners need to think about both the outside and the inside of their properties when mitigating the risks of extreme thaw. For external risks, RSA Canada advises policyholders to shovel paths or trenches so that melting snow and rainwater can run away from the property,
basement off the floor to prevent potential water damage. Homeowners should also inspect their basement ceilings for leaks after outside water supply lines have been turned on in case a pipe froze or burst during the winter. “The best advice that brokers and insurers can give to homeowners is for them to be proactive about protecting their property and to exercise proper maintenance and care,” Graham says. “There is mitigation that can be done that might help with insurance premiums, such as installing battery back-ups for your sump pump or an in-line backwater valve.” One of the biggest risks property owners face during times of fluctuating temperature is ice damming, which occurs when water builds up behind a blockage of ice. The ridge formed by an ice dam can prevent further snow and ice melt from draining off a roof, causing water to back up and eventually leak into the home. This is one of the most common causes of weatherrelated damage and is a frequent source of spring property damage claims. To protect against the costly consequences of ice damming, RSA Canada advises property owners to hire a professional to remove the bulk of snow from the roof as soon as possible after a severe snowstorm. The insurer also recommends proper roof ventilation, as a cool attic during the winter months can prevent the thawfreeze cycle that triggers ice damming.
“Most of the homeowner’s insurance claims we see in the spring are related to overland water getting into the home” Amy Graham, RSA Canada not toward it. In the same vein, the insurer recommends checking that all downspouts divert water away from the property and that eavestroughs are clear so water can run through easily. For properties with a sump pump, property owners should check that it’s working properly and is discharging water at least nine metres from the foundation of the property. Many spring-thaw-related water damage claims involve either a roof or a basement. To avoid basement claims, RSA Canada suggests raising any personal belongings stored in the
Having the right insurance coverage is essential, alongside best-practice property risk mitigation. RSA Canada’s enhanced Waterproof Coverage endorsement provides property owners with a clear, combined coverage option for sewer back-up and overland flood (including from eaves, downspouts, drains, and sudden and rapid snow or ice melt). More information on RSA’s Waterproof Coverage can be found at rsabroker. ca/water. For extra tips and advice on how to protect properties against weather-related damage, visit rsabroker.ca/climatesmart.
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1/04/2020 11:00:06 4:22:41 AM 14/03/2018 PM
SPECIAL REPORT
THE SHARING ECONOMY
INSURING THE SHARING ECONOMY IBC sat down with industry experts to find out how insurance companies are responding to the growth, challenges and opportunities presented by the sharing economy IN THE most straightforward sense, the sharing economy provides the infrastructure for peer-to-peer transactions through community-based online platforms or mobile apps. Uber, Lyft, Airbnb, Zipcar, GrubHub, Shyp and Zeel are just a handful of the companies that have been created in the last five to 10 years and are now rapidly becoming household names. Indeed, the sharing economy has experienced incredible growth over the past decade – historically, there hasn’t been a business model shift that has attracted so many workers since the last Industrial Revolution. The McKinsey Global Institute estimated in 2016 that 20% to 30% of the global population was engaging in the type of independent work facilitated by the sharing economy. In
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the US, the Freelancers Union estimates 35% of Americans – 57 million people – freelanced last year, contributing US$1 trillion to the economy. And while these unconventional businesses have largely simplified life for end users, they’ve simultaneously disrupted traditional business models and thrown a wrench into the workings of insurance companies. “The [sharing economy] market emerged over the past decade, but more so over the past five years, it really began to gather speed,” Chris Kopser, president of US global risk management at AXA XL, said in a study released by the insurer in 2019. “These are companies growing at the fastest rate of any industry we have ever experienced. We routinely now see companies in this space going from concept startup to multi-billion-
dollar valuations in only a handful of years. This is unheard of outside of this space.” The sharing economy’s growth rate shows no signs of slowing – some projections predict it will grow from around US$15 billion in 2014 to US$335 billion by 2025. In light of that, insurance companies around the world are seeking ways to design coverage options that can adequately protect the fluid, nebulous world of sharing economy businesses. Many of these platforms – from ridesharing to house-sharing and everything in between – operate in a grey area between personal and commercial lines, which presents an especially unique challenge. “Sharing economy companies are evolving and expanding at an accelerated pace, which means insurers need to demonstrate that
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RYAN STEIN Executive director of auto policy and innovation Insurance Bureau of Canada
they can meet the emerging needs of these companies,” says John Hastings, assistant vice-president of client relationship management, global corporate and specialty at Aviva Canada. “Unique underwriting and claims solutions are essential as these companies continue to reshape the way consumers live in today’s world.” After facing steep regulatory obstacles when the sharing economy first blossomed, the insurance industry has caught up and, according to the experts IBC spoke with, is primed to keep innovating to respond to the next new thing – whatever that may be. For now, here’s how some of Canada’s insurance companies are approaching the current opportunities and challenges presented by the sharing economy.
The sharing economy tends to blur the line between personal and commercial risk. What insurance challenges does this present? Ryan Stein: Before the sharing economy came, vehicles tended to be used for personal use or for commercial use, and so the distinction between the two was pretty obvious. When ridesharing came, suddenly a vehicle could be used for personal use sometimes and then commercial use other times. I would say one of the biggest challenges was the distribution of the insurance policies for the various uses. For the personal use of the vehicle, the person who owns the vehicle goes and buys insurance from their broker or directly from their [insurance] company or an agent. With ridesharing, the big
With more than a decade of experience in policy development, Ryan Stein leads a team of policy analysts that works with Canadian insurance companies to develop solutions to various legislative and regulatory issues. Stein and his team help the Insurance Bureau of Canada support its members across a broad range of important emerging issues. ridesharing companies were buying insurance on behalf of all the vehicles in their network, which would cover them for when the app was on until it was turned off. So you could have two insurance companies insuring the same vehicle. One of the big challenges was figuring out if that vehicle was involved in a collision, how do you quickly figure out whether it’s the ridesharing policy or the personal policy that should respond? In the United States, they came out with a really good solution: legislation/ regulations that mandated the ridesharing
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SPECIAL REPORT
THE SHARING ECONOMY company to turn over data after a collision so that both insurance companies could review it and decide if it was a ridesharing collision or a personal-vehicle-use collision. That model has been adopted in several provinces in Canada. So does that mean the responsibility for risk mitigation falls to the ridesharing companies? RS: That’s right. So you as the driver would already have your personal insurance, which you set up yourself, and when you sign up with one of these big ridesharing companies to be a driver, insurance would be provided to you automatically that the company secured itself. It doesn’t have to work that way; it’s just how it has been working. The market dictates whether that’s the most efficient means of getting insurance. But it is important for people who are using their vehicles for ridesharing to inform their personal insurance company
vehicles has come a long way. It first started with ridesharing, then there was vehicle sharing, and now there’s delivery of food and packages. This is all changing relatively quickly – it’s all been over a few years. But these have all been opportunities for insurance companies because the market for insurance coverage from the sharing economy growing is great for the insurance companies that can get in there. I think what happened with ridesharing is that, when it first came in 2015 and 2016, it was like a shock. That was when the line between personal and commercial just got blurred. But then once the market figured that out, it’s primed to figure out [other changes] as the sharing economy evolves. Hypothetically, if someone delivered food and packages, drove for a rideshare company, and made their car available for rental, would they have to have different coverage for all of those? RS: If you’re that kind of entrepreneur who’s
“Once the market figured out [ridesharing], it’s primed to figure out [other changes] as the sharing economy evolves” that they’re using it for that purpose. Because when that personal insurance company sells the policy, they think that vehicle is being used for personal use only, and it’s important to inform them that they are going to be using their vehicle for ridesharing and that they are with a ridesharing company that provides coverage from the moment the app is turned on until the app is turned off. The advanced technology driving the sharing economy helps commercial enterprises reduce risk and increase efficiency. But does it also create new liability risks or concerns? RS: I don’t look at it as concerns; I look at it as opportunities, and so do the insurance companies. The sharing economy with
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going to be involved in the entire suite of the sharing economy, I do not believe you’d have to go and buy five different insurance policies. The way the market has worked is that the sharing economy company that you sign up with would probably have already purchased a policy that would apply to your car. They want the experience for drivers signing up for their service to be seamless, and having a message at the end that says, “OK, great, one more step is for you to go buy your own insurance” is not seamless. They don’t have to, but they have been providing the coverage themselves. What roles are brokers playing in developing insurance solutions for the sharing economy? RS: I’m not privy to actual negotiations,
but I think the sharing economy companies are purchasing coverage just like any business coverage. Businesses – in this case, the ridesharing company – would probably work through a broker, and the broker would engage an insurance company. In this example, there are three pretty sophisticated businesses, and they’re able to figure out what the coverage should look like, how much it should cost, all those things. The ridesharing company would be the expert on their business, the broker is an advocate for that company and knows what coverage is available to the market and the nature of the insurance companies, and then the insurance companies – their expertise is underwriting risk; they also probably know the regulatory environment the best. So each party brings something of high value to that kind of discussion. I believe it is collaborative. Now that insurance companies have the experience of the last five-plus years under their belts, will they be able to adapt and move quite a bit faster for whatever the next big sharing economy development is? RS: Oh yes, absolutely. When ridesharing first came to Canada, I believe it was the rules – the government regulations – that were holding things up. It’s no fault to the lawmakers – no one saw this coming – but the laws weren’t conducive to insurance policies for ridesharing companies, and they needed to be updated to accommodate that. I knew right away that there were insurance companies that wanted that business. The problem was that the rules wouldn’t allow you to offer the type of policy that made sense for the ridesharing company and their drivers. They needed to work with the government and the regulators to update those rules. That obviously takes time. But I believe what happened back in 2015 and 2016 has paved the way. I believe that with the next thing that comes, everything will work out a lot smoother.
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Andrew Hosie has more than 18 years of risk management consulting experience and joined Gallagher in 2018. He’s responsible for developing and implementing insurance and risk management services in line with Gallagher’s industry expertise and market partnerships. Through enhanced global and national connectivity, Hosie ensures a consultative risk management and servicing platform that links the four traditional quadrants of risk – hazard, operational, financial and strategic – with necessary methodologies to reduce clients’ total cost of risk.
ANDREW HOSIE Vice-president of strategic growth Gallagher Canada
The sharing economy can blur the line between personal and commercial risk. What insurance challenges does this present? Andrew Hosie: Effectively, it’s the commercial use of personal assets or the personal use of commercial assets – that’s really the blurred line that exists. The requirement of better communication of intent or actual use by the insured – i.e. the individual
you’re dealing with any combination of broad-form insurance, which is property & casualty, auto, commercial general liability, contingent commercial general liability and non-owned auto. Often, people understand the potential profitability of shared economy businesses more readily than the insurance requirements to conduct the activity. They simply think of the opportunities for revenue, personal income and/or augmentation of personal income as opposed to “What are the insurance requirements, and what are the risk management requirements I’m bringing on?” Those are an afterthought. conducting the activity – is the largest challenge I’m finding. Given there are around 90 million people in North America using the shared economy, the volume of blurred lines is a significant challenge. Going a little bit deeper, due to this volume and mixed usage of commercial assets for personal use and personal assets for commercial use, there are various increased liabilities that depend upon which of the five common types of shared economy are being used. You’ve got rideshare, car share, property share, space share and delivery share, and all of them are intermingled. Out of those five common types of shared economy,
When multi-party relationships are involved, who should bear the responsibility for risk mitigation? AH: There are three parties involved: the flagship, or operational banner under which you’re operating; the user, or the person trying to make income; and the customer who is using the service. The responsibility for understanding the implications of risk, in my personal opinion, should be or could be shared equally. We’re obviously in a very litigious society, and risk management should always follow the “above and beyond the reasonable person” defence statute to
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SPECIAL REPORT
THE SHARING ECONOMY ensure that any incurred liability for risk that comes to be is defendable. If you look at a three-party arrangement, I would suggest the greater onus of responsibility is that of the parent or flagship organization, because it’s their reputation that could be harmed by actions or inactions of an individual working under their banner. And we are seeing this done – everything from police checks and criminal record checks to driving licence checks and, in some instances, previous claims experience from any of that person’s personal or commercial ventures. The list goes on. Similarly, the individual who is now operating under that banner should go above and beyond to demonstrate that they’re worthy of being a pseudocontract employee. If under a rideshare banner, which is the most voluminous of the five, you should want to prove that you have a clean driving record, your car is properly maintained, and telematics – artificial intelligence – is in your vehicle so you can show the driving pattern you have. For property sharing, it could be getting landlord or tenant acceptance – a lot of large condo establishments are banning these nightly rentals. By securing permission, it can show a demonstration of risk-aware behaviour, which checks some of the boxes from a risk management perspective. What’s the difference between insuring, say, a taxi driver and a rideshare driver? AH: To me, it’s split. A taxi driver is a fulltime employee of the firm for which they operate, and nine times out of 10, it would be a commercial-use vehicle. A rideshare operates commercially with a personal vehicle. A rideshare vehicle only operates as a rideshare vehicle upon acceptance of a fare and until that fare is dropped off. If that vehicle is driving around and they’re not going to pick anyone up or no one’s in the vehicle, it’s a personal-use automobile. Visually, it’s very easy to pick out a taxi, and by having those taxis branded
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as such, you’re actually enforcing a form of risk management because people are going to associate your actions with that firm. You’ll notice that with some of the rideshare organizations, their branding is getting slightly larger. All that’s doing is greying the area between commercial and personal use even more. What are some of the key opportunities for insurance companies in the sharing economy? AH: In my opinion, the insurance industry needs to capture the shared economy demographic, which is traditionally millennials, so that insurance, which is known as a more traditional white-collartype industry, remains nimble and offers the choice, speed, coverage and claims
Whose responsibility is it to make sure the person operating as a sharing economy employee is covered correctly? AH: You’d obviously want to call a broker or risk advisor to let them know that you’re thinking of this. If you partner proactively with an advisor, there can be changes made to your personal insurance policy to cover for its commercial use. Many carriers are now reacting to that and are offering addendums or amendments to current policies when you start to use your personal vehicle for commercial use. Additionally, the rideshare economy has come to the table from an insurance perspective. Many of the branded shared economy firms are enforcing or offering insurance requirements. They
“People understand the potential profitability of shared economy businesses more readily than the insurance requirements to conduct the activity ... Those are an afterthought” resolution as quickly as this web-based industry is growing. The speed it takes to hail a rideshare, rent an apartment, order food or share commercial space is literally five minutes or less. We need to get to that same level of quickness so we can match the end users’ expectations.
have a master policy with their carrier or broker, and they themselves are working proactively with their risk management company or their insurance company to create these policies that allow them to become more of an attractive franchise or contract employer.
What would that “quickness” look like in insurance? AH: Online platforms for both combined policies and claims. I think it just highlights the grey area between commercial and personal lines insurance. For personal lines insurance, of which I’m not an expert, you as an end user can go online, fill in the forms and get an automatic quote back. Commercial insurance – particularly for larger, complex businesses – hasn’t quite got there. Due to the blurred line I’ve referenced, there’s both a challenge and an opportunity in closing that gap.
How does the labour shift toward freelance contractors and selfemployment give rise to new risks and insurance challenges? AH: For me, this is the toughest question to answer because all of these shared economy services – or at least a large portion of them – represent additional or augmented income. It’s not the person’s primary source of income. And if there are injuries or losses of assets in those instances, meaning that you then can’t complete your commercial business or you can’t go to work, then all of a sudden
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there’s a business interruption or a workers’ comp claim [if you’re in the US], and your secondary source of income is actually causing you the inability to earn your primary source of income. I would also imagine there are no benefits packages or healthcare coverage provided on the secondary income. And many secondary incomes could actually exceed primary incomes in this space now. And there’s not a sharing economy insurance package yet, right? AH: I think that’s the opportunity that the insurance industry is now reacting to. There are increasing online and more traditional insurance platforms and brokers who do provide these packages and/or programs, whereby you are one of many entering into a reciprocal buying arrangement that will allow you to do that. It comes back to the proactive discussion with the broker [and then] going above and beyond in a reasonable case perspective to manage their own risk and that of their passengers or end users. It’s the closing of that gap between the perception that the traditional insurance industry isn’t as nimble as the shared economy industry is. I think that many carriers, to their credit, are expelling that rumour, because you can get quick turnaround when you make that phone call to your agent and get that policy for whatever activity you’re doing. Do you think the grey area in insuring the sharing economy will be more clear a year from now? AH: Not even a year. I think we’re going to see it get clearer and clearer every few months. We’re such a data-driven industry that once there are increased claims coming through and you see the volume of data that we look for, we can actually create product lines and/or claims management processes to be reactive so that you’re almost providing lessons from loss so you can actually move forward. I think we are, as an industry, beginning to react much quicker.
WENDY MADEVU Vice-president, claims Swiss Re Corporate Solutions Canada
What insurance challenges does the sharing economy present? Wendy Madevu: Traditional insurance coverage isn’t always a great fit for sharing economy companies, such as those that provide ridesharing or tourism experiences. If you have a personal lines policy, that really is only protecting the driver, and then on the commercial side
Wendy Madevu oversees property, specialty and casualty claims activity for Swiss Re Corporate Solutions Canada. With nearly two decades of experience in commercial insurance claims management, Madevu is committed to delivering best-in-class knowledge and service to customers. Based in Toronto, she holds a BA in criminology and sociology from the University of Windsor and a CIP designation from the Insurance Institute of Canada.
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SPECIAL REPORT
THE SHARING ECONOMY of things, it’s only protecting whatever the company or small business is. So the problem is, now that we have these people with a personal policy trying to take part in the shared economy, where does the insurance coverage lie for these people, and vice-versa for commercial clients? How do we cover this? In the traditional sense, there’s no ‘combo package’ insurance coverage for someone who’s using their personal car to pick up customers and make money off it. But it’s true that companies are offering their own options. Here in Canada, there are a couple of insurance companies that are working with ridesharing platforms, and they provide special coverage for people who are using their personal vehicles in that way. Once both policies are in place – personal and commercial – who bears the risk in the event of an accident, the company or the driver? WM: Once you have that policy – let’s just say for ridesharing – then the risk goes onto the person who’s driving the vehicle. The consumer is protected, because you’re going to get the benefit of coverage under the company policy, which you would almost consider a smaller type of commercial policy because you’re picking up individuals. What about the passenger? Do they bear any risk? WM: Not usually, because it would be the same as using a taxi. If you use a taxi and get into an accident, you can go back to the taxi company for your coverage. It’s likely the same with ridesharing: If you’re in a vehicle at the time of an accident, you would go to the company for whatever coverage you needed. What about for home-sharing? Does that operate in the same manner as a hotel? WM: In the shared space, it’s a little more complex. It’s kind of like having a tenant in a rental. For people who own
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properties and are renting them out to a tenant, the person who owns the condo has to have special insurance to rent it out. The owner then is only responsible for things like a toilet breaking or a burst pipe
cover, we don’t know. There have been instances where people have rented out their places and then filed claims against their personal policies, only to have them declined because they were renting it
“In the traditional sense, there’s no ‘combo package’ insurance coverage for someone who’s using their personal car to pick up customers and make money off it. But it’s true that companies are offering their own options” or something like that. But when it comes down to something a tenant did – let’s say a tenant cooked something and the whole kitchen caught on fire – the tenant is required to have insurance to cover that, not the owner. For home-sharing, what makes it different is that the person renting the space isn’t a tenant – they’re a short-term occupant, so the coverage should reflect that. Most companies provide property protection coverage for the host, and a lot of hosts protect themselves from immediate damage by charging a security deposit. It sounds like home-sharing is more complicated than ridesharing when it comes to who should bear the risk. WM: Technically, the person who bears the most risk is the person renting out that unit via a home-sharing platform. The occupant who is just staying there for three days without proper coverage may burn down your kitchen and be gone. And the company isn’t going to bear the risk because the owner is the one who chose to let that person stay. WM: Home-sharing companies have evolved in their coverage offerings. For example, Airbnb offers property protection for up to $1 million, according to their app. But how long getting to those funds will take and what specifically they would
out for commercial use. Because at that point, it’s basically becoming a commercial property, and you only have a personal property policy. That sounds like a pretty big challenge for insurance companies, but is it also an opportunity for them in terms of figuring out a way to cover that grey area? WM: A lot of insurance companies are looking at innovative solutions that can help provide coverage or close coverage gaps. What role do brokers play in developing insurance solutions for these types of emerging risks? WM: Some companies have embraced it and decided to look at ways to work with the different customers who are doing this. But there are also some companies that are saying “absolutely not.” They are just not allowing it on their policies. If you are looking to move into participating in the shared economy, you really have to do your research to figure out which companies are allowing it and which ones aren’t. What are some of the biggest opportunities you see for insurers in the sharing economy? WM: Stronger, more entrepreneurial communities generate more potential
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customers. By that I mean that the sharing economy gives access to a lot of people who didn’t have access to do things or be able to move around as much as they did before [in a traditional space]. For instance, travelers can now stay, explore and spend in neighbourhoods outside of the typical tourist destinations, helping more small local businesses and interacting with the local residents. They help build up communities – smaller businesses grow in number and in size, creating a larger demand for insurance services. Is there anything about Canada specifically that creates more challenges for those participating in the sharing economy? WM: With Canada, the difference is that a lot of the insurance here is no-fault insurance. So what happens, for instance with ridesharing, is that even if you get into an accident with a personal vehicle, it’s all no-fault insurance, meaning each person has to go back to their own insurance company and make the claim. So we’re not seeing any increased rates of claims or any increased rates of damages or injuries because each person has to report to their own insurance company, so it’s easier to cap those types of things. In terms of where things will go from here, what do you see happening? WM: I think we’ll start to see more customized products for the end users. I definitely think there will be more that we’ll see like that. Do you think insurance companies will start to advertise it more: “We do home insurance, we do car insurance, and we do sharing economy insurance?” WM: I don’t know why they wouldn’t. They advertise everything else, right? I could see an insurance company that’s very strong in the shared economy space saying, “Hey, this is a business model we’re interested in” – I don’t see why they wouldn’t. I haven’t seen anything like that yet, though.
JOHN HASTINGS Assistant vice-president of client relationship management, global corporate and specialty Aviva Canada
The sharing economy tends to blur the line between personal and commercial risk. What challenges does this present for insurers? John Hastings: Insurers need to find the balance of being meaningful participants in this new market while also maintaining pragmatic underwriting. Insurers also need to be comfortable that they are gathering the right data to support their decisions. When it comes to the sharing economy, we’ve had to rethink how we apply much of the science we typically use to evaluate risk – in particular when the line is blurred between personal and commercial, as illustrated by transportation network companies like Lyft. Aviva has partnered with Lyft Canada since December 2017, offering an auto insurance solution for all drivers and passengers using Lyft in Ontario. As this relationship has developed, we’ve created an integrated claims solution for Lyft drivers that leverages collaborative technology and our expertise to reduce claims handling time. It’s important for insurers to reconcile
John Hastings is responsible for building Aviva Canada’s client relationship management (CRM) team, including the creation of the structure, governance and target operating model for the CRM function. The team drives client retention and acquisition by working crossfunctionally with underwriters, brokers and clients. With more than 23 years of insurance experience, Hastings has worked as a director of client management and a client advocate. Before joining Aviva, he worked as head of corporate property for Canada at Allianz.
the challenges that come from making decisions about sharing economy risks based on data that typically doesn’t have the same credibility when compared to segments and lines of business that are supported by decades of results and development. Clients in the sharing economy collect an exceptional amount of data from their users and customers. With such a vast amount of data, the challenge for insurers is to be as certain as possible that they are collecting the right data that best captures the exposure and to constantly revise how they analyze this data.
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SPECIAL REPORT
THE SHARING ECONOMY When multi-party relationships are involved, who should bear responsibility for risk mitigation? JH: The roles of risk mitigation in the sharing economy are largely unchanged from other examples of multi-party insurance relationships. Our experience with the sharing economy is that clients understand their risk and look for brokers and insurance partners who can complement those efforts. How does the labour shift toward freelance contractors and selfemployment give rise to new risks and insurance challenges? JH: Self-employed or freelance contractors aren’t new for the industry, so we’re equipped to handle the challenges and risks from these groups. What has shifted is the technology and the channel that brings the products and services to the consumer.
What do you think are some of the biggest opportunities for insurers in the sharing economy? JH: One of the biggest opportunities for insurers is to offer a value proposition that covers the full spectrum of the client’s needs – from out-of-the-box underwriting to fully integrated risk data and claim data sharing. Sharing economy companies aren’t that different from other complex insureds in that they aren’t insurance companies. They tend to tap into and lean on the collective knowledge of their insurer and broker. Where do insurance brokers stand in the sharing economy insurance landscape? What role can they play in developing insurance solutions for this emerging risk? JH: Brokers will always be one of the most efficient channels to introduce
“Brokers will always be one of the most efficient channels to introduce clients in the sharing economy to insurers” The advanced technology driving the sharing economy is helping commercial enterprises reduce risk and increase efficiency. But is it also creating new liability risks? JH: We keep potential liability risks for any client, whether they’re in the sharing economy or not, top of mind when doing business. The services that consumers are using via dedicated apps for the sharing economy are familiar to us, which means typically there aren’t new liability exposures. In terms of new exposures, insurers and clients should be mindful of superior court and provincial labour tribunal decisions related to interpretations of the employee relationship and how those decisions change their exposure to vicarious liability.
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clients in the sharing economy to insurers. This won’t change, but what we’ve seen change is the mandate that clients give to insurance brokers. Clients’ decisionmaking, as it relates to their insurance and risk management, will rely on brokers to be consultative. The broker needs to remain the check and balance to the insurer/insured relationship. Brokers can provide value by informing clients on whether insurers have applied the right approach in the underwriting process and claims handling. In terms of development of solutions, I’ve learned that in the sharing economy, no idea is too big or provocative. Brokers are in a position to help insurers offer innovative solutions for alternative risk transfer, claims handling and more.
HOW CAN INSUREDS MANAGE RISK IN THE SHARING ECONOMY? Inform your personal insurance policy provider that you’re planning to use your vehicle or home for commercial reasons as well as personal ones Take the necessary measures to make sure your vehicle and/or home is in exceptional condition Set up guidelines for future passengers/guests and make sure those guidelines are clearly communicated, as well as consequences when the stipulations aren’t met Stay abreast of changes in the law, your personal insurance policy and your policy through the sharing economy platform you work for Communication is key – insureds need to communicate with their insurance agency, platform and the end user
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FEATURES
SECTOR FOCUS: POLLUTION LIABILITY
Sweat the small stuff When it comes to environmental coverage for large-scale construction projects, every little detail is important
INCREASED AWARENESS around climate change, along with tighter government regulations, has made large-scale companies with environmental risk vulnerable to fines that were unimaginable just a few years ago. In 2019, Kirby Offshore Marine Operating was ordered by the Provincial Court of British Columbia to pay more than $2.7 million for contaminating a waterway inhabited by fish and other wildlife. It was the largest penalty ever imposed in Canada for a single spill, which happened in 2016 when one of the company’s tugboats ran aground, resulting in the release of more than 107,000 litres of diesel fuel and more than 2,240 litres of lubricants into the waterway. Environmental regulations in Canada have become stricter, and fines have increased over the past decade. In 2009, the federal government introduced a new fine regime under the Environmental Enforcement Act that implemented higher mandatory minimum fines for individuals and corporations. Under these rules, large corporations and ships of 7,500 tonnes or more can face fines between $500,000 and $6 million. That’s had a direct impact on insurance coverage requirements. “Most environmental impairment liability
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(EIL) policies now have either a sublimit or full policy limit for government-mandated cleanup or remediation costs,” explains Ulli Garrett, casualty and pollution underwriter at South Western Insurance Group. If large construction companies aren’t properly prepared or aware of all environmental exposures, they can end up being pulled into lawsuits, potentially with multiple parties and heavy repercussions. “Large construction companies should have pollution liability coverage year-round, not just for a specific project. You never know when you might encounter a situation that could impact the environment,” Garrett says, adding that even parked vehicles and machinery sitting unused in a lot can bring the potential for damages.
Attention to detail Corporations are now being held liable for what was once swept under the rug. Every detail of a company and its operations is important when looking at pollution liability for large-scale projects; anything that’s left out can become an unknown exposure. “We’ve seen a trend where smaller claims are being inflated, and it’s putting customers in a target that they aren’t prepared to face,” says Ludwig Nagata, assistant vice-
president of environmental at Liberty Mutual Insurance. “It’s much more serious and significant now, which makes underwriting even more important.” Garrett echoes that sentiment, noting that some markets are veering away from covering pollution due to drastically increased premiums and heavy litigation. Accordingly, brokers must have a complete understanding of the entire scope of a project and the company to build a customized coverage plan that takes all areas of the operation into consideration. It can be difficult at times to get all the information from a client upfront, which means brokers need to know the right questions to ask. Without a holistic understanding of the operation, underwriting can be challenging. “You need to dig deep to find where the
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“You need to dig deep to find where the main exposure lies, how heavy it leans into one type of business and how much of an impact it could have on the environment” Ulli Garrett, South Western Insurance Group
“Whether you require sudden and accidental coverage or full gradual coverage is really driven by the contract specifications and the insurance risk tolerance,” Nagata says. On top of contractually mandated coverage, he says insureds should consider purchasing supplemental insurance to cover any additional exposures.
Location, location, location main exposure lies, how heavy it leans into one type of business and how much of an impact it could have on the environment,” Garrett says. Nagata advises brokers to open the lines of communication early to identify any potential issues that could come up during construction so problems can be mitigated before they become a reality. It’s important to
bring all stakeholders to the table – including engineers, contractors, lawyers and lenders, along with brokers and insurers – to start the conversation on managing exposures, risk control and risk engineering. Studying contracts, reviewing expectations and asking specific questions about project demands, timelines and insureds’ experience is a good place to start.
The closer a project is to densely populated and developed areas, the greater the impact a pollution disaster would have on neighbouring properties. This can increase the project’s complexity while also potentially affecting cleanup costs. Proximity to water is also a big contributor to higher premiums. Garrett explains that “any operation on or near a water source is
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FEATURES
SECTOR FOCUS: POLLUTION LIABILITY
POLLUTION FINES IN CANADA
$75,000
Minimum fine for a designated offence for small-revenue corporations and ships under 7,500 tonnes
$4 million
Maximum fine for a designated offence for small-revenue corporations and ships under 7,500 tonnes
$500,000
Minimum fine for a designated offence for large corporations and ships of 7,500 tonnes or more
$6 million
Maximum fine for a designated offence for large corporations and ships of 7,500 tonnes or more Source: Government of Canada
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going to greatly affect the limit of coverage and pricing.” A policy that covers on- and off-site damages is integral in this case, she adds, as any leaks or spills into a waterway can affect a very large area and result in a costly cleanup effort. This is also the case when it comes to environmental coverage for premises, specifically for companies like chemical manufacturers. Underwriters need to consider the possibility of a chemical leak or toxic fume emissions that can contaminate surrounding waterways and farm fields or affect residences in any way. From an underwriting perspective, the insured’s experience is also an important factor, as it provides solid historical evidence
mental pressure on corporations to protect the environment for future generations,” Nagata says. “Those who are successful in addressing corporate behaviour, social inflation and technology advancement will ensure their longevity in EIL.”
Getting in For brokers who aren’t as experienced in environmental insurance, both Garrett and Nagata recommend teaming up with insurers who are well-versed in the field or reaching out to industry peers, as the product is complex and isn’t as easily understood as other lines of insurance. In some instances, clients and brokers aren’t familiar enough to spot the all the
“Those who are successful in addressing corporate behaviour, social inflation and technology advancement will ensure their longevity in environmental impairment liability” Ludwig Nagata, Liberty Mutual of previous projects and loss experience. According to Nagata, underwriters also often look at whether insureds are partnering with the same subcontractors and whether those contractors likewise demonstrate good environmental practices and have a clean track record. There’s also a lot more responsibility put on corporate governance and whether companies have proper risk mitigation plans in place. Insurers are increasingly prioritizing environmental, social and governance (ESG) standards, which are non-financial factors used to measure the sustainability and social impact of a company’s operations. “There’s an increased societal and govern-
exposures or to even know if there’s coverage available for their type of business. Because regulations, policies and products are constantly changing, Garrett advises brokers to keep an eye on what’s happening in the market and pay attention to any emerging issues or cases. Looking at past claims is an opportunity for those in the market to learn from previous mistakes and assess growing environmental concerns. Nagata says they also help determine the cost of claims, including defence and monitoring costs. “Pollution losses drive innovation as businesses look for ways to prevent or mitigate losses from happening again,” he says.
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FEATURES
BROKERAGE INSIGHT
Continuing a legacy in Atlantic Canada Aneill MacCaull and Wayne Ezekiel of AA Munro discuss the brokerage’s recent 75-year anniversary, its approach to serving local communities and its ongoing leadership handover
IBC: Congratulations on celebrating your 75th anniversary last July. Tell us about AA Munro’s mission and focus. Aneill MacCaull: We are primarily a P&C company focusing on personal lines, but we do have a fairly significant commercial portfolio, as well as financial services and investment products through AAM Financial. We really pride ourselves on being a communitybased brokerage. We try to promote community involvement and believe the community supports us and makes our business viable – it’s not only important to us, but it’s also our role to give back and support the community. We encourage individual brokers in each community to find things they’re passionate about and want to support, and we support them in any way we can. Wayne Ezekiel: That shows up in our marketing numbers: One-third of our business comes from referrals. [We] don’t prioritize spending money on advertising, on the normal models. We usually do it through word of mouth.
IBC: How is AA Munro embracing the digital changes happening in the industry right now? AM: We’ve taken a little bit of a different
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approach to digital than some direct writers or other brokerages. Where they provide a full online service – a product sold and serviced online – we’ve been using our digital space and tools as a lead generator and a way to provide additional servicing tools to our clients, while still trying to hold onto the original concept of having a broker in the office to call or come visit. WE: We went through a lot of the different iterations online. What we find is we’re a rural population here – we still operate in small communities; people still know who we are. They’ll go online to find a broker, but they do not do business online. Once we get the referral online, we call the client right back. We don’t do automated online quotes without the input of a broker – we call the
client and do the business, and then turn it over to a local office after the policy is sold.
IBC: What are some of the challenges specific to being located in Atlantic Canada? AM: It is a reality that in Atlantic Canada, we do see consumers behave in a different way than the rest of the country. It’s more community-based here; people value interactions and want to do business with people they know and feel comfortable with. In this industry, there’s this huge shift to doing it all online, and it’s not to say the Atlantic community doesn’t want to do it online, but we do feel it’s different here. We have the challenge of both embracing the online tools and digital space, but
A FAMILY BUSINESS Aneill MacCaull officially started at AA Munro full-time in 2012, but he spent time in the office growing up, doing work for his father, CEO Harley MacCaull. While the younger MacCaull didn’t originally intend to join the insurance industry, that changed in his 20s. “I grew a little bit and developed, and the opportunity presented itself,” he says. “I’ve spent the last eight years here [and] last year took over the transition of overseeing the whole organization. It’s been a fun journey. I’ve been very lucky, and AA Munro’s been very lucky to have a solid leadership team that guides us and sets the direction of the company. I’ve been put into a great position.”
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“In Atlantic Canada, we do see consumers behave in a different way than the rest of the country. We have the challenge of both embracing the online tools and digital space, but also holding on to those community roots” The AA Munro Insurance culture team, from left: James Kerr, team manager (Cape Breton); Rodney Munro, VP of operations; Greg Hull, VP of sales; Aneill MacCaull, president; Tracey LaTulippe, staff development manager; Wayne Ezekiel, culture champion; Stacia Peters, broker (Sydney River); Harley MacCaull, CEO; Tanya Young, broker (New Glasgow); Tammie McLearn, broker (Greenwich); Valerie Guilbault, team manager (sales development); Angus MacCaull, communications analyst. Missing from the photo: Georgie Fleck, team manager (Central Nova and Valley South Shore)
also holding on to those community roots. That’s the client base. That’s the core of our business. It’s not one or another; it’s “How do we grow as a community-based organization while adding these digital tools?” In terms of obstacles, one that we have is our physical, geographical layout. One of the things about being a community-based brokerage is we have to physically be in the communities. That’s something we value, and that’s the core of our business, but it presents the logistical challenges of moving around to all the locations.
IBC: What’s something you’re particu-
larly proud of from the past year? WE: Last July, we exceeded our goal of $75 million in premium (we’re over $80 million now) [and] experienced over 4% growth last year. AM: Another thing we are very proud of is how our co-workers have dealt with Eastern Canada’s marketplace, which has been extremely challenging on the consumer, with substantial price hikes in personal lines and a hardening of commercial lines. Our brokers are hearing about it every day and [still] finding solutions, providing professional guidance and showing up every day with a smile on their face.
FAST FACTS: AA MUNRO INSURANCE Areas of service Auto
Commercial insurance
Homeowners
Financial services
Year founded: 1944 Number of offices: 19 Head office: Whycocomagh, Nova Scotia Number of employees: 120 Leadership: Harley MacCaull, CEO; Wayne Ezekiel, former president and culture champion; Aneill MacCaull, president; Greg Hull, vice-president of sales; Rodney Munro, vice-president of operations; Valerie Guilbault, team manager; Georgie Fleck, team manager; James Kerr, team manager
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FEATURES
MEETINGS
How to run successful virtual meetings With more people working remotely, virtual meetings have become crucial to gather a team. Donna McGeorge explains how to make your virtual meetings more efficient and effective
DOING ANYTHING by distance takes twice the time and is half as good. Unfortunately, if our face-to-face meetings are bad, then it’s likely our virtual meetings will be twice as bad (at least!). Running effective virtual meetings means navigating time zone differences, language barriers and technological inconsistencies. The three biggest criticisms of participants in virtual or distance meetings are that people are not fully present on the call and are checking emails or having side conversations with their phones, that the speaker or presenter often simply reads the slides, and that they go on for too long and much of the content is not relevant to everyone. Good protocols are important for both physical and virtual meetings. Here are some tips for handling virtual meetings. Be prepared. Make sure everyone knows why they’re there and what’s expected of
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them. Send out an agenda, or at least a purpose statement, so that people are clear about the reason for the meeting. Be punctual. Start and end on time. As the meeting convener, be online at least 10 minutes early so you can manage any tech issues. Be present – and keep it short. Distractions are everywhere, so by keeping virtual meetings to 25 minutes or less, you are more likely to keep people focused. In addition to improving how we meet generally, when it comes to virtual meetings, there are other things we need to consider.
Use the camera This is particularly useful for one-on-one meetings or smaller groups, but not so useful once you have more than six people on the
call. Using the camera creates a stronger connection, and you’ll gain access to the visual cues that an auditory interaction can’t provide. Of course, there are exceptions. Your teammates on those late-night conference calls don’t need to see you in your pyjamas. When videoconferencing: Speak clearly and slowly. This is especially important for multicultural meetings. Accents can be hard to understand. Move and gesture slowly and naturally. Depending on the bandwidth, movement can slow things down or create pixellated images. Look into the camera. Don’t look at yourself on the screen. Dress appropriately. Often we think that distance means we can be more casual, but this is not true; you still need to be professional. You also need to think about colours and patterns that might be jarring on the screen. Put your microphone on mute. When you aren’t speaking, be aware of background noise and keep your movement to a minimum. Use the ‘hands up’ function. This is a better way to let people know you have something to say than trying to speak over the top of others. Stay focused and present. Keep focused on the task at hand, just as you should at an in-person meeting.
Run it like a radio show The next time you’re listening to the radio, pay attention to how the announcer refers to the audience. Typically, they don’t say, “Welcome, everyone out there in radio land.” They say things like, “Thank you for joining me today.” This is because they realize that the relationship between the radio announcer and the listener is one-on-one. The listener is often alone in a car, sitting at a desk or listening via headphones, so referring to “everyone” creates a disconnect.
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It can be the same when running virtual meetings. In many cases, the participants are sitting in a room or at their desks with headphones on, looking at a screen. Even when using the camera, the radio principle applies for creating inclusion and engagement. Instead of saying things like, “Thank you all for coming” or “Many of us have,” try saying, “Thank you for making the time” or “You have.”
Tell ‘em and tell ‘em again Everyone in a meeting has to have a role. This is especially important in a virtual meeting. You need to be very clear on what level of participation you need from everyone involved. Let them know in advance that you might call on them specifically for input or information. Remind them that you can’t afford for people to not be fully present. In addition, to get the best from your
virtual or distance meetings, you need to: Use the video to see people’s faces, not to
share slides Be considerate of other attendees’ time
zones and schedule meetings appropriately Encourage those in remote locations to
speak or contribute first Encourage those dialling in to book a room
or private space for the meeting (not just be at their desk) Use different methods of communication to
remind people of your expectations of the meeting; for example, instead of sending out an email, maybe take the time to send a personal instant message to make sure people are clear Make sure the meeting charter for recur-
Run a training session on how to effectively
use the technology; don’t just assume people know how Given a choice, face-to-face meetings are always going to be more effective, but for those times when you need to do virtual meetings, remember that, as the meeting leader, it’s up to you to set the tone and expectations, no matter where in the world people are. Donna McGeorge is a speaker, author and mentor who helps people make their work work. Using a creative, practical approach, she improves workplace effectiveness while challenging thinking on leadership, productivity and virtual work. She is the author of The 25-Minute Meeting: Half the Time, Double the Impact. Find out more at 25minutemeetings.com.
ring meetings is available to all
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FEATURES
PRODUCTIVITY
Why can’t we focus anymore? Aytekin Tank explores the truth behind our modern culture of distraction and what we can do to combat it
WE DON’T always have what it takes to shut off the noise in the background. It’s easy to think that being distracted is just the inability to focus, when in fact it’s more complicated than that. As Seth Godin, the content god himself, said in one of his essays: “If you’re not paying, you and your attention are the products.” We let ourselves get sucked into an endless cycle of distraction while the gatekeepers are busy selling our attention to advertisers. One of the problems with distraction is that we are being handed what we believe is available out there. We never second-guess if there’s anything out there that we need to know as we’re being fed information we think we need. Tristan Harris, a former Google design ethicist, has learned firsthand about what technology does to our vulnerable minds. Harris put it best when he compared how technology works with how a magician operates: by giving us the illusion of choice. “The more choices technology gives us in nearly every domain of our lives – information, events, places to go, friends, dating, jobs,” Harris said, “the more we assume that our phone is always the most empowering and useful menu to pick from.”
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We fail to see what other options are out there because we simply think what we have in our hand is the only set of options we can choose from. A close look at how we get through an hour in a day can tell us so much about how we choose to direct our attention. As the founder and CEO of Basecamp, a project management hub that champions efficiency,
Jason Fried might be the voice we want to listen to: “Time is the most precious thing there is, yet we split it up and give it away like there’s an endless supply. And whatever time you do have, you have even less attention.” Where do we lose all the time we have? Waves of interruption of chat, notifications, presence and always-on expectations. The effect, as you might guess, is the more
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fragmented hours we clock in to finish what could’ve been done in an hour or two if we consciously chose to silence all the unnecessary noise. Detaching ourselves from the over whelming noise around us requires some determination, though. Detaching means taking active steps to create a space where absolutely nothing can get in the way of our full attention. That means putting away the smartphone or even not having internet access for a day – or a week, if you dare.
What multi-tasking does to our brains Not switching between tasks is the realistic thing to add in the effort to refocus. Singletasking, as Manoush Zomorodi, the author of Bored & Brilliant, calls it, is a way out that we’ve come to believe is less efficient than its sophisticated, overrated cousin: multi-tasking. “Humans’ neural resources are not infinite, and switching between tasks, especially for those who work online, can happen upward of 400 times a day,” Zomorodi says. No wonder we’re all zombies with missed deadlines. This reinforces another issue introduced by Daniel Levitin, professor of behavioural neuroscience at McGill University, which is that the mind should be allowed to wander between finishing one task at a time. Only then is attention for singletasking not fragmented – and, as a result, we become more productive and successful in completing challenging tasks. The idea that spacing out is necessary might be contradictory to what we’re wired to believe, which is to never let one’s mind wander aimlessly. Being bored is so heavily associated with negative connotation that we
don’t even bother to consider that only out of boredom comes the stimulation-seeking part of our mind, explains Sandi Mann, a psychologist and the author of The Upside of Downtime: Why Boredom Is Good. Neuroscientist Marcus Raichle also pointed out that when our minds wander, it activates the default mode network in our brain, allowing us to think back and forth. It allows us to access our subconscious minds and not focus on goal-oriented tasks.
down on the desk in front of us, undercuts our ability to perform basic cognitive tasks. There’s no way of getting rid of technology once it’s adopted, Brown notes. Instead, Boundless Mind is trying to use these persuasive technologies to promote a healthy and democratic society. Essentially, the organization is trying to change the way our minds are controlled by campaigning for upfront transparency for the companies it’s representing. It’s helping people’s engineered
“The more choices technology gives us in nearly every domain of our lives, the more we assume that our phone is always the most empowering and useful menu to pick from” Different connections in our brain circuits then fall into place, creativity takes over, and self-awareness increases our chance to refocus ourselves.
How to reclaim the attention Tristan Harris, the former design ethicist at Google, has created the Time Well Spent movement, which aims to educate people on how not to be abused by online products that profit from our endless attention. Neuroscientists Ramsay Brown and T. Dalton Combs co-founded Boundless Mind with a mission to disrupt America’s addiction to technology. The American Psychological Association revealed in 2018 that 65% of us believe that periodically unplugging would improve our mental health. Another study conducted by the University of Texas in 2017 found that the mere presence of our smartphones, face-
minds be what they want to be and not just robots with more eyeball time. The conversation needs to start – the ability to control our own minds must belong to us. Despite all of these companies advocating for us, we can always start with ourselves. As Derek Powazek, the author of Design for Community: The Art of Connecting Real People in Virtual Places, puts it: “We are not the product if we educate ourselves enough.” Aytekin Tank is the founder and CEO of JotForm, an online form creation software with four million users worldwide and more than 100 employees. A developer by trade but writer by heart, Tank shares stories about how he exponentially grew his company without receiving any outside funding. For more information, visit jotform.com.
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PEOPLE
CAREER PATH
TEAM PLAYER
From his days in the CFL to his long career in insurance, Kevin Neiles has always embraced the power of teamwork Looking for a change in his fourth year of university, Neiles switched his athletic focus from track and field to football, a decision that led him to try out for – and win a place on – Montreal’s CFL team before ending up back in Winnipeg after a number of trades. “My first full season as a Blue Bomber, we won the Grey Cup; I was nominated for Rookie of the Year. I felt like a rock star.”
1981
1988 MOVES INTO COMMERCIAL Neiles switched to commercial insurance when the opportunity arose to take over a portfolio of commercial accounts from a retiring colleague. “I always had a strong work ethic, and I like to think that the hard work I was putting in made them decide to move the commercial portfolio to me. I became a shareholder as well; it made me feel like I was working for myself.”
2014 BECOMES PART OF GALLAGHER Ranger Insurance’s acquisition by Gallagher broadened its reach even further and gave Neiles the chance to take on national roles. “It broadened my perspective and created an opportunity to work with others; we worked hard to develop strong trust with our partners. Hard work, dedication, planning and a desire to win are the attributes of an athlete who succeeds, and of a business professional who succeeds.”
2019 LEADS THE PARADE While his on-field career is a thing of the past, Neiles has spent the last two decades involved in associated philanthropic activities. Just last year, in his role as a board member for the Winnipeg Football Club, Neiles took part in the parade when the Winnipeg Blue Bombers brought the Grey Cup home for the first time in 29 years. “I was right at the front, walking with the mayor on one side and the premier on the other.”
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1986
MAKES IT TO THE CFL
FINDS INSURANCE On a tip from a teammate, Neiles started working at Ranger Insurance part-time during the off-season the same year he sustained injuries that would end his football career.
“I wasn’t all that excited about insurance, but I found it more interesting than I expected. The day I decided to stick with insurance, my boss said I would look back and see it as one of the best things that ever happened to me – and he was correct” 2006 GOES NATIONAL Becoming part of a broker network called Noraxis Capital Corporation was a game-changer for Ranger Insurance – and Neiles. “We collectively became the fourth largest brokerage in the country. That made us part of a national network of brokers, lent us both buying power and clout, and created a network of brokers across the country. It enabled me to see how others run their business and take and utilize some of the great learnings they had over the years.”
2017 GETS A BIG PROMOTION A leadership change culminated in Neiles taking on the role of chief marketing officer. “The primary point of the role of chief marketing officer is managing relationships. We deal with 150 partners, but the top 10 represent 90% of premiums, so it’s maximum value for both sides. It’s got to be a win-win situation, or relationships don’t last long.”
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IBC su
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PEOPLE
OTHER LIFE
TELL US ABOUT YOUR OTHER LIFE Email insurancebusiness@kmimedia.ca
Hiba was featured on the back of her motorbike in the video for Shagg y’s “It Wasn’t Me”
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Number of first-place finishes Hiba had during her racing career
1st
Hiba’s rank at the RACE Super Series Pro 125 Grand Prix at the peak of her career
13
Weekends per year Hiba spent competing at the height of her career
THE NEED FOR SPEED For Angela Hiba, nothing compares to the thrill of watching the world rush by on the seat of a motorcycle ANGELA HIBA took to two wheels at the age of 10, on the minibike originally bought for her brother – but she was the one who developed a passion for the sport. Hiba went on to get her competition licence before moving on to motorcycle racing. “Two weeks [after getting my competition licence], I entered my first
race,” she says. Competitive riding tapped into Hiba’s drive to succeed and led her to aggressively pursue the Pro 125 Grand Prix title – which she ultimately won in 2004, becoming the first woman to do so. These days, Hiba, a Toronto-based executive coordinator at Arthur J.
Gallagher Canada, gets on her bike far less often, but she makes a point of competing in one event a year to maintain her pro status – and to reawaken the sense of excitement she gets from riding. “I really like the thrill,” she says. “I can’t even put into words what it feels like to get that rush.” Photo credit: Damian Pereira Photography
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Celebrating 75 years of partnership!
SGI CANADA is proud to celebrate 75 years of success in the insurance industry, in partnership with the best insurance brokers in Canada. Thank you for helping us reach this amazing milestone.
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