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Why insurtech collaborations are all the rage in the industry right now
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Sedgwick CEO David North on how he’s working to build an inclusive company
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24/07/2019 3:39:29 AM
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UPFRONT 04 Editorial
Autonomous vehicles are coming – is insurance ready?
Key data that should be on your radar
08 Head to head
Which insurance line will grow the FIVE-STAR WHOLESALE FEATURES the rest of the year? BROKERSfastest & during MGAs CREATING AN
How encouraging brokers to take an entrepreneurial approach has helped one Canadian brokerage grow
Sedgwick CEO David North has grown the company into a global behemoth that remains committed to diversity and inclusion
Checking in on insurers’ digital transformation journeys
This month’s big movers, shakers and new products
14 Technology update
Opportunities await those willing to partner with insurtechs
16 MGA update
Why MGAs don’t need to worry about disintermediation
FIVE-STAR CARRIERS 2019
Brokers reveal how their carriers are performing in nine key areas, from underwriting expertise and quote turnaround times to rates and product range
10 News analysis
18 Opinion PEOPLE
The road to organic growth starts with collaboration between sales, marketing and underwriting
THE VALUE OF INDEPENDENCE
Independent brokerage owner Andrew Janzen on the freedom of making your own way
54 Career path
Charting Suzette Huovinen’s climb to the top of the ladder at Securian
55 Other life
Back in the saddle with equestrian and insurance broker Vanessa Barr
New technology is helping to simplify common complications in the claims process
INSURANCE BUSINESS CANADA’S 2019
CYBER REPORT Page 38
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24/07/2019 4:26:45 AM
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24/07/2019 4:26:36 AM
Driving changes in insurance
emember when CDs replaced the cassette tape? When the DVD supplanted the VCR? Or the birth of the iPod? All of these technologies have subsequently been usurped, too – and now change is coming to the seemingly ultra-modern cars we drive. In April, during Tesla’s Autonomy Investor Day, CEO Elon Musk told attendees that the company planned to have more than a million self-driving “robotaxis” on the road by next year. Coinciding with this autonomous push, Tesla has also dipped its toes into insurance circles, outlining plans to launch its own insurance product and announcing a partnership with US-based Markel subsidiary State National Insurance Company. “As new technologies [develop], particularly around self-driving … there is [an opportunity] to jump into the insurance space in some way, shape or form and offer that product, and potentially soak up some of the market share for Tesla,” Ian Sweeney, general manager of mobility at insurtech startup Trov, told Insurance Business Canada in June.
It’s clear that autonomous vehicles are coming. What’s less clear is the impact this will have on insurance and claims Regardless of what Tesla does next, it’s clear that autonomous vehicles are coming. What’s less clear is the impact this will have on insurance and claims. In theory, autonomous vehicles are designed to make driving safer and reduce claim numbers – but that might not always be the case. “There is some evidence already that the technology that’s being used to drive the vehicles autonomously ... is quite expensive, so when you have a collision, that technology is damaged and is very, very expensive to replace,” Karl Gray, Zurich’s global head of motor and retail lines, told IBC. Then there’s the cyber risk issue. “New vehicles will be connected to the cellular network, they’ll be connected to GPS, they’ll be connected to other vehicles, and probably to some extent, [they’ll] be connected to the infrastructure,” Gray said. “That will lead to a substantial increase in the potential risk to cyber exposure because if someone has the ability to hack into the networks, then there’s a risk because they could control the vehicle.” Simply put, autonomous driving has the potential to reinvent auto insurance, transferring liability from the driver to the organization behind the technology. As a broker, it’s time to start educating yourself on this emerging risk topic now – because as history proves, technology doesn’t wait for anyone.
The team at Insurance Business Canada
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24/07/2019 4:13:41 AM
HELPING CANADIANS EVERY STEP OF THE WAY 1M+
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Gaining the confidence of customers doesn’t happen easily these days. While there are significant challenges in the industry with rate increases, fraud, and severe weather, customers just want to know that they’ll be taken care of, and that they’ll get a quick, correct answer when they have a question. That’s why keeping people at the centre of everything is more than our promise — it’s what our team does best.
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property | auto | business The claims satisfaction percentage is based on 13,285 claimant survey responses measuring customer satisfaction with claims services from January 2018 to December 2018. ©2019 Economical Insurance. Economical and Economical Insurance are registered trademarks of Economical Mutual Insurance Company. All Economical intellectual property belongs to Economical Mutual Insurance Company. All other intellectual property is the property of their respective owners.
24/07/2019 4:13:45 AM
STATISTICS SHIPPING LOSSES DECLINE
WHO’S WILLING TO SHARE DATA?
Source: Safety & Shipping Review 2019, Allianz Global Corporate & Specialty
Willing to share data to receive advice that’s more relevant to their personal circumstances
Willing to share data to receive faster, easier services
DO CONSUMERS WANT INTEGRATED PROPOSITIONS? Across all consumer types, around half of those who responded to Accenture’s study were interested in integrated propositions, such as a home security package that includes insurance, remote home monitoring, financing and security tips. However, only 30% of consumers, on average, are prepared to pay extra for the convenience of these bundled services.
INTERESTED IN INTEGRATED PROPOSITIONS
Weather-related shipping losses in 2017
Number of large ships lost worldwide in 2017
Weather-related shipping losses in 2018
The willingness to share data (or not) was one of the most marked points of difference among the four customer types insurers are likely to encounter, according to Accenture’s latest global study of financial services consumers. The study identified four key consumer personalities based on their approach to technology: pioneers (tech-savvy and hungry for innovation), pragmatists (trusting and channel-agnostic), skeptics (tech-wary and dissatisfied) and traditionalists (avoid tech and value the human touch). Of these, the pioneers were by far the most likely to be willing to share data than any other customer type, although skeptics and traditionalists were more enticed to do so if it resulted in lower prices.
Number of large ships lost worldwide in 2018
WILLING TO PAY FOR THEM
Traditionalists Source: Accenture Global Financial Services Consumer Study, 2019
24/07/2019 3:33:10 AM
LEADING SOURCES OF CYBER LOSS
According to Beazley Breach Response Services, hacking or malware incidents among the insurer’s clients rose 10% between 2017 and 2018, and the average ransomware demand soared to $116,000.
TOP CAUSES OF LOSS DUE TO CYBER INCIDENTS
Willing to share Willing to share data Willing to share data to receive to receive a priority data to receive personalized offers service such as discounts on nonbased on their fast-tracked insurance-related current location claims settlement products or services
Willing to share Willing to share data to receive data to receive more competitive/ personalized services lower prices or information that helps reduce the risk of injury, loss, etc.
The gender pay gap at Lloyd’s of London dropped considerably between 2017 and 2018, but a gulf remains between the salaries of men and women – due in part to the fact that the majority of the highest-paying jobs at the company are held by men.
Mean gender pay gap, 2018
27.7% Mean gender pay gap, 2017
Hack or Accidental Insider Social Portable Physical malware disclosure engineering device loss/nonelectronic record Source: 2019 Breach Briefing, Beazley Breach Response Services
BOMBINGS TOP THE LIST OF EVENT THREATS Terroristic threats to sports and entertainment events in 2018 were most likely to take the form of a bombing at an event, according to the Risk Advisory Group and Aon.
TOP TERRORIST THREATS AT SPORTS/ENTERTAINMENT EVENTS
LLOYD’S EMPLOYEES BY PAY QUARTILE
Source: Accenture Global Financial Services Consumer Study, 2019
THE GENDER PAY GAP NARROWS AT LLOYD’S
Women Source: Lloyd’s 2018 Gender Pay Gap Report
Source: Aon and The Risk Advisory Group, 2019
24/07/2019 3:33:14 AM
HEAD TO HEAD
Which line will grow the most during the rest of 2019? P&C was the standout during the first half of the year, but which line of business is poised to grow the fastest during the last half?
Head of property underwriting, reinsurance division Munich Reinsurance America “As a property underwriter, I would like to say that personal and commercial property lines will grow fastest due to rate increases attributable to the severe drag that natural catastrophes have had on results over the last two years. However, commercial auto is most likely to grow fastest due to the continued need for material rate increases, as well as rising demand for coverage due to a strong US economy. For example, the Council of Insurance Agents & Brokers’ first-quarter 2019 survey found that 39% of respondents observed an increase in demand for commercial auto coverage during the period.”
Managing director, property practice Gallagher “With hurricane season following hot on the heels of unprecedented spring flooding, I predict we will see tremendous growth in flood insurance in the second half of 2019. Flooding is the most common and costly natural disaster, with more than $54 billion in losses to the US economy predicted this year. Most surprising is that a quarter of insurance claims actually come from outside high-risk flood areas. So there is urgency now to review risk for damage caused by flooding, either through private-market flood solutions or the NFIP, where a 30-day waiting period may apply.”
President M&T Insurance Agency “The answer is contingent upon whether you define growth as premium increases driven by rate or total policy count. In terms of policy count, cyber will grow the fastest. Recent ransomware attacks have made national news, prompting businesses to take notice. Furthermore, many businesses don’t currently purchase cyber, and the increased awareness and maturity of the coverage, along with technological innovation, will impact demand. Regarding rate, while not a hard market yet, there is a continued push from carriers to focus on underwriting profitability and deploying capacity more efficiently. We’re seeing hardening of markets in property, auto and excess casualty.”
P&C ON THE RISE As of mid-June, the P&C sector was enjoying strong performance due to a lull in catastrophes, among other factors, according to Yahoo Finance. P&C insurance recorded a gain of 3.1% during the first six months of the year, putting it well ahead of the finance sector overall, which saw just a 0.2% bump. Following several years of soft pricing, insurers began hiking rates late last year – in the first quarter of 2019, both personal and commercial lines saw increases of around 2%, while commercial auto experienced a 7% rate increase. Yahoo Finance predicts that most commercial insurance lines will continue to see rate increases throughout the remainder of the year.
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Digital upheaval Taking the first step on an often multi-year path toward digital transformation pays off in the end – but for each insurance company, that journey will look a little different
THE NEED to retire legacy systems, combined with the pressure of changing consumer expectations and the rapid pace of technology innovation, is pushing insurers to undertake digital transformation journeys to serve clients better and improve behind-thescenes efficiencies. That journey will look a little different for each company, depending on what pain points they have and what they hope to accomplish at the end of the day. At StarStone Insurance, the focus has been on artificial intelligence. “Brokers are entering data in our systems, they’re classifying risks, and we’re relying on their expertise to properly classify a risk,” explains Kardiner Cadet, senior vice presi-
For instance, StarStone’s AI capabilities will catch if a broker classified a ‘family’ restaurant as one that doesn’t serve alcohol. However, that same restaurant could serve alcohol on the weekends, which means the risk hasn’t been accurately captured. “Understanding that nuance through AI has been transformative for us. It’s allowed us to cull our book of many risks that we otherwise would have written,” Cadet says, adding that the new capabilities haven’t changed StarStone’s broker-facing interface, which remains as seamless as ever. Another step in StarStone’s transformation has been getting a better understanding of the data the company has in its systems.
“[Artificial intelligence] has allowed us to cull our book of many [inaccurate] risks that we otherwise would have written” Kardiner Cadet, StarStone Insurance dent of StarStone’s e-commerce division. “At times, either because they’re moving very fast or because they don’t have enough knowledge of how to classify a risk, they may misclassify a risk. We’ve implemented artificial intelligence to confirm what they’ve entered in the system.”
“Having access to the data has allowed us to have insights that we otherwise would have never even thought of,” Cadet says, pointing to a statistic unearthed by data analysis, showing that within three days of when a broker starts binding, a deal often falls off the table, which means the broker can get more out of an
account within those first few days. It’s been three and a half years since StarStone embarked on its digital transformation, and the company has learned a ton during that time. “Initially when we started doing the AI work, we opened the floodgates,” Cadet says. “I wanted to know everything there is about these risks, which is good to know, but does it really matter? All of this extra information was flooding us, and it was preventing us from actually looking at what really matters.” Axis Capital has gone through its own transformation, which Darryl Catts, Axis’ CIO of insurance IT, presented on in detail at Duck Creek’s Formation ’19 conference earlier this year. The past four years have been full of change for Axis as it upgrades its platforms, looping in various applications and allowing its partners to write more profitable business
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DIGITAL TRANSFORMATION IN INSURANCE
of insurance executives believe they have a coherent technology plan in place
believe cloud-based technologies designed to improve operational efficiency are having the most impact on insurance companies today
think customer-facing blockchain is the technology that will have the most impact on insurance companies in three years Source: Digital Transformation Is Remaking Insurance, Accenture, January 2019
while also being more efficient. “One of the major things we’ve seen with our underwriting is that we’re able to shift work from underwriters in the system, who
with the brokers directly, write more business and do the things they really need to do to expand their book even more profitably.” When undertaking such a big transform-
“One of the major things we’ve seen ... is that we’re able to shift work from underwriters ... to our operations group” Tim Bibler, Axis Capital are keying in things and generating policy documents, to our operations group,” says Tim Bibler, VP and North American IT business lead at Axis Capital. “We have the operations folks now doing those tasks that they were doing in the legacy applications, which is freeing up the underwriters to go out and deal
ation program that necessitates multiple work streams, Bibler admits that challenges are inevitable. “We knew we were going to have, being in the specialty business, pretty complex custom specialty products,” he says. However, Axis was able to build out its technical and
marketable products “and then take things like coverage for cyber and very quickly apply it to other marketable products.” Before starting a digital transformation journey, it’s crucial that all team members are on board, from the top of the organization all the way down. “When you have these great ideas, you assume that people will immediately buy into this fantastic idea, but quite often, they don’t understand what you’re doing and they may not even trust that it’s coming from a good place because there have been so many people who’ve implemented technology with the approach that they’re going to cut out humans,” Cadet says, adding that it’s important for executives to communicate to their teams that there’s nothing to fear. “We just want them to make decisions faster with better data and more consistent data.”
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INTELLIGENCE CORPORATE ACQUIRER
Shaw Insurance Agency, Solutions Assurances 360°, J. & N. Assurances
Archway's triple acquisition in Atlantic Canada represents close to $20 million in premium volume
Lloyd Stiles Rossier
Lloyd Stiles Rossier is a niche adjusting firm with specialized experience in commercial, industrial and energy claims
Crawford & Company
Penta Expertise & Consult
Based in Antwerp, Belgium, Penta offers a range of specialized loss adjusting services with a focus on construction
Berk Bilgen Insurance and Porchlight Financial
Edmonton-based Berk Bilgen offers personal and commercial insurance, while BC-based Porchlight is a full-service group retirement plan consulting firm
Benefit Consultants Inc.
Edmonton-based BCI provides group benefits and retirement consultation services
Excel Bonds & Insurance Services
Excel is a commercial insurance and surety bond broker serving middle-market and large firms in the US and Canada
RVezy expands RV insurance to Nova Scotia
Peer-to-peer RV rental marketplace RVezy.com has launched an RV rental insurance policy in Nova Scotia. The company had previously collaborated with Aon to launch the solution – which it deemed “the first peer-to-peer RV rental insurance policy of its kind” – in Ontario, Alberta and Quebec. By launching the product in Nova Scotia, the company said it hopes to expand its foothold in the Maritime region, adding that “bringing the RV sharing economy to Atlantic Canada has been a priority of RVezy from the beginning.”
Navacord enters the Alberta benefits market
Navacord has established a group benefits and retirement presence in Western Canada with the acquisition of Edmonton-based Benefit Consultants Inc. [BCI]. Founded in 1975, BCI is one of the longest-standing benefits brokerages in Alberta. Following the acquisition, BCI will be absorbed into the benefits and retirement consulting division of Navacord founding partner Lloyd Sadd Insurance Brokers. BCI’s management team will remain the same, led by president Darcy Smith, and the brokerage will continue to operate out of its current locations in Edmonton and Calgary. According to executive chairman T. Marshall Sadd, Navacord’s goal is “to build one of the top benefits and retirement businesses in Canada ... The addition of BCI positions us well in achieving this goal, as well as offering our Western Canada clients expertise and service with local presence.”
Markel International rolls out new cyber policy
Markel International has launched Markel Cyber 360 on a stand-alone and add-on basis for businesses in the UK, Europe, Canada, Asia and beyond. Designed to provide comprehensive protection, the policy has limits of up to £10 million (about C$16.3 million) per risk. One of its key features is support from a panel of “geographically diverse expert advisors,” giving insureds more accurate assessments of their cyber vulnerabilities and recommendations on how to address them, in addition to breach response, forensic investigation, credit monitoring and incident management services.
24/07/2019 3:34:28 AM
PEOPLE AXA XL enhances pollution liability
AXA XL has added supplemental coverage to its pollution and remediation legal liability policy in North America. The new coverage gives owners, operators and developers of fixed facilities additional protection against loss, remediation expenses and legal defence expenses. The enhanced policy includes location and contingent transportation coverage for third-party claims for bodily injury, property damage and remediation expense. It also covers emergency remediation expense indemnity, disaster response expenses, green building materials for restoration, and litigation and subpoena expenses.
Apollo launches online subscription for SMEs
Apollo Insurance Solutions has introduced a monthly small business insurance subscription service, which it claims is an industry first. The subscription service is available through the company’s digital broker exchange platform, Apollo Exchange, which allows brokers and their small business clients to instantly quote and purchase insurance products online. With its new insurance subscription service, Apollo hopes to streamline brokers’ workflow, giving them more time to offer strategic advice and counsel.
Aon devises crypto asset insurance for banks
A panel of London insurers arranged by Aon has agreed to offer a crypto asset crime insurance product to financial institutions that use Metaco’s SILO wallet-management solution to protect digital assets from losses resulting from damage, destruction or theft. The arrangement will simplify the underwriting process for both insurers and SILO users. “Aon is pleased to have pioneered the formation of an insurance solution covering theft of crypto assets for the benefit of Metaco’s customers while utilizing the SILO platform,” said Jeff Hanson, a director for Aon’s UK financial services team.
Lloyd’s of London
Director of global corporate development
Independent financial analyst
RSA UK & International
Chief underwriting officer, global risk solutions
Allianz Global Corporate & Specialty
Global head of aviation
Global head of shared services
Allianz Global Corporate & Specialty
Global head of marine
Chief underwriting officer, short-tail insurance lines
Global chief procurement officer
Lloyd’s of London
Chief operations officer
Munich Re America
QBE North America
Vice-president of analytics
Member of the board of management
AIG names shared services head
AIG has appointed Shane Fitzsimons as global head of shared services. Most recently the group synergy officer at Tata Group, Fitzsimons joins AIG in a newly created role that establishes a single point of accountability for key operational and financial capabilities. He will be responsible for developing and implementing a global strategy within AIG’s shared services to create a costeffective infrastructure that leverages technology and innovation. “Under Shane’s leadership, AIG shared services will be modernized to accelerate our progress towards restoring AIG as the leading insurance company in the world,” said Peter Zaffino, AIG’s global COO and CEO of general insurance.
Allianz shakes up management board
Allianz has revealed that Helga Jung, a member of its board of management, will retire from her station at the end of this year. The insurer has appointed Renate Wagner, who is currently serving as chief human resources officer at Allianz, as Jung’s successor on the board. Her tenure will start on January 1, 2020, subject to regulatory approval. Wagner joined Allianz as head of office for the CFO in 2013, later leading the office of the CEO. She was named chief HR officer at Allianz earlier this year. Wagner previously served as regional CEO for Allianz’s life and health business in Asia-Pacific, after spending three years as regional CFO and head of life and health.
24/07/2019 3:34:31 AM
TECHNOLOGY UPDATE NEWS BRIEFS Intact Financial introduces photo-based claims estimating
Intact Financial has begun offering photographic loss estimating services through an app-based virtual claims system. Powered by Snapsheet, an insurtech startup that previously collaborated with Aviva Canada on a similar system, the new service allows Intact customers to take and upload pictures of auto damages to make claims. Snapsheet’s artificial intelligence then assesses the damage, saving customers from taking their vehicle to the shop for an estimate before getting the necessary repairs. Moving forward, Intact hopes to increase the AI capabilities of the service.
Hiscox introduces cyber exposure calculator
Specialist global insurer Hiscox has launched a cyber exposure calculator, designed to help businesses estimate the potential financial impact of a cyber attack. The free calculator also provides insights into the types of cyber attacks businesses commonly face and gives owners estimates specific to their industry and revenue. “With hacker techniques increasing in sophistication and attacks becoming more targeted in their nature, it’s important that businesses fully understand the risks they face,” said Hiscox cyber CEO Gareth Wharton.
FM Global announces major investment in RiskGenius
Global commercial property insurer FM Global has invested US$1 million in RiskGenius, a startup that uses AI and machine learning to help automate the underwriting process. The investment comes on the heels of the insurer’s
US$250,000 investment in AirWorks, an aerial mapping and surveying startup, earlier this year. “As we look to the future and the evolving landscape of property insurance policy issuance, AI and machine learning offer FM Global great opportunities to enhance our clients’ experience,” said Michael Lebovitz, FM Global’s senior vicepresident of innovation.
Acturis Group acquires BC provider of broker software
Acturis Group, a UK-based software-asa-service [SaaS] provider for general insurance brokers and underwriters, has acquired BC-based Zycomp Systems. Established in 1992, Zycomp has a presence in both Canada and the Caribbean. Its Power Broker broker management system is used by more than 820 brokerages, commanding 30% of Canadian market share. “We are extremely pleased to join the Acturis Group, and we feel that the combination of Zycomp and Acturis can have a significant impact on the Canadian broker software landscape,” said Zycomp CEO Steve Zylak.
Lloyd’s introduces insurance contract tool
Lloyd’s of London has launched a new software tool designed to improve the quality of insurance contract review. Its Contract Confidence tool runs checks against 1,400 open-market rules, using advanced search techniques to scan insurance contracts. The subscriptionbased tool comes pre-populated with the full set of clauses from the recently launched Lloyd’s Wordings Repository and also gives underwriters the ability to set their own rules. Lloyd’s hopes the new tool will lead to fewer disputes, faster claims resolution and lower costs for policyholders.
The insurtech opportunity Both insurers and brokers can learn something by partnering with startups
Insurers can no longer ignore the important role insurtechs are playing in the industry. By introducing innovations such as automation, mobile apps and photo-based claims processing, insurtechs are pushing the boundaries of what’s possible in insurance. As these technological applications gain more traction within the industry, it falls on insurers and brokers to keep up with such advances or risk losing relevance. Instead of viewing insurtechs as the enemy, insurers and brokers should aim for collaboration, says Sachin Rustagi, director of digital at Gore Mutual. “As a company, we recognize that innovation in our industry, and the insurtech domain as a whole, relies on building and participating in the larger tech and innovation ecosystem,” he says. Rustagi has seen an increasing number of insurtechs willing to work with major carriers over the past year. Carriers’ reach and resources give insurtechs leverage to better pilot their ideas and validate their solutions. Rustagi has also noticed more brokers teaming up with local insurtechs and other startups in a bid to optimize their operations or sales channels. And while the insurtech space appears to be getting more crowded each year, Rustagi believes there are other tech opportunities that the industry has yet to fully tap into. “Insurers, brokers and industry technology platforms still have a big opportunity around the delivery of standardized connectivity methods such as API technology,” he says. “This isn’t an overnight initiative, but it has
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the power to create faster service, wider transparency and cleaner workflows across multiple points in the customer life cycle.” He points to AI-powered chatbots as another significant innovation that brokers and insurers shouldn’t sleep on. Not only do chatbots automate the customer service process, but they also facilitate faster connectivity between brokerage staff and underwriting guidelines.
“Innovation in our industry … relies on building and participating in the larger tech and innovation ecosystem” While significant obstacles are sometimes present for companies trying to take a technological step forward, partnerships can help insurers and brokers avoid these. Rustagi says Gore Mutual has embraced a culture of multiparty collaboration, which allows it to micropilot innovations to see if there’s a possibility of wider adoption. It also allows Gore Mutual to be flexible in deciding whether to incubate with an insurtech, subscribe to solutions from tech partners or even co-fund an idea. “When applying these collaborative, testand-learn philosophies,” Rustagi says, “we’ve found that there are more potential opportunities than challenges.”
Simplifying the payment process
What is ClearPay and why should brokers be interested?
Years in the industry 5 Career highlight “After two years of R&D, thousands of test transactions, and help from key carriers, brokerages and BMS partners, our software handled the first ever BMS electronic premium payment and policy data transfer in the industry”
First, we do not do premium financing. Some people assume that with ‘pay’ in our name, we must be a premium financing company. What we do is enable brokerages to make electronic payments and standardized reporting without leaving their major broker management systems. ClearPay is designed to eliminate the thousands of cheques and paper- or email-based reports that are going from brokerages to carriers every single day. This manually intensive process for monthly agency bill payments or direct bill advances costs brokerages, on average, $18 per disbursement. ClearPay brings the cost down to less than $3 by automating everything that happens after a disbursement in the BMS.
How can ClearPay enhance brokerages’ existing broker management systems? The insurance community has very diverse and evolving needs, as literally no brokerage is exactly alike. If you asked 10 different brokerages what features they wanted in their broker management system, you would likely get 10 different answers. There’s nothing wrong with that – and, in fact, the differences amongst brokerages are really the strength of the channel. For broker management systems, it quite simply is not practical, or perhaps possible, to deliver all of the functionalities the user base desires. Rather, the broker management systems need to be excellent at their core functionalities with increased focus on industry connectivity. Other needs can be satisfied by tying in with complementary and best-in-class services, like ClearPay, that brokerages can pick and choose from.
Are there other insurance processes that could use the same level of streamlining and accessibility that ClearPay offers? In the framework of reducing repetitive processes and standardization, absolutely. There are many examples throughout the industry where there are manual tasks and duplicate-entry processes that would be better served through automation. That’s not to say that getting there is easy and can be solved by simply moving to modern-day systems. There needs to be a careful examination of areas where savings through automation could be used to create efficiencies.
With data breaches a constant risk, what can insurtechs do to secure client data? The first priority is understanding what data you have, why you have it, how long you need it for and whether you really need it all. Once this understanding is obtained, then you can really design appropriate measures for data protection and identify the underlying risks of a breach.
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MGAs can dodge disintermediation MGAs are well-placed to weather the latest online insurance shopping trends, according to one expert
Purowitz points out. “They might not have all the claims handling, risk management capabilities and other things of that nature … and that’s where the market gets confused,” he says. “[Insurtechs] often pass some of the customer experience on to the insurance companies.” For wide-scale broker disintermediation to happen, Purowitz believes there has to be a significant shift in customer behaviour, wherein large numbers of consumers see a
“Agent-enabled direct is a notion we’ve really rallied around”
Many in the industry have been quick to blame insurtechs for the disintermediation of brokers. But one expert believes insurtechs are the closest thing to “a digital MGA” the industry has – and that traditional MGAs could learn a thing or two from them. “The industry used to look at this issue in a very binary fashion,” says Mark Purowitz, principal and US insurance M&A leader at Deloitte Consulting. “It was seen as a binary decision that a customer would either want
to be acquired online and go through the entirety of the customer journey in a direct manner, or they would want to go through a broker. Thankfully, the industry has evolved in its understanding that policyholders … want to have options along the spectrum of what we call ‘self-directed to guided.’” Because insurtechs are not full-spec insurance companies, but instead serve as customer acquisition vehicles, they have much in common with traditional MGAs,
April Canada launches Flashquote tool
Following up on the release of its online file-tracking tool for broker partners, April Canada has implemented another online feature to aid brokers in helping their clients purchase landlord insurance. The new Flashquote tool, available on April Canada’s specialized website for landlord insurance, saves both brokers and clients valuable time and makes insurance more accessible by allowing customers to obtain up to three premium estimates in less than three minutes with just a few steps.
benefit to completely bypassing traditional channels. While he doesn’t see this happening any time soon, Purowitz has observed a switch to “agent-enabled transactions.” “Agent-enabled direct is a notion we’ve really rallied around at Deloitte,” he says, adding that customers will occasionally want a human element to their purchases – something traditional MGAs have no shortage of. “We believe that in various stages across the customer interaction, the ‘self-directed to guided’ notion will kick in,” he explains, “and customers are going to want to interact with brokers differently based upon their needs, the level of complexity in their transaction and, ultimately, whether they feel that getting answers digitally versus talking to a human satisfies their needs.”
Cansure appoints new VP of sales and marketing
Cansure Underwriting has named Denise Yeng its new VP of sales and marketing. Yeng has more than 13 years of experience managing broker relationships, developing go-to-market strategies and supporting insurers to strengthen their value proposition. She has been instrumental in supporting the Beacon Underwriting and Cansure brand integration, introducing a formalized approach to business segmentation and managing broker KPIs, improving market visibility, and working to help bring CansureTech to life.
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John Barclay Executive director
Building longevity in specialty lines
Years in the industry 25+ Fast fact Three Holdings acquired South Western Insurance Group in May 2018
What benefits have you seen from Three Holdings’ acquisition of South Western Group? It’s been a year since the deal. What it has done is reinforce the independence of both MedThree and SWG as MGAs for the Canadian broker channel. On a combined basis, we have a deeper and stronger set of insurer relationships, which will help us continue to provide across the company’s stable sources of product and capacity. We’re really starting to see the benefits of a deeper talent pool that’s able to bring its capabilities to our broker channel. In terms of providing solutions, we’re seeing the benefits of a larger operating company being able to invest more in technology and innovation to improve our broker service. That broader depth and size [makes us more] nimble and flexible in delivering our solutions in the way brokers want to receive them.
Which lines of business are poised for growth? Our products are industry- or segment-focused – we’ve got healthcare, senior care, medical malpractice, professional liability and so on. That’s not about a hard or soft market. It’s about having knowledgeable people being able to help brokers. We want to continue to grow and invest in those specialty lines, irrespective of cycles. At the same time, we’re seeing a dislocation in the property market, which means people are looking to us to see how we might be able to help. The general insurance industry is going through an underwriting profitability exercise. As a byproduct, we’re seeing more submissions, which we understand are cyclical. The
Encon Group unveils digital broker platform
Encon Group has launched what it’s calling “a next-generation digital platform for commercial insurance brokers.” The new platform, known as V2, allows brokers to quote, bind and issue policies within minutes. Accessible through Encon’s website, V2 also enables brokers to choose multiple quote options to present to clients, add additional insureds, secure certificates of insurance and manage their transactions in real time. Encon’s technology insurance for small firms will be the first coverage line to be offered via V2.
market will find its level on underwriting profitability, and domestic insurers will find their feet. But that opportunity flow will slow down at some point in time. We see longevity in investing in specialty segments and specialty talents that can help brokers with knowledge. Our view is that specialty is not as cyclical as general insurance.
Is consolidation a trend you’re seeing in the Canadian MGA marketplace? We’re seeing a marketplace that’s tightening, and we’re seeing the creation of some MGAs. Underwriting stability and profitability are some of the main drivers of M&A in the MGA wholesale space. The industry as a whole is looking to reduce its cost of acquisition, and one of the ways to do that is to simplify your access to market. Through the application of technology, [you] can deliver your solutions in a more efficient manner, reducing the acquisition cost.
How is automation impacting specialty lines? Automation is about two things: simplifying the transaction for the broker and allowing underwriters to spend more time on the tougher risks that need more hand-holding. Automation is enabling human expertise to come to bear faster, and it’s making the transaction process smoother. In a pre-automation environment, all those experts would have to touch every file, leading to a longer timeline. Automation enables expertise; it doesn’t displace it.
Digital MGA Marketplace rebrands to Apollo
Digital MGA Marketplace has been rebranded as Apollo Insurance Solutions. Along with a new name and aesthetic, the company overhauled its logo, website and digital insurance platform, although it stressed there will be no change to its leadership, vision and direction. “We wanted a name and brand experience that didn’t simply relate our function, but inspired our stakeholders, staff and partners,” said Apollo CEO Jeff McCann. “The future of insurance is a space race, and like Apollo, we intend to get there first.”
New report highlights MGAs’ continued growth
The MGA market continues to grow and remains a key business model for the P&C industry, according to a new study by investment management firm Conning. “The MGA market has nearly doubled since 2012, when Conning began tracking this sector,” said Conning VP Jerry Theodorou. “The MGA market continued to expand in 2018 and early 2019, driven by numerous factors, including MGA startups, insurers’ quest for blocks of business, and investment from private equity and MGA incubator firms.”
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GOT AN OPINION THAT COUNTS? Email firstname.lastname@example.org
Transparency trumps trespassing In today’s competitive market, true collaboration between sales, underwriting and marketing is critical for survival, writes Arthur B. Seifert HYPER COMPETITION, evolving technology, excess capacity and distribution consolidation are just some of the elements challenging the insurance marketplace. Growing organically and producing an underwriting profit is always demanding – maybe more today than ever before. When I left my comfy salaried insurance carrier position in 1986 and became a retail producer, my goal was to reach $100,000 in commission income by my third year. I learned my hit ratio, did the math and realized I would have to make 11,250 phone calls a year – and I did. I knew the power of productivity, and I quickly learned the power of productive partners. The fact is that sometimes you nurture a client for months, even years, before they agree to let you in the door – only to be let down by a carrier who doesn’t want to write the business. Why does this happen? Perhaps a sales associate has ignored the carrier’s appetite, or an underwriter has overlooked the actual risk potential, or a marketer hasn’t communicated effectively. Program managers must recognize that there needs to be true understanding and collaboration between sales, underwriting and marketing to grow organically, produce an underwriting profit and develop an ongoing relationship with agents. This requires breaking down the silos and being comfortable with sharing what was once
sacred turf. In today’s market, transparency trumps trespassing. And if it doesn’t, it’s often at the agent’s expense. Marketing builds the relationship that creates the opportunity for sales to open doors, and sales maintains the constant flow of qualified submissions that underwriting productivity depends upon. But these ties are
underwriters comfortable. Underwriters need to know what information they want from agents, and they need to know what that information truly means. Your submissions are in the right hands when the underwriters don’t have to compare apples to oranges. Underwriting expertise in a class of business is an advantage. Underwriters who have reviewed thousands of files in a specific class have greater insight and are positioned to make better underwriting decisions. Marketing has a duty to assist sales and underwriting by conducting research to gain a solid understanding of the challenges associated with the class. What keeps the prospect up at night? What message will attract attention and create an opportunity? This information shouldn’t be carrierexclusive. Marketing departments ought to serve as a resource for agents by providing them with the important updates, industry news and marketing collateral they need to stay up-to-date on business operations and bind business. When you combine sales, underwriting and marketing efforts, what results is a team that truly brings value to the agent
“When you combine sales, underwriting and marketing efforts, what results is a team that truly brings value to the agent and can help them bring additional value to their client” useless if all parties don’t understand, appreciate and respect the amount of work, time and expense an agent must invest to produce a submission. Submissions are the raw material that drives insurance production: no submission, no business. Sales should be in the field or on the phone to help drive the submissions in the door. To be a truly helpful resource, salespeople have to understand their industry deeply and be able educate their agency partners on its need-toknow nuances and product advantages. They must tell agents what information will make their submissions competitive and how much context and landscape is needed to make the
and can help them bring additional value to their client. Driving profitable organic growth is always challenging. It requires constant communication and collaboration. The quality and quantity of information increases the probability of better underwriting decisions. Better decisions lead to better results, and better results lead to profitable organic growth. Arthur B. Seifert has 40 years of insurance industry experience, including positions in sales, financial consulting, underwriting and leadership. He currently oversees niche insurance programs as the president of Glatfelter Program Managers.
24/07/2019 3:36:03 AM
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24/07/2019 3:36:07 AM
SETTING THE INDUSTRY ABLAZE Only the second CEO to lead Sedgwick in its 50-year history, former firefighter David North is passionate about the claims business and all that it does for people across the globe
PART OF a CEO’s job is to put out fires. Luckily for Sedgwick, David North has some experience in that department. Growing up in a suburb of Detroit, North was surrounded by a family of firefighters, including his dad, uncle and grandfather. His mom was also in the business, working as a dispatcher even before 911 became the official national emergency phone number. Naturally, North thought this would be his path, too, so he pursued a career in firefighting. “When I graduated high school, the best place to get training as a firefighter at the time was in the United States Air Force,” he says, “so I enlisted in the Air Force, went to fire protection training school and spent four awesome years as a firefighter.” Somewhere along the way, North decided that there might be a better way to help extinguish flames than running into buildings when they were on fire. He got a degree in fire protection engineering, which ultimately led him to the insurance industry, where companies were looking for fire protection expertise. After working for an insurance company
in Chicago as a fire protection specialist, North was offered a role with Gallagher Bassett, launching his career in the claims business. It’s become clear to him over time that claims professionals bring a ton of value to the table.
Inspired by icons As only the second CEO in Sedgwick’s 50-year history, North took up the reins from Sedgwick’s founder in 1995. While he never aspired to the top job, now that he’s at the helm of the company, North says he’s found
“The entire insurance industry is based on a series of promises to be there when something goes wrong, and what’s amazing to me … is that the claims industry is where those promises are kept” “[Without] insurance, almost nothing happens – you don’t get to buy a car; you don’t get to drive that car; businesses don’t open their doors; products don’t get manufactured,” North says. “The entire insurance industry is based on a series of promises to be there when something goes wrong, and what’s amazing to me … is that the claims industry is where those promises are kept.”
it to be a “truly amazing job” that keeps him busy with something new every day. “The thing I will spend the most time on today will probably be something that yesterday I didn’t even know was coming,” he says. “It’s not on my calendar; it wasn’t a planned event – it’s something that’s occurred with a customer, a colleague or in the business, and the last person that’ll get
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PROFILE Name: David North Title: President and CEO Company: Sedgwick Based in: Memphis, Tennessee Years in the industry: 30 Fast fact: Under Northâ€™s leadership, Sedgwick has grown to be the largest third-party administrator in the insurance industry
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that issue is me. I’ll have some number of minutes to evaluate it and understand it the best I can, and then I will have to make a decision. I just love that aspect of the CEO job, especially when you get a chance to represent such amazing people as there are at Sedgwick.” To ensure that team members have ample opportunity to succeed at the organization, Sedgwick is committed to diversity and inclusion initiatives. Women comprise almost 70% of the company’s staff, and there is diversity across the board, whether it’s in gender, race or generational differences. North personally became even more attuned to the importance of D&I when
gets incredibly strong,” he says. “You get a significant competitive advantage when you recruit, embrace, and then work with and hear from individuals from all walks of life. I have never had the opportunity to meet Gloria Steinem, but I would credit her with changing my perspective on that and helping it become one of the great strategic advantages of Sedgwick.”
Keeping customers close From its origins as a California-based workers’ compensation third-party administrator for self-insured employers to now, as a global company spread across 65 countries, Sedgwick has proven its value to customers,
“We’re proud of not only how we are advancing [D&I] issues within the company, but also how we are helping lead the conversation in our industry about how incredibly important inclusion is” he saw Gloria Steinem speak in 2011. “Her message was about how you see the world through your own lived experiences,” he recalls. “That moment changed my point of view about diversity and, more importantly, inclusion. At Sedgwick, we’re proud of not only how we are advancing those issues within the company, but also how we are helping lead the conversation in our industry about how incredibly important inclusion is. We make it a priority to hire colleagues of all genders, races and ages.” No matter if someone is classified as a millennial or a baby boomer, Sedgwick’s role as a company is to see each of its employees as unique individuals, North adds. “If we find a way as a corporation to tap into each individual’s strength, the company
some of whom have been loyal to the company for decades. Sedgwick developed an integrated disability management program for a Fortune 10 customer 26 years ago, and that client is still working with the company. Twenty-three years ago, a major employer outsourced its claims handling processes to Sedgwick – and it’s still a Sedgwick customer today. “Those are the kinds of moments that, when you get that opportunity with customers who have a chance to choose amongst many competitors, and they put their faith in the value proposition that your company articulates, that’s a proud moment,” North says. “It’s not just a sale – it’s an opportunity and a trust that employer has given you about something very significant to them, and we get a chance to deliver that.”
SEDGWICK BY THE NUMBERS
Year Sedgwick was founded as a regional claims administrator
Number of Sedgwick employees working across the globe
Number of countries where Sedgwick has offices
Claims payments delivered by Sedgwick annually
Number of new claims handled by Sedgwick each year
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CARRIERS Brokers speak out about which carriers are providing superior service HOW WELL are carriers meeting the needs of brokers – and where do they have room to improve? To find out, Insurance Business Canada polled hundreds of insurance brokers from across the country. Brokers were asked to rate their carriers on a scale of 1 (poor) to 10 (excellent) across a range of criteria, from underwriting expertise and claims service to competitive rates and product range. When asked about the three most important things they look for in a carrier partner, brokers named claims processing, communication and responsiveness, and competitive rates. Of these, only rates made the top three last year, yet the category dropped markedly in importance – 71% of brokers named competitive rates among their top three criteria when selecting a carrier in 2018, yet only 59% put it among the top
three this year. Claims processing, meanwhile, nearly doubled in importance: Only 34% of brokers ranked it among their top three criteria last year, compared to 59% this year. In terms of performance, carriers increased their average scores across every single category this year; the most notable jumps came in product training and marketing support and carriers’ commitment to the broker channel. The number of carriers that achieved five-star ratings (earning a score of 8.0 or higher in at least one category) tells a different story, however. Just 16 carriers achieved five-star ratings this year, down from 17 last year and 21 in 2017. In addition, while three carriers earned five-star ratings in every single category last year, not a single carrier received that distinction this year.
CARRIER PERFORMANCE UP ACROSS THE BOARD 10.0 2017
Commitment to the broker channel
Range of products
Speed in providing quotes
Technology and automation
BROKERS ON MGAs 2017
BROKERS ON MGAs 2017
BROKERS ON MGAs
FIVE-STAR CARRIERS 2019
FIVE-STAR 2017 FIVE-STAR WHOLESALE BROKERS & MGAs CARRIERS 2019
FIVE-STAR CARRIERS 2019
WHAT ARE BROKERS LOOKING FOR IN A CARRIER? 2019
Claims processing 59% 34%
Communication and responsiveness
Chair, Board of Directors
Insurance Bureau of Canada (IBC) is pleased to announce that its Board of Directors has elected Silvy Wright as Chair.
Underwriting expertise 49%
Ms. Wright is President and Chief Executive Officer of Northbridge Financial, a leading Canadian commercial insurer. She has been and continues to be a driving force in challenging the status quo and leading change within the industry.
Commitment to the broker channel 32% N/A
Speed in providing quotes 19% 34%
Prior to being appointed President and CEO of Northbridge Financial in 2011, Ms. Wright held a number of senior positions in insurance and financial services, including President and CEO of Markel Insurance in 2006.
Range of products 11% 40%
Product training and marketing support 7% N/A
Technology and automation
Ms. Wright has been a member of IBCâ€™s Board of Directors since 2012 and brings a wealth of knowledge and experience to the role. Her refreshing perspective and commitment to exploring new opportunities will be pivotal in resolving the issues affecting the Canadian property and casualty (P&C) insurance market.
HOW WELL DID CARRIERS PERFORM ON AVERAGE IN EACH CATEGORY? Commitment to the broker channel 8.48 Underwriting expertise 8.20
Ms. Wright has an honours bachelor of arts in economics and commerce from the University of Toronto and is a Chartered Accountant.
Claims processing 7.82 Range of products 7.65
IBC is the national industry association representing Canadaâ€™s private home, auto and business insurers. Its member companies make up 90% of the P&C insurance market in Canada. For more than 50 years, IBC has worked with governments across the country to help make affordable home, auto and business insurance available for all Canadians.
Communication and responsiveness 7.57 Competitive rates 7.56 Speed in providing quotes 7.45 Product training and marketing support 7.35 Technology and automation 6.96
BROKERS ON MGAs 2017
FIVE-STAR CARRIERS 2019
WHICH CARRIERS EARNED FIVE-STAR RATINGS? Carrier
Aviva Chubb CNA Gore Mutual Intact Liberty Mutual Canada Peace Hills Pembridge RSA SGI Canada Sovereign General Insurance Company Trisura Guarantee Insurance Company Unica Insurance Wawanesa Insurance Wynward Insurance Group Zurich Canada
Commitment to the broker distribution channel
Range of products
Communication and responsiveness
Speed in providing quotes
Product training and marketing support
Technology and automation
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BROKERS ON MGAs 2017
FIVE-STAR CARRIERS 2019
COMMITMENT TO THE BROKER CHANNEL
Carrier performance 8.48
Carrier performance 8.20
FIVE-STAR CARRIERS Chubb CNA
FIVE-STAR CARRIERS Sovereign General Insurance Company
Trisura Guarantee Insurance Company
Liberty Mutual Canada
Wynward Insurance Group
Last year, the trend of carriers selling direct to consumers provoked a drop in their average score in this category compared to the previous year. But carriers appear to have redeemed themselves in 2019. Following last year’s dip in broker satisfaction, carriers’ score in commitment to the broker channel jumped by 1.35 points – the highest increase of any category in this year’s survey. In addition, 14 carriers received a five-star rating in this area, compared to 10 last year. The renewal of confidence in carriers’ commitment to the channel was reflected in brokers’ comments. One broker lauded their carrier for having a management team that “recognizes brokers as part of the team and not as an adversary,” while another raved that their carrier “supports brokers in any way they can.”
One broker said they’re more likely to send business to “companies that don’t have a direct arm that takes business away from the broker channel” Still, brokers remain vocal in their opposition to carriers’ direct-toconsumer business. One respondent implored their carrier to “get back to being a broker-focused company,” while another said they’re more likely to send business to “companies that don’t have a direct arm that takes business away from the broker channel.” Another broker called out their carrier for having “zero commitment … broker business finances all their competitive ventures.”
Sovereign General Insurance Company
Gore Mutual Liberty Mutual Canada
Trisura Guarantee Insurance Company
Wynward Insurance Group
Underwriting expertise appears to be less of a priority for brokers this year than in years past. Only 49% of brokers named underwriting expertise as a top-three quality they look for in a carrier in 2019, compared to 64% in 2018. Yet in terms of performance, carriers’ average score in this category increased markedly over 2018, climbing from 7.44 last year to 8.20 this year. Many brokers were emphatic about their appreciation for their carriers’ underwriters. One broker who gave their carrier a perfect 10 in this category praised them for having the “best underwriters in the industry.” Another broker commended their carrier’s “very strong depth in both property & casualty and automobile underwriting.”
Despite their high marks, brokers expressed some wariness about the increasing role technology is playing in underwriting at the expense of human expertise Yet despite their high marks, brokers expressed some wariness about the increasing role technology is playing in underwriting at the expense of human expertise. One broker noted that their carrier “relies too heavily on AI and credit score – underwriters no longer have the authority to properly underwrite a risk.” Another broker implored their carrier to “give the underwriters some actual authority.” Brokers also had some advice for underwriters about how to enhance their relationship with brokers. “Junior underwriters need to refer to a senior when they don’t know an answer and not just say no when they do write the product,” one broker said.
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BROKERS ON MGAs 2017
FIVE-STAR CARRIERS 2019
RANGE OF PRODUCTS
Carrier performance 7.82
Carrier performance 7.65
FIVE-STAR CARRIERS Chubb CNA
FIVE-STAR CARRIERS Sovereign General Insurance Company
Trisura Guarantee Insurance Company
Liberty Mutual Canada
Wynward Insurance Group
Claims processing tied for the most important quality brokers consider when looking for a carrier partner – 59% of respondents named claims processing in their top three. Because claims processing is so important, brokers have a high threshold for satisfaction. Fortunately, carriers mostly seem to be meeting it, earning an average score of 7.82 in this category, a decent improvement over last year’s 7.06. One broker praised their carrier’s “excellent claims service – prompt assigning of adjusters and communication with insureds and fair settlements.” Another said their carrier couldn’t be any better when it comes to claims: “Very consistent with claims process; very good communication with clients. No suggestions for improvement.” A third broker gave their carrier a high score for claims service, but cautioned them to “remember the claim is the most important factor to a client – look for ways to cover a claim [versus] ways to not cover a claim.” For those carriers that came up short in this category, brokers didn’t hold back their criticism. “Horrible service – they outsource nearly everything. Three to five days for an initial contact call is so beyond acceptable,” one broker said of their carrier. Another diagnosed their carrier as understaffed. “Adjusters seem to not have enough capacity to deal with the volume of current claims,” the broker said, adding that “clients are getting frustrated with the lack of attention during a claim.”
Sovereign General Insurance Company
Being able to provide full service to clients means offering as many options as possible, which is why a carrier’s range of products is vital. Brokers gave carriers relatively high marks in this area – carriers’ average score was 7.65, up slightly from last year’s 7.56 – but only six carriers earned a five-star rating, whereas eight claimed the honour in 2018.
Even brokers who rated their carriers highly indicated they’d like to see more product expansion Brokers were crystal clear about how essential it is for carriers to provide an extensive product suite – even those who rated their carriers highly indicated they’d like to see more product expansion. Some brokers expressed a desire to see a bigger appetite for commercial risks. One broker lamented their carrier’s lack of E&O coverage, either in a package or as an option. Another suggested their carrier could grow by expanding classes of business and reviewing their underwriting guidelines. Among the results in this category, there were glimmers of excellence. One carrier that received a perfect 10 was praised for having a “very large suite of products,” while another highly rated carrier was described as “almost the best in the market.”
HOW CAN CARRIERS IMPROVE?
IBC asked brokers what carriers can do to improve their service. Here’s what they had to say: “Say yes more often and don’t be so restrictive” “Assist brokers with technology” “Move small business teams back to the region. The nameless/faceless call centres and central mailboxes remove accountability from the underwriters and are incredibly frustrating to deal with”
“Instead of training underwriters by the book, train them to be underwriters with common sense” “Stop taking brokers’ clients with the same rates, only without broker commissions” “Give us the name of an underwriter instead of everything having to go through the queue”
“Be friendly to existing clients. Don’t be mean in this industry – clients can find better companies out there” “Don’t put such high priority on AI and credit scoring in underwriting. The biggest factor to a risk is the person; this method of underwriting removes the human being from the equation and is not accurate”
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BROKERS ON MGAs 2017
FIVE-STAR CARRIERS 2019
COMMUNICATION AND RESPONSIVENESS
Carrier performance 7.57
Carrier performance 7.56
Liberty Mutual Canada Peace Hills RSA Sovereign General Insurance Company Trisura Guarantee Insurance Company
Liberty Mutual Canada SGI Canada Sovereign General Insurance Company Trisura Guarantee Insurance Company Wynward Insurance Group
Wynward Insurance Group
Tied for the most important quality they look for when choosing a carrier, communication and responsiveness from carriers is universally valued by brokers. While the category (a new addition to this year’s survey) received a decent average score of 7.57, only eight carriers received a five-star rating for communication. In addition, the vast majority of feedback from brokers was negative, indicating that they have little patience for lax service in this area.
There was little enthusiasm among brokers when it came to carriers’ ability to provide competitive rates, despite this being the third most important quality brokers look for in a carrier. Yet carriers improved significantly on their average performance in 2019, moving from a score of 6.99 in 2018 to 7.56 this year. In addition, seven carriers earned five-star ratings for the competitiveness of their rates, which is on par with the eight that achieved the distinction last year.
Many brokers acknowledged Several brokers felt carriers were that the blame for tough pricing likely struggling in this area due to conditions doesn’t fall exclusively staffing shortages on carriers; several commented Similar to the refrain among respondents regarding claims processing, that the market is pulling rates up several brokers felt carriers were likely struggling in this area due to staffing shortages. “Hire more staff to keep up with growth,” advised one broker. Another suggested that automated communication could improve their carrier’s performance, adding that “wait times to speak to underwriters is atrocious. Improve staffing levels and allow brokers more automation.” Another broker proposed that carriers give each broker an assigned underwriter, rather than dumping everything into a general mailbox, as this makes it easier for brokers to build business with the carrier. Though understandably held to a high standard on this issue, several carriers did receive compliments for their communication and responsiveness. One broker described their carrier as “typically really easy to get a hold of,” while another noted that their carrier “always replies quickly and is easy to reach.”
Many brokers acknowledged that the blame for tough pricing conditions doesn’t fall exclusively on carriers; several commented that the market is pulling rates up. “It is difficult in this hard market – push for auto reforms,” said one broker, while another admitted that their carrier’s rates “are fairly priced for the marketplace.” The competitiveness of a carrier’s rates also depends on the area of the business. Brokers have witnessed competitive rates for commercial lines but less so in personal lines. Others pushed for improvement in auto insurance rates, including for one-vehicle policies, while another broker advised their carrier to lighten up the rates for claims-free renewals. Another broker opined that their carrier’s rates are “great – if you fit into their box of desirables.”
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BROKERS ON MGAs 2017
FIVE-STAR CARRIERS 2019
SPEED IN PROVIDING QUOTES Carrier performance 7.45
PRODUCT TRAINING AND MARKETING SUPPORT Carrier performance 7.35
FIVE-STAR CARRIERS Peace Hills
Trisura Guarantee Insurance Company
Wynward Insurance Group
FIVE-STAR CARRIERS Chubb
Trisura Guarantee Insurance Company
Liberty Mutual Canada An inability to provide quotes quickly is a sure way to direct brokers’ business elsewhere. But brokers weren’t as concerned about carriers’ ability to generate quick quotes this year as they were in years past – only 19% of brokers put speed in providing quotes among their most important criteria when looking for a carrier, compared to 34% in 2018. And while carriers’ average score climbed from 7.02 last year to 7.45 this year, only four carriers received five-star ratings in this area, compared to seven in 2018. Brokers comments on this area were largely unenthusiastic. “Underwriters usually respond in a reasonable time period,” one broker said, while another called their carrier’s quoting time “not bad.” A third broker said their carrier “was the quickest but seems to be slowing down a bit now.” Other brokers were frustrated by inexplicably slow quote turnaround times. “Must apply, and they will reply in two weeks or so – for auto!” one broker lamented. Another advised their carrier to speed up the process by hiring someone exclusively for quoting. One broker who described their carrier’s quote times as “horrible” surmised that carriers uninterested in taking on new business could be holding up quote times to discourage new customers.
TECHNOLOGY AND AUTOMATION Carrier performance 6.96
FIVE-STAR CARRIERS Chubb
Trisura Guarantee Insurance Company
In an era when technology keeps advancing at a rapid pace, it’s critical for any business to adapt and transform. Based on carriers’ performance in technology and automation, which improved only slightly from last year and has fallen since 2017, brokers don’t believe their partners are staying ahead of the curve. In addition to a rather weak overall average
Delivering excellent service to clients is a team sport – and therefore new and innovative lines of insurance require training and marketing support from carriers. Brokers, however, rated this category toward the bottom of their priorities – only 7% named it as a key factor they use when assessing carriers. That it’s not top of mind is a silver lining, given that carriers earned their second lowest score in this category, with an average of just 7.35, and only five carriers garnered five-star ratings. Despite the low grade overall, some brokers are clearly pleased with the service they’ve been getting from their carriers in product training and marketing support. “Training support is excellent,” said one broker. Another was pleased that their carrier offered webinars to help train and educate brokers on new products. Other respondents were less enthused. “Never hear from any of them,” said one broker. “They are too busy to answer questions, and their reference material is only helpful when things go right – no troubleshooting or common errors,” said another. Other brokers indicated that their carriers aren’t providing service in this area at all. “I don’t even know who the marketing rep is or if they’ve ever been here,” one broker said.
score of 6.96, only four carriers snagged a five-star rating in this area, down from five last year and seven in 2017. Whether carriers truly have shortcomings in this area or are simply failing to meet the high expectations of brokers and consumers is uncertain. One broker praised their carrier’s online portal as “the best broker-facing company portal in the industry and has been for 10+ years,” while another noted that their carrier is “catching up to the market.” Other brokers noted that many carriers’ recently released tech features don’t work properly. “Their new portal is causing a lot of issues and payment problems,” said one broker, while another dinged their carrier’s portal for “poor functionality.” A third broker noted that their carrier’s “claims processing platform/communication needs improvement.” Brokers also advised carriers to take a measured approach to rolling out new technology. “Too much technology can take away customer interaction, so this has to be kept in mind by carriers,” said one broker, while another warned their carrier that the release of a new automated program “could make or break broker relationships.”
TOP INSURANCE Workplaces
C A N A D A
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Brokers’ key cyber questions answered Insurance Business Canada spoke to four experts in the cyber insurance space to get their perspective on emerging trends, crucial policy details and how to convince clients of the necessity of cyber coverage
FROM EQUIFAX to Marriott, from WannaCry to Petya, cyber attacks have been grabbing global headlines in recent years – but for many, they still feel like something that happens “somewhere else.” In a landscape of Russians allegedly interfering with US elections or giant firms like Yahoo being brought to their knees by hackers, comparatively small Canadian businesses can seem such a long way from it all.
Until, that is, you realize that nobody is safe from what has become the crime of the 21st century.
Canada’s new threat Research by Accenture and the Ponemon Institute reveals that cyber attacks are costing Canadian companies millions – the annual cost of malware- and people-based attacks, such as social engineering and phishing,
reached US$9.25 million in Canada in 2018. Meanwhile Scalar Decisions’ annual cybersecurity study reported that 58.4% of Canadian firms had data exfiltrated during the previous year, and more than 25% of the orga nizations victimized lost personally identifiable information on customers or employees. The attacks are only getting more frequent and more devastating, too. “One of the first trends right off the bat when it comes to
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ransomware is that we’re seeing a lot more claims, and the strains of ransomware are becoming more and more virulent, making them harder to remedy,” says Tony Dolce, Chubb’s cyber claims lead for North America. “The other significant trend we’re seeing is that ransom demands are going up. A couple of years ago, a demand in the neighbourhood of $15,000 to $20,000, converted into cryptocurrency, were the norm. Then it climbed up into the $30,000 range, and over the course of the last year and a half, we’ve started seeing demands frequently in excess of $100,000. That’s a very disturbing trend.” Not every business has $100,000 sitting in the bank to pay off a ransom demand, so the need for cyber insurance has never been more apparent. It’s a message that may finally be getting through. “Most organizations finally realize they have some degree of exposure and know they must do something about it,” Brian Rosenbaum, Aon’s national cyber leader in Canada, wrote in the organization’s 2019 Cyber Security Risk Report. “For the better part of the last decade, a large number of Canadian organizations were either ignorant or in denial about their cyber risks. So, we
have no doubt seen progress.” A survey from a Silicon Valley analytics firm revealed that cyber insurance take-up rates among Canadian companies are growing: Only 18% of companies had fullcoverage cyber insurance in 2017, but 40% purchased it in 2018. On the other end of the spectrum, the proportion of Canadian businesses that reported not having any cyber insurance dropped from 36% in 2017 to 22% in 2018. Clearly, the appetite for cyber insurance is there – but how do brokers make the most of it?
A hard sell While businesses are becoming more educated on cyber threats, some retain the “it won’t happen to me” mentality. Typically, they fall into the trap of thinking that if they don’t collect personal data as part of their business, they won’t be a target; or that if they have their own IT department in-house, they will be able to handle their exposure; or, simply, that they’re not big enough to be hit. The reality, of course, is that small businesses are under attack, and it’s up to brokers to get that message across and convince them
of the benefits of insurance. How to do that, however, is open for debate. “We get a lot of objections from clients who say, ‘We have the best IT systems in place; we don’t actually need a cyber policy,’ and you can get quite a hostile reaction from a CISO or somebody in the IT department that you’re trying to sell a cyber policy to because it’s effectively saying, ‘The IT department isn’t good enough, so here’s a cyber policy to help mitigate some of your exposures,’” says Lindsey Nelson, international cyber team leader at CFC Underwriting. “It’s really helpful to play on the human error element of cyber versus whether the IT systems are good or bad.” Meanwhile, James Arnold, principal of cybersecurity at KPMG, says it’s about making cybersecurity as important as the overall value of the business, particularly when a merger or acquisition is in the works. “Insurance brokerages and agencies, as well as sellers of any type of business, can help secure and enhance the value of their entities prior to a sale by ensuring their cybersecurity risks are properly addressed,” he says. “A well-developed and -implemented cybersecurity program will help ensure there are no surprises during the deal period and after closing. It will also help put buyers at ease, knowing the target cybersecurity issues have been addressed.” Clearly, there are plenty of contrasting opinions out there on the best approach to market – and if brokers are to truly capitalize on this burgeoning space, it’s vital that they get a clear understanding of what the product is and where it’s heading. That’s why Insurance Business Canada has put together a panel of experts to address five key questions that our research suggests brokers are lacking clarity on. Armed with this insight from industry experts, we hope brokers can start to transform cyber insurance from the product everyone is talking about to the product everyone is buying.
Paul Lucas Managing editor Insurance Business Canada www.insurancebusiness.ca
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CYBER REPORT MEET THE PANELISTS Jacqueline Detablan Vice-president, specialty CNA CANADA
Jacqueline Detablan is CNA Canada’s vice-president of specialty, a division that includes healthcare, professional liability and technology, as well as the commercial and financial institutions executive liability departments. She is a frequent speaker at industry conferences, focusing on professional liability, especially emerging cyber risks. Michael Kalakauskas Assistant VP and product manager, professional liability and cyber liability TRISURA GUARANTEE INSURANCE COMPANY
As the national E&O and cyber product manager at Trisura, Michael Kalakauskas is responsible for product development, strategy, training, reinsurance placement, marketing and broker relationships in Canada. His product expertise includes miscellaneous and technology E&O, media liability, and cyber liability. Darren Peters Director, commercial insurance THE WAWANESA MUTUAL INSURANCE COMPANY
Darren Peters brings 23 years of insights from both the insurer and the broker perspective. He began his career as a licensed insurance broker, ultimately holding the role of COO at an independent brokerage. After 13 years, he transitioned to the insurer side and has pursued extensive industry volunteer work, including serving as president of the Insurance Brokers Association of Manitoba. Dan Lewis Director of cyber liability and Canadian management liability practice leader GALLAGHER
Dan Lewis advises corporate clients in the for-profit and non-profit sectors on liability exposure in the areas of D&O (private and publicly traded companies), E&O, cyber liability, employment practices, fiduciary liability, white-collar crime, kidnap/extortion, trade credit and transaction liability. Lewis has worked in the insurance market throughout Canada, the US, the UK and Bermuda since 1998.
What key market trends should brokers be aware of in the cyber insurance space in 2019? Michael Kalakauskas: I would place key market trends into two different categories: cybersecurity trends and cyber coverage trends. Both categories should be front of mind for brokers, not only in 2019, but in the years to come as well, as they allow brokers to think of exposure, risk and insurance solutions simultaneously. From a cybersecurity trend standpoint, the sheer volume of cyber attacks and compromised personal information on a worldwide level is at an all-time high and will only continue to grow with the expansion of things like company interconnectivity, the Internet of things, the use of cloud services, artificial intelligence and machine learning, automation, and small to medium-sized business vulnerability. These trends are at the heart of cyber security and point to the need for all organizations to increase their security and awareness in protecting themselves against cyber attacks and data breaches. Cyber criminals and attackers are only getting more sophisticated, so as an industry, we need to keep up with, and respond to, emerging threats. Another important trend from a cybersecurity standpoint is the evolving landscape of international data privacy laws and government/ regulatory body involvement. From a cyber coverage standpoint, brokers need to be aware that third-party liability coverage for data breaches is only one piece of the overall cyber insurance puzzle. The trends from a coverage standpoint – and the biggest causes of current cyber claims, in Trisura’s experience – are ransomware, social engineering and business interruption. Not all businesses carry large amounts of personal data that data breaches might target; however, all businesses are dependent on computers, cell phones and the internet, ultimately making them vulnerable to different types of cyber attacks. The one thing all companies do hold is
employee data, so all companies are exposed to a potential data breach. Our experience, though, is that the coverages I mentioned are the ones most sought after by small- to medium-sized businesses. It is easier to target small- and mid-sized companies, as they may not have adequate security measures and resources in place to protect themselves. Small companies must reassess their security position and ensure adequate measures and controls are implemented to safeguard against today’s cyber attacks. Jacqueline Detablan: There are several. For example, there has been an increase in the level of business-interruption-related claims activity after a cyber criminal strikes, and brokers cannot ignore ransomware/cyber extortion and the fact that no industry or size of operation is safe from this threat. Cyber crime is on the rise, as are the financial impacts on businesses that become victims of cyber attacks – Cybersecurity Ventures projects that the global cost of cyber crime will grow to $6 trillion by 2021. In the current environment, cyber insurance has become a valuable risk transfer and risk mitigation tool for companies across the board. Even over the past year, there have been evolutions in the cyber insurance space, from continued expansions of coverage for business interruption and system failure resulting from cyber attacks to a heightened focus on silent cyber, according to experts at CNA Canada. There is also a lot of discussion around the topic of cyber as a peril. Rather than covering all exposures related to cyber under a cyber policy, consideration needs to be given to treating cyber as a peril that needs to be addressed under multiple coverage lines. Darren Peters: New cyber trends are emerging constantly. And while threats like ransomware attacks, phishing scams and banking trojans aren’t new market trends, they are becoming more sophisticated and commonplace. As an insurer that is 100% brokerdistributed across Canada, it is our duty to instill in our brokers the confidence to conduct effective risk assessments with our mutual clients and recommend the appropriate first-
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In today’s technology-driven world, cyber threats represent a critical and growing risk. There is no one size fits all approach. Now available, pre-breach cyber risk services from CNA designed to help companies take an individual and holistic approach to cyber threats, aiding CNA cyber policyholders combat cyber losses with minimal controlled and predictable costs.
Learn more today: cnacanada.ca. “CNA” is a registered trademark of CNA Financial Corporation. Certain CNA Financial Corporation subsidiaries use the “CNA” trademark in connection with insurance underwriting and claims activities. Copyright © 2019 CNA. All rights reserved. 20190628 19-0161-PROD
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CYBER REPORT STAGES OF A TYPICAL RANSOMWARE EVENT
Step 1 Criminal creates and sends a message containing ransomware
Step 2 Recipient opens a spam message with an attachment
Step 3 The malicious attachment installs ransomware on a computer
Step 4 Files in the infected computer are encrypted
Step 5 A ransom message is displayed, stating the amount required to unlock the files and a deadline
Step 6 The recipient can choose to pay using cryptocurrency
Step 7 The encryption key to unlock the files may be provided on payment Source: National Cyber Threat Assessment 2018, Canadian Centre for Cybersecurity
and third-party coverages to address common and emerging vulnerabilities. In partnership with the Boiler Inspection and Insurance Company of Canada, one of the most innovative firms for cyber risk coverage, we are able to provide our brokers with outstanding education and training seminars. We are mindful of how overwhelming it must be for clients to try to keep up. We encourage our brokers to take the lead on
simplifying the process, educating clients on best practices to avoid attacks and ensuring the right coverage is in place. Dan Lewis: Because the threat environment is constantly evolving, the insurance market is continuously trying to adapt. New insurance contract wordings may specifically address threats like cryptojacking, push payment fraud and system failure, or clarify their intent with respect to cyber warfare. In the past, these may not have been addressed. Some forms will even address full physical damage. PIPEDA, the new federal law enacted in 2018, addresses mandatory breach reporting when there is a risk of significant harm. Also, there is no proof of economic damages required in order for plaintiffs to bring a claim. We will continue to see the tort of ‘intrusion upon seclusion,’ or privacy breach, commonly referenced in class-action litigation.
Which client groups should be the target markets for cyber insurance this year? Jacqueline Detablan: Given the increase in ransomware events across all industries, it’s impossible to identify a specific market. In fact, cyber crime as a whole impacts businesses of all sizes. Sixty per cent of small to medium-sized businesses will fail six months after a cyber attack. Brokers should have conversations with their clients and educate them on the importance of cyber risk. If a client chooses not to buy, they need to be comfortable with the possible stress on their balance sheet, as well as how to respond to these events independently. Insurers have relationships with vendors who are experts in dealing with these situations. CNA Canada’s latest cyber proposition reflects the changing risk environment. Technology adoption creates new exposures, and cyber criminals are becoming more sophisticated. Our new pre-breach services are designed to enhance our cyber solutions to help policyholders combat cyber losses with
minimal controlled and predictable costs. The more prepared a business is to handle a cyber attack, the faster it can identify the problem and get back on its feet, which means fewer resources are used and they see less operational disruption. Dan Lewis: If a corporation holds sensitive data, such as financial, education or healthcare data, they were likely among the first to adopt cyber coverage in Canada a few years ago. We are seeing much more take-up among companies that are more concerned about business interruption losses: industries such as manufacturing, infrastructure and energy/ mining, where cyber coverage perhaps has not been as well understood in the past. Canadian municipalities are another area where loss frequency has dramatically increased, especially when it comes to ransomware. In 2018 and 2019, we have seen a number of losses impacting smaller cities in Canada. Finally, small and medium-sized enterprises, which traditionally felt somewhat immune to cyber attacks and had an “I’m not a target” mentality, have realized that their balance sheet likely cannot withstand even a low six-figure claim and that they likely cannot afford to have their network down for several days. Darren Peters: Truly, all client groups are at risk. There was a time in which privacy concerns were the only argument for cyber coverage. Today, the adoption of technology in virtually every aspect of our lives – business and personal – is changing the way we think about cyber threats. From a commercial perspective, we primarily write policies for small and medium-sized businesses, as well as agricultural clients, all of which are increasingly bearing the brunt of online predator groups. The threat of losing or compromising customer data is still very real; however, there are more consequences to consider. If an online retailer were to be breached, for example, there could be considerable revenue lost from business interruption and long-term damage to its reputation. The same
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WHEN CYBER CRIME STRIKES, WILL THEY BE COVERED? The adoption of technology in virtually every aspect of our lives is changing the way we think about cyber threats. Our suite of cyber risk solutions is designed to help your clients—personal and commercial alike—protect themselves in the face of our new realities. Contact your Wawanesa Business Development Representative for resources to prepare your clients for the exposures of today.
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CYBER REPORT TOP INDUSTRIES TARGETED BY CYBER CRIMINALS PERCENTAGE OF BUSINESSES IN EACH INDUSTRY THAT HAVE EXPERIENCED A CYBERSECURITY INCIDENT 40% 30% 25% 20% 15% 10% 5%
Management companies and enterprises
Finance and insurance
Information and cultural industries
Mining, quarrying, oil and gas extraction
Professional, scientific and technical services
Real estate, rental and leasing
Transportation and warehousing
Source: Statistics Canada, 2017
threat exists in manufacturing – a sector that may not have been previously concerned about cyber risks – thanks to the level of technology used throughout facilities’ operations. In our personal lives, most of us conduct routine banking, shopping and online research activities, and we take security for granted. Cyber criminals know this and are targeting us in ways that appear more professional and authentic every day. The disadvantage for individuals – and small businesses, for that matter – is that they simply don’t have the resources at their fingertips to correct a breach, and recovery can be an exceptionally long and expensive process. Michael Kalakauskas: All client groups! All businesses – small, medium or large – have cyber exposures, and each company should be having conversations with their insurance broker about adequate cyber insurance coverage and risk transfer options. That said, I would prioritize some of the industries that have not previously bought cyber insurance on a widespread basis. Indus-
tries including finance, banking, healthcare, retail and hospitality – all well known for holding and using personal information – have already been exposed to cyber insurance and the risk of data breaches; however, industries like construction, transportation and manufacturing, as well as smaller professional offices, are slowly being exposed to the importance of cybersecurity and need more awareness in this space. At Trisura, we are trying to increase the exposure of cyber insurance with all our smallto medium-sized business clients, regardless of industry type. As mentioned, it is easier to target small- and mid-sized companies, as they may not have adequate security measures and resources in place to protect themselves. Trisura has a large surety book that comprises clients of all sizes in the construction industry – for example, builders, developers and contractors – and with them being more reliant on technology and computers, it is imperative we offer cyber solutions as part of their overall insurance and surety bonding package. Likewise, we insure many small- to
medium-sized professional offices for E&O and directors & officers liability and are currently trying to target them for cyber coverage as part of their insurance portfolio.
How can brokers overcome the “it won’t happen to me” mentality held by many smaller businesses in reference to cyber attacks? Darren Peters: Cyber attacks are still just a concept to many individuals and businesses – something you’d see in a movie, for example, or more of a concern for large corporations. The “it won’t happen to me” mentality tends to dissolve when threats become relatable. Frankly, our brokers are equipped with many of their own claims examples to share with clients to illustrate just how vulnerable the entire population is.
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In addition to sharing real-life examples, our broker partners can continue to provide education and increased awareness to our mutual clients digitally, through social media, blogs and podcasts, as well as through traditional channels like education sessions. In collaboration with the Boiler Inspection and Insurance Company, we are able to provide co-branded resources for our broker partners to support their conversations with insureds. In my opinion, nothing is more effective than facts and statistics to educate clients and convince them that “it won’t happen to me” should really be, “When it happens to me, will I be covered?” Michael Kalakauskas: All businesses, regardless of size and industry type, have cyber exposure. Regardless of whether they hold or store their customers’ or suppliers’ personal data or corporate information, they have data on all of their employees that is at risk. Furthermore, all companies are reliant on computers, cell phones and the internet, and therefore would be susceptible to loss in the event of a cyber attack like ransomware, a hack, data loss, payment diversion or phishing, malware, and software or hardware failure. Cyber attacks are indiscriminate. Even if it’s not from an attacker, one of the biggest forms of cyber exposure is the error of an employee clicking the wrong link, sending an email to the wrong person or leaving an unencrypted laptop or cell phone at a public place. Cyber exposure could come from anywhere, and if it were to happen, it could give rise to significant financial loss. My rule of thumb is to advise businesses that cyber attacks are not a matter of ‘if ’ but more of ‘when’ – and whether the company is able to withstand the financial impact of such an attack or loss. If the company is not equipped to sustain such an attack, or the business would like some additional protection, then cyber insurance is a key to their risk management process, no matter the size of their business. Dan Lewis: There are four main areas that we focus on when speaking to smaller organizations. Our discussion usually begins with a
refresher on the duties of directors and officers under the Canada Business Corporations Act [CBCA]. This is key because ultimately the directors and officers are responsible for safeguarding the data they collect, and they are charged with safeguarding the corporate balance sheet. Additionally, we link the organization’s ethical responsibility to act in the best interest of all of the corporation’s stakeholders, not just shareholders. This includes employees, customers and the general public. We also focus on the connection to service providers that insurance provides: breach coaching, PR, forensics, etc. This is invaluable, as SMEs would likely not have those relationships in place. We as brokers can provide concrete examples of where SMEs have had tangible Canadian cyber claims – ransomware, social engineering fraud, rogue employee claims, accidental employee data issues – and the downstream impact of not having insurance in place. Finally, we note that the 2018 NetDiligence Cyber Claims Report found that small businesses with revenues of less than $50 million are targeted 49% of the time by hackers. Jacqueline Detablan: Given the number of incidents in the media, I am hopeful that we have moved beyond this mindset. According to the 2019 Verizon Data Breach Investigations Report, 43% of breaches involved small business victims. While Statistics Canada reported that 58% of businesses undertook
activities to identify cybersecurity risks and only 5% of Canadian businesses reported not having any cybersecurity measures in place, there continue to be major vulnerabilities within companies’ four walls that expose them to cyber attacks. The human element, for one, plays a central role in increasing a company’s cyber risk. I would encourage brokers to speak openly about the exposures without using traditional scare tactics.
What are the key differences between cyber as a stand-alone product and as an addon? In which situations should brokers consider one option the better choice for clients? Jacqueline Detablan: This is a tough question, given that not all add-on extensions are created the same, and sometimes these can create a false sense of security. Brokers should review the limits of these bolt-on endorsements, as well as the various aspects of coverage included. Loss drivers today are focused on the first-party side of the coverage, particularly business interruption and cyber extortion. If the add-on does not contain these items, a full policy may be worth
PESSIMISTIC ABOUT CYBER PROGRESS
of IT professionals believe their organization’s cybersecurity posture will either stay the same or decline
believe cybersecurity staffing problems will worsen
predict artificial intelligence will not reduce the need for experts in cybersecurity Source: 2018 Study on Global Megatrends in Cybersecurity, Ponemon Institute
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CYBER REPORT exploring. In addition, costs associated with even a relatively small cyber event can add up quickly. A modest sublimit won’t go far. Dan Lewis: The first-party extension on a general liability policy has been a good introduction for many clients in past years. It at least gave brokers a springboard to discuss the difference between the add-on and a full cyber policy. Most add-ons only provide a sliver of firstparty cover, such as notification costs, but may not respond to other first-party costs. They likely have no coverage for PCI fines/penalties, cryptojacking, social engineering, business interruption, contingent BI, system failure, ransomware payments, media liability and full data re-creation. They may offer a $50,000 to $100,000 sublimit, which may be eroded quickly. The 2018 Ponemon study pegged the average Canadian claim at nearly $6 million. Finally, most of these add-ons are a first-party coverage only, versus first- and third-party. The key for brokers is to make sure that their clients clearly understand what they’re buying. Weighing the pros and cons of coverage versus cost, and explaining what is available, is an important education step. Darren Peters: Three key considerations are the limits of insurance, retroactive coverage and corrective action plan costs. Depending on what type of data one stores, the limit of insurance offered by any add-on coverage should be closely examined. Often, the limits are lower and can be incrementally increased. Standalone cyber offerings can be more flexible and allow clients to purchase much higher limits than are available with add-on cyber coverage. With cyber claims, data breaches often go undiscovered for long periods of time. Some stand-alone options offer full, or at least partial, coverage for events that may have occurred even before the inception date of a traditional property & casualty policy. This is something we strongly recommend our broker partners address when consulting with clients. Depending on what businesses our clients are in, or how they use their personal computers, it is important to help them understand what the regulatory requirements
WHAT MOTIVATES COMPANIES TO SPEND MONEY ON CYBERSECURITY? Protect information 68% Prevent fraud and theft 41% Secure continuity 31% of operations Protect business 30% reputation Prevent downtime 28% and outages Compliance with 27% laws and contracts Protect trade secrets, intelligence and property 15% 0%
80% Source: Statistics Canada
would be if they experienced a data breach or cyber event. At times, regulators will mandate compliance protocols and/or audits, which drives up recovery costs. Other factors to consider are bodily injury because of a cyber breach, post-event remediation, notification costs, as well as business interruption costs that often result from these types of claims. In most cases, a stand-alone or add-on cyber policy can be put into place at any time, not just at renewal. Michael Kalakauskas: The key difference between a stand-alone cyber product and an add-on by endorsement is the quality of the coverage and of the claims service. With a stand-alone cyber policy, you are getting a dedicated product – and limits – with specific and broad coverage and, most likely, access to a comprehensive cyber response team that can help navigate any claim or cyber incident. Most add-on cyber endorsements cover such a limited amount, and language tends to be very restrictive. Furthermore, add-ons usually contain such a small limit of liability, or the limit itself is shared with the main policy limit. My hope is that add-ons become less and less used in the industry and that all clients
– again, regardless of size and operation – purchase a stand-alone cyber policy to properly cover themselves. Another advantage of a stand-alone policy is that it is most likely being managed by a dedicated and experienced cyber underwriter. A true cyber underwriter can not only help with exposure and risk identification, but can also tailor the cyber policy and coverage to the specific needs of the client. Most add-ons are offered by underwriters in the professional liability or casualty space, and they may not have any expertise in the field whatsoever.
What are the vital elements of a good cyber insurance policy, and which elements are particularly important for different clients? Dan Lewis: The primary reason you buy insurance is that you want claims to be paid. So, partnering with an insurer that has experience in handling Canadian cyber claims is key,
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MOST COMMON CYBER INSURANCE EXCLUSIONS
Intentional or deliberate acts
Outdated anti-virus software
Certain types of websites (adult entertainment, gambling and sales of firearms or weaponry) Source: Insurr.com/ca
including strong relationships with Canadianbased service providers such as breach coaches, IT, etc. You don’t want a carrier to sit on their hands for days in a ransomware scenario, wondering whether elements of the claim might not be covered. Speed of response is important as well. How long is the waiting period for the business interruption coverage to trigger? The coverage, of course, is important, and the most valuable coverage sections to an individual client differ depending on their business. For instance, a retailer may value PCI coverage. An oil company may be most
interested in physical damage cover. An auto parts supplier may value business interruption cover that can extend to the full supply chain. A law firm may value crisis management services, reputational cover and robust data re-creation coverage. Michael Kalakauskas: Overall, good cyber insurance provides coverage for both an insured’s first-party and third-party losses associated with a network security breach, or the loss, theft or unauthorized disclosure of personal information or confidential corporation information. The coverage should include expenses related to breach notification, extortion threats, public relations, credit monitoring, forensic investigation, defence costs, the costs of judgments or settlements, regulatory claims, business interruption, and media liability, among other things. Every business has an exposure and should be protected accordingly. Exposures come in the form of employee information, customer information, internet access, electronic and network activities, and the overall use of technology. Specifically, the most important element of any good cyber insurance policy is the claims handling service and response team associated with it. A cyber insurance policy should give clients access to experts in all fields of cybersecurity and make them feel comfortable throughout the whole process, whether it is a full-blown claim, a possible breach or a system hack. A good response team should include law firms and breach coaches, forensics and investigation professionals, public relations and communication specialists, and breach notification, identity repair and credit monitoring firms. Legal experts can help minimize the risk of litigation and fines in the wake of a breach. They can provide legal advice based on your specific incident, such as determining how to notify affected individuals, government agencies, third parties and others who may be impacted. The law firms and breach coaches can also manage breach response teams and oversee all aspects of the response. Forensic and investigative providers can
advise your organization on how to stop the current data loss, prevent further harm and secure evidence as necessary. They can also determine where, when and how the breach or hack occurred, analyze data sources to determine what information has been compromised, and assist in data restoration. Public relations providers can help develop both the internal and external communications needed during an incident, as well as oversee crisis management services. They can also provide advice on how to best position the incident to key audiences, update social media and help manage media questions related to the issue. Breach notification providers can help in the form of credit monitoring, credit reports, call centre services and direct mail campaigns. Jacqueline Detablan: Claims servicing should be the main driver when choosing a carrier, as well as which vendors they use. Experience is also key. Cyber policy language within the market has become pretty broad, but value-added services such as pre-breach are an asset, while claims response remains key. I feel the market has lost sight of the reason clients are buying the coverage. Darren Peters: A good policy – cyber or otherwise – is, above all else, fully understood and deemed to be valuable by the insured. It should be tailored to the insured and reflective of the unique exposures they are up against in their lives or businesses. A thorough consultation with a client may reveal such vital elements as media liability, regulatory privacy proceedings, regulatory fines and penalties, notification to affected individuals, services to affected individuals, public relations services, electronic data recovery and replacement expenses, legal services, and information and network security, such as unauthorized release of information. We call this cyber coverage; however, keep in mind when educating your business clients that this can just as easily occur when paper documents, contracts, photos or other forms of literature are not properly secured.
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Insurance Business Canada is the leading business magazine for insurance professionals
• • • • •
Profiles and case studies of successful brokers and agents Interviews with industry leaders Special reports and surveys In-depth features on specialist lending Business strategy content
Find out more and subscribe at insurancebusinessmag.com/ca IBC subs ad 2018.indd 1 38-49_Cyber Report-SUBBED.indd 49
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SPECIAL PROMOTIONAL FEATURE
Creating a culture of entrepreneurship Brokers are increasingly looking to work for nimble companies with an entrepreneurial spirit
CREATING AN entrepreneurial culture is an important advantage for any business striving to succeed in today’s ultra-competitive landscape. For insurance brokers particularly, working at a nimble, ambitious firm is often the driver that enables them to achieve their full potential. A big part of creating an organizational culture of success is fostering an environment where brokers feel empowered to think (and act) like entrepreneurs as they carry out their day-to-day activities. Brett Klymochko, partner and senior advisor at Lloyd Sadd, a Navacord broker partner, says an entrepreneurial culture matters in today’s business landscape because it enables brokers to adapt to turbulent conditions. Navacord is an example of an organization that cultivates a highly entrepreneurial culture. Founded by two established, independent insurance brokerages, Jones DesLauriers and Lloyd Sadd, Navacord now boasts more than 95 shareholders and is committed to keeping the entrepreneurial spirit alive. Preserving each broker partner’s unique local identity and culture is at the heart of Navacord’s philosophy, and Klymochko says this entrepreneurial culture
was one of the main things that attracted him to the organization. “The opportunity to be part of building Navacord was a strong draw,” he says. “Being able to lead the growth of the company, rather than just being a number in an organization with thousands of employees, is a huge thing.” It also attracted Aaron Hinks, partner and account executive at Jones DesLauriers, who says he left his previous brokerage because he
to tap into expertise from across the Navacord broker partners in order to provide my clients an excellent level of customer service.” Klymochko points out that being part of Navacord also gives him access to resources across other industry sectors. Although he focuses primarily on the energy sector, he’s able to leverage expertise in other areas such as management liability, manufacturing and technology.
“Being able to lead the growth of the company, rather than just being a number in an organization with thousands of employees, is a huge thing” Brett Klymochko, Lloyd Sadd, a Navacord broker partner wanted more control over how he operated and serviced his clients. “I’m able to leverage the best practices, standard operating procedures and support of a national broker, with an experienced team that includes dedicated account managers and account assistants,” he says. “I’m also able
“We have all the resources that a big multinational firm would have, but also the ability to be nimble and effect change as we need to,” he says. “And being a Navacord broker partner is also resonating well with our clients.” Navacord’s business model enables firms to remain competitive and diverse while focusing
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on growth and healthy profit production. Its broker partners maintain their regional focus, giving customers a local, boutique experience, yet still benefit from the company’s Canadawide presence. “I think the business model is important because people still want to deal with the people who know their name – they want to deal with a local broker – but obviously, in the hardening market that we’re heading into, we need economies of scale as well,” Hinks says. “We need to be part of a larger organization but still have that hometown kind of feel.” Hailey Taskey, another partner and senior advisor at Lloyd Sadd, describes the ‘owners serving owners’ model, in which partners are made shareholders, as “a big deal.” It’s not
something many companies offer to brokers, and she believes there is a definite correlation with increased client satisfaction. “This message resonates when you work with clients; they do feel like you have more of a buy-in and a bigger commitment to the company,” Taskey says. “People move around a lot in the broker world, and I think with the ‘owners serving owners’ model, there is a lot more security from the client’s perspective. Security makes them feel more comfortable and happier with their choice in brokerage. I have had clients say that knowing I am here to stay makes them feel comfortable.” Given the changing nature of the insurance industry and the increased level of competition, Taskey is certain that more brokers will
be attracted to the business model offered at companies like Navacord. Having the ability to operate relatively independently but with the backing of a national brand is an attractive recipe for most ambitious brokers. “We’re not only focused on our personal goals, but also those of the organization,” Taskey says. “Everyone wants the best for the company because, with this model, everyone succeeds when the business is doing well. “With all of the mergers and acquisitions in the industry,” she adds, “brokers are often moved into large groups where their names are taken away and they are blended in as another office of the same brand. We are lucky enough to still keep our own identity while having that strength behind us.”
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The value of independence Being an independent broker doesn’t have to mean going it alone. Andrew Janzen tells IBC about the challenges and rewards that come with seeing your own name above the door
IBC: Since your business took on the Janzen Insurance name in 2017, what have been some of the benefits of owning an independent brokerage? Andrew Janzen: When I got into the business, I didn’t want to be an insurance salesman – I don’t think any broker does. I wanted to be seen as a professional, and working as an independent gives me the opportunity to be that professional and trusted advisor [for clients], but also have the joys and frustrations of running a small business. Most of my customers are also business owners. Fifty-five per cent of our revenue comes from insuring small businesses, so when I’m sitting down with a business owner, I can commiserate with them over the challenges, whether it’s dealing with landlords or suppliers, or finding, attracting and retaining staff.
IBC: What challenges in the broader insurance landscape are having an impact on your work as an independent broker? AJ: The number-one challenge in our industry is access to markets. As an independent broker, [you need to] have to access to the insurance companies, [and while] MGAs are getting stronger and stronger, it’s still not the same thing as having a direct relationship
with an underwriter where you can place business. That was my biggest concern going into it, but what surprised me was how receptive my underwriters have been to allow us to carry on with the contracts we had. The support I’ve received from the insurance industry has blown me away. With all the consolidation going on, we’re a little broker – we have six staff, and we do about $10 million a year in premium – so how many markets can you really represent? As much as I’ve been worried about it, they’ve been great. I also know that I have to be a front-line underwriter because if I’m not profitable or have a couple of years of unprofitable business in a row with poor loss ratios, those relationships won’t last long. I have to continue to perform.
IBC: How can independent brokers, particularly those serving smaller communities in Canada, underscore their value proposition to clients in today’s risk-laden landscape? AJ: To me, it’s always been about education. We have to be insurance professionals, not salesmen. When I look at what has made me successful when I got into the business, [it’s that] I immediately jumped into education. I didn’t want anyone to say, “He was just successful because he inherited or took over the family business.” You’ve got to be professional, you have to know your stuff, and you have to know what’s going on. When I got into the business, I completed my CAIB designation in nine months; I completed my CIP designation two years
HOW JANZEN INSURANCE CAME TO BE Andrew Janzen’s insurance career kicked off in 1992 when he joined the family brokerage that his mother founded. In 1995, she and her business partner sold the business, though Janzen continued to work for the new owners. Almost a decade later, Janzen and his wife, Charlene, the brokerage’s financial controller, made an offer to buy back the brokerage. However, they were unsuccessful and left to join Mardon Insurance as 50% owners. In early 2017, the pair’s business partners wanted to retire, so they had a decision to make. “I either had to buy them out or I had to sell – the status quo wasn’t an option,” Janzen says. “As an independent broker, I could maintain the customer relationship, but I could also have the high-level decisionmaking authority to be directing my own future.”
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FAST FACTS: JANZEN INSURANCE
LOCATION Surrey, British Columbia
NUMBER OF EMPLOYEES 6
“I wanted to be seen as a professional, and working as an independent gives me the opportunity to be that professional and trusted advisor [for clients]” after that, and then I completed my FCIP designation about two years after that. Then I did my FRM designation as well. When I have a producer who wants to work with us, I tell them, “You’re not a salesman – you’ve got to be a professional; you’ve got to be adding value to that conversation because it’s
not just about making the sale.” As an independent broker, you’ve got to perform for the insurance companies, which means you’ve got to have good loss-ratio results and you’ve got to have below-average claims, so how do you do that? Part of it is knowing frontline underwriting, but how do you front-line
underwrite? You have to know your product, and that goes back to your education – the insurance education is the foundation that undergirds a healthy business. Whether it’s a business owner or a homeowner, no one particularly likes the insurance transaction, but if they really believe that you are trying to manage their funds well and be a good steward of their resources, and you develop that trust, it actually makes our job really easy.
IBC: How do you distinguish yourself as an independent broker in your community? AJ: We just moved a new office, and we have really invested in our tenant improvements. We wanted our office to be different than any other insurance office you might walk into, so it’s unique, and that, for me, is how we are different and how we distinguish ourselves. I didn’t want to look like every other broker – we want to elevate the customer experience, and part of it is having a professional office.
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LEARNING NEVER CEASES Suzette Huovinen is always looking ahead and always willing to discover something new
While Huovinen grew up working weekends and summers at her father’s brokerage, it wasn’t until university that she truly discovered actuarial science. “I’d heard about being an actuary from my dad but didn’t understand what that meant. When I was doing interviews as a senior, I realized all the things actuaries could do: consulting, back-end analytics, insurance – a wide variety of companies wanted to interview me.”
1999 MOVES INTO MANAGEMENT When the head of the tax department approached Huovinen with an idea to make her job an actuarial position, it gave her the opportunity to take on a broader role in management. “That was my transition into supervising; it whet my appetite for the idea that being a manager was what I wanted to do. I liked working with people, seeing them grow, seeing them succeed.”
2009 EMBRACES A NEW CHALLENGE Huovinen’s foray into enterprise management, where she held the position of second vice-president, presented her with another exciting challenge. “That was a great experience – enterprise management was very new; it taught me a lot of what we needed to do to continue to evolve our vision and keep the company strong. My focus is always about learning from bad things that happen.”
2019 BECOMES CEO OF PREMIER Huovinen was part of the acquisitions team prior to Securian’s 2017 purchase of Premier; her knowledge of the Canadian marketplace and her willingness to take the next step came in handy when she was named Premier’s CEO. “We’re figuring out what’s next for Canadian Premier: what business lines we want to do, what we’re going to build out. Building things is a big passion of mine.”
1997 DISCOVERS HER CORPORATE ‘HOME’ Right after graduation, Huovinen came to work for the company that eventually became Securian – but not quite in the way she expected. “I liked the values and the family atmosphere – it was where I wanted to work, but I didn’t get offered an actuarial job. I graduated on Sunday, interviewed on Monday and on Tuesday went to Europe with the school orchestra for a three-week trip – they called me at the hotel, offering me a position in the tax department.”
2005 TAKES THE LEAD Huovinen’s willingness to expand her skills and duties landed her the opportunity head up a new project, creating Securian’s first enterprise risk management framework.
“I’ve always been very vocal about being open to new responsibilities. That experience started my love of creative things and being a driver for change, for starting from nothing and figuring out where you’re going” 2015 JOINS THE C SUITE Thanks to the incremental increases in her responsibilities over time, Huovinen was eventually appointed Securian’s chief actuary and chief risk officer. “Things came full circle – I became chief actuary after not being hired to be one in the first place. I had a lot to learn; what gave me confidence was the relationships I had in the company.”
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TELL US ABOUT YOUR OTHER LIFE Email email@example.com
Three horses live at Barr’s fa mily farm: Twigg y, Penny (Twigg y’s mother) a nd Barr’s first horse, Duke, now 34. “He’s a good lawn orna ment,” she jokes.
Maximum height of a jump in Barr’s Hunter division
16.2 hands Height of Barr’s horse, Twiggy
Number of Hunter events Barr attends each summer Photo: Laurel Jarvis
HORSING AROUND There’s nowhere insurance broker Vanessa Barr would rather be than on the back of a horse VANESSA BARR has always had a love of animals – the Toronto-area broker volunteered on a nearby farm as a child and took riding lessons before becoming a horse owner at the age of 14. It was around then that Barr discovered Hunter – a horse show discipline that is
judged on the consistency of the horse’s style and movement, a challenge that appealed to her. “Hunter is smooth and has to look perfect – it’s based on style that’s tough to sustain,” she says. Today, even Barr’s 2-year-old son has been brought into the equestrian fold,
making regular visits to the barn to see his four-legged friends. And although the demands of her daily life only allow for rides twice a week, rather than the five times a week she’d prefer, “just being in the barn is real therapy,” Barr says. “I love horses – even mucking out the stalls is relaxing!”
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Simplifying the claims process THE CLAIMS process is arguably the ultimate litmus test of an insurer’s worth. Having a seamless claims experience reinforces the need for insurance as a necessary investment. In 2018 alone, Canadian P&C insurers paid out $39.1 billion in claims. The impact of climate change and rise in severe weather events across Canada resulted in $1.9 billion in insured damage that same year. And the number of property claims as a percentage of total claims has significantly risen over the last decade. Claims are increasingly impacting insurers’ bottom lines, and existing claims submission and adjudication processes can be inefficient and time-consuming. As such, it’s become clear that the claims infrastructure of the industry as a whole could do with an overhaul. As the newly created Financial Services Regulatory Authority of Ontario [FSRA] pushes forward its mandate around consumer protection and increased transparency, it’s possible it could impact the level of detail insurers will have to provide customers around claims. The industry needs to adapt its legacy systems in order to meet customers’ evolving expectations – and the new regulatory environment.
The solution: RSA Claims Point™ RSA made RSA Claims Point™ available to brokers earlier this year, simplifying the process by allowing brokers and their clients to easily submit personal property, auto and individually rated commercial [IRC] auto claims online at any time and from any device. Users can also upload documents and images in support of the claim, including photos of damage or receipts for contents, and, for added convenience, check on the status of the claim at any time. At the point when insurers will be required to provide claims history, our system is already set up to provide this information to policyholders. The online status tracking allows users to
search for claims by policy number, claim number, insured name, policy type, date range or claim status. As a result, the claims process is more efficient than ever before. For instance, an adjuster is automatically assigned on the same day a claim is submitted. “During the pilot phase, RSA consulted with brokers on their experience with RSA Claims Point™,” says Jullie Hands, vice-president of claims technology at RSA. “Conversations with our broker partners were instrumental in helping refine the process, in addition to generating lots of great ideas for future functionality.” With brokers’ buy-in, the team at RSA felt confident in opening up the system to customers. While RSA still sees the broker as a first point of contact in the event of a claim, the insurer also believes a brokers’ expertise goes beyond processing a claim and encourages its brokers to direct their customers to the Claims Point™ customer portal after being notified of a claim. This enables brokers to further solidify their role as a trusted advisor for clients and frees up their time to navigate complicated claims, find
the best rates and services for customers, and manage evolving service expectations. “We wanted to make the submission of claims as seamless as possible in an attempt to improve transparency of the process, ensure that our customers receive optimal service, and start the claims process that much quicker,” Hands says. “Brokers and customers can still submit claims over the phone in order to seek reassurance from a skilled adjuster, who can talk them through the process and ease any concerns they might have. However, we also process a high volume of smaller, more transactional claims where the ease of submission and speed of resolution are of top concern, and that’s where RSA Claims Point™ can play an important role.”
What’s next? Building off the portal’s initial success, RSA Claims Point™ has recently been made available for some commercial brokers to submit IRC auto claims. The team at RSA is exploring more ways to enhance the tool. To learn more, please visit rsabroker.ca/claimspoint.
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strengths and expertise
protection around the world
You know your business inside out. You know your markets, your customers, your competitors. Above all, you know the risks facing your business. At Swiss Re Corporate Solutions, we have the capabilities and the financial strength to meet the risk transfer needs of businesses worldwide. But that’s only half the story. Whether your risk is basic or complex, whether the solution is off-the-shelf or highly customised, we believe that there’s only one way to arrive at the right solution. And that’s to work together and combine your experience with our expertise and your strengths with our skills. Long-term relationships bring long-term benefits. We’re smarter together. corporatesolutions.swissre.com Swiss Re Corporate Solutions offers the above products through carriers that are allowed to operate in the relevant type of insurance or reinsurance in individual jurisdictions. Availability of products varies by jurisdiction. This communication is not intended as a solicitation to purchase (re)insurance. © Swiss Re 2019. All rights reserved.
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Meet Aviva Ally Small business your way.
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