When should your clients buy travel insurance?

When you book flights online, you’re typically prompted to buy travel insurance. Same with cruises and tours.

Should you buy the insurance? What will it cover? Equally important, what won’t it cover, and when might it not be worth your while?

Read: Canadians don’t have a good understanding of travel health coverage

The AP Travel podcast “Get Outta Here!” got the answers to these and other questions from Beth Godlin, president of Aon Affinity Travel Practice. Aon, a global insurance broker that represents insurance companies, creates specialized travel products, including insurance policies sold by cruises, tour operators and certain online booking sites.

Excerpts from the podcast interview:

TRAVEL INSURANCE: WHAT IS IT GOOD FOR?

Typically travel insurance protects your financial investment in your trip, to “cover penalties and extra costs you would incur” if you couldn’t take your trip or if your trip was interrupted, Godlin said.

Read: Blockchain could affect info sharing in P&C industry, travel claims payments: InsurTech TO

For example, say you need to cancel a trip or head home early because of a death in the family or because a hurricane is headed to your beach destination. This type of insurance reimburses prepaid expenses – flights, tours, hotel – as well as expenses incurred because the trip was interrupted, like rebooking fees for new flights. This type of insurance also covers additional costs incurred if your trip is delayed – for example, you miss a connection because of a storm and need to stay overnight in a hotel before catching the next flight out.

Another type of travel insurance offers health benefits, typically providing “gap coverage for emergency medical expenses and also medical evacuation.”

Read: Cancellation insurance for space tourism

A third category protects “your stuff,” Godlin said, meaning whatever you bring with you or pack that’s not covered by existing insurance, in case of loss, damage or theft.

WHEN WOULDN’T YOU BUY INSURANCE?

Buying insurance should be based on potential losses and what you can afford to lose.

If you’re staying in a hotel that won’t charge you if you cancel, or you’re taking a trip booked with miles but you can get the miles back with no penalty if you cancel, you don’t need insurance because your losses would be zero.

But if you stand to lose your investment should you cancel, can you live with that risk?

Typically, insurance costs 6% of the cost of a trip. So for $60, you can insure a $1,000 trip. What’s your comfort level on the money? Would you rather spend the extra $60 and know that you’re covered? Or can you live with the possibility that if the trip falls through for some unforeseen reason, you could lose most of what you spent on flights and other nonrefundable components?

“You have to do the math,” Godlin said. “What’s the penalty versus what would be the cost to insure it?”

EXCLUSIONS AND TIMING

Risk assessment is also a factor. If you’re planning now for a Caribbean trip in September, that’s prime hurricane season. Insurance would mitigate potential financial losses if a storm disrupted or caused the cancellation of your trip.

Read: 2017 was the costliest year on record for weather disasters: Aon Benfield

But you cannot get insurance to cover specific problems that already exist. So if your trip starts Friday, and a storm is already headed to your destination, it’s probably too late to buy insurance.

“Insurance is designed to protect the unforeseen,” Godlin said.

Similarly, if a family member was just admitted to the hospital, it’s probably too late to buy insurance to cover the possibility that you’ll have to cancel a planned trip if that person’s condition worsens. Godlin advises calling the insurer and asking if reimbursement would be offered in that scenario, “or is that an exclusion.”

Buying insurance when you book your trip is the best way to assure your claims will be covered, but many policies can be purchased until the day before the trip. That said, of course, you can’t sprain your ankle on Monday, buy insurance on Tuesday and cancel the trip om Wednesday.

Typically, exclusions – things not covered by insurance – include pre-existing medical conditions (though you might be covered if your medical condition has been stable and there’s an unexpected, new complication) and work-related issues (a last-minute deadline that the boss can’t handle without you).

One option that covers every scenario: cancel-for-any-reason insurance. That gives you flexibility to just say, “it’s just not a good time for me to go,” Godlin said. Typically, though, that type of insurance only reimburses 75 per cent of your cost rather than the 100 per cent with other types of policies.

TERROR ATTACKS

What if a terror attack unfolds somewhere and you’re feeling so nervous that you want to stay home? If the attack shuts down the city you’re headed to, you may be covered. But if the attack is in a provincial capital and you’re heading to a different region, you probably can’t make a case for an insurance claim unless you have cancel-for-any-reason insurance.

And if insurance doesn’t cover your situation, or you don’t have insurance, it’s always worth contacting the airline, hotel or tour operator. Sometimes travel providers are sympathetic to individual problems or when the public feels skittish following a major event. Even if you can’t get a refund, you might get credit toward a future trip.

Canadian Insurance Top Broker is now on Facebook (facebook.com/TopBrokerMag) as well as LinkedIn (linkedin.com/company/citopbroker) and Twitter (twitter.com/CITopBroker). Follow us for easy access to the top P&C news you need to know.

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NEW PRODUCT: Gore Mutual launches E&O coverage for contractors and professionals

Gore Mutual has announced its new errors and omissions (E&O) coverage created specifically for contractors and professionals.

Gore Mutual’s E&O coverage is part of a broader commercial value proposition the insurer unveiled at its Fast Forward industry event in June.

Read: Gore Mutual’s Fast Forward returns for second year

“The needs of our brokers’ business customers rarely fit inside a box and require flexibility on our end,” says Ed Nesbitt, Director of Commercial Insurance at Gore Mutual. “As part of our new commercial offering we’re improving the way we work with brokers with a common-sense approach to underwriting, technical expertise, modern products and more.

“By adding E&O to our commercial program, we’ve listened to our brokers and reduced a lot of hassle for them and their customers by providing enhanced coverage and more features all in one place.”

Read: Breaking down broker errors & omissions

Gore Mutual’s E&O coverage can be bundled with a customer’s general liability insurance to create a comprehensive all-in-one solution. According to the company, the added coverage safeguards contractors and professionals against allegations of errors, omissions and negligent acts resulting from professional services. The protection is currently available for more than 100 different contractor and professional classes, which the company intends to expand in the future.

Read: Construction risk basics

“We have the ability to do so many things that I think a lot of brokers aren’t aware of,” Nesbitt says. “We want to be a go-to market for mid-sized commercial business and are continuing to strengthen our products and services to ensure brokers can easily get their customers the protection they need.”

Canadian Insurance Top Broker is now on Facebook (facebook.com/TopBrokerMag) as well as LinkedIn (linkedin.com/company/citopbroker) and Twitter (twitter.com/CITopBroker). Follow us for easy access to the top P&C news you need to know. 

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Convincing clients cyber coverage is crucial

WannaCry, the Equifax debacle, theYahoo hack, the Uber cover-up—the list goes on. We’ve all heard about these massive cyberattacks and data breaches in the past year (and perhaps reconsidered our choice of password as a result).

While headlines featuring major cyber scandals help to raise consumers’ awareness around privacy concerns, they can also leave small and medium-sizedbusinesses (SMBs) believing they aren’t of interest to cyber criminals.

Because of the focus on “all this big stuff, [SMBs] don’t think [cyber risk] applies to them,” says Lori Bader, Gore Mutual’s senior director of national sales and business development. “They feel they don’t have the ability to be financially hurt or damaged.”

Lindsey Nelson, the international cyber team leader at CFC Underwriting Ltd. in London, England, explains that this assumption partially stems from brokers referencing big name cyberattacks when attempting to persuade smaller clients to buy cyber coverage.

“When brokers are selling to Canadian SMB clients, they’re hearing about U.S. Fortune 500 companies,” she says. “The message isn’t matching up because a lot of those clients will go back and say, ‘Well, I’m not Equifax, I’m not Yahoo. That’s not an exposure that’s relevant to me.’”

SMBs might also assume these massive cyberattacks are irrelevant because they centre on thirdparty liability and privacy. Miki Ho, Beazley Canada’s cyber-risk underwriter, says, “The first buyers [of cyber coverage] were retailers, health care, financial institutions because they saw privacy exposure. They were worried about getting sued by their clients for mishandling their information.”

The truth is far scarier for SMBs. All businesses are vulnerable to these types of cyber risks, says Bader, and the number of incidents is increasing. “We’re increasingly dependent on technology. The rise of internet-connected devices gives attackers more opportunity, and they’re not particular about whether they’re going after large organizations.”

In fact, Nelson says 90% of her firm’s cyber claims in 2017 were filed by SMBs. “One of our largest claims last year in Canada was a small architect firm of five employees making less than $1 million. They were subject to a ransomware attempt where they reported about $400,000 in data recreation costs to restore their files.”

“The number one objection a lot of our brokers experience when they sell cyber insurance is the IT director assuring them that their systems are 100% secure, so they don’t need the insurance.”

It’s also important to note that cyber risk doesn’t solely exist online. “For small businesses, it could be a stolen laptop,” says Bader. “It could be a mobile device left somewhere in a coffee shop. It could be malicious employees within the organization. It could just be employees mistakenly clicking on phishing links. Or it can be an attack.”

So how do Canadian brokers overcome objections from SMBs who believe cyber policies are only beneficial to large enterprises?

1) Use language relevant to SMBs

Focus on cyber policies relevant to an SMB client, says Nelson. She notes that an “objection that we’ll get from clients is we don’t hold any sensitive data. Therefore, we don’t have any exposure and don’t need to purchase the cyber policy.”

Nelson recommends “moving away from the concept of privacy liability. Cyber policies cover much more in terms of first-party exposure that have nothing to do with data. Focus on the key coverage components that are more relevant, regardless of industry, size, or location of the risk.”

Ho agrees it’s in the client’s best interest to focus on more common risks. “Most of the claims we’re seeing have been a lot of ransomware, a lot of malware that’s affected systems. We’re seeing a lot more business interruption claims. The products have evolved to match these exposures, but clients aren’t necessarily aware of the benefit.”

To illustrate the vulnerabilities all SMBs share, you can use real claims examples around these common risks. “If I can tell you something that has happened to a small business, then you can put yourself in that business’s shoes,” says Bader. “We have an obligation to give actual claim examples to help customers understand they’re vulnerable.”

2) Understand the client’s IT needs

Determining an SMB’s knowledge of cyber security and its existing defenses is another way to broach a coverage conversation, says Ho.

First, Ho suggests asking if they know cyber coverage is available. “If they say yes, then the next step would be understanding if they’ve considered buying it. If they’re not aware the coverage is available, then highlight some of the key points that would be beneficial to that client and their industry.”

That’s because the cyber coverage needs differ for every type of business depending on how they use IT—are they frequently travelling with devices that could be stolen? Do they use servers, or cloud storage?

56%
of Canadian CEOs feel “very well prepared” to deal with a cyberattack.

Source: KPMG

13%

of the data breaches reported to Beazley in Q1 2018 targeted cloud-based office solutions.

Source: Beazley Breach Insights Report

“The biggest thing is understanding why a client might be interested in buying the coverage—tailoring the cyber pitch to the client’s needs,” adds Ho. “Understanding how companies use IT, what their reliance is on those systems.”

It’s also key to understand you may get a hostile reaction from the IT team, who could interpret your pitch as an insinuation that they haven’t done a good enough job protecting their employees. “The number one objection a lot of our brokers experience when they sell cyber insurance is the IT director assuring them that their systems are 100% secure, so they don’t need the insurance.”

Nelson says one way to work around this is to explain that “from a frequency perspective, it’s the human error-related scenario that triggered much of our claims activity,” such as forgetting a laptop in a coffee shop or clicking on a phishing link.

“All of those scenarios are issues that the IT department isn’t able to account for,” she says. “It’s very easy for brokers to go back and say, ‘Well, you can account for all the systems and that’s great that you have them. But it’s important to have that two-pronged approach in cyber insurance as well to account for the employee side of cyber incidents.’”

3) Explain the financial and reputational risks

Adding a cyber policy means clients have to increase their insurance budget—which can be a touchy conversation. Ho says, “Everybody’s focused on spending money wisely. When it comes to cyber, I think the answer is [asking], ‘What happens if you were to suffer an incident? Who would you rely on?’ And that question often gets the conversation started and it gets clients interested in understanding what cyber insurance could provide.”

There are many value-add services that come with a cyber policy that can help justify the cost—such as a breach response plan, which Bader says is key in recovering from an attack. “The best thing to do is to have a breach response plan in place before the breach happens, and you need insurance coverage to help you keep your business operating while you deal with this.”

Mitigating business interruption costs is becoming a more popular trend in cyber insurance, says Ho. “We think of energy providers, manufacturing companies, industrial type risks. They’re realizing that if their systems are down they can’t produce their product, which can be a huge interruption in their revenue stream and potentially impact the longevity of their business.”

It’s also a good idea to educate clients about the damage their brand would experience in the event of a cyberattack. “It’s a reputational risk. The customer is trusting you with that information,” Bader says. “There’s a duty to do everything possible to protect the customer. Reputational damage can put a small company out of business.”

“It’s important for the broker community to be aware of different products that are available to clients and familiarize themselves with the different terms and conditions that are listed within each one—not just the price or the limit being purchased.”

4) Educate clients about necessary notification and policy accessibility

Following the Digital Privacy Act of 2015, Canadian companies must inform customers and the Privacy Commissioner when there’s a breach of private information, starting Nov. 1, 2018, says Bader. “There are clear rules for how companies must inform Canadians when their data is compromised. It’s very specific— and there’s an expense to deliver the notification. In the situation that it’s more severe, the Privacy Commissioner will have to be advised as well.”

Bader believes this new law could be a motivator when discussing cyber coverage with your clients. “I think this is going to be the turning point in companies not having insurance protection. This will be a great reason to make sure that you’re protected.”

Another common objection Nelson says brokers need to overcome regarding fine print is that many SMBs “say cyber policies are riddled with warranties and exclusion; therefore, there’s no point in purchasing because it won’t respond adequately. There are a lot of different cyber policies available to insureds these days, and there’s a lot of varying levels of coverage out there.”

So, to respond to that objection, she says “It’s important for the broker community to be aware of different products that are available to clients and familiarize themselves with the different terms and conditions that are listed within each one—not just the price or the limit being purchased. Take a step further and really become familiar with what specific exclusions are in this marketplace.”

If all else fails, Nelson says, show them the value-add services they’re purchasing in addition to the coverage. “The cyber policy can act as a way for them to have the appropriate channel network on speed dial in the event of an incident. A lot of insurers are offering risk management portals and proactive services—it’s a benefit to insureds to know they have both proactive and reactive services available to them around a cyber incident occurring.”

__________________________________________________________________________
Copyright © 2018 Transcontinental Media G.P. This article first appeared in the June/July edition of Canadian Insurance Top Broker magazine

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Insuring out-of-pocket expenses

If you have ever been involved in a collision—or one of your clients has—you know how fraught with pain points the claims process can be.

At-fault drivers are faced with deductibles and potential rate hikes. And, regardless of who is at fault, anyone who’s been in an accident will see the value of their car diminish—an especially bitter pill to swallow for drivers who weren’t in the wrong.

The end result is often the same: customers who feel they’ve been shortchanged by their insurance policies. Why are they paying out-of-pocket expenses when insurance is supposed to cover them?

That’s a question Farhad Eslah has heard again and again after years of working in the industry.

“I’ve worked as a broker, I’ve worked as an underwriter and I worked in the government as a regulator, and at every stage I was always advocating for customers, always trying to make the process more fair,” Eslah told Canadian Insurance Top Broker.

So Eslah decided to take matters into his own hands. After years of working for insurers such as Aviva Canada, and a stint at the Financial Services Commission of Ontario, he now finds himself in a new role: founder and managing director of Out of Pocket, which launches in July.

Underwritten by Northbridge Insurance, Out of Pocket offers drivers coverage that fills the gaps found in traditional car insurance policies. Drivers can get reimbursed for their deductible when they’re in an at-fault accident. They can also get reimbursed $500 if their premium goes up, in addition to getting $500 to offset the diminished resale value of their vehicle if they sell their car within a year of the accident.

Coverage is available for $10 a month for drivers with a $500 deductible, $15 a month for drivers with a $1,000 deductible, and $25 a month for drivers with a $2,000 deductible.

“I’ve worked as a broker, I’ve worked as an underwriter and I worked in the government as a regulator, and at every stage I was always advocating for customers, always trying to make the process more fair.”

“At each stage of your primary auto insurance claim, when you have out-of-pocket expenses for things that aren’t covered, you would check with your Out of Pocket coverage to see if they’re covered,” Eslah explains. “If you’re in a collision and you get your car repaired and have to pay a deductible, you would just take a picture of your receipt and email it to us, and we would cut you a cheque for the $500 for your deductible.”

Drivers with a $500 deductible can claim a maximum of $1,500 in coverage over a 12-month rolling period. Drivers with a $1,000 deductible can claim a maximum of $2,000, and drivers with a $2,000 deductible can claim a maximum of $3,000. Policyholders can cancel their coverage anytime.

“If you have a premium rate hike due to the accident, take a picture of the old and new premium, and we will cut you a cheque for the $500,” Eslah explains. “For the diminished value of your car, if you sell your car within a year of the accident, it doesn’t matter what value you sell your car for—that’s fine with us. We know that there’s a loss, and we’ll cut you a cheque for that as well.”

Distribution through the broker channel

Eslah has partnered with April Canada to distribute Out of Pocket to the MGA’s network of more than 500 brokers.

“Farhad has got a great idea here,” says Nick Kidd, CEO of April Canada. “It’s a unique idea to solve some consumer problems and consumer pains in the marketplace, which is really tied into the DNA of April and what we’re trying to achieve with a number of our products.”

Although drivers will be able to purchase Out of Pocket direct at outofpocket.ca, Eslah is banking on brokers being the main sales channel for the product.

“He feels strongly—as do we—that broker distribution will be quite an important and, certainly, the primary distribution channel for his product,” Kidd says. “He will run the product and make sure it meets the needs of customers. We will try to house that in April as part of our distribution process.”

And Out of Pocket should be easy for brokers to sell, Eslah says, because it doesn’t require any underwriting rules for drivers to sign up—all drivers are covered.

“All they need to give is the owner’s first name and last name, the year of their birth—not even the birthday—and also the year, make and model of the car, and if they want the $2,000 deductible, $1,000 deductible or $500 deductible option,” he says. “I want everyone to have a 100% conversion ratio, because you should have this information off the top of your head.”

14%
of drivers say they check their phones while on the road because of work obligations.

Source: Travelers Canada

31%
of drivers who admit to using their phone behind the wheel say they do so because of family obligations.

Source: Travelers Canada

Eslah turned to BMS provider Brokercore to enable online sales and policy production for Out of Pocket. Drivers enter their information online, and Brokercore leverages technology from Stripe—an online payment processing system—to complete the transaction.

“Brokercore will automatically generate policy documentation and send the documents and transaction receipt to the policyholder’s email address,” explains Chris Farris, director of business development for Brokercore.

Brokers interested in selling Out of Pocket don’t need to be on the Brokercore BMS to do so—they can just embed some code on their website, and away they go.

“Farhad will provide a broker a web link that can be added to the broker’s website, like adding Google Maps,” Farris says. “Then business can be transacted, and at the end of the month, Out of Pocket is going to send the brokerage a cheque for the commissions generated from someone purchasing the policy through the brokerage’s website.”

Now, the commissions earned from $10 and $15 sales may not allow many brokers to retire early, but selling Out of Pocket requires little effort from a broker. They just need to plunk the Out of Pocket sales screen onto their website and tell their clients about it. Customers can then sign up on their own in a matter of minutes.

“Brokercore will enable MGAs to operate more effectively by automating the online policy transaction and providing a form that brokers can add to their website,” Farris says. “This capability makes it very easy for a broker to sell the MGA’s solution to their clients and not have to do any heavy lifting to collect commissions.”

And, while the commissions for each individual sale may not amount to much, they can add up in a hurry.

“Our ability to enable the sale of 1,000 of these at very low cost means that you’re suddenly profitable in this stream of business,” Farris says.

But it’s not just the prospect of easy commissions that makes Out of Pocket attractive, says independent broker Daniel Rajkovic.

“You’ve got the commission side of it, but I think more than anything, our business is about the relationship with our clients, and this helps that relationship,” Rajkovic says. “The direct writers for years have been pushing this order-taker kind of industry. As brokers, we’re more than order-takers. We’re almost like consultants in a sense.”

And Out of Pocket won’t hinder a broker’s ability to be a consultant. If, for instance, a broker decides to move a client to another insurer, they can do so without interrupting the client’s Out of Pocket coverage.

“The flexibility on that is pretty fantastic,” Rajkovic says. “As a broker, sometimes we have to move over a client to do what’s best for them with different carriers. Out of Pocket allows us the flexibility of maintaining that for them.”

From the outside in

Throughout his insurance career, Eslah always felt car insurance should be more fair, but it was only recently that he’d been able to find a way to effect change.

“If a client does have a claim and has the deductible paid for by Out of Pocket, then the broker comes out a winner here. The broker is a hero to their client, who recognizes the value of the advice that they’re buying.”

“I realized I had to do this from the outside in. The best way to do that was through brokers, and getting brokers to make insurance fair,” he says. He describes Out of Pocket as a product that will “improve our standing in the industry, and make me proud that I’m an insurance professional.”

And Eslah is not alone in thinking auto insurance could be more fair to policyholders.

“Given how much you’re paying for your insurance, maybe as a consumer you would expect to be a little bit better compensated—or a little bit less penalized—when you make a claim,” Kidd says.

Kidd believes Out of Pocket will allow brokers to fulfil their role as a trusted advisor to clients.

“The more brokers can take the pain away from their clients when they have a loss, the better,” he says. “This is what brokers do. They offer value to their clients in a bunch of ways beyond just finding them more competitive insurance or more choices on insurance.”

But, more than that, Kidd says Out of Pocket will allow brokers to be heroes to clients in their time of need.

“If a client does have a claim and has the deductible paid for by Out of Pocket, then the broker comes out a winner here,” he says. “The broker is a hero to their client, who recognizes the value of the advice that they’re buying.”

More than just auto insurance

Out of Pocket will also be available for home insurance policyholders in July. Coverage includes:

• reimbursement for deductibles;
• $500 in reimbursement for rate hikes;
• $500 in reimbursement for underinsured claims.

Affinity coverage is also available for businesses that want to cover their employees’ or members’ out-of-pocket insurance expenses. Rates can be customized and negotiated per group.

__________________________________________________________________________
Copyright © 2018 Transcontinental Media G.P. This article first appeared in the June/July edition of Canadian Insurance Top Broker magazine

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Are you getting the most out of digital?

Jennifer Pugsley used to bang down doors to get business when she was brokering deals in commercial oil, gas and trucking.

Literally.

She would get into her car, turn the key and drive the long expanse of highway and rural roads out to the dusty industrial areas of Alberta, where she would then show up unannounced at potential clients’ buildings.

That worked well for a few decades. Until it didn’t.

She says her bosses finally asked themselves, “How can we leverage digital? Because people are just slamming the door in our face or not picking up the phone.”

That conversation happened more than a decade ago, but it’s a question brokers are still asking themselves today.

Traditional brokerages are facing these challenges because sourcing and converting online leads is still largely a new frontier—the rules change every year and everyone is figuring it out as they go along.

“A lot of brokers don’t even have the infrastructure to handle the leads that they want.”

So Canadian Insurance Top Broker decided we wanted to help. We spoke with experts and brokers who have successfully gone digital to uncover advice and tips to help other brokers upgrade their online presence, improve their SEO and stay relevant in 2018.

Pugsley figured it out by accident—her genius-ofa- nerd brother had founded an e-commerce site in Toronto that was doing well, and she was intrigued.

Long story short, she went back to school for digital marketing and joined him. Their company evolved into Goose Digital, a marketing automation agency that brings on bricks-and-mortar insurance brokerages and holds their hands while helping them build an omni-channel framework.

‘Omni-channel’ simply means that a business services clients the way the client wants—whether that’s a faceto- face meeting, on Facebook, or through a website, to name a few options. And any broker in it for the long term is going to have to evolve to provide those services.

The average storefront brokerage can finish a quote in 40 minutes. But Matt Alston’s online brokerage, for example, can complete a quote in as little as a quarter of that time.

Alston knew he wanted to stay in the small town where he grew up in Alberta, near the Montana border. But with a population of only 2,500 people, and being a two-and-a-half hour drive to Calgary, there wasn’t exactly a bustling local economy. Still, he was determined to provide the same warm, wholesome and community-minded environment that he grew up with for his four children.

An online business was the answer. He teamed up with a partner who owned a traditional insurance brokerage, and in 2012 they opened Surex Direct, an entirely virtual brokerage.

“Online insurance didn’t put a ceiling on how big we could get, and we could compete with all the brokers in Toronto and Calgary and Vancouver, but do it on our terms,” Alston says.

Since 2012, they’ve managed to grow the business by 8,000%, without ever seeing a client face-to-face.

79%
of desktop search traffic came from Google in 2017.

Source: NetMarketShare

46%
of small businesses in the United States did not have a website in 2016.

Source: Clutch

That incredible growth proves there’s leads to be had and money to made in the still-fresh world of digital brokerages.

But there’s a major caveat—unless you’re able to commit wholeheartedly, don’t do it.

That’s because a physical brokerage is a completely different business than digital—you can’t simply pop a database up online, create a website, hire an intern to do your Twitter and expect to capture clients.

If only.

If you do plan to take your business entirely online, you must be prepared to spend a mint, along with all your time, on strategies, staff and preparation. Anything less is a waste of resources.

“It’s a viable business, but so is making parts for nuclear manufacturing. You can do it if you understand what you’re doing, and you could also lose your shirt if you don’t,” says Adam Mitchell, who’s grown his brokerage, Mitchell and Whale, from two brokers to 45 in just eight years. The Insurance Brokers Association of Ontario awarded them the Innovator of the Year in 2017, and made them finalists for Brokerage of the Year the same year.

Mitchel has put considerable effort into growing digitally and focusing on long-term growth—as opposed to shortcuts that get him through to the next quarter— and understands that going online won’t matter unless you ensure your processes are running smoothly first.

Handling online leads

“A lot of brokers don’t even have the infrastructure to handle the leads that they want,” Pugsley says. “They’re not even servicing their existing book the way that they could be. Have you considered opening your hours until 8:00 p.m., like Sonnet does?”

A $20,000 website, Pugsley says, is not going to solve a broker’s problems—not if they don’t know their business inside, out and under.

“Do you know your cost per acquisition? Do you know your cost per lead? Your cost per quote? Do you know how many leads are coming in? Do you know how many leads are getting closed? And why not? Do you have a good handle of your retention rate?”

Even if she dropped 100 qualified leads into a brokerage’s lap, Pugsley says, most would not be able to keep up. The brokerages that are able to handle the number of leads generated online have a thoughtout funnel system. Some offices, for example, have a whole sales team that is watching screens scattered all over the office. As soon as a lead comes in, it goes onscreen and hits the marketing automation platform, and the team has immediate response-time goals.

“It’s a viable business, but so is making parts for nuclear manufacturing. You can do it if you understand what you’re doing, and you could also lose your shirt if you don’t.”

There’s no sense spending money on trying to attract online leads unless your office and team is 100% primed to handle them in the swift—yet personal— way that everyone, from millennials to boomers, now expects.

If all this sounds too overwhelming, it should. Capturing online leads is not for the timorous.

Going digital

Here are some basic strategies for the brokerage that wants to present a polished online presence to encourage and assure new clients, but isn’t prepared to create a cyber infrastructure.

First, get rid of your GeoCities website (remember those?). At the very least, says Pugsley, your website needs to look clean and be optimized for mobile. Alston recommends hiring a recent grad as a developer.

Secondly, do some digital housekeeping. That means bringing your Yellow Pages marketing up to date and setting up a Google business account with local keywords.

Third, if you do plan on creating a blog or social media content, hire a marketing coordinator.

“[Some brokers are] like, ‘Sally in the corner can do it,’” Pugsley says about how most businesses react when she tells them she needs a single point of contact when rolling out a website. “Sally has a full-time job, actually, and Sally doesn’t know how to write—she’s not a copywriter. If you’re asking Sally to do the Twitter just to keep the lights on, and you don’t really care about the ROI of Twitter, then don’t ask Sally in six months where our tweets are getting us.”

Sadly, digital has a reputation for being easy, and that any young person naturally knows how to do it. That’s incorrect.

The truth is, social media rarely has a direct ROI. Instead, it has rather the same effect as when auto dealerships wash their cars. Does it help actually sell the vehicles? Sometimes, maybe, not really—but it definitely adds to the whole transaction.

So don’t take social media too seriously or post too many facts about the insurance industry. Instead, use it to showcase your brokerage’s personality, and maybe try what Mitchell does. Social media strategy for him is the equivalent of “cats chasing lasers,” he says. “It’s informative, yet irreverent and fun. We almost avoid the insurance side of it.”

“Online insurance didn’t put a ceiling on how big we could get, and we could compete with all the brokers in Toronto and Calgary and Vancouver, but do it on our terms.”

The biggest benefit of social media is its instant communication possibilities. If customers are confident in a fast reply (we’re talking minutes) and are impressed by your content, they’re likely to DM (that’s direct message) you on Twitter and Facebook to ask for a quote.

Fourth, stop treating Google like a game. The days of stuffing keywords for SEO are over. We don’t want to get too deep into the SEO specifics, like meta tags, headlines or link-backs because they really don’t matter unless you’re planning to go wholly virtual, and Google will probably change its algorithm as soon as you’ve mastered it anyway. Suffice it to say that SEO will come naturally—and be there to stay—when you’re writing high-quality content that people want to read and share.

Look at the articles that you read on a daily basis. Are they just jargon? Or do they actually provide service? Do they make you think? If yes, strive to produce that kind of content.

And finally, don’t spend a cent or do anything unless you have a strategy. Don’t just start creating Facebook Ads, for example, unless you’ve figure out what you’re aiming for and how you’re going to measure results. (And let your brand-new marketing coordinator, the one with extensive experience in creating ad campaigns, handle it.)

“When you principally lead with strategy,” Pugsley says, “the tactic becomes much more successful.”

__________________________________________________________________________
Copyright © 2018 Transcontinental Media G.P. This article first appeared in the June/July edition of Canadian Insurance Top Broker magazine

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Explaining auto insurance rates to clients

Many Ontarians drive carefree on the province’s roads and highways. However, that freedom comes with a price: auto insurance rates. Just recently, the Financial Services Commission of Ontario (FSCO) reported that the average increase in insurance rates in the first quarter of 2018 was 2.23% across the whole market. That’s up from the fourth quarter of 2017, in which rates increased by an average of 1.03%.

While insurers and brokers are, in part, in business to make a profit, one recent—and controversial— study has shown that the profit has been excessive. In an April 2018 report prepared for the Ontario Trial Lawyers Association (OTLA), Dr. Fred Lazar, associate professor in economics at York University’s Schulich School of Business, indicated that auto insurers made $1.5 billion in pre-tax profits in 2016. That’s a 57% increase (or $534 million) since 2012. As Lazar wrote, “The automobile insurance companies in Ontario that have been profitable have been very profitable during the past years. Their average ROEs [return on equity] have been 14.9% in 2012, 17.5% in 2013, 18.9% in 2014, 16.8% in 2015 and 16.3% in 2016.”

If the numbers are accurate—and a number in the insurance industry vehemently deny these soaring profits, most notably the Insurance Bureau of Canada—then how do brokers explain increasing rates to their clients without having them feel they’re being overcharged?

Tom Reikman, chief distribution officer with Economical Insurance, says it’s up to insurers and brokers to educate clients on why rates increase, and they can do this in a number of ways: through social media, news articles and policy renewal mailings. “We also try to give as much information to our customer service representatives in brokers’ offices so they’re armed to respond to those questions,” he says. Even the broker associations, he continues, “spend a considerable amount of time and effort making sure brokers are up to speed—not only lobbying what they deem to be the necessary changes to make the product more affordable, but also making sure their members are aware of what’s going on.”

37%
of drivers admit to using their phone behind the wheel.

Source: Travelers Canada

Claims related to distracted driving increased by 23% in the past two years.

Source: Aviva Canada

$547 million
The amount that auto insurance fraud costs Ontarians annually.

Source: Aviva Canada

But what, exactly, is going on? Rates are really driven through two areas, says Reikman. While he notes that insurers need to create a less expensive product for consumers, “a lot of that’s tied into the escalating costs on the accident benefits side, and they just seem to go up and up.”

Then there’s the physical damage side. There are costs to indemnify the same type of claim, inflation, and the rising cost of repairs to damaged automobiles. “Newer vehicles are significantly more expensive to repair,” Reikman says—take windshields, for instance. “Windshields have sensors in them now, so it’s no longer putting in a new windshield. You have to put the new windshield in and then reprogram it so those sensors are accurate. There’s additional cost related to that.”

Henry Hamm, director of personal insurance at RSA Canada, agrees, adding that cars also have many more safety features. “While this integration makes manufacturing more efficient and cost-effective, it has the inverse impact on repair costs. As a result, physical damage coverage is showing an industry-wide deteriorating loss ratio trend,” he says.

Vehicle repair times take longer, too, thus increasing the cost of a rental car while the insured’s vehicle is being repaired. And, Hamm continues, more vehicles are being written off due to the time/cost needed to repair them.

But it’s not just technological advances in car parts that are driving up costs. Driver use of technology is becoming increasingly costly to insurers—namely, distracted driving. “Right now, we’re definitely seeing rates impacted by technology—people using their phones in their cars,” says James Clarkson, agent/ owner of State Farm in Hamilton, Ont.

Fraud also plays a role, as money is leaked from the system by malevolent individuals. According to the Insurance Bureau of Canada, auto insurance fraud costs drivers in Ontario an estimated $1.6 billion per year. That means $236 of a driver’s auto insurance premium pays for fraudsters’ illegal actions.

Aviva Canada did its own study of fraud throughout 2017. It studied 10 different auto claims and found that nine involved fraud, and that an average of 57% of total repair costs invoiced to Aviva were fraudulent.

“Windshields have sensors in them now, so it’s no longer putting in a new windshield. You have to put the new windshield in and then reprogram it so those sensors are accurate.There’s additional cost related to that.”

About three years after Clarkson opened State Farm 11 years ago, the office was targeted by fraud. “We saw it first-hand. I don’t know to what extent it’s happening now because we don’t actually experience it in our office any longer,” he says. But the money doled out because of fake accidents, repairs and assessments adds to increasing rates.

Much ado about rates

Despite the factors that may increase rates, some insurers say their rates have recently decreased. Before State Farm Canada was purchased by Desjardins, Clarkson says, rates were quite high. “We were competitive,” he says. “For most of our customers, we were a very good price, but getting new customers was very difficult.” Since the purchase in 2015, however, 80% of Clarkson’s clients from his office alone have seen significant rate reductions. “I have clients who, what they’re paying today for the same policy that they’ve had with us is as much as half what they were paying.” The reason, he says, was the difference in the way the two companies rated risk. Which is yet another issue.

Rating risk now has become individualized for the major insurers, Reikman says. “There’s so much backend data supporting the rating models and how the models define each individual risk, you literally have to look at each risk on its own. There could be one risk that gets a renewal and it could go up 3%, but the next client’s renewal—because something has occurred or there’s some enhanced or new data— could go up 6% or 7%,” he says.

“We’re a heavily regulated industry in terms of oversight from the government,” Reikman continues, “but it has to balance [not only] the needs of the consumers, but also the needs of the companies to be able to make an adequate profit.”

An adequate profit—not excessive. For Claire Wilkinson, president of the OTLA, it’s about transparency. “We shouldn’t have had to hire an economist in order to understand the profit that [Ontario insurance] companies make,” she says. “Auto insurance is mandatory. It’s not like home owners’ or life insurance, which are optional. We have very little information about how these how rates are arrived at or what the profits actually are,” she says “There is a responsibility, in my view, on the part of the government to make informed decisions about understanding what the true profit levels are within the industry. But, currently, that’s not required.”

Again, whether you believe the profits are excessive or not, the rate increases are also at a time when victims’ accident benefits have been reduced. “It was great before, when you could get all the coverage [medical and rehabilitation and attendant care for catastrophic injuries was $2 million; as of June 1, 2016, it was reduced to $1 million] without having to purchase optional benefits,” says Wilkinson. “But now, that’s been taken away, so if you want to get the expanded levels of coverage, you have to purchase optional benefits.” While she knows brokers do send out information on these optional coverages, very few of her clients are aware of them. “People are looking at it and saying, ‘Oh, it’s optional; I don’t want to pay more money’ and then discard it.”

Wilkinson returns to the OTLA study. “It would suggest there’s enough money in the system that we didn’t need to erode these benefits the way they’ve been eroded in order to still provide coverage.”

Clarkson agrees that clients need to be informed about optional benefits. However, similar to Wilkinson’s experience, in the last few years he says a “very small” percentage of his clients have bought the optional coverage. “You have to provide the option, but people are so price-focused that oftentimes they’re putting their coverage at jeopardy to save money,” he says.

“There’s so much back-end data supporting the rating models and how the models define each individual risk, you literally have to look at each risk on its own.”

Brokers helping clients

Unfortunately, rates are high, and may still increase, if the latest FSCO report is anything to go on, but brokers can encourage their clients to be proactive. Clarkson encourages them to shop around. “Customers need to be in contact with their insurance company and just ask the simple question, ‘Is there anything I could do to lower my rates?’” He points to options such as changing deductibles, signing up for telematics and staying with the same insurer to get a loyalty discount.

As for vehicle repairs and damage, RSA is trying to address the growing costs in this area by leveraging its preferred repair facility network, which is particularly important during weather and catastrophic events. It also has preferred repair facilities, which reduce storage fees associated with vehicles waiting on repair. This, Hamm says, reduces claims costs and helps to maintain affordable rates for clients.

RSA also encourages drivers to consider a 48-month waiver of depreciation, rather than the standard 24-month waiver. This would ensure policyholders can get back into a new car, and reduce the need for them to pay out of pocket if there’s a claim.

Conclusion

Former Workplace Safety and Insurance Board CEO David Marshall wrote in his Fair Benefits Fairly Delivered: A Review of the Auto Insurance System in Ontario report that it’s the Ontario auto insurance system that’s at fault. “Claim costs continue to rise while automobile accidents continue to fall. The main cause is not inefficiency or excess profits by insurance companies or the behaviour of claimants, providers or lawyers. It is the way the system is structured.”

For Wilkinson, that structure needs to be changed. A solution, she says, needs all stakeholders at the table: victims’ rights advocates, healthcare providers, lawyers, insurance industry professionals and lawmakers. “We need everybody there to try to work out a new system that will work effectively, because what we have right now is dysfunctional.”

__________________________________________________________________________
Copyright © 2018 Transcontinental Media G.P. This article first appeared in the June/July edition of Canadian Insurance Top Broker magazine

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Where are your customers?

If you’re planning an online marketing push, then boy, have we got a deal for you. We’ve pinpointed the top five social media sites, so you can get the most bang for your buck when targeting new clients.

The internet is kind of like the universe—vast and continually expanding, and difficult to navigate if you don’t know where you’re going. The nearest star is light years away—and your newest online customer can seem just as distant.

We all know that social media is rife with prospects. According to Pollara, 91% of Canadians use at least one social media network. But there are so many social media sites to keep track of, it can be hard to decide which ones to target if you’re trying to find new clients.

Well, fret not, dear broker. We’ve compiled the top five social media networks in Canada, based on the percentage of Canadians who use them. Now, go forth—and live long—and prosper.

Source: Pollara

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10 tips for your clients leaving on summer vacation

If you thought burst pipes only happened in winter, think again.

“It’s hard to imagine at the moment with the current temperatures,” says Iris Handke, Managing Director of AXA ART in Canada in an interview with Canadian Insurance Top Broker. But it does happen. “Pipes don’t always need frost to burst. We’ve had people come back from their holidays and discover their house is an inch deep in water.”

Handke explains that water damage that occurs in the summer can be compounded by mould that results from seasonal humidity, especially if the water damage occurs on Day Two of a two-week absence. “Mould goes hand in hand with high temperatures,” she says.

Read: Burglaries spike during summer months, says Aviva

For brokers with clients leaving for summer vacation, Handke offers a simple tip.

“Maybe you have a neighbour or family member living around the corner that owes you a favour. In addition to picking up the mail so that your mailbox is not overflowing and your house doesn’t look abandoned, have them open the door and check that everything’s still there and also that there wasn’t a leak from the roof, the pipes, anywhere. Because water is a sneaky thing.”

Read: 10 summer road safety tips

Here are some additional tips brokers can offer to their clients getting ready to leave the house for summer fun:

*   Be sure to secure your property. Lock all doors and windows.
*   Place highly valued items in adequate storage.
*   Cancel newspaper deliveries.
*   Ask a family member or trusted neighbor to take away mail.

In addition, AXA offers the following tips for art collectors to avoid problems with bugs in the house before departing on vacation:

*   Clean kitchen appliances, cabinets and countertops and dry all surfaces.
*   Dispose of fresh or opened perishable foods, including cereals, pasta, etc.
*   Clean out refrigerators and freezers.
*   Clean dishwasher interior and filter.
*   Thoroughly clean bathroom fixtures, surfaces, and wash all bath towels.
*   Turn off the water to the washing machine and the hot water heater.

AXA also notes that extremes in temperature and humidity can cause multiple types of damage to works of art, including warping, quickened deterioration, mould or mildew. A temperature and humidity monitoring thermostat can help to avoid these problems. For the technophile, look for a system which can be read and adjusted remotely via a handheld device. Consistency is the key to conservation. A general guideline is to maintain a humidity level between 35-50 per cent and a temperature of 18°C to 24°C throughout the year.

Canadian Insurance Top Broker is now on Facebook (facebook.com/TopBrokerMag) as well as LinkedIn (linkedin.com/company/citopbroker) and Twitter (twitter.com/CITopBroker). Follow us for easy access to the top P&C news you need to know. 

 

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9 tips for your clients leaving on summer vacation

If you thought burst pipes only happened in winter, think again.

“It’s hard to imagine at the moment with the current temperatures,” says Iris Handke, Managing Director of AXA ART in Canada in an interview with Canadian Insurance Top Broker. But it does happen. “Pipes don’t always need frost to burst. We’ve had people come back from their holidays and discover their house is an inch deep in water.”

Handke explains that water damage that occurs in the summer can be compounded by mould that results from seasonal humidity, especially if the water damage occurs on Day Two of a two-week absence. “Mould goes hand in hand with high temperatures,” she says.

For brokers with clients leaving for summer vacation, Handke offers a simple tip.

“Maybe you have a neighbour or family member living around the corner that owes you a favour. In addition to picking up the mail so that your mailbox is not overflowing and your house doesn’t look abandoned, have them open the door and check that everything’s still there and also that there wasn’t a leak from the roof, the pipes, anywhere. Because water is a sneaky thing.”

Here are some additional tips brokers can offer to their clients getting ready to leave the house for summer fun:
*   Be sure to secure your property. Lock all doors and windows.
*   Place highly valued items in adequate storage.
*   Cancel newspaper deliveries.
*   Ask a family member or trusted neighbor to take away mail.
In addition, AXA offers the following tips for art collectors to avoid problems with bugs in the house before departing on vacation:
*   Clean kitchen appliances, cabinets and countertops and dry all surfaces.
*   Dispose of fresh or opened perishable foods, including cereals, pasta, etc.
*   Clean out refrigerators and freezers.
*   Clean dishwasher interior and filter.
*   Thoroughly clean bathroom fixtures, surfaces, and wash all bath towels.
*   Turn off the water to the washing machine and the hot water heater.

AXA also notes that extremes in temperature and humidity can cause multiple types of damage to works of art, including warping, quickened deterioration, mould or mildew. A temperature and humidity monitoring thermostat can help to avoid these problems. For the technophile, look for a system which can be read and adjusted remotely via a handheld device. Consistency is the key to conservation. A general guideline is to maintain a humidity level between 35-50 per cent and a temperature of 18°C to 24°C throughout the year.

Canadian Insurance Top Broker is now on Facebook (facebook.com/TopBrokerMag) as well as LinkedIn (linkedin.com/company/citopbroker) and Twitter (twitter.com/CITopBroker). Follow us for easy access to the top P&C news you need to know. 

 

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Nominations open for IBAO Annual Awards of Excellence

The Insurance Brokers Association of Ontario (IBAO) has opened nominations for their 2018 IBAO Awards of Excellence program. Every year IBAO recognizes the broker channel’s best-in-class performers across four categories:

• Brokerage of the Year
• Young Broker of the Year
• Innovator of the Year
• Affiliate of the Year

Read: Industry discusses data connectivity at IBAO strategy meeting

“Winning an IBAO Award of Excellence is advantageous for both your personal and professional brand,” says Norah Black, IBAO Marketing Manager.  “The press and promotion around the award has created many business opportunities for current and past winners – everything from business development to attracting new talent to boosting sales.”

Awards of Excellence finalists and winners are celebrated at the Opening Night Gala of the IBAO’s Annual Convention, this year held in Niagara Falls on October 17.

Nominations are open until August 18. Visit www.ibao.org/awards for more information and nomination forms.

Canadian Insurance Top Broker is now on Facebook (facebook.com/TopBrokerMag) as well as LinkedIn (linkedin.com/company/citopbroker) and Twitter (twitter.com/CITopBroker). Follow us for easy access to the top P&C news you need to know. 

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What a difference a decade makes

Most people in the insurance industry are bracing for the seismic shift that is anticipated over the next decade as automation, artificial intelligence and machine learning are predicted to make “simple risks” easy to manage. But many in the industry may not appreciate that a seismic shift has already taken place in the past decade.

In 2007, the largest cohort of employees in the insurance industry was baby boomers. By 2017, that had changed; the largest cohort was now millennials.

Michael Burt, director of industrial economic trends with the Conference Board of Canada, conducted the Insurance Institute’s latest demographic research study on the industry’s workforce. According to Burt, Canada’s general labour market has seen a similar shift in recent years, “but not as strong a shift as the research is showing for the P&C insurance industry in Canada.”

Breaking down the numbers

In 2007, the Insurance Institute’s first demographic research study showed that half of the industry’s workers were over 40. Forty-nine percent of the workforce were boomers, then aged 41 to 60. And with a median retirement age of 60, the research projected a 25% decrease in the workforce due to retirements expected between 2007 and 2017. The share of boomers in the industry and the early retirement age were out of step with the general labour market in Canada.

In 2012, the Institute’s second research study showed that employers had acted on recruitment recommendations and successfully increased the millennial cohort from 12% in 2007 to 27% in 2012. The proportion of boomers had dipped to 37% of the industry’s workforce, which was more in keeping with the general labour market in Canada. With the industry’s average retirement age still younger than the general labour market at 60, the findings projected a 28% decrease in the industry’s workforce over the next decade.

In 2017, initial findings from the Institute’s third study show that the proportion of boomers and the proportion of millennials have flipped from 37% and 27%, respectively, in 2012, to 27% and 39%, respectively, in 2017. The industry has a much higher concentration of millennials than average, making it much younger than the general labour market in Canada.

According to Stats Canada’s 2016 Census data, the general labour market is now split roughly in thirds between millennials, Gen Xers and boomers. “So, for the P&C insurance industry to have such a significant increase in the proportion of millennials and for the share to flip with the boomers is pretty dramatic, particularly over a five-year period,” Burt says.

“A couple of reasons may account for this,” he continues. “First, the industry has fewer boomers than the general labour market (27% in the industry versus 31% in the general labour market) due to early retirements. As well, the industry has fewer Gen Z members than in the general labour market (at just 1% for those aged 21 and under versus 6% in the general labour market), which may not be surprising given the industry’s median age at entry is closer to 30.”

Attracting millennials to insurance

Contributing factors to the influx of millennials over the past decade are increased awareness about the great careers insurance offers and more opportunities for education as a pathway into the industry.

1. First, there has been a significant increase in post-secondary programs offering a direct pipeline into the industry.

The number of full-time college programs offering a business of insurance program—with potential credits earned toward the Institute’s Chartered Insurance Professional (CIP) designation—has increased substantially since 2007, when there were just four. Now, there are 12 programs, with more than 400 candidates who have chosen to study insurance and are seeking to work in the industry.

Employers are recognizing the valuable pipeline provided by these programs, with some or most credits going toward graduates’ CIP designations. For the new entrants to the industry, it’s the 95% to 100% job placement rate at program’s end that is attracting millennials, university graduates and career changers to study and work in insurance.

2. Second, there has been a significant increase in the promotion of insurance careers.

The Insurance Institute’s Career Connections program has seen a substantial increase in awareness of and engagement in insurance careers over the last decade. In the early days, many potential candidates would have indicated they were not at all interested in exploring a career in insurance. Now, potential candidates are curious about how their analytical skills could be used for cat modelling rather than capital markets in banking.

Some highlights of how the industry can continue to attract young talent:

• Promoting insurance as a stable industry with full-time employment opportunities works well, as the gig economy impacts employment prospects for youth.
• Positioning the P&C insurance industry as being at the forefront of gamechanging issues—like artificial intelligence, big data, autonomous vehicles, extreme weather, cyber security, and other national and global risks—sparks interest and brings relevance to insurance and emerging issues.
• Emphasizing that most employers in the industry offer an excellent value proposition that includes paying for continuing education and earning professional designations is appreciated by potential candidates looking to grow their knowledge and competencies.
• Being able to state that 87% of employees in the P&C insurance industry are satisfied with their careers in the industry resonates with candidates looking for satisfying work.

One of the additions to the 2017 demographic research study was a series of employee engagement questions. We are confident that the strong employee engagement we uncovered will resonate with potential new recruits to the industry:

• 64% strongly agreed that they contribute to their company’s success;
• 56% strongly agreed that they are proud to work in the insurance industry;
• 50% strongly agreed that there is a clear link between their work and their company’s goals and objectives.

Burt notes that, “In a Conference Board of Canada study on employee engagement, it is estimated that just 27% of Canadian employees across all industries are highly engaged in their work. For the industry to have such high engagement scores is very impressive.”

It is a great news story that the face of the industry’s workforce is more youthful and more engaged today than it was 10 years ago. This is just one of many findings to come from the Insurance Institute of Canada’s decade of demographic research. The 2017/2018 reports are due to be published in September 2018. More information is available at: www.insuranceinstitute.ca/research.

By Margaret Parent, Director, Professionals’ Division, The Insurance Institute of Canada
__________________________________________________________________________
Copyright © 2018 Transcontinental Media G.P. This article first appeared in the May edition of Canadian Insurance Top Broker magazine

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Broker corner: Where everybody knows your name

Finding customers a great deal on insurance and a bottle of whisky? That’s all in a day’s work for Devon Hoff, branch manager of Hoff Insurance in the small community of Rouleau, Saskatchewan.

“You’ll see that in a lot of smaller, family-run businesses,” Hoff told Canadian Insurance Top Broker. “There are usually one or two or three things that [businesses] do under one roof, and this makes them that much more profitable at the end of the day.”

Hoff has been surrounded by the insurance industry his entire life. His parents owned a brokerage when he was growing up, but he didn’t opt to go down that path initially. He moved to Saskatoon for a couple years, but decided to take over his parents’ business when he returned to Rouleau in 2009.

In a town with only 540 inhabitants, each business must serve multiple purposes, he notes. That’s why Hoff Insurance sells pop and potato chips, in addition to insurance and liquor.

“Our customers aren’t just a number—they’re people to us.”

“All employees handle the liquor, the convenience and the insurance side. We’re all trained on all of it,” Hoff says. “We have a liquor franchise in Rouleau, which sells beer and liquor and wine, and then we also sell cigarettes, chips, pop—anything that kind of goes with the liquor.”

Hoff also offers a dry-cleaning service, although the cleaning itself is done offsite in Regina.

Hoff ’s home, auto, commercial and farm insurance business has grown over the years. In 2012, Hoff purchased three offices from Grainbelt Agencies in the nearby towns of Yellow Grass, Pangman and Milestone. But the brokerage’s biggest leap came earlier this year, when it was acquired by Regina-based Harvard Western Insurance.

“Our philosophies really lined up, and [we] have really good connections and rapport with all their staff from a few years back,” Hoff says of Harvard Western and its president and CEO Dave Pettigrew, whom he has known for years. “It’s good because we’re getting a little bit more help now with Dave’s crew, and we can offer a little bit of assistance to Dave’s crew on some of the farming insurance areas.”

The merger will see Hoff rebrand under the Harvard banner in 2019, but that won’t change what Hoff says his company is best known for: “small-town service, big-city options.”

“We want to make sure we continue to have the client come to the broker and sit in on an insurance-world conversation,” Hoff said. “Our customers aren’t just a number—they’re people to us.”

__________________________________________________________________________
Copyright © 2018 Transcontinental Media G.P. This article first appeared in the May edition of Canadian Insurance Top Broker magazine

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You wanted the best, you got Gene Simmons

You know there’s money to be made when Gene Simmons shows up somewhere. And he showed up—in my inbox—back on March 14, 2018.

Now, let me be clear: the bass player from KISS did not send me an email directly. (He’s actually more than just the bass player from KISS, but I’ll get to that stuff later.) No, this email came in the form of a press release from Invictus MD Strategies announcing that Simmons had been named their “Chief Evangelist Officer.”

What, you might wonder, is Invictus MD Strategies? I wondered the same, and it turns out they have nothing to do with the Invictus Games. Invictus—formed in 2014 and based in Vancouver—has ownership stakes in various licensed producers of medical cannabis throughout the country. And, with the legalization of recreational cannabis just around the corner, Invictus is no doubt seeing dollar signs in all the new licensed producers that will be cropping up (pun intended).

So, what exactly is a Chief Evangelist Officer? According to the press release, Simmons will be responsible for “providing marketing counsel, serving as a spokesperson in the media, public appearances and participation in the company’s annual general meeting and investor meetings.” Those will be some interesting meetings!

Simmons will report to Dan Kriznic, chairman and CEO (the normal kind of CEO—not an evangelist) of Invictus. According to Simmons, who is quoted in the press release, he and Dan hit it off immediately when they met for the first time.

“Values and family are very important to me, and when I first connected with Dan at Invictus, I understood immediately that we enjoyed a shared passion for these key life foundations,” Simmons said. “Instead of launching straight into business, we talked about the things that matter the most.”

How heartwarming.

The press release also explains that Simmons has a licensing empire with more than 2,500 licences (for things like KISS T-shirts, pinball machines, credit cards, lunch boxes, caskets and condoms, if I’m not mistaken). Oh, and he’s launching a “premium soda line” called MoneyBagâ„¢ Sodas at 7-Eleven stores everywhere, in addition to launching MoneyBagâ„¢ FootGear, which, I assume, must be premium shoes.

So, why is Simmons suddenly appearing as the chief evangelist of a Canadian cannabis company just before recreational pot becomes legal here? Because there’s money to be made. New money—this stuff wasn’t legal before! That also means there’s money to be made for brokers, because these licensed producers ain’t gonna insure themselves.

This month, we’re doing a deep dive into the legalization of recreational cannabis, giving you all the information you need to ensure that you, dear broker, can also capitalize on this new money.

__________________________________________________________________________
Copyright © 2018 Transcontinental Media G.P. This article first appeared in the May edition of Canadian Insurance Top Broker magazine

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Cultivating medicinal cannabis…at home

At some point later this year, Canadians will be allowed to grow as many as four pot plants in their place of residence. And the early indications are that growing your own pot at home won’t void your home insurance policy.

“If the growing of four plants is legal, we’re not going to turn around as the insurance industry and say we won’t accept that,” says Marc Lefebvre, underwriting coordinator with the Insurance Bureau of Canada’s legal division.

But that four-plant rule won’t be of much use to medical marijuana users who are licensed to grow their own cannabis. Medical users can obtain a licence to grow dozens of plants at home. And then there are designated growers, who are permitted to grow on behalf of up to four licensees.

Cultivating medicinal cannabis at home is a perfectly legal activity for licensed growers, but it’s an activity that has seen insurers in Canada denying claims and declaring existing home insurance policies void.

Last April, a B.C. resident’s home went up in flames after a fire broke out in his kitchen, according to a report in the Peachland View. The homeowner’s insurance claim was denied because he had a Health Canada-sanctioned grow operation for medical cannabis in his home. The insurer acknowledged that the grow-op had nothing to do with the fire, but that was of no help to the homeowner, who ended up having to borrow money from his sister to move into a trailer.

But, with the legalization of recreational cannabis on the horizon, is it possible we might start to see domestic insurers offer coverage for homes with medical grow-ops?

Finding a home-grown solution

Karen McGee is the senior vice-president and chief operating officer of O2 Insurance Services, an MGA in B.C. that has arranged coverage for residences with legal medicinal grow-ops.

“There’s an opportunity in this, and in all likelihood it will generate above-average premiums, which always makes it an interesting target market for anybody to consider.”

O2 offers a full residential package for licensed growers, which includes a liability policy and errors and omissions coverage for designated growers. Some of O2’s clients are licensed to grow up to 700 plants at home.

Most of the coverage is arranged through Lloyd’s of London, and McGee thinks it’ll be a while before we start to see domestic insurers offer similar coverage.

“Perhaps in five or 10 years, a domestic residential market might look at this as an opportunity, but they haven’t as of yet,” she says. “They’ve had lots of opportunities — this has been going on for several years, going back to the MMAR [Medical Marijuana Access Regulations] licensing, and they haven’t wanted to engage in providing coverage.”

Eric Lock, a broker with AC&D Insurance in Kelowna, B.C., has helped people with legal medical grow-ops in their houses obtain home insurance. He believes insurers in Canada are thinking about offering this type of coverage, but no one is willing to take the plunge yet.

“It’s not that they’re not thinking of it—they just don’t want to be the first in, in my opinion,” he says. “I think they just don’t have enough data.”

Lefebvre agrees that insurers are likely considering getting into the space, but it may take some time before any of them step forward.

“I think it’ll take a while for the mainstream insurers to get a lay of the land and see what they’re comfortable with,” he says. “Insurers are traditionally conservative and will likely take a wait-and-see approach.”

Analyzing the risk

All of this poses the question of just how risky it is to grow your own pot at home. Well, the answer depends on how many plants you plan on growing, for one thing.

According to Bill MacDonald, coordinator of Niagara College’s Commercial Cannabis program, the four plants Canadians will soon be allowed to grow aren’t a particularly risky proposition—especially if homeowners only plan to cultivate cannabis on their windowsills. But that’s not how growing your own pot is typically done.

“Anybody who’s doing it seriously is using what’s called a grow tent, which you can get from a hydroponics store or Amazon,” MacDonald says. “Within that, you’ve got your carbon filters, a place to hang your lights—that sort of thing.”

The kind of lights used will impact the level of risk involved, MacDonald notes.

$5.7 billion
The amount Canadians spent on cannabis (medicinal and recreational) in 2017.

Source: Statistics Canada

108

The number of licensed producers of medical cannabis in Canada (at press time)

Source: Government of Canada

“I would much prefer someone using LED light, which has lower heat output and lower energy consumption than one of those higher HID (highintensity discharge) lights, like HPS (high-pressure sodium),” he says.

Things get a bit more complicated when people are cultivating cannabis for medical use and the number of plants starts piling up.

“If you’re going to be growing that many…you’d have to get one of those commercial tents, and do it inside that,” MacDonald says. “With that number, you are going to get more humidity, and you’re going to want to get that out.”

But that’s just one of the issues medicinal home growers face.

“The biggest thing is the smell,” MacDonald explains. “When those things are flowering at the end, all the terpenes have quite a smell to them. You’d want to go through a charcoal filter and then vent outside.”

McGee says that when it comes to clients who are allowed to grow dozens—if not hundreds—of plants at home, it’s necessary to make sure that the electrical work in the house is up to snuff.

“Electrical issues are always a concern,” she says. “When we look at a risk, we want to make sure that any changes or modifications to the architecture of the electrical panel or wiring has been done by a proper electrician, that it has been permitted and it has been inspected.”

Managing the humidity levels of large home grows is also essential.

“Obviously, you want to make sure you’ve got proper ventilation,” McGee says. “The last thing you want is excess humidity, for two reasons. If you have excess humidity in your grow space, your plants don’t perform very well. But if you have excess humidity in your grow space, you can also create mould issues in your residence, and you certainly don’t want to have that happening.”

Water is also a big exposure, McGee notes. Most plants are fed either by a drip mechanism or by hand, she says, so home growers will want to ensure they have water catchments to capture any excess water. And if you’re using a water reservoir, you’ll want to remain in the room when you’re refilling it.

“If you do have a water reservoir in your home—a large barrel—just make sure that when you have to refill it, you don’t leave it unattended,” McGee says. “We’ve had some losses that have happened where they’ve gone to refill the reservoir—and it’s a fairly big container—and they’ve walked away, got distracted doing something else…and it’s overflowed and caused water damage.”

“I think it’ll take a while for the mainstream insurers to get a lay of the land and see what they’re comfortable with.”

But, more than anything else, McGee says the potential for theft remains the largest risk for people growing cannabis at home. It remains to be seen whether that will change when recreational marijuana is legalized, but in the meantime, she says most people growing at home “take extraordinary care” to ensure their grow-ops are well concealed.

Looking ahead

As long as the risks associated with medicinal home grows can be managed safely, Lock believes domestic insurers will eventually come around to covering houses that have them.

“My opinion is that as long as all precautions are taken, this should be a quantifiable, calculable risk,” he says. “That’s why I think the Canadian market will get resolved.”

And, given the potential for profit, it could just be a matter of time before we see a Canadian insurer write a home with a medicinal grow-op in it.

“I think you’ll see over time that someone will turn around and realize there’s a potential here,” Lefebvre says. “There’s an opportunity in this, and in all likelihood it will generate above-average premiums, which always makes it an interesting target market for anybody to consider.”

__________________________________________________________________________
Copyright © 2018 Transcontinental Media G.P. This article first appeared in the May edition of Canadian Insurance Top Broker magazine

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Adapting to change

There’s no doubt Canadians want on-demand information through digital channels.

According to Accenture’s 2017 Global Distribution & Marketing Consumer Study: Insurance Report, in 2016, 68% of consumers preferred to search for insurance information digitally. That’s up from 54% in 2013.

Clearly, the digital game is well underway. But are brokers ready to play?

Opportunities knock

Much has been made of the potential for chatbots to modernize the way brokers do business.

“There are various free platforms available online,” says John McLelland, founder of Toronto-based brokerage miBroker. “We’re testing what kind of information people are willing to give to a chatbot. How far in that process are they willing to go before they get frustrated?”

Right now, he notes, many brokers have an online-quoting process, and more traditional brokerages have a simple web form that customers fill in to get quotes.

“Those aren’t necessarily great user experiences today,” he says. “I think the chatbot has the ability to make that an even more natural, conversational type of process. As the AI grows, [the chatbot] will be able to answer questions and give [consumers] feedback or connect them with a broker if they need help to understand their coverage.”

Taking pens out of the process

E-signatures are another way brokers can create a more user-friendly experience for customers. But surprisingly, not all brokers are providing the digital John Hancock option to their clients.

Just under half (48%) of Canadian brokerages offer e-signatures, according to Applied Systems’ Annual Applied Digital Brokerage Report.

Catherine Smola, president and CEO of the Centre for Study of Insurance Operations (CSIO), noted that the organization’s survey on e-signatures saw less than 1% adoption several years ago.

“The latest results I remember seeing, it was up to 14% in some provinces,” Smola says.

“Change management is just so critically important. It’s more important, in some cases, than the platform change.”

For McLelland, the last statistic he saw was for 7% in Ontario.

“I found that to be incredibly low,” he says, noting that without digital signatures, consumers have to print and scan a document or take a photo of the signature. “That’s great, but not best from a regulation standpoint, where you’ve just got a picture of a signature and not the whole document.”

E-signatures not only save brokers time—they also save them money.

According to a CSIO report, spending just three hours a week on getting a wet signature (i.e., preparing documents, sending reminders, filing) could cost a broker $3,000 annually, compared to $300 with e-signatures.

E-signatures can also help raise the profile of smaller brokerages by showcasing the fact that they’re keeping current with technological trends.

“It’s one of those really slick digital interactions, and it doesn’t matter the size of the broker,” says Smola. “A small [brokerage] of 10 people in a rural town sending a document to sign electronically would have the same appearance as being a 100-person Toronto-based brokerage.”

Rising to the challenges

The seamless integration of broker and insurer technology remains among the biggest challenges the industry will face in the immediate future.

“You have legacy systems on the insurance company side and legacy systems on the broker side and they can’t really talk to each other easily yet,” says Tanya Eyram, vice-president of business solutions with RSA. “If you’re a broker that’s been in the industry for 25 years or longer, you’ve got to adapt and pivot and replace your systems. Then you can leverage some of the funky tools once you get your legacy systems up to speed and integrating.”

Smola agrees, adding that sometimes it’s simply about who’s willing to invest in a new system.

“A lot of the carriers currently are on legacy systems—they don’t want to invest and move to new platforms,” she says. “That can cause friction between brokers and carriers. I hear all the time about brokers having to go into carrier portal systems to rate commercial business. That’s time-consuming and it’s an irritant for brokers.”

80%
of insurers are prioritizing ease of use and simplicity in their interfaces to make for a more human-like experience

Source: Accenture’s Technology Vision for Insurance 2017

Of course, technology is expensive, especially if it’s brand-new or something that’s not produced in-house.

“Any time you’re dealing with, say, software developers, it’s almost like building a house, where you have the contractor,” says McLelland. “You get the timeline, and then you get the real timeline. It’s double that or more. It can be difficult to coordinate all those timelines.”

That’s why managing the transition to new technology is key to a broker’s success.

“Change management is just so critically important,” says Jeff Purdy, senior vice-president of international operations with Applied Systems. “It’s more important, in some cases, than the platform change. If you manage change well, then you will reap the benefits of the change.”

Another challenge is to convince brokers to get the basics first and keep the bells and whistles for later. Smola says she’s seeing many brokers play and experiment in the chatbot space.

“I think that’s terrific, but one shouldn’t underestimate the work and time it takes to develop something like this,” she says.

For instance, she knows of brokers who talk publicly about developing chatbots. However, when customers go to use them on the broker’s portal, they receive a message saying it’s in a “beta test phase.”

“Personally, I’m concerned that customers may not have a great experience,” Smola says. “Maybe the messaging has to be a bit stronger, that this is a start-up tool versus announcing they actually have a chatbot to service customers.”

“You have legacy systems on the insurance company side and legacy systems on the broker side and they can’t really talk to each other easily yet.”

Joseph D’Souza, founder and CEO of ProNavigator, agrees.

“With any emerging technologies, typically the first applications are built in silos and not integrated with your existing systems,” he says, noting that this often leads to a suboptimal user experience.

Still, he’s optimistic about the strides brokers are making.

“In 2018, I hope, we should see much better integration with databases and analytics,” he says. “The next generation of conversational agents will be much better at handling a conversation instead of simple answers to questions.”

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Copyright © 2018 Transcontinental Media G.P. This article first appeared in the April edition of Canadian Insurance Top Broker magazine

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