A milestone for digital pink slips

In January, Nova Scotia’s Office of the Superintendent of Insurance issued a bulletin approving the use of digital proof of auto insurance, becoming the first province in the country to do so.

“I believe it’s something the industry is looking for, I think consumers are looking for it, and I think it’s a step forward in technological evolution,” Jennifer Calder, the province’s deputy superintendent of insurance, told Canadian Insurance Top Broker.

In 2015, a report commissioned by the Centre for Study of Insurance Operations (CSIO) found that regulators in Canada could approve the use of digital pink slips via bulletin. Nova Scotia’s bulletin includes guidelines for insurers and brokers on the implementation of digital pink slips.

“It’s basically the guiding principles outlining the expectations of the insurance industry should they choose to offer electronic proof of auto insurance,” Calder said. “If their platform meets the requirements that we’ve outlined, then that would be acceptable.”

The milestone was met with fanfare from Catherine Smola, president and CEO of CSIO.

“We applaud Nova Scotia on being the first regulator in Canada to take this important step and are optimistic that other provinces will follow suit in the coming weeks and months,” Smola told CITB.

At press time, Nova Scotia remains the only province to have approved digital proof of auto insurance, but that doesn’t mean the industry isn’t preparing for a sea change.

In December, Aviva Canada partnered with 12 brokerages in Ontario to launch a digital pink slip pilot program. The six week trial gave brokers’ customers the option of downloading digital pink slips when their insurance came up for renewal.

Drivers who participated in the program still had to carry physical pink slips since digital versions aren’t accepted in Ontario. But Tom Reid, Aviva’s executive director of digital broker strategy, believes it’s only a matter of time until the province approves digital pink slips.

“There’s a whole raft of regulatory changes that are coming down the pipe,” Reid told CITB. “Eventually it’s going to happen—there’s no doubt. It’s just a question of how it’s going to happen.”

Reid noted that privacy will be one of the key issues regulators have to consider before approving the use of digital proof of insurance, since drivers would be handing over their phones to police if they get pulled over.

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

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Taking paper out of the process

There’s an acknowledged semi-truth in insurance: it’s typically the last industry to take advantage of new technologies.

But that’s now changing, with insurers taking digital steps to help their brokers not only enhance workflows, but gain new business. According to a 2016 Accenture technology report, 51% of insurers plan to pursue digital initiatives with new digital partners over the next two years.

“Both insurers and brokers are looking for efficiencies in business and looking to technology to help as much as it can,” says Matt Baynton, vice-president, surety (national), with Trisura Guarantee Insurance Co.

“[Technology] amplifies brokers’ existing way of doing business,” adds Sachin Rustagi, director of digital with Gore Mutual.

And the trickle-down effect benefits the consumer, too.

“Consumers are comparing their insurance technology to other technology,” says Chris Harness, senior vice-president, solutions delivery, with Northbridge Financial. “We’re seeing that insureds are looking for better from how they interact.”

That, says Harness, is driving conversations and changing the relationships that carriers have with brokers.

We decided to take a look at how some insurance companies are using new technologies to help brokers do business.

82%
Percentage of insurers that believe AI will be incorporated into every aspect of business over the next five years

Source: Accenture

Leveraging APIs

An API—an application programming interface—can be used across industries, from finance to insurance, explains Rustagi.

Gore has developed a digital sales API for tenants insurance and home-based businesses that allows brokers to quote, bind and issue Gore products directly from their own website or mobile app.

“Essentially, we’re trying to give the broker more options to service the various customer journeys that exist now,” Rustagi says. “A customer just doesn’t go to a broker and expect to see someone… They might want to buy tenants insurance on a Saturday night and they want that policy issuance right then.”

This technology can also increase sales. For example, if a broker has three producers, and they’re swamped with phone calls, what might the producer say?

“They might say, ‘Sorry, we’ll call you back tomorrow,’ or, ‘Sorry, can I take down your email?’”

Currently, Gore offers tenants insurance and home-based business insurance through the API, but Rustagi says the insurer plans on releasing a number of additional products this year. Gore is also looking to invest in areas of service-based APIs, such as endorsements, renewals and claims transparency.

Expediting claims

Last year, Northbridge Financial deployed a mobile app to expedite its claims process and service for its auto insurance customers.

“The current situation of having to schedule time for an adjuster to come out to a body shop, to a home or to a side of the road—we’re able to eliminate that wait time,” says Harness.

The new process is simple. A customer contacts Northbridge’s claims department, which sends them a link to the app.

“This app takes advantage of the camera within the phone,” says Harness. “[The customer] can take pictures of the damage on the car, and the Northbridge person on the other end of the line can direct the customer on what they need to see. It’s real time as the pictures are coming through.”

It all adds up to a more efficient process—both for the customer and the insurer, Harness explains.

“They can work collaboratively with a customer, [or] with a broker, on settling the claim within hours as opposed to weeks,” he says.

“Both insurers and brokers are looking for efficiencies in business and looking to technology to help as much as it can.”

Feedback on the pilot project has been positive to date.

“People like having the direct, real-time conversation and getting a response right away—and even having an element of control in the process,” says Harness. “They’re getting feedback from Northbridge, and they have a better sense of what the next steps are going to be.”

This year, Northbridge intends to add an online payment option for its clients in order to settle claims electronically. The insurer is also looking to bring the mobile app to its property business.

On the underwriting side, Northbridge is trying to make it easier for brokers and underwriters to interact by implementing instant messaging, working on documents online and doing more video collaboration.

“We’re trying to make it easy to stop that inevitable ping-pong that goes back and forth when you’re trying to work with people in different offices,” says Harness.

Serving small business clients

In September of last year, RSA launched RSAPro, a tool that allows brokers to quote and bind small business clients online.

Rosalind Staples-Simpson, RSA’s vice-president, commercial operations, says brokers wanted something new and modern that would help them become more efficient and serve their customers better.

“When we developed [RSAPro], the brokers’ workflow was what we had in mind,” she says.

Although it’s still early days, there has been positive feedback on the free service, and RSA has included elements in the tool to gauge what brokers think of it while they’re actually using it.

76%
Percentage of Canadians who own a smartphone

Source: Catalyst

“We have a live feedback tab embedded in the tool where at any point in the process [brokers] can choose to send a compliment, a complaint or a suggestion because we want to always keep it relevant,” Staples-Simpson says.

RSAPro includes a net promoter score that’s generated from brokers’ input. Brokers can also submit free-form compliments, complaints or suggestions. Early indications from the net promoter score show that RSAPro is performing well.

“And we’ve already received a couple of dozen suggestions on what [brokers] would like to see next,” she says. “For us, this is exciting because that tells us they’re engaged and they want more.”

RSA’s first priority was to get new business quoting and binding into brokers’ hands. This year, it will expand RSAPro by allowing brokers to administer simple changes to existing policies, in addition to offering policy renewals.

“Today, quite commonly, that would have to be either called in or sent via email to have the change done by us,” says Staples-Simpson.

E-bonds gaining ground

In the summer of 2017, Trisura launched an online bond solution offering e-bonds—an electronic delivery of a bond as opposed to paper delivery.

“E-bonds are still a relatively new frontier,” says Baynton. “It’s only been in the last couple of years that they’ve really taken hold.”

He adds that systems are going to change and the requirements will likely evolve over time.

“Being the provider of the technology as well as the company standing behind the bond, there is a nice synergy, so as things change and evolve, we can change and evolve our system with that, as opposed to other systems that don’t have that same congruency.”

Trisura has tried to make the process as simple as possible.

“The current situation of having to schedule time for an adjuster to come out to a body shop, to a home or to a side of the road—we’re able to eliminate that wait time.”

“It doesn’t interfere in any way with [brokers’] current workflows and how they generate bonds in their own world,” says Baynton.

“All we’re doing is really putting a signature and seal and securing the document after they’ve already populated the form.”

“It’s the delivery that’s changing,” says Pina Mazzoli, vicepresident, commercial surety (national), with Trisura Guarantee Insurance Co.

“It was a gradual evolution for us as we went into the e-commerce world and started to put more of our products online,” she says. “That was really the trend and will continue to be the trend as brokers and owners and obligees are looking to streamline their internal workflows and processes.”

This new way of doing business benefits the broker because it’s a “one-stop shop,” Mazzoli says.

“Essentially, the bonds are being procured from our online platform. It allows the brokers to e-verify the bonds with the same provider, the surety bond provider.”

It’s cost-effective for brokers, too, as Trisura absorbs the cost of the transaction, she says, noting that third-party providers pass this cost along to the broker or client—or both.

“The struggle was always [that] in order for a bond to be valid it has to be signed, sealed and delivered,” says Baynton. “It was trying to take that same precedent into the electronic world.”

The electronic seals and signatures used in Trisura’s e-bonds offer verification of the bond’s validity, Baynton explains.

“Certainly, when we look at our bond platform and the ability to purchase bonds online with a credit card, you don’t have to wait on an underwriter because all the information is preprogrammed,” he says. “You don’t have to worry about collecting a small receivable because the client can pay online.”

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

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Cyber risks in oil and gas

On June 27, 2017, a malicious cyberattack crippled Ukraine’s hospital networks, banks and government services within a matter of hours. So relentless was the attack on the country’s data infrastructure that Oleh Derevianko, the head of Kiev-based cybersecurity firm Information Systems Security Partners (ISSP), wasn’t sure how to label it.

“At first, I thought it was an APT (Advanced Persistent Threat),” Derevianko later told the BBC. “But soon I realized that we needed a new term to describe what was happening.”

Derevianko isn’t the only one failing to come to terms with a new world order in cyber risk. Once confined to data privacy and protection, cyber risk has also become a central concern for any industry moving toward advanced automation of operations. Hackers, meanwhile, are becoming more sophisticated and better funded, and are often politically or financially motivated to disable, disrupt and coerce, rather than merely steal data.

It would later be revealed that Ukraine was the victim of malware virus NotPetya. The same day as the Ukraine attack, NotPetya breached operations at Russia’s top oil producer, Rosneft. And A.P. Moller Maersk, the world’s largest container shipping company, experienced a total system shutdown after the malware attacked its automated operations, causing multiple days of paralysis and costing an estimated US$300 million. In September, FedEx also suffered US$300 million in damages from business interruption triggered by NotPetya.

Research firm Cybersecurity Ventures estimates global damages from cybercrime will reach $6 trillion annually in damages by 2021, a number that has been substantiated by other sources. In Canada, and across the globe, major industrial entities in oil and gas, mining and manufacturing are starting to wake up to the reality that cyber breaches are no longer about data privacy alone. They have the potential to cripple operations and cause serious physical damage.

“We’ve started to see the convergence of IT (information technology) and OT (operations technology) environments,” says Lance Mortlock, oil and gas leader for Ernst & Young in Canada. “That’s creating new cyber-physical risks. New risks are created where network-connected end points, such as smart sensors, handheld engineer terminals and industrial routing equipment, are being produced and deployed.”

And the more devices become connected, the greater the risk becomes, Mortlock says.

“Beyond damage to control systems and to equipment in the network, which has a safety impact, there is the potential to disrupt the supply chain, which has a production impact and a financial impact,” he notes.

Although Canadian firms have so far been sheltered from high-profile cyber breaches, the number of operations-disrupting cyber incidents skyrocketed in 2017. Ransomware payouts doubled from 2016 to $2 billion, according to anti-virus software firm Bitfinder. Uber, Equifax, the National Security Agency—no one is immune.

26%
of the victims of cyberattacks are in the energy sector

Source: MMC Cyber Handbook 2018

And cyber exposure has expanded from traditional data-heavy industries like banking and healthcare into any industry that uses a computer. With the rise of automated industrial control, and with the emergence of the Internet of Things, any device connected to the internet is another entrance point or vulnerability.

“Cyber risk has taken on less of a privacy risk focus and the concern is becoming more about the impact to an organization’s operations,” says Catherine Evans, a vice-president with Marsh Canada’s Cyber Centre of Excellence.

Vulnerabilities in the energy sector

The oil and gas sector is particularly at risk of cyber intrusion. A 2017 global study of oil and gas executives conducted by Ernst & Young found 87% of oil and gas companies have not fully considered the information security implications of their current strategy and plan; 60% have had a recent, significant cyber security incident; and 95% say their cyber security function doesn’t fully meet their organization’s needs.

“With the size and extent of the operations of oil and gas companies, you’ve got a multitude of different systems,” says Kyle Gray, director of underwriting for Ridge Canada, which deals wholly in cyber risk as a coverholder of Lloyd’s. “Not only different systems, but many are pretty old and legacy systems at some of these points of operation, which is a significant vulnerability. With the legacy systems, obviously, the security is not as broad as something that is newly developed.”

“Cyber risk has taken on less of a privacy risk focus and the concern is becoming more about the impact to an organization’s operations.”

Mortlock adds that energy firms and mining companies have, in some ways, come late to the digital revolution. The economic downturn and the rapid increase in automation have led to a significant digital push in the industry.

“Part of the challenge is that, even as they’re rapidly acquiring these technologies to improve efficiency, the impact of cyber security attacks is not fully understood by the [oil and gas] industry,” says Mortlock. “Given the level of investment we’re seeing in operational technology and automation, particularly around robotics, process automation, asset performance management, remote sensing, cloud computing, machine learning, mobile blockchain and analytics fuel ticketing, these companies need to be upping their cyber game. There are a lot of pilot projects, but they’re not necessarily integrated. What are they doing to manage that risk from a cyber perspective?”

A shift in the insurance landscape

“The number of cyber incidents that have taken place in the last couple of years have heightened the risk up to the board level,” says Evans at Marsh. “The conversation has shifted. Before it may have been the risk manager or the IT team trying to get attention of people above them. Now, we find they’re reaching out to us to talk about it because the board has mandated it.”

This has had a twofold effect on the type of insurance available and the profile of the cyber-risk insurance customer.

67%
of companies with critical infrastructure were targeted by a cyberattack in the last year

Source: GE Digital

“Ten years ago, it was very basic and limited in coverage, and limited in the carriers,” says Gray at Ridge Canada. “It was primarily a liability product at the time for any lawsuits stemming from cyberattacks.

“Typically, customers were entities with a large volume of customer data or personal information or banking information,” says Gray.

Gray notes that cyber policies still tend to be broad, but insurers are starting to put specific sublimitations in place.

“The policies today are extremely broad in the verbiage of the coverage, with the exception of specifically listed exclusions or sublimits, such as social engineering,” he says.

Social engineering refers to hackers manipulating employees to breach systems internally. In the past, it wouldn’t have been explicitly mentioned. Now, says Gray, in a million-dollar policy, social engineering may be sublimited to $50,000.

Evans notes there have also been developments on the business interruption side, in an attempt to appeal to industries or entities that may not have previously considered cyber coverage.

“Oftentimes, the people that are responsible for making these decisions aren’t always that comfortable understanding or talking about cyber risk.”

“The other piece is examining existing insurance portfolios and taking a look at where the gaps may exist from a property and general liability perspective,” she says. “If they include cyber types of exclusions, there are now products that can drop down and fill in those gaps or that can sit over top of those and act as a wraparound for those coverages to broaden out the cyber that’s available.”

The broker role

According to AI and machine learning analytics specialist ABI Research, oil and gas firms worldwide are expected to spend US$1.87 billion on cyber security in 2018. But most agree that money alone will not resolve the issue.

“You can spend a lot of money on cyber security and not have much to show for it,” says Tim Truman, a cyber-security architect based in Calgary. “You can buy the best technology in the world, but if it’s not implemented correctly, if you don’t have the baseline practices in place to take care of the technology that you buy and make sure it’s deployed to meet certain conditions and mitigate certain risks, then you’re really just buying stuff just to have it.”

US $1.87 billion
The amount American oil and gas companies are expected to spend on cyber security in 2018

Source: ABI Research

Brokers, says Truman, have a unique role to play in helping their clients understand that cyber risk management follows the same principles as enterprise risk management, which is how he approaches cyber security architecture for his clients.

“We look at the industry, we look at the state of our control infrastructure, the assets we have deployed, what’s potentially out there, what emerging trends are in the cyber world that could potentially pose a risk to us—and we drive an action plan to see how we can mitigate that risk,” Truman says.

Evans notes the brokers also play a unique role in educating company decision-makers on the nature of cyber risk. Part of that is about having a solid understanding of the technology at play. It’s a key reason Evans sought out certification in Risk and Information Systems Control (CRISC), so she could be well positioned to educate clients on the technical side of risk without merely relying on a checklist.

“I think that’s very difficult for an organization to try to get their heads around,” she says. “Oftentimes, the people that are responsible for making these decisions aren’t always that comfortable understanding or talking about cyber risk. They could be intimidated by them because it has to do with technology that they’re not familiar with.

“Part of our role is to try to bridge that divide a bit, to bring everyone to the table together to make sure we have all the stakeholders involved in evaluating these considerations and trying to address them.”

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

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‘‘Hey Google, get me a car insurance quote.”

For decades—longer than this writer’s lifetime—science fiction films have predicted a world with talking computers.

First there was Robby the Robot in Forbidden Planet. Then, before you knew it, machines that could talk were commonplace in sci-fi, from HAL in 2001: A Space Odyssey to the talking computer—known simply as “Computer”—in various iterations of Star Trek.

Now, at long last, we are finally living in a world with real, honest-to-goodness talking computers. What was once science fiction has become science fact, and a glorious achievement for humankind.

We’ve not only had the ability to talk to our smartphones for years, but we’ve now got smart speakers in our homes, with the recent arrivals of Google Home and Amazon Alexa in Canada.

Thanks to these devices, many of life’s inconveniences are now things of the past.

Can’t be fussed to turn your lights on and off by hand? Don’t feel like getting up to change the temperature on your thermostat? Not willing to budge to turn your kettle on? Well, now Google Home can do all those things for you by following your voice commands (assuming you have the necessary connected devices, of course).

30%
of millennials used voice enabled digital assistants at least once a month in 2017

Source: eMarketer

Early forecasts indicate that smart home speakers won’t just be a passing fad. Canalys predicts that global shipments of these devices will exceed 50 million this year, with Amazon and Google leading the pack.

That’s a lot of talking computers. And these days, they’re not just for playing music or reading the news—you can even use them to get insurance quotes.

The first to the table

Kanetix has been offering quotes through Google Home smart speakers since last summer. Currently, consumers can ask InsuranceHotline.com for auto quotes and RateSupermarket.ca for quotes on mortgage rates.

“What’s good about these smart speakers is they all have phone capabilities and they will connect you to the [insurance] provider,” explains Kanetix CEO Andrew Lo. “You can start talking to them from your smart speaker.”

As of press time, customers can’t purchase insurance through the devices—and that’s something Lo doesn’t see changing in the immediate future.

“It’s still really early days with regard to purchases,” he says. “I personally don’t use a smart home device to purchase my groceries or order a pizza.”

In December, Aviva became the first insurer in Canada to launch a “skill”—essentially an app—on Amazon Alexa, allowing consumers to ask Aviva questions about insurance.

“They’re saying that one third of all Canadians will own a smart home device within the next five years,” says Ryan Spinner, head of innovation for Aviva Canada. “We wanted to be really connected to what our customers are doing and how they’re living their lives, and integrate our products and services within our customers’ lifestyles.”

Right now, Aviva’s Alexa skill can explain insurance jargon to consumers. For instance, users can ask Aviva what a deductible is. The skill is also designed to offer auto insurance quotes to drivers in Ontario.

While Aviva doesn’t have immediate plans to expand the quoting tool to other provinces, the insurer says Amazon’s technology will make it easy to determine where the demand for smart speaker quoting exists.

“The good part about Amazon Alexa is we can track how customers are using it and where they’re using it,” Spinner says. “If there’s demand from another province or demand from another area, we’re able to quickly react to that market.”

“They’re saying that one third of all Canadians will own a smart home device within the next five years.”

Consumers can also use Aviva’s Alexa skill to help them find a broker.

“One really cool option with Alexa is location-based features, so we’ll be able to eventually add the ability to say ‘Who’s the closest broker?’” Spinner explains. “Once you have location-based features built in, you can say ‘Where’s the local body shop?’ or ‘Who’s the closest plumber to my house?’”

Although the skill only hit the market in December, Aviva is already getting feedback on its performance from customers.

“We are receiving tons of feedback on social media from customers using the app,” Spinner says. “We take that feedback and basically in real time we’re able to improve and update the skills of the app moving forward.”

What about brokers?

The idea of an insurer using smart home technology to offer quotes directly to consumers might sound scary to some brokers—but there’s no reason brokers themselves can’t get into the smart home game. Some already are.

Jeff Roy, the CEO of Excalibur Insurance, is currently working in collaboration with Tom Reid at Aviva Canada and Joseph D’Souza at ProNavigator, along with two other brokerages—iSure and Mitchell & Whale Insurance Brokers—on developing a smart speaker tool for brokers that will offer auto insurance quotes.

Roy says Excalibur plans to launch the tool on both Google Home and Amazon Alexa this year. He believes smart speaker offerings are just another way brokers can respond to evolving consumer expectations.

15%
of U.S. households had smart home speakers in 2017

Source: Forrester Data: Smart Home Devices Forecast

“It’s just one more arrow in our quiver to adapt to how clients want to do business,” he says. “Our user experience initiative is to give people a choice in how they roll with us, whether they want to call us, walk into the office, use our chatbot, get a quote on our website or talk to a smart speaker.”

Other brokerages—some of which may be in direct competition with Roy—will be able to purchase this platform once it’s fully developed and deploy it themselves. But Roy sees the implementation of this technology as a necessary step to ensure brokers stay relevant.

“We need more brokers to help each other out, help develop stuff and help push the industry forward so we can all survive,” he says. “I feel that brokers who are successful in the future will continue to add on and build these options into their experience, and that’s going to allow us to compete with the insurtechs.”

Other brokers are taking a wait-and-see approach when it comes to smart speaker technology.

“This has exploded in the States over the last year and it’s launching in Canada now, so a lot of analysts are saying this is going to be a big year for smart speakers,” says John McClelland, founder of Toronto-based brokerage miBroker.

“They’re calling it the battle for the side table— they’re envisioning these in every home,” he says. “So maybe we’ll see these in millions of Canadians’ homes and the voice interface will be very important for financial services.”

But, for the time being, McClelland says miBroker isn’t making plans to start offering quotes through smart home devices.

“They’re calling it the battle for the side table— they’re envisioning these in every home.”

“If this ends up being the biggest thing since smartphones, I think it’s something we’d have to seriously look at. Hopefully with a solid digital strategy and moving forward with some modern carrier connectivity, we’d be in a good position to do that if we wanted to,” he says. “But is it worth putting the effort into it if this just turns out to be a fad?”

McClelland notes that, once smartphones took off, many predicted apps would be a game-changer in the insurance industry. But that wasn’t necessarily the case.

“There are some really good solutions out there for self-service on apps, but the kind of glorified app that tells you how to file a claim and all that stuff—people weren’t downloading them,” he says. “Everyone kind of thought those were going to be the next big thing, and it didn’t really pan out that way. But if you look at how smartphones have changed how we’re interacting with customers, that did have a big impact on things.”

Looking to the future

It remains to be seen whether insurers—or brokers— will get to the point where they’re actually selling insurance through smart home speakers. For now, the ability to educate consumers will remain a key offering of the technology.

“Consumer education is a good thing at the end of the day, and [Aviva is] trying to do that in an innovative way, which is especially important for millennials,” McClelland says. “Millennials love to research a product before they buy it.”

Indeed, millennials could be the primary demographic the insurance industry ends up targeting through smart home speakers. According to eMarketer, the heaviest users of virtual assistants are people between the ages of 25 and 34.

It’s conceivable that millennials will turn to smart speakers for insurance quotes, but for the time being, Roy at Excalibur is taking a realistic approach to what the technology could mean for brokers.

16%
of people who own smart speakers use them to find local businesses

Source: comScore

“I don’t envision a lot of policies being sold in the first year,” he says. “But the fact that we’re learning, adapting and getting the experience now is awesome. We’re not waiting five years to get in the game—we’re actually getting in when everybody else is getting in.”

There may be flaws in the technology in its incipiency, he acknowledges, but that’s par for the course when it comes to new tech.

“A lot of the time, you try things and there’s no guarantee you’re going to be successful. But in life, you have wins and lessons,” he says. “It’s what you learn from what doesn’t work that builds the next thing, and eventually you get it.”

And, at some point in the not-too-distant future, who’s to say people won’t be using their smart speakers to buy insurance?

“I would imagine that as the technology becomes more robust and more ingrained into our culture, it won’t be that far off until it’s common to order your Lyft with Amazon Alexa, order your pizza with Amazon Alexa, or buy your insurance with Amazon Alexa,” says Spinner.

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

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Using data to sell a “grudge purchase”: ICTC 2018

As brokers are well aware, it can be a challenge selling insurance to customers who typically aren’t excited to buy it.

“As brokers or distributors of insurance, we can forget quickly that we sell a product that a consumer doesn’t necessarily want,” says Sherif Gemayel, president of Calgary-based brokerage Sharp Insurance. “In a lot of cases, it is a grudge purchase.”

Speaking at a panel discussion on customer experience (CX) at Insurance-Canada.ca’s Technology Conference (ICTC), Gemayel shared insights on what Sharp has learned from trying to enhance the customer journey.

“On the claims side, it comes down to speed—creating an experience that’s full and rich to the consumer, but not long and drawn out,” he said.

But it’s not just claims that can be a pain point for consumers: there’s also the quoting process, which has traditionally involved a lengthy list of complicated questions.

“We completely rewrote how we quote the customer, and how we get from beginning to end with as few questions as possible, which is ultimately the dream in our industry,” Gemayel said.

Sharp’s key to cutting down on quoting and claims times has been aggregating data wherever possible to maximize efficiency and minimize pain points.

“It really comes down to data,” Gemayel said. “Whatever we do, if we can’t have something measurable—if there isn’t a data point that we can get out of it—then we’re likely not going to do it.”

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CEO Spotlight: Beazley Canada

This an edited excerpt from our December issue, where we talked to the CEOs of some of Canada’s largest insurers. Read the full story here.

Specialist insurer Beazley expanded its Canadian presence in 2017 when it acquired Creechurch Underwriters—and it plans to continue growing.

“Beazley didn’t buy Creechurch for it to stay as is—it was a platform for growth,” says Phil Baker, president of Beazley Canada and the former president and CEO of Creechurch. “We’ll continue with the existing business that we do, which is profitable, but with that we’ll roll out new products and we’re going to expand our underwriting capacity to match it.”

To that end, the company recently entered the environmental market, as well as the media, film and television space. Hiring skilled underwriters has been a key component to Beazley’s strategy.

“Our underwriters are very close to the business, so they should be the ones making the decisions,” Baker says. “That, ultimately, is what I think most of our brokers want—they want to do business with somebody who can make a decision.”

Beazley sees the potential for growth in the cyber market on the heels the high-profile Equifax breach and ransomware attacks that took place last year.

“Canada’s a few years behind where the U.S. is in terms of buying [cyber insurance],” Baker notes. “One of the great things we offer is not so much the insurance product—which is important—but the services we wrap around it.”

As part of its cyber offering, Beazley offers credit monitoring and forensics, among other value-adds.

“When you buy a policy from us, you’re buying a service as much as you’re buying the insurance,” Baker says. “Even before it gets into our claims department, you’re dealing with our breach response team. That’s our biggest selling feature.”

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CEO Spotlight: Zurich Canada

This an edited excerpt from our December issue, where we talked to the CEOs of some of Canada’s largest insurers. Read the full story here.

Zurich underwent a huge transformation last year, combining its global corporate and commercial markets units into one commercial insurance entity.

The move was made to streamline the business and make it easier for brokers to work with the insurer. So far, brokers have responded favourably to the change, according to David Levinson, Zurich Canada’s president and chief agent.

Levinson says the big focus for Zurich in 2018 will be finishing what it started last year.

“It’s really easy to move people around and make changes on an org chart,” he says. “Now we want people to live it and breathe it. We want people to embrace the new change and the new culture.”

Brokers, he notes, have been eager to embrace the new structure.

“They’re thrilled that we’re one company now and we don’t have two access points,” Levinson says. “They didn’t know where to send their submissions in the past, so they’d send them to each unit.”

Under its new structure, Zurich has made underwriter empowerment a point of emphasis.

“We gave the underwriters a lot more empowerment to make decisions. We have products and services to support them, but we wanted them to make the decisions, which goes a long way with brokers. It’s much better—one line of accountability, you make the decision.”

The insurer also plans to trumpet its specialty products in the year ahead, such as cyber insurance. As part of its cyber offering, Zurich has partnered with Deloitte to review clients’ cyber exposures and help them understand the risks.

“What we’re trying to get customers to do is to start talking about [cyber security]. Are they talking about it in board meetings? Are they talking about it in executive meetings?”

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CEO Spotlight: Trisura

This an edited excerpt from our December issue, where we talked to the CEOs of some of Canada’s largest insurers. Read the full story here.

Continuing to develop strong relationships with its brokers will remain a key priority for Trisura Guarantee in 2018, says president and CEO Mike George.

“The reason for our success has been because of the broker support we’ve received,” he reflects. “There is no plan B—we live and die with the broker. I also happen to believe we have the best and most engaged team in the business. Working with great brokers and having great people is a winning combination.”

George says the company’s biggest challenge will be remaining relevant to brokers in an “incredibly competitive” insurance market. Trisura plans to follow a three-pronged strategy to ensure it continues to meet the needs of brokers.

“One, we have to get bigger, increase our capacity and be able to help our brokers with even their largest clients,” George says.

The company also intends to double down on its existing strengths.

“Even in areas like professional liability, where we’re really good now, we have to continue to push the envelope and start writing more and more segments of that business over time,” George explains.

Third, Trisura plans to broaden its product spectrum.

“Cyber is an example. We’ve embraced that challenge,” George says. “We’ve been offering that for a couple years now and some of it is embedded in our core products already. We also have a standalone product that we’re now able to support.”

Trisura also recently bolstered its book of business with the addition of RSA Canada’s contract and commercial surety business, which consists of approximately 450 accounts with annual premiums in excess of $6 million.

The majority of the accounts involved in the deal are small to midsize contractors, which George describes as the “bread and butter” of Trisura’s business.

“It ended up being a perfect fit for us. A lot of the brokers who were using RSA for this business are brokers we already deal with. There are also a few new ones, which is a win for us.”

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CEO Spotlight: Gore Mutual

This an edited excerpt from our December issue, where we talked to the CEOs of some of Canada’s largest insurers. Read the full story here.

Gore Mutual has been revamping itself over the past few years, and company president and CEO Heidi Sevcik says there’s more to look forward to in 2018.

“Gore Mutual began a program of transformation in 2014, and since then we’ve modernized just about every part of our business,” Sevcik told Canadian Insurance Top Broker. “We’ve introduced new core systems, sophisticated pricing and new products like Padlock and WaterEscape Plus.”

The insurer intends to expand its product offering in commercial lines this year, with an eye toward bolstering its mid-market and small-business packages. It also plans to launch a number of digital initiatives that will help brokers keep pace with evolving consumer preferences.

“In digital, we are launching a series of APIs that will enable brokers to quote, bind, issue and bill customers in their e-commerce environments,” Sevcik says. “This will be quickly followed by APIs for policy change and renewals. Our aim is to make Gore Mutual a go-to market for digital brokers, and we’re expanding our portfolio of new products designed exclusively for online distribution, including tenants, condos, contractors, office and many others.”

Gore launched Go Magazine, a publication aimed at its digital broker partners, last year. The insurer will also be hosting its second annual Fast Forward event for brokers—with guest speakers Peter Mansbridge and Rick Mercer—in Toronto in June.

“It’s an exciting time at Gore Mutual,” Sevcik says. “We’re an ambitious, growing company, and the best is yet to come.”

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CEO Spotlight: Chubb Canada

This an edited excerpt from our December issue, where we talked to the CEOs of some of Canada’s largest insurers. Read the full story here.

It’s been two years since Chubb was acquired by Ace Limited, and Chubb Canada president and CEO Ellen Moore says it’s been a smooth transition—both for the insurer and its broker partners.

“In Canada, we’re really excited about the continuation of the journey, and of the expanded product capabilities and services that the coming together of these two companies brings to our brokers,” she says. “The integration has not stopped us from being very market-facing. We’ve been very visible to [brokers].”

The key to the transition, Moore says, was communication.

“We were out early and often with the message that this is a growth story for the new Chubb: two very successful companies, both in market penetration and certainly financial strength, that could complement one another and push more product into the Canadian marketplace.”

Last year, Chubb launched a small business platform in the U.S., something Moore hopes Chubb Canada will be bringing to market in 2018.

With cyber security on the minds of many, Moore notes Chubb Canada is well positioned to help brokers ramp up their knowledge of cyber risks. She says Chubb has “on-the-ground experts in Canada” standing at the ready to educate brokers on Chubb’s cyber offering.

“I think that is where our brokers will be spending a fair amount of time over the next couple of years, learning the product and appreciating how they get in front of boards of directors and management teams to be able to sell this very needed coverage,” she says.

Continuing to invest in its broker channel will remain a key priority for Chubb in the years ahead.

“Chubb is very committed to the independent broker channel, specifically in Canada. We’re always looking for improved technology to work in concert with our brokers so there’s an ease of transacting business with Chubb.”

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CEO Spotlight: RSA Canada

This an edited excerpt from our December issue, where we talked to the CEOs of some of Canada’s largest insurers. Read the full story here.

Helping brokers succeed in an increasingly digital marketplace will remain a priority for RSA Canada in 2018, says president and CEO Martin Thompson.

The insurer launched a staggered rollout of RSAPro, a tool that allows brokers to quote and bind SME clients online, toward the end of 2017. RSA plans to continue developing the tool and getting more brokers on board with it this year.

“I think the SME area is ripe for a different approach and a different level of thinking,” Thompson told Canadian Insurance Top Broker. “It’s typically been quite difficult for brokers to go and do that business in a cost-effective way. That’s exactly why we developed Pro.”

RSA has also invested in mapping its customers’ journey with an eye toward developing technological solutions that address customers’ paint points.

“We’re using the customer conversation to inform our technology decisions, rather than have it be the other way around,” Thompson says. “We want to help [brokers] understand customer expectations and how those expectations are shifting.”

Additionally, the insurer has been involved with the Centre for Study of Insurance Operations (CSIO) in developing industry-wide data standards.

“If all the insurers run off and develop their own products and standards, the people who lose out on all of that will be the brokers,” Thompson says. “If we can get to a standard that means [brokers] can communicate with every insurer on the same [level], I believe passionately that that’s really important.”

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CEO Spotlight: CNA Canada

This an edited excerpt from our December issue, where we talked to the CEOs of some of Canada’s largest insurers. Read the full story here.

CNA celebrated 100 years in Canada last year.

The insurer has come a long way since it first ventured north in November of 1917—it had fewer than 10 underwriters in its Canadian office at the time—and Nick Creatura, president and CEO of the Canadian business, believes the best is yet to come.

“It feels like there’s a bit of a buzz about the organization,” Creatura told Canadian Insurance Top Broker. “There’s certainly a wave of energy flowing through CNA these days—not just here in Canada, but globally.”

Recently, CNA Canada has been strengthening its underwriting team and expanding its coverage. It now has an equipment breakdown component for its engineered property division—an offering that had previously been seeded out—and it plans to grow its specialty lines business in the years ahead.

“We only launched specialty in Canada in 2015,” Creatura says. “We’ve been building that—it’s an area where there’s tremendous opportunity.”

The company has also benefited from infrastructure investments happening throughout Canada—a trend Creatura hopes to see continue.

“There is a tremendous amount of investment in infrastructure across the country, and we’re participating in a good amount of that through our construction offering, the marine coverages we participate in and also through our surety business,” he says.

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CEO Spotlight: Northbridge

This an edited excerpt from our December issue, where we talked to the CEOs of some of Canada’s largest insurers. Read the full story here.

Innovation is the name of the game when it comes to Northbridge’s plans for the year ahead.

“We have some exciting things coming up in 2018 where we’re using innovation to enhance the experience for our brokers and their customers,” Silvy Wright, president and CEO of Northbridge Insurance, told Canadian Insurance Top Broker.

At the end of last year, Northbridge gave its auto insurance customers the ability to submit images from collisions online in order to have their claims adjusted the same day.

This year, Northbridge’s initiatives include a pilot project for electronic claims payments and trying out chatbots to answer simple customer queries online. The insurer also plans to help brokers focus on small business clients.

“One key customer segment we believe hasn’t been approached in a very focused way is the small business customer,” Wright says. “Brokers are helpful advisors to small businesses, and how we approach that customer with a product that speaks to them is very important.

“I believe that this understanding—coupled with simplifying key touchpoints for them, like renewals—will greatly enhance the customer value we can provide together with our broker partners.”

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Kristin Coulombe: Attracting and retaining top talent

Working at an insurance brokerage may not be top of mind for many students— but Kristin Coulombe is determined to change that.

“It’s quite a challenge to shout from the rooftops how amazing this industry actually is,” says the director of human resources for Jones DesLauriers Insurance Management Inc. (JDIMI). “People don’t really know that until they’re in it, or if they know someone else who’s in it.”

Since joining the JDIMI team in 2012, Coulombe has been involved in reaching out to local colleges and universities to hire students on a part-time basis for summer and winter opportunities.

“We like bringing in students to train them and get them to learn about insurance,” she says. “We do that knowing that they’re going back to school.”

So far, the strategy has been paying off.

“We have great stories in-house about individuals who have worked with us for three years part-time while they were getting their insurance education, and we pretty much guaranteed them a full-time job when they graduated,” Coulombe notes. “We have a few people like that. It saves a tremendous amount on training, development, time and cost for us to be able to do that. Plus, we’re giving back to the community—giving back to the schools.”

Retention strategies

But cultivating young talent is only part of the battle—retaining high-performing employees is also high on Coulombe’s list of priorities.

“It’s a very competitive marketplace, and in order to attract and retain, we know that we need to create different opportunities and different levels in our structure in order to support the growth and development people aspire to,” Coulombe says. “We’ve added a bit more hierarchy in our organization so that we have more leadership versus a flat structure, just for greater development opportunities and bandwidth as we grow.”

Coulombe’s HR initiatives have received the full support of JDIMI president Shawn DeSantis, who joined the company a year after Coulombe.

“He’s a huge advocate of the HR function, which is great,” Coulombe says. “Together, he and I have really transformed what the strategy is and what it will be going forward.”

Vision and values

Another one of Coulombe’s accomplishments at JDIMI has been helping the company establish a vision and values.

“We had the entire executive team come together and think long and hard about what we want our employee and customer experience to be like,” she says. “It was a great exercise to go through and learn about their business, their view of it and how we’ve been able to instill that in our business on a go-forward basis.”

While customer satisfaction is always a concern, JDIMI also makes employee satisfaction a point of emphasis.

“When our employees are here, it’s not just about the job that they’re doing every day,” Coulombe says. “It’s about their life and what they want to get out of this opportunity personally and professionally.”

Cultivating culture

A clear company culture is key to an engaged workforce.

Fortunately, Coulombe has had an ally in DeSantis in establishing a strong culture at JDIMI.

“He really believes, as do I, that your culture is what drives performance,” she says. “If people are happier at work, you will see greater levels of performance.”

So—what it JDIMI’s company culture?

“I would say the culture is very entrepreneurial. The producers own their books of business and they’re very passionate about that and their clients. Our culture is one where we focus on the client experience— going above and beyond all the time, every time…

“We’re an aggressive sales organization, and that does shine through in our culture as well. We are competitive and we like to win. And we’re also very social.”

But, much like the weather, culture can change when you least expect it. Much of JDIMI’s growth in recent years has come from acquisitions, which means maintaining a consistent company culture can be a challenge.

“Culture is something that’s always evolving. When you’re in a growth mode, like we are, and constantly acquiring businesses, sometimes your culture can change and shift,” Coulombe notes. “If you don’t constantly pay attention to that, it can get away from you.”

But, to date, JDIMI has successfully retained the culture it strives for.

“Our brokers are so professional. I look at an insurance brokerage just as I would look at a professional accountant or a professional lawyer. They’re intelligent, professional individuals helping other professionals mitigate their risk. And it’s something to be proud of.”

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Copyright © 2017 Transcontinental Media G.P. This article first appeared in the December 2017 edition of Canadian Insurance Top Broker magazine

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Building your small business prospect pipeline

If you’re a small business insurance broker, building your prospect pipeline is key to your success. But before you create a strategy, you need to understand the value proposition of your brokerage, says Igor Bubic, the director of marketing and communications at Gore Mutual. “If you don’t recognize what’s uniquely different about the services you offer, how can you expect a customer to know?”

Brokers will also need to determine who their ideal target client is, says Sylvia Garibaldi, principal and founder of SG and Associates in Toronto. “You’ll have to locate where these people hang out. It may be finding associations that your target audience belongs to. You need to know who they are and what their pain points and needs are.”

Social media use

To earn a prospect’s business, it’s important to become a trusted business advisor, says Larry Graham, an associate at LePhair Associates in Toronto. One way to achieve that status is through social media.

1,143,630
The number of small businesses (with up to 99 employees) in Canada in 2015.

Source: Statistics Canada

Graham says you can do this by writing blog posts on LinkedIn about topics targeted to your ideal client. For instance, if you’re targeting microbreweries, write a blog post about trends in that space. Once people can see your interest and credibility in an insurance niche, then you can search for specific prospects via LinkedIn’s search tool.

LinkedIn allows users to search for specific players in a given industry, Graham notes. For example, he says, you can search for “VPs of operations in the GTA.”

However, Graham warns brokers to make sure their profiles are up to snuff before reaching out to prospects, emphasizing the need to stress your brokerage’s area of expertise on your LinkedIn page. “I could have all the leads I want but if my social profile [is] self-oriented, it’s not going to resonate.”

If a prospect isn’t on LinkedIn, he suggests sharing articles with them through email. “I should be looking at trade mags and my own links to that industry that would keep me understanding what’s going on. If I know you’re interested in construction, I’m going to look into information that would be relevant, then send it to you.”

Outside the digital realm

Garibaldi says if your ideal client isn’t active digitally, one of the best ways to establish your credibility in a market sector is through speaking engagements at industry events. “It could be a small room of business owners, having a place where you could speak and build credibility.”

“If you don’t recognize what’s uniquely different about the services you offer, how can you expect a customer to know?”

If you choose this method, she continues, “It’s always got to be about something your ideal client finds painful. You can only get their attention when you address their pain point.”

If you prefer to avoid public speaking, she suggests finding a prospect’s centres of influence. These “are the people who influence your ideal target audience. They’re perhaps not your ideal client, but they work with your ideal client in a non-competing industry; maybe a life insurance agent who specializes in group benefits, or [a] lawyer.” Once a relationship is built with a prospect’s centre of influence, an introduction can be made.

A third option Graham mentions is asking current clients for a referral. He suggests reaching out and saying, “I appreciate the way we’ve been working together for a while. After I deliver on your expectations of me, would you be comfortable providing me with an introduction to someone like you in the same—or another—industry as another potential client?”

He reiterates that it’s key to ensure you have met the client’s expectations so they’re comfortable with this process. “To have the guts to do that is important. It would be your best way to get new business. Not many people do it.”

Closing the deal

If you manage to secure a first meeting with a prospect, that doesn’t mean it’s guaranteed business. Garibaldi says, “There’s this myth out there that you can’t bring in clients in the first meeting, and in this particular case, you probably can’t because you’ve got information-gathering to do. I think the objective of the first meeting should be about securing the second meeting.”

10,000
The number of small business owners who participate in more than 300 events across Canada for Small Business Week.

Source: Business Development Bank of Canada

To hook the prospect in for a second conversation, you need to prove your value and expertise. One way to do this, Garibaldi says, is by asking questions to establish the prospect’s points of pain. For example, you could ask a prospect what their business might look like if they didn’t have an insurance product and a loss were to occur.

Getting prospects to dig deep will help you analyze how your services can best benefit them. “That’s the act of using powerful questions, because as the broker, you should be doing minimal talking the first meeting. It’s all about getting the prospect to talk by asking powerful questions,” Garibaldi says.

Another key to securing a second–or third–meeting is reinforcing your competitive advantage in the prospect’s industry.

Behzad Salehoun, the co-founder and innovation lead at BrokerLift, notes that small business owners typically aren’t well acquainted with the inherent risks involved in running their businesses. “There’s a huge opportunity for brokers to share information and provide value to small businesses out there,” Salehoun says.

Then, if you do secure the prospect’s business, Bubic reminds brokers it’s important not to forget about them—or your existing clients. “Use those existing customers to become your brand ambassadors. Cater to their needs, and the best tool is always word of mouth.”

__________________________________________________________________________
Copyright © 2017 Transcontinental Media G.P. This article first appeared in the December 2017 edition of Canadian Insurance Top Broker magazine

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Could you get sued?

It’s the call that no broker wants to receive.

An angry and confused client is on the line, wondering why a claim sent to an insurer was denied. The money is necessary, the client argues, to pay for damages they never expected and cannot afford.

And then might come the accusation: “You didn’t do your job. You are supposed to make sure that I have the right coverage to protect me from situations like this. Otherwise, why do I have insurance?”

The broker’s next call could be to his or her own insurer to inform the company that collecting on the broker’s errors and omissions (E&O) insurance might become a pending reality.

The staff at ENCON Group Inc. is getting more calls and emails along these lines. The managing general agency has seen an increase in the number of E&O claims it receives, says Marianne McKinnon, senior underwriter of E&O, at ENCON.

In 2015, 51% of those claims came from brokers who allegedly failed to provide adequate coverage based on clients’ needs.

“That can be anything from not even obtaining the necessary policy to obtaining the policy but with insufficient limits, or even obtaining the policy but maybe emitting certain other key coverages that may have attached to that policy,” explains McKinnon. “That has been pretty consistent since we started handling broker claims about 25 years ago.”

“As a broker, you can’t put your head in the sand. You need to be aware of what people are actually doing.”

Fourteen percent of claims to ENCON come from situations in which clients claim their brokers did not provide proper or sufficient advice about the coverage.

A duty of care

The problem with these cases is that they cut to the heart of a broker’s obligation to provide a duty of care, a legal standard applicable to any Canadian broker, regardless of jurisdiction.

Brokers owe a duty to customers to provide information about their insurance coverage, to further advise them as to what other forms of coverage are available, the associated costs with that coverage, and what might be required to meet the customers’ needs for coverage, says Kevin Lasko, a lawyer at Blouin, Dunn LLP.

If brokers are not asking enough questions of the client regarding their possible needs, they can’t possibly be in a position to offer proper coverage; and that could become an issue, he says.

Whether the discussed coverage is meant to protect customers from age-old issues or evolving risks that are changing the insurance game, brokers must remember to cover themselves. An informed understanding of available products and their customers’ needs will help prevent that run to collect E&O.

The role of insurance in protecting homeowners and business owners from damages caused by extreme weather is well known, but the frequency and magnitude of rain, hurricane and fire events in recent years has challenged the P&C industry.

Airbnb rates are
30–60%
cheaper than hotel rates worldwide.

Source: The Brookings Institution

In the case of flood-related events, the industry responded with an increase in the number of personal lines products that offer overland flood protection. Choice is good for the consumer and the broker, but with that choice, comes great responsibility, says Gord Enders, president of Direct-Line Insurance.

“The broker has to really research the products and make sure that they are advising the client of the right product,” Enders says. “There is a great deal of responsibility in making sure that we are asking the right questions and drilling down and making sure that clients are aware of those choices in front of them.”

Price-conscious customers may want to stick to basic coverage to keep premiums low, but brokers should be reminding them of how weather has become more unpredictable and drastic in recent years.

“People who thought that they would never ever have a loss for water are experiencing those losses. That’s up to us to really educate and have those real discussions with clients,” says Enders.

Brokers should also remember that asking probing questions about a client’s property may even result in some savings. For instance, a broker who is aware that a client’s home is made of weather-resistant materials may be able to find an insurance package with a reduced premium, according to George Hodgson, CEO of the Insurance Brokers Association of Alberta.

Commercial risks

On the large commercial accounts side, one pitfall for brokers is not keeping up with their clients, who generally experience more rapid changes to their circumstances than personal lines clients.

“[Commercial clients] may start manufacturing a new product or they may buy a new property where they are going to be doing something different from what they are currently doing, and so that needs to be taken into account,” says Chris Stephens, national product leader at Burns & Wilcox Canada’s Professional Liability Centre of Excellence. “[If] it’s a material change, the insurance company needs to be notified [and] the broker needs to be on top of that as well.”

Jason Cedrone, senior vice-president at JLT Canada, has a strategy to ensure he fully understands his clients’ business development plans and the potential risks that could ensue. It involves meeting with clients multiple times throughout the year to have those conversations in person. These meetings help Cedrone produce a comprehensive risk management plan, but also differentiate his level of service from others.

“Clients who only see their broker at renewal are usually a source of great opportunity [for brokers like myself to] demonstrate a different type of value-add. It’s not just keeping up with the changes; it’s more about how you engage with your clients,” says Cedrone.

“The broker has to really research the products and make sure that they are advising the client of the right product.”

Then there are the emerging risks that are relatively new but gaining traction every day, thanks to the rapid pace of technology. The example most cited by the professionals interviewed for this story? Cyber breach.

“Brokers are telling us that they’re having a hard time selling cyber coverage because a lot of the smaller businesses think that it’s a novelty coverage. They think that because they’re not the CIBCs or the Equifaxes or the Sonys of the world, they don’t have cyber exposure, but that’s not it at all,” says McKinnon.

Smaller commercial clients may not see the need for cyber insurance but that does not nullify the broker’s responsibility to be informed on the issue, understand the available cyber products and, at least, recommend the proper coverage.

Understanding the intricacies of the coverage is another way for brokers to protect themselves from a cyber-insured client’s wrath in the wake of a denied claim. Cyber policies are not necessarily an umbrella-type of coverage for any scam involving the use of technology.

Lasko is studying the interpretation of cyber policies in U.S.-based lawsuits in which policyholders are challenging their insurers’ rejection of a claim. He finds judges are interpreting the policies, including their exclusions, as they are written.

Fraud conducted by social engineering is an example of a possible exclusion within policies. If a nefarious party calls or emails the employee of a company, pretending to be a senior executive, and convinces that employee to send company funds to a non-verified source, that company may be unable to rely on its cyber policy to recoup that loss.

Lasko has reviewed cases in which similar events occurred and the courts have typically said that the duped employee should have taken additional steps to ensure that the communication was legitimate.

18%

of clients with professional services firms reported social engineering breaches in the first three quarters of 2017.

Source: Beazley

When is personal commercial?

Brokers should also be familiar with a concept that is a hot topic for consumers, media and various levels of government: the sharing economy.

As some Canadian municipal and provincial governments continue to try to get a handle on regulating issues such as shortterm apartment rentals and ride-hailing, the insurance industry has been working on products that could apply to more flexible uses of homes and personal vehicles.

The motor vehicle side of the insurance equation is starting to settle because most jurisdictions in which Uber is allowed to operate require there be some form of insurance available for drivers who participate in the service, says Jonathan Meadows, a partner at Harper Grey LLP.

Meadows believes the bigger risk right now is short-term apartment rentals, because insurance policies for this use are less common.

Just as brokers would ask clients whether they use their cars or homes for business use, they should specifically ask whether clients supplement their income with sharing economy activities. Clients may not provide this information, unless directly asked, because they don’t realize their personal lines policy likely will not cover this type of commercial activity.

“As a broker, you can’t put your head in the sand. You need to be aware of what people are actually doing. And that’s why the sharing economy issue or issues that are related to that are so critical because people are actually doing this on a huge scale,” says Meadows.

The possibility that Canada may see a case in which a policyholder sues his or her broker over a denied claim connected to a sharing economy activity is on Meadows’s radar.

“I can see that being a case at any time. You have a big loss out there and somebody is going to name the broker as a result of a denial on that basis,” he says. “It’s coming. It’s almost inevitable.”

__________________________________________________________________________
Copyright © 2017 Transcontinental Media G.P. This article first appeared in the December 2017 edition of Canadian Insurance Top Broker magazine

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Hook new customers with an effective brand strategy: Kingsley, Top Broker Summit

Can you define your brand in a few words on a sticky note? Can you define your brand at all?

When professionals reach the point in which they find it difficult to express what they are known for, it is time to explore and define their hook, said Justin Kingsley, a creative strategist and writer, at Canadian Insurance Top Broker’s annual summit in Toronto on Monday.

Related: Transformation of P&C business is required, not optional: CEOs at Top Broker Summit

Brokers and their employees can begin this process by squeezing their definition of their brand on a sticky note, he suggested.

The sticky note exercise involves gathering company employees in one room and asking them to write down 12 or fewer words that describe your company’s brand. Employees are discouraged from talking to each other.

“You’re going to get the gut truth out of your people. Not the one that is written in your mission and value statements but the one that comes from people that spend every day in your company,” explained Kinglsey, whose client list has included Montreal’s pro hockey team, the Canadiens and mixed martial artist, Georges St-Pierre.

Those who are visual thinkers might find it helpful to have the team go through newspapers and magazines and cut out images that they feel represent the company brand.

Related: Marketing Masterclass

Another exercise involves asking your team key questions to help everyone understand how they are supposed to promoting the business. These can include:

> What is our company about?
> What is the benefit of our company?
> What is our real challenge?
> Who is our biggest enemy?
> What makes us different?

“If you don’t get to the right answers and you’re the leader, that means that you have got work to do to identify these things,” Kingsley said.

The one way a professional should never identify him or herself is by the amount that they charge their customers. Competing professionals can just continue to go lower on the price scale until doing so actually becomes a problem for the sustainability of the business, he said.

Once the branding story is determined, brokers have to understand they literally have seconds to share that story and convince potential customers to try the broker’s service.

You have three seconds to tell someone you would like to share your story, 33 seconds to actually tell your story and 333 seconds to get their business, Kingsley said: “All of your [employees] have to understand this is how it works.”

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What brokers need to know about insurance renewals

The insurance value chain is a long one: reinsurer, reinsurance broker, insurer, MGA, broker and consumer. So it’s rare that what happens at the very top — reinsurers asking for higher rates — affects what happens at the other end of the spectrum — primary insurance brokers telling their clients they need to spend more.

“It’s only in peak scenarios that reinsurers make a tremendous difference in the results of the insurers,” says Philipp Wassenberg, president and CEO at Munich Re Canada. He notes that for a primary insurance company, reinsurance premiums may make up one or two per cent of their expenses, while claims costs often take up more than half. “Even if [reinsurance costs] change, let’s say 10% per year, up or down, that’s only a tenth of a percent in their own cost difference.”

There’s still “lots of domestic reinsurance capacity for appropriate risks,” says Eric Steen, executive vice-president of reinsurance at JLT Re Canada. But when major claims events occur, reinsurance coverage gets pricey, and trickles down to policyholders. One such example is the Fort McMurray wildfires in May 2016, the largest P&C loss in Canadian history.

“I would suggest the insurance community has been and will continue to be impacted by fires across the country, which will diminish their profit margins, and this will have to be transferred to the insureds — you and me,” Steen says.

Wassenberg notes wildfire is an unmodelled peril because it traditionally doesn’t consume top capital requirements. “If [unmodelled perils] become a problem suddenly and you don’t get enough money for that over time, then there would be repercussions to the availability of a fundamental product,” he says. He adds that while this summer’s B.C. wildfires aren’t on the scale of the Fort McMurray devastation, reinsurers are “very nervous.”

“I would suggest the insurance community has been and will continue to be impacted by fires across the country, which will diminish their profit margins, and this will have to be transferred to the insureds — you and me.”

Reinsurers can’t simply exclude fire from policies — that was the original insured peril when insurance first began. So “wherever there are catastrophe layers with large exposure of potential fire, that is definitely going up in price,” Wassenberg says.

In the past, after large losses such as Hurricane Katrina, Superstorm Sandy and the World Trade Center, “reinsurers did overreact or demand more just to have some earning payback parts built in,” Wassenberg says. He declines to share numbers, citing differences between clients, but argues that in the Fort McMurray aftermath, increases have been “very fair.”

Brokers should also expect rate increases in directors’ and officers’ insurance, says Jeff Turner, partner and managing director, Toronto, at the reinsurance brokerage Beach & Associates. “There’s lots of competition on the primary side and it’s been suffering losses as of late. That’s one of the tougher areas, [where] reinsurers are less likely to give in on rate reductions and are actually more likely to push the rates up,” he says.

He notes increases will be “modest” — likely in the single digits — and tied to areas where reinsurers have seen losses. In June 2017, for example, mortgage lender Home Capital Savings agreed to pay more than $29 million to settle allegations from the Ontario Securities Commission (OSC) and the class-action lawsuit against the company.

“I can’t really comment on any of that,” says Turner, “other than to say reinsurers are on the hook for substantial losses for that. And there are a number of others out there in the market right now,” such as class actions against Valeant Pharmaceuticals and Amaya.

In terms of auto insurance, Steen says that rate increases depend on individual carriers’ performance. On the whole, however, rising costs for repairs and injury claims have thinned primary insurers’ profit margins. And if they’re not making much money, it will cost more for reinsurers to support them, Steen notes.

Last year’s changes in Ontario auto insurance legislation caused “some of the insurers to ask the reinsurers to decrease the premiums,” Wassenberg says. “I think that was premature and the actual severity losses that we are picking up as reinsurers — and I’m not talking frequency because that remains with the insurers — will probably not go down.”

__________________________________________________________________________
Copyright © 2017 Transcontinental Media G.P. This article first appeared in the November 2017 edition of Canadian Insurance Top Broker magazine

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