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Summer Storms, GIC Elections, Problems with the Level-3 Licence Exam

Posted By Thom Young, August 12, 2016

The Lazy Days of Summer Are upon Us

We continue to have an exceptionally weird summer here in Alberta. Someone told me that Calgary had more rain in July than Edmonton and that the total amount topped the usual annual precipitation for the city. All I know for certain is that every day in Alberta seems to end with severe weather warnings for many places. While we were in Ponoka at the beginning of July, a tornado formed almost directly over us. It touched down less than two kilometers away, took the roof off a home under construction, and threw a porta-potty into the trees, making quite a mess. Luckily, the amount of damage was negligible. Still, I’m left wondering what could have happened. On the ridge east of Aldersyde where I live, we have watched the severe storms moving from the north west to the south east through Calgary, Okotoks, and High River, soaking our place with large amounts of rain. We’ve seen many funnel clouds, and hail storms are almost routine. Cutting the grass is becoming a full-time job!

The summer storms have produced some catastrophic losses for our industry, and summer is far from over yet. The Fort McMurray fire has been declared the worst insurance disaster in Canadian history, a record previously held by the 1991 Calgary hail storm. This past weekend saw parts of Calgary dealing with wind, hail, and overland water—all in one afternoon. Will we start seeing claims settled under the new “flood” wordings? The response of those who were not offered the coverage and have now suffered an uninsured loss will be interesting. Can any of you enlighten me with examples of any such situations?

Elections for the General Insurance and Life Insurance Councils

If you hold a General or Life insurance license, you should have received an email link to the Election Buddy website for voting. This link is configured uniquely to the email in your AIC profile. If your email address has changed, contact the AIC and have this corrected so you can vote. Voter apathy is a concern, especially given the history of how the election was created. Before the 1990s, the superintendent of insurance would choose agents for the position on the councils. Industry pressure to make the process more representative initiated a change to the process, and we were given the ability to vote for candidates. Ballots were mailed out but yielded extremely poor returns. The electronic voting system has been in use for quite a few years, but the response rate is rarely much above 10%. Please stop what you’re doing, and invest 10 minutes of your busy day by clicking on that link and choosing a candidate to represent your interests in the regulatory process.

Six candidates are running for the two openings on the General Insurance Council. My term has expired and I am running again. If I am successful, I think this will be my last time on the General Insurance council. I am going into my second term, candidates are allowed to serve only on two consecutive 3-year terms, and I am getting close to retirement. Sherif Gemayel, who is an IBAA director, is also running. If you click on each candidate’s name, you can read a brief bio. The entire process of going to the website, reading each bio, and selecting two candidates will take you less than 10 minutes. Do it right now! If you have only 10 minutes, do it rather than read the rest of this essay! If you have a life-insurance licence, you will have received an email for this election between three candidates as well. Roy Jaques is running again and has served the life-insurance licence holders well. Again it takes less than 10 minutes to click the link, review the list, and make a choice. When a regulatory change or review arises that you do not like or have thoughts to share, you can open the conversation with “I voted for you….” You will likely have more influence in the outcome.

If you’ve read this far without voting, let me remind you once again. Go to the email from Election Buddy, make your choice, and then come back to read the rest of this entertaining epistle. It will wait for you!

Don’t you feel better that you did that?

Alberta Level-3 Licence—the Designated Representative for Your Brokerage

Let me apologize to those of you who have no interest in the Level 3 issue. While this discussion might be boring for you, I would appreciate you mentioning to your DR that she or he might be interested in this article.

When a brokerage started up, it used to have to register its name with the AIC. The name was then linked to the brokers working there, and that was pretty much it. The regulations on “holding out” are quite simple. The brokerage advertises itself. The broker employee licences are managed by the DR for the corporation (including the DR). All these staff are bound by the regulations governing all General Insurance agents. Other than the regulations specific to the role of a DR (supervising the activities of sponsored agents and notifying the AIC when an agent is terminated), the rules for market conduct of the brokerage are the same for the agents.

A couple of years ago, a new regulation that required the DR to pass an examination came out of the blue. While it did not specify what had to be tested, the direction from the government to the AIC was clear: DRs are to be tested. No one recalls any industry consultations that implied a need for this testing. DRs in other provinces aren’t tested. I certainly would have had an opinion on this requirement if I’d been asked. I first became aware of the new testing requirements when people started calling me to complain about the difficulty in passing this exam. The pass-rate for the Level 3 exam continues to be ridiculously low. Strangely, most of the people having difficulty with this exam are long-term, experienced brokers. Many of the new people attempting and failing it have demonstrable academic skills, business degrees, and advanced management experience, all of which should have made a reasonable test of their aptitude and the understanding of a DR’s role a breeze. Either the test is not focusing on what these people were studying, they were studying the wrong stuff, or the educators in our business are teaching the wrong material. Regardless of how the change occurred and who is to blame, the problem is serious for our industry. In my role as one of your broker representatives on the General Insurance Council, I have been working very hard to fix it by sitting on the licensing course-curriculum review committee for all three levels of licensing as well as on the equivalency committee.

This spring, we made recommendations to the government to amend the regulations and approve particular equivalencies for Levels 1, 2, and 3 licensing exams. While the process of government approval on this is painfully slow, I have heard that progress is being made to get this implemented. I am not holding my breath for an immediate response, but I am hopeful. We have amended the curriculum of study for both Level 1s and 2 licensing. Level 1 was implemented several months ago, and we have seen some improvement in the pass rate. It is still under 40%, which in my view is unacceptable, but it is steadily improving from the low 20s when we began the process. The General Insurance Council is working with the education stakeholders to help them further understand the curriculum necessary to pass the exam. After each review, the results seem to improve, and we seem to be moving in the right direction: even before the exams changed as a result of the curriculum review three years ago, the pass rate for the Level 1 licence exam was never higher than 48% over all. Individual course providers have had better results than the average. The new Level 2 examinations, based on the revised curriculum, were introduced last month. The initial results from a very small sample show a mid-40% pass rate, and we are hopeful that for Level 2 we have found the balance we were looking for. Time will tell. The Level 3 examination remains the same convoluted and confusing thing it has been since the exams for this level were introduced.

The committee has so far done a lot of work to make the testing of the DR commensurate with the role. As all the technical insurance material is tested in Levels 1 and 2, we have removed it from the course curriculum for Level 3. The requirements for the information necessary to run a business, not relative to the regulations, have been reduced to an appropriate level. However, we have no unanimity on these requirements. Some believe the exam should test a level of proficiency that is beyond the reach of regulations governing our business. I am not in that group.

I believe we should not even need an examination to become a DR. What a DR really needs to know for regulatory obligations is covered in two pages of the regulations. A DR should have a Level 2 licence and have been in the business for two years. The management and organizational material, as well as the insurance technical knowledge, is already tested in the Levels 1 and 2 licences. The role of a DR is not hierarchical either in the gathering or the exercising of expertise. Often in larger brokerages, the DR is an HR function, while in the smaller ones the DR also empties the waste baskets and answers the phones. How do you test for proficiency at the level necessary for a 100-person brokerage or a 3-person brokerage and be fair? How do you permit the smaller brokerages to start up and become established in the usual manner without creating a very challenging barrier with a complicated exam designed for proficiency not needed in a small brokerage? Eliminating the need for an exam is an option, but complicated, because it would involve a change in regulations. The best solution is to make the exam relative to the role of all DRs at the lowest common denominator.
    
I have strong views about regulations limiting access to our business and will not bore you here with a thousand-word essay on it. I ask you to think about these issues because the AIC is going to send all DRs a survey. The direction of the Level 3 licensing study and testing will be guided by the responses received. I am told the survey will be out in the coming weeks, and I am looking forward to seeing good participation in this process. The relevance of the representative process that results from the voting for members of the councils is often challenged because voter response is so low. When I have dug my heels in on an issue, I have been told that I am not representative of brokers because so few actually participate in the voting process. I certainly hope that each DR will grasp the serious need for input and a positive result on this issue. At least a half dozen smaller brokerages are currently in a holding pattern on the sale and the succession of their businesses due to the difficulty of getting this Level 3 licence in place, particularly in the rural communities. This problem needs to be fixed now.

Those who is not Level 3 licence holders will not get this survey but may well have some ideas on this topic that are important. Do you think you might want to own a brokerage some day? If so, you will need to get a Level 3 licence. Send your opinions directly, and I will make sure they are reviewed by the General Insurance Council. (I will meet with members of the council in person if I am successful in getting elected to another term.)

In Closing

That’s it for this issue. We’re off to points west for a couple of weeks, hopefully to get away from the never-ending rain and thunder storms. I’ll have to get some heavy equipment in to cut the grass when I get back!

If you haven’t voted yet, please do it now!

The opinions expressed in this blog are not necessarily those of IBAA.
Comment on this post below or email Thom Young privately. Thom also encourages suggestions for topics.

 

Tags:  elections  flood  General Insurance Council  hail  Licensing Level 3  tornado 

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