Print Page   |   Contact Us   |   Sign In   |   Sign Up
Young's Stuff
Blog Home All Blogs

IBAA Convention, Cybercrime, Gore Mutual Conference, BMS-Insurer Technology, Demise of the Broker, Flood Conference

Posted By Thom Young, June 21, 2017
As we get closer to our ever-brief summer, I seem to be busier than ever. If you’ve missed seeing my blogs, please be assured that I’m doing my best to catch up with the schedule.

IBAA Convention 2017

If you didn’t attend the IBAA convention in May, then you’ve shortchanged yourself on an easy commitment to keep yourself apprised of the changes going on in your industry and who is leading us in the process of adapting to them. In all the years I’ve been trying to figure out how to remain aware and responsive to the challenges we all face in this business, I think this year’s convention was the most helpful to me. The seminars were interesting and informative (especially my little presentation), and the new people in attendance this year brought with them refreshing perspectives to deal with old issues. I strongly recommend you attend the convention next year. I enjoyed the ability to meet new people as much as see old friends, but convention is not just all about partying and having a good time; it’s about remaining competitive and informed so that you can lead yourself and your business through the challenges that change brings.

Cybercrime Is Real Crime!

One of the interesting presentations at this year’s convention was a cybercrime panel that was stewarded by very knowledgeable insurance and security experts. Of interest was the large show of hands when the audience was asked who had been a victim of a cyberattack. The response was larger than I expected given that a significant number of people in the room would likely not be inclined to admit to the event. Clearly, this issue continues to grow beyond a mere annoyance to a significant risk of financial loss for us individually, for our businesses, and for our customers.

I was one of the people who raised my hand. I’ve had my credit and debit cards scammed several times. Once in Mexico, I received a call from the bank security people asking me if I’d just purchased a TV in Cancun. I was surprised: I was in Mazatlan at the time. Another time, my U.S. dollar credit card was scammed at a merchant location in Sandpoint, Idaho. By the time I’d gotten home, over $14,000 in bogus charges were accrued against my account. The charges were all reversed, but fixing the problem was still a heck of an aggravation. Throughout all of these scams, no one in law enforcement would accept a complaint. The Federal Police in Mazatlan and Cancun, the Sherriff in Sandpoint, and the police in Calgary and Tel Aviv where the fraudulent charges occurred showed no interest in initiating an investigation to charge the perpetrators involved. All claimed that the jurisdiction of the events made them of no concern to the individual agency. In reality, they all had no knowledge of the process or interest in the outcome of this criminal theft. Credit card scams are less likely to occur now that most cards are equipped with a chip, but the process of obtaining the pin number through criminal entrapment and observation continues. One of my business interests was recently subjected to a ransomware attack that enabled a criminal to get a worm into our computer systems that encrypted our files. Attempts to open programs directed us to call an 800 number that would provide us the encryption code for the nominal fee of 35 bitcoin. Fortunately in our case, our backup protocols allowed us to restore our system and avoid paying the ransom, but we lost half a day of inputting and spent a whole day and night restoring our systems. With bitcoin’s trading at around $3,500 USD, the solution was a lot of work but each a cheaper solution than paying the ransom.

Imagine a scenario where someone broke into your home, found your safe or filing cabinet where you keep all your personal information and financial records, changed the combination to it and the alarm codes into your house, left a note tacked to your front door with instructions to call the people who had broken into your home for the new codes and combination, and were very helpful when you called them in getting you back into your home so long as you paid them $5,000 for their assistance. Ransomware on a business or personal computer has the same effect. Wouldn’t you define the perpetrator as a criminal who should be punished severely?

In order to remain secure from criminal attacks on your computers whether at home or in your business, you need get up to speed on the security processes that you need in place on your systems. You have to defend them with proper procedures and security software that will keep your data safe. In today’s day and age, you can’t run your business without computer systems that are connected to the world wide web. Accounts are settled online, products are sold online, payroll is processed online, and client data exists in the clouds. If you’re not taking actions to secure your systems and your clients’ data, you may well be in violation of several privacy statutes and subject to fines and penalties in the event of data breaches that release clients’ personal information. Beyond the business costs of such a security failure, you’re looking at regulatory penalties for allowing it. If you don’t have the expertise in house to install security, then you have to get yourself some professional help, have someone in your office attend the training classes needed to ensure your compliance, and review your internal security protocols to ensure your people are following them. In almost every case that malware enters into a computer system, it arrives with an unsuspecting employee innocently processing a transaction outside of the firewalls you’re using to secure your systems. Phishing attacks in emails; piggybacked malware on flash drives, telephones, cameras, Sony Readers, Kobos, and Kindles; and naïve trusting employees opening the door to the criminals are all things that knowledge through training can prevent.

The last word of advice that I have on cybersecurity for all of my colleagues in this business is that coverage for this peril continues to evolve. Several really good packages are available at increasingly lower costs. Our industry responsibility is to get ourselves informed about them and to offer the protection provided by them to our clients. Don’t get caught in the situation where a cyber breach of computer systems causes your clients a substantial loss that could have been mitigated by a policy you could have offered them. While some businesses need this coverage more than others, no businesses operate in today’s business environment without the risk of a data/computer system failure impacting their operations. While considering this coverage for your clients, ensure that your brokerage has the proper protection in place to keep your doors open should a cyber breach occur on your watch.

Looking Fast Forward

I had the opportunity to attend Gore Mutual’s Fast Forward conference in North York, Ontario, last week. Gore Mutual brought together a select group of brokers to talk about the future of our business from the perspective of the changes we all face and will have to adapt to. The morning began with presentations by David Suzuki, followed by Commander Chris Hadfield, and wound up with futurist Jim Carroll. Each focused on his area of interest. Dr. Suzuki gave a fairly bleak summary of the environmental prospects for our species and the planet unless we change our ways. Commander Hadfield focused on the process of solving problems, declaring that anticipating and preparing for problems was more productive than worrying about them. Mr. Carroll talked about the pace of technological change outstripping predictions by over a hundred years. Much to think about and much to talk about.

The afternoon session was a structured interactive panel discussion on several topics. A panel of selected industry representatives was on stage, and moderated topical discussions were driven by Gore representatives. Interaction with the audience was facilitated by a meeting program called “Go Connect,” which allowed the audience to comment and question the topics in real time. At the end of each moderated discussion, the panel members selected questions they addressed. The focus of the three panels were the challenges facing the distribution network, evolving opportunities for synchronizing the technology platforms in use by our industry, and the increasing risks of damage to the industry and the public through cyber malice.

I must admit that at one point in these discussions I was feeling kind of jaded. I’ve reached the point in my evolution through this business where I’m now hearing new people discussing old issues like they are new and proposing solutions that have been attempted several times before with less than stellar results. Perhaps because I’ve been speaking out for the past 35 years about the lack of cooperation on communication issues in the insurance industry, I’m once again dismayed to find the same entities entering the discussions once again as if they are new. IBAC, IBC, CSIO, and IBAO all had representatives in the panel discussions, and all were politely nodding during discussion of the “technology crisis.” The issue is only of concern to them now because disrupters are just now starting to exploit the opportunities of our industry’s failure to unite on a functional common platform in technology. Only one spoke up about the opportunity this situation presents to fix the technology rapidly and without too much dissention because the technology is readily available at reasonable costs and the limited number of players both on the Broker Management Systems side and the company side of our industry makes the change feasible. The point was valid, but not one taken up by the panel’s other representatives. At this point, I just sighed in recollection of the failed SEMCI projects I had been involved in and even as far back as the ICEnet CSIO undertakings that I had been active in development and promotion of—all failed to be taken up by the very people funding the research.

I’ll say it again, if the insurance companies had been charged with the development of telephone technology, we’d have a telephone in our office for each company we deal with. (The last time I said this, the president of a large Canadian insurance company lectured me on how much more complicated computer systems were—duh?) Communication systems are very complicated, and they’re much more complicated to work with when the point of sale for products (the broker) has to follow completely different protocols to enter the data on every company portal and requires yet again different hardware platforms to unite the data. Maybe the broker’s inability to capitalize on this information (the metadata) in the incapable Broker Management Systems has finally been the eye opener.

The financial industry has actually been able to get their systems doing some of the things that would improve our industry’s service, marketing, and actuarial prognostications. Meanwhile, I’m trying to explain to a customer that I don’t know why he can’t make an email payment to the insurer we placed his business. Go figure.

70 to 90 Brokerages Left in All of Canada in 8 Years???

One of those dumbfounded looks from the crowd at Gore’s Fast Forward conference came when one of the panelists made this response to a question about the future for brokerages:

“‘In my view there’s probably going to be 70, 90 brokers across Canada seven or eight years from now,’ Aly Kanji, President and Chief Executive Officer at InsureLine said. ‘I just don’t think small, independent brokers can survive. I don’t think you can compete in the face of the consolidation that’s going on and the super brokers that are forming.’”

If I had a nickel for each time I’ve heard someone predict the demise of the broker distribution network, I’d have a whole lot of nickels! We’ve survived direct writers, banks, telephone sales, and internet marketing; various forms of franchising, nesting, and strategic alliances; and no end of unfair treatment by insurers limiting our markets and interfering with our operations. Still, we hear young people who have no idea how resilient our business is making these outlandish statements. We might be facing some hurdles that we will need to adapt to, but we will be here in 8 or 80 years. That’s how I see it anyway.

In Conclusion

I continue my journey around Southern Ontario and will attend a Flood Risk conference on June 12th. This should be interesting as we’re finally seeing the claims results of a serious flooding season after the implementation of flood coverage by the industry. I will do my best to have another issue out by the end of the week. In the meantime, I’m hoping you’re having a good summer. Other than the severe weather and thunderstorms, it’s sure better than the winter we had.

Keep those emails coming!

 

The opinions expressed in this blog are not necessarily those of IBAA.
Comment on this post below (you need to be logged on for the link to appear) or email Thom Young privately. Thom also encourages suggestions for topics.

 

Tags:  broker channel  broker management system  cybercrime  flood  Gore Mutual conference  IBAA convention  insurance technology 

Share |
PermalinkComments (0)
 

Supplier Loyalty, Airline Customer Service, AIC Stakeholder Meetings

Posted By Thom Young, April 19, 2017

How Happy Are You with the Loyalty of Your Suppliers?

While our suppliers have been competing with us for a long time, the issue has been of considerable concern to all independent brokers. Insurance contracts have not always been easy for brokers to obtain. When I first got into this business, finding a sponsor to back you was almost impossible. The insurers had field men and local managers who operated in a manner that would make King John and the Sherriff of Nottingham proud. The regional managers had nearly absolute control on who they allowed into the business, and the field men enforced their own pride and prejudice in the treatment of the brokers contracted to those companies.

Getting a contract wasn’t a sure thing even after all the leg work of putting together a bang-up business plan and amassing enough capital to get a general insurance brokerage going. Regardless of how good your business plan was, how much capital you had to ensure your start up, or what you promised the company in business volume or profitability, getting a contract was all about whether or not the good old boys running the territory you were trying to establish yourself in liked you. Even buying an existing brokerage was no sure deal if the field man and managers didn’t approve of the sale to you. I know of more than one offer to purchase an existing brokerage that was usurped by an insurer who didn’t like the buyer and directed a different broker to better the offer to the vendor. I can hear people gasping while reading this, but I can assure you that business was done this way when I started in this business in the 1970s.

In this kind of environment, our product suppliers demanded and enforced total loyalty. Taking issue with their people, policies, or procedures could result in severe consequences for you and your business. Companies could impose market restrictions on you through underwriting and special regulations. They could limit your ability to grow, restrict the territory you wished to compete in, and even direct who you could associate with or hire. Being a small broker often wasn’t easy, and sometimes even large brokers found themselves faced with hard decisions in a perceived ultimatum in their business relationship with a company. Rewriting a multi-million dollar book of business is never good for your bottom line. The harder the marketplace, the more difficult these relationships were. Even in a healthy competitive marketplace, it is hard to remain competitive if those you place your business with don’t play fair.

Imagine the morality in the business and social relationships of the TV series Madmen, and you’ll have an idea of how cliquey the general insurance business was just 30 years ago! Even the local chapter of a prominent insurance club wouldn’t allow women to join. The number of women in middle and senior management positions was so small that not even a tiny whimper of complaint would arise back then. No one spoke up against this abomination due to fear of the negative consequences applied equally to both men and women who took issue with the status quo. Their careers depended on their compliance. Such conduct wasn’t limited to just the insurance industry. Ethnicity, social orientation, religion, and other restrictions were even more of an issue in some places. For the most part, our industry has thankfully made great strides in overcoming these travesties, but we were not leading these advances and can still do more to advance our industry and people. Atonement for the past is unnecessary, but we need to ensure we don’t forget it or repeat it.

I started this trip down memory lane looking for the reason why we join associations but got lost on the way in exposing some of our dark history. To get back on track and summarize the musings above, our suppliers fail to take into account our interests when acting in what they see as their best interests. One of us cannot do much to influence them, but all of us together can force change in the manner that those we count on to support us in our businesses deal with us. For the most part, our interests are the same as those of our suppliers, so when we are treated fairly everyone wins. Some people have a different perspective on what’s fair though, and that can make dealing with the people you rely on difficult. Common interests draw us to groups like IBAA and IBAC and ally us with other groups representing consumers and governments. Some common interests ally us with the associations representing our suppliers too, like when we’re arguing against banks competing with us from their branches or restrictive regulation that stifles our ability to serve our customers. The dynamics of these relationships become readily apparent at association meetings as they fill the discussion time in one way or another.

Recently two of our sister associations have taken extreme issue with Aviva and the manner in which its direct marketing arm is competing with the brokers who represent Aviva (Insurance Business). Both IBAO and IBANB have refused to allow Aviva to participate as sponsors in their annual conventions, alleging that Aviva’s new affinity program does not play fair with brokers. Aviva has spent much time attempting to justify this program, but for many, including this writer, a supplier that sells essentially the same product that brokers sell, under the same name and at a price less than what brokers can sell it for, puts brokers at a considerable disadvantage and particularly strains the business relationship. Beyond the issue of fairness, explaining to clients who want to partake in Aviva’s affinity program why they can’t have the services of a broker who has the Aviva shield hanging on the wall in the reception area is difficult, to say the least!

The idea of being contracted to sell a company’s products under all kinds of rules, regulations, and stipulations, only to have that company begin direct advertising of the same product at a lower price to your potential and existing clients is absurd. Imagine how many of us would sign up to represent a company doing business like that. I’m sure the line would not be very long. MacDonald’s has franchise stores and company-owned stores, but the price of the burgers are the same in each location. Not many would be very willing to invest the millions of dollars to obtain that franchise if they weren’t. MacDonald’s guarantees this equivalence in its franchise contract. Perhaps we should be reviewing our contracts for similar assurances.

I wonder if this topic will arise at the IBAA AGM or at the IBAA convention. The convention has a broker Town Hall. The AGM is in April, prior to the convention in May. Make sure you’ve got yourself registered to attend!


IBAA Annual General Meeting 2017

Via Webinar
Wednesday, April 26, Starting at 9:00 a.m
.

Register


It All Boils Down to Customer Service, Doesn’t It?

Way back in the day when I was on the board for a prominent insurer, I had to fly from Calgary to Toronto on short notice because the insurer had made some major decisions that needed to be ratified immediately. My return airline ticket in coach cost $2,700 because of the short booking time. The young lady in the seat next to me was flying return but had booked her flight two weeks earlier at the competitive price of $500. We did not pay a surcharge just to get a seat. Such a charge was unsupportable by the marketing dynamics in place at the time and the likely half a dozen empty seats on most flights. This was the way things worked in those days and you just put up with it.

When I was a kid, my father moved around a lot. We seemed to be always on a plane to somewhere or from somewhere to Winnipeg where my mom’s family lived. I had to wear church clothes whenever we flew, and the accommodations and the service were beyond the norm of anything we were ever used to. Stewardesses and stewards were always in formal attire, and pilots were never without a tie and jacket. They all looked like officers and carried themselves with a deportment that commanded admiration and respect. Customers were treated like royalty. Little things like toys for the young kids and attentive service for the adults were routine and not just reserved for the people in first class. Taking an airplane trip was a special event. Today, not so much, and anyone born beyond 1980 has no idea what I’m talking about.

The new airplane cabins cram as many human beings as possible into them. Even in first class, the seats are smaller and the service less than special. About the only advantage of paying the extra couple hundred dollars is getting on and off the plane with less inconvenience. Flight crews are half the size they used to be. Commonly, only four or five people are charged with the task of getting some form of service to 300 or more passengers. A cart rolls the aisles with a frazzled attendant doling out soft drinks and a bag of seven pretzels or a biscuit that could double as a door stop. If you want an adult beverage or a sandwich, you need a credit card on some airlines but cash on others. Some may not have anything left to sell you if you’re sitting any further back than the wings. Young people look at you as if you’re silly when you tell them that hot meals were included with your plane ticket and the norm was that adult beverages were just as free as the soft drinks were. Go figure. For people like me who find themselves on an airplane about twice a month on average, the advantage to flying is it gets you to where you’re going in the shortest possible time with no extra comfort than a public bus. Strangely enough, you chalk it up as a win if the plane actually leaves on time.

United Airlines has been getting quite a bit of media attention in the past two weeks. In the first fracas, a couple of teenaged girls were denied passage on a flight because they were inappropriately dressed. Initially, the story was spun with the slant that they were just innocuous young girls boarding a flight and were turned away on account of them wearing “leggings.” Social media immediately erupted with cries of a sexism and anger at the thought of it. Later, we found out that these young ladies were travelling on employee passes for free and that, as with all employee airline passes, the user is required to dress in appropriate business attire. While these rules are often applied selectively and young children are usually not held to as high a standard as an adult, the rule was the rule and the kids’ parents were well aware of it. The airline got a pass on this one in March, but not the next in April. In the absolute dumbest display of callous actions in today’s “everyone has a video camera” environment, United called security agents onto a plane to eject a passenger because the company had oversold the flight and he was protesting his removal from the seat he had bought and paid for. The short clip of them beating the hell out of the poor man and dragging him off the plane bleeding about the face and in a semi-conscious state has now been viewed by several million people online and millions more on the news channels. If ever there was an example of poor public relations management, this was it. As a consequence, the stock value of the airline has dropped by half and its already poor reputation for service has been forever ruined.

What were they thinking? The pundits being interviewed on TV are all lamenting the action but stating that the airline was within its rights to do what it did. Sure, the contract legalities of the carrier’s right to refuse passage can be debated in the corporate arena, but no waiver in any North American corporate contract can give anyone the right to physically assault another. We make laws to protect us from physical abuse. As anyone can see in the video, those laws were clearly broken. One thing for certain is that public awareness that the airlines are able to eject a paying customers at their whim is increasing demand upon our lawmakers to protect them from such unfair practices. Much discussion has arisen in the USA about bumping passengers and the compensation necessary to do so. In Canada, we’re talking about banning it altogether with a passenger bill of rights. How customers are treated is the essence of competition. I’d like to make a shameless plug for WestJet who makes it a rule not to double book people and just doesn’t bump passengers for any reason. WestJet is not perfect, but you won’t be asked to leave the plane after you’ve sat down in your seat, which, in my opinion, is how it should be for all airlines.

Alberta Insurance Council Stakeholders meetings Edmonton and Calgary

If you hold an insurance licence and are checking the email you have on file with the AIC, you will have received this notice:

The Alberta Insurance Council would like to invite you to attend our Stakeholder Information Sessions to be held in Edmonton the morning of May 18, 2017 or in Calgary the morning of May 25, 2017.

These sessions will begin at 10:00 AM and will last approximately 2.0 hours. New for this year, a live renewal demo will be included.

Edmonton session:
When: Thursday, May 18, 2017 starting at 10:00 AM
Where: Holiday Inn Conference Centre Edmonton South located at 4485 Gateway Blvd.

Calgary session:
When: Thursday, May 25, 2017 starting at 10:00 AM
Where: Hotel Blackfoot located at 5940 Blackfoot Trail SE

For further information or to register for either of these events please visit this link.

Please RSVP no later than May 11, 2017 to indicate if you will be attending and which session you would like to attend.

Follow us on TWITTER @AbCouncil for ongoing updates at https://twitter.com/AbCouncil.
Alberta Insurance Council


I hear many complaints about the AIC, but I often find on investigating them that most of those complaining the loudest are not at all familiar with the AIC, its role, its purpose, and its function. Besides the responsibility for market conduct of all licence holders, AIC is responsible for the structure and the standards of the licence examinations, as well as for awarding certificates for the class and types of business. I also hear arguments about the AIC rules and the definitions of what they mean. This is the place to air your concerns, get your explanations, and demand change for things that aren’t right, so register and go if you can. You get the bonus of receiving CE credits as well. Be prepared to listen to people complain about Life Insurance and Accident and Sickness issues too as all licence holders are represented in this process. Still, if you have concerns about the way our industry is regulated and licensed, here’s the forum where you can make those concerns known. I know I have some concerns about many things, the CE-credit process for one and the Level 3 licensing boondoggle in Alberta for another. When I ask about these things in my role on the Council, it would be nice to have the support of the many people who share my views (many of which have been expressed in this forum) to reinforce the industry’s concerns!

These meetings are public, and I don’t believe you need a licence to attend them. At past meetings, industry representatives have attended and lobbied for changes to allow the sale of their products and challenge regulations, so if you’re not licensed but concerned about our industry feel free to attend.


In Closing

The days are getting longer and warmer and those of us who like to play outside when it’s not cold and white are getting outdoors once again. Biking and hiking, family outings to parks, and other outdoor attractions are increasing as we approach our ever-brief summer. Remember to drive carefully through those school and playground zones. Be aware of people out and about, and watch for the little and big people playing with their toys. Spring is my favourite time of the year, with new life springing up all around us and new opportunities to reset your goals and make new objectives for your life! I’m looking forward to convention in May (all the tech-savvy, fun, and informative stuff) and hope to see many of you there.

 

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:  Alberta Insurance Council  Alberta Insurance Council Stakeholder Meetings  customer service  insurance company  supplier loyalty 

Share |
PermalinkComments (0)
 

Bank Marketing, AIC Disciplinary Website, Consumer Protection in Travel Insurance

Posted By Thom Young, March 28, 2017

The Banks Are Coming, the Banks Are Coming—They Never Went Away

Recent media reports (e.g., Insurance Business) have revealed that once again the marketing departments of our federal banks are flouting the rules for insurance sales. The problem seems cyclical. About every four or five years for as long as I can remember, the marketing managers unfamiliar with regulations governing their industry (maybe they’re a new crop of managers) begin their never-ending search for success by generating new revenue streams for their employers. (Maybe they review the revenue ledgers for the profit centre they are responsible for and wonder why there’s so little in the ones for insurance.)

Bank officers seem to receive little in the way of training on the regulatory responsibilities limiting their operations. While they may understand that banks cannot sell insurance from their branches, they don’t seem to understand that promoting the products of a subsidiary that sells insurance from their branches is the same as selling the insurance itself. In my own personal dealings with banks and lenders, I’ve often seen the offer of financing come with recommendations for life insurance and General insurance sourced by bank officers. When I do, I immediately notify the regulators, but most non-industry-related borrowers would not have any idea that they were being unduly influenced and directed by the inclusion of an insurance agent’s business card or even a quote for coverage when they are in the process of arranging financing.

Unlike the credit unions which are for the most part provincially regulated on marketing rules, the chartered banks are governed by the federal Bank Act. The Act provides a number of regulations that limit the ability of banks to use their market dominance and biased influence to compete unfairly in our business. The good lobbying efforts of our industry associations have been able to continue this limitation on the banks’ entry in our insurance market. Still, the banks seem to need to be reminded on regular intervals that they’re welcome to compete with us in selling insurance so long as they play the game the same way we do. Under Alberta insurance regulations, employees of a lending institution and many other professions cannot hold an agent’s licence if what they do can be used unfairly to influence the buying public into purchasing policies from them. Bankers are also restricted from holding an insurance licence by the Bank Act, which limits them on this point for the same reasons.

Those of us required to hold a licence to sell insurance are personally responsible for upholding the rules. The regulations require us to understand the rules, and our very jobs hinge on our compliance. The individuals involved in the banking business have no licences to enforce their compliance. Their employers are bound by the regulations but are rarely sanctioned for their employees’ violation of them. When they are caught in activities outside of the rules, their regulator most often sends them a letter to deal with the infraction and orders them to cease from further activity that is outside of the rules. When the federal Minister of Finance gives them formal notice, they usually comply, but sometimes they push back.

The banks pushed back a few of years ago when they were developing websites with hyperlinks to their insurance divisions. Their web pages advertising insurance products were indistinguishable from their banking pages. When consumer groups and our national association brought this conflation of the bank and the insurer to the attention of the Minister of Finance, the minister issued a notice that in his view they were violating the provisions in the Bank Act that prohibit the sale of insurance in their branches. Initially the Canadian Bankers Association began lobbying against this interpretation and attempted to justify the activity. The appeal didn’t go so well. The minister sent them a letter clarifying why they were wrong. Arguing a point of interpretation with the people who make the regulations rarely wins. Sometimes new regulations may be introduced that clarify what the government meant. Sometimes these new rules may seem punitive to the industry being regulated. Our industry can attest to such futile struggle in several examples over the years, not the least of which is the ongoing structure of the Alberta auto reforms introduced by the Government in Alberta over a decade ago.

The federal financial watchdog has now formally given the banks notice that they are under investigation for their marketing methods. The findings will no doubt show that the banks continue to press against the marketing service limits set out in several fair market regulations, not just the insurance ones. Telemarketing ignoring the Do Not Call List and violations of tied-selling rules for bank products seem to abound. These issues should not recur cyclically. Perhaps a couple of multi-million dollar fines might get the attention of the banks’ own in-house compliance people. Who knows if even that would have any effect. When you make billions of dollars, a million dollar fine would just be chump change, wouldn’t it?

The ongoing arguments about who can and how they can sell insurance products in Canada will continue. The banks invest millions of dollars in government advocacy and have whole departments in their organizations that develop strategy to get around rules and regulations that they see limiting their right to dominate any field in which they choose to compete. As with the stock brokerage investment business and before that the Trust business, they’ve been able to take over an entire industry and market sector completely with hardly any public notice. While some of our colleagues will argue the old laissez-faire point of view against regulations that limit or restrict access to markets, history repeatedly demonstrates that, without rules to ensure fair play, the marketplace does not play fair. This principle applies as much to those already in our business as it does to those who wish to expand their operations into it. Both the new entrants and the current players have to be watched closely as time and again insurers and large brokers try to dominate the market to the point that they can bypass competitive reality. Allowing anyone to do so is not going to benefit the consumer, the independent broker, or ultimately anyone. Market dominance destroys healthy competition by stifling the adaptation of price, service, and product to a competitive end. Without regulations to ensure fair play and proper enforcement of them, any marketplace won’t remain healthy or beneficial for long.

Transparency Is Important

The very public nature of our disciplinary matters has now become readily apparent in the Alberta Insurance Council’s new website. The public can now view the decisions of the disciplinary committees for the General Insurance Council, the Life Insurance Council, and the Adjusters Insurance Council, as well as the work of the appeal boards for each, at http://decisions.abcouncil.ab.ca/abic/en/nav.do.

As someone who has been involved in every one of the General Insurance Council decisions for the past four years, I like that the work being done is easily available for review. I think the very public and transparent record of these disciplinary matters will both encourage all licence holders to follow the rules properly and make the industry and public aware of the work being done to ensure that we serve the public properly!

If you are a DR for an insurance brokerage firm, I would encourage you to subscribe to this site for updates on who’s being disciplined for what. If your shop is large enough to have an HR person, I’d make certain that that person is subscribed too. You can subscribe to an RSS feed for email notifications of all new listings on the site at http://decisions.abcouncil.ab.ca/abic/en/l.do.

Speaking about the Regulations—Better Consumer Protection Is Needed

Ultimately, government regulations are enacted only to benefit the public. Whether the regulations are about the way insurance coverage is interpreted and adjudicated for losses or about keeping the market for these products competitive for the consumer, they’re all about the customer. The main lobbying point from the various associations representing all the participants in our industry is that making rules that benefit their operations will provide a better outcome for the public.

One issue that seems to cause recurring problems is distance from a licensed insurance agent. The further the insurance sale gets from the sales intermediary who is licensed and required by the regulations to have a standard of knowledge and professional conduct, the worse the outcome seems to be for the customer. The problem arises with many different kinds of insurance products. Take creditor life and disability insurance for example or equipment warranty coverage offered by equipment dealers. Travel insurance is another example. A report produced by insurance regulators has determined that a good number of travel insurance companies in Canada are not treating their customers fairly. Have any of you had the displeasure of reviewing one of these wordings for your clients after the adjuster tells them they’re not covered? In my experience with several situations, reviewing the wordings is complicated and discussing the coverage with the insurers confusing even for an insurance professional. The insured often times gives little thought to what the coverage is until such time as when a claim arises.

bitterness of poor quality remains long after the sweetness of low price is forgottenThe consumer’s assumption of comprehensive coverage seems to prevail as the seller puts little emphasis on pointing out the limitations of coverage and the seller’s knowledge of the product rarely amounts to little more than understanding where the insured is to sign on the application. Such deficiencies might be acceptable when the product is an extended warranty on a $135 ink jet printer but clearly not when a travel insurer may be adjudicating a US$50,000 hospital bill claim. This client might not have travelled to where the medical condition occurred had this client been aware that a claim arising from a condition that is already being treated may not be covered. Alternatively, this client might have been offered a product with a higher premium that was commensurate with the risk exposure for this client’s situation.

The real issue with travel insurance from an insurance perspective is that it is “post claim” underwritten. Few questions are asked in the application stage. The insurer thoroughly reviews the risk and makes a qualifying assessment only when a claim is made. Only then is the question asked, “Would we have insured this person for this risk?” If the answer is “no,” the applicants are left on their own to deal with the loss and not even given the basic assistance of adjudication by an insurer that often reduces the cost of a claim in the U.S. by more than half of the uninsured billings. Other than a few absolutes that limit or void coverage such as age and pronounced medical conditions, little in the process of obtaining travel insurance provides the applicants with the knowledge necessary to comprehend whether the policy actually provides the protection they expect it does. Involving an agent with an Accident and Sickness licence in the process provides a good chance that the client understands what a preexisting condition may be and how it is defined. Unfortunately, these contracts are more frequently arranged by travel agents or even completed online by the individual applicant dealing directly with the insurer than they are being completed with the assistance of an insurance professional. I recall reviewing a declined claim for an 83-year-old lady who bought a policy for a trip to Florida only to find that after a medical event leaving her with a $15,000 bill that the company she bought the coverage from didn’t insure anyone over the age of 65. She was even more confused because she had been buying the coverage from the same people for 15 years.

Travel insurance is a lucrative business. Analysis of the returns on this product for the insurers show it to be a real money maker. More checks and balances seem needed in the process to protect the consumer better. Does anyone have different thoughts or some suggestions as to how to address this problem? Please send me a note!

In Conclusion

I was out last week for my first Canadian ride on a motorcycle this year. The roads are covered in sand and gravel, wet, and in shady spots even icy. With nearly 60 years of riding experience, I’m well aware of the technical issues of road conditions and am able to navigate these hazards without too much difficulty. The road conditions are a given, but the main hazard for bikers old and new are the people driving the four wheelers. Particularly in spring, they’re not used to motorcycles on the road and often enter the roadways or change lanes without consideration of the people on motorcycles. Our bikes are small, hard to see, and quicker than many expect them to be. It’s hard to judge how fast we’re coming at you when you’re making a left turn, and we fit too well into the blind spot beside your car. While we do our best defensively to avoid getting in your way, if you are not watching for us we can’t always be quick enough to avoid you. The first statement given by the driver of a car when explaining an accident with a motorcyclist is always “I didn’t see him.” The truth more properly told is that the driver wasn’t looking. As our spring continues to unfold into our brief summer, please give us a thought while driving, and take a little extra care looking for us! We’re not all wheelie popping head bangers on crotch rockets ripping up the roads. Some of us are quite harmless old papas just out enjoying a leisurely ride on a sunny spring day. My grandchildren will thank you if you watch out for me in your travels.

Are you getting ready for Convention? I’m excited this year and will be presenting an interesting topic for discussion at the Broker Town Hall. If you haven’t got yourself booked in yet, get yourself on the IBAA website and do it now!

Keep those ideas for discussion coming. My private email address is thom.young@landy.ca and you can get me on twitter @Thomcat04. Some of you have found me on LinkedIn and Facebook too.

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:  Alberta Insurance Council  Bank Act  banks marketing insurance  disciplinary website  insurance licence  motorcycle  travel insurance 

Share |
PermalinkComments (0)
 

Prescribed Marijuana a Human Right in Employee Benefits, Public Confusion about Residential Flood

Posted By Thom Young, March 7, 2017

February comes with a short week for many as we pass the first civic holiday in 2017. While many business owners try to run every long weekend into a mini holiday, the demands differ for small business owners. Being the first one into work each day and the last one to leave is the norm for most small business owners, and getting a break from it isn’t always easy. When you’re the one who gets the payroll done and the remittances sent in on time all while building and servicing what is usually the largest client base in your shop, you don’t have much spare time to enjoy on rest and relaxation. Managing your cash flow often sees you paying yourself after everyone else. When there’s more month than money, you become a skillful juggler of all your cash obligations. When we first started up our own business, long weekends were always very important to our business success, not because we could eke out a little holiday but because that whole day of uninterrupted desk time allowed us to catch up on paperwork with a little time extra for planning. We sure knew how to get some stress relief in when needed, but no laws govern how many hours the owners are allowed to work when they’re building their businesses, nor do they get paid any overtime. Still, if it is done right, right the rewards in the end can be unbelievable. The toughest boss you’ll ever have will be the person in charge of the business you are running.


My computer has a little box in the top right hand corner that keeps me in tune with the weather, both where I’m at in my travels and at my Alberta home. Sometimes, particularly in the spring months when those Chinooks blow in, I’m amused by how close the morning temperatures can be. But, sorry, as I find myself in the middle of the Pacific Ocean now, the temperatures are not close to equal at any time of the day, Chinooks blowing or not! Work in this connected world carries on no matter where you are. Some are always surprised by my answer when they ask how my holiday is going. While some of the places I work are much nicer than the square room in Calgary called an office, I’ve got reports to review, decisions to make, people to talk to, meetings to attend, and staff in need of my support. My “holiday” some days is more of a chore than others. I must confess though, my view is much more relaxing.


ocean view


Prescribed Marijuana Defined as a Human Right in Employee Benefits Plans

While the law does not require employers to offer an employee benefit plan, companies commonly offer some form of group insurance as an employee benefit. In large established companies, these employment benefits are expected and for many form an important part of the decision process when entertaining an offer of employment. These group benefit plans usually contain some mandatory provision for participation in the basic coverage such as Life, disability, dental, and extended medical coverage for extra things not covered by provincial healthcare, such as travel insurance, private rooms, and prescription drugs. While these group benefit plans all have similarities, the form of coverage and what is covered often varies.


Recently, an employee covered by the Canadian Elevator Industry Welfare Trust Plan was declined coverage for the cost of a plan member’s prescription for marijuana. CBC News Nova Scotia, The Globe and Mail, and the Financial Post, among others, have covered this case. The member filed a complaint against the Trust with the Nova Scotia Human Rights Board. They set down a ruling that failing to cover a doctor’s prescription for marijuana was not only in contravention of the definitions of what was covered and not covered within the plan but that, in doing so the Trust had violated the man’s rights. The insurer was ordered to pay the individual’s current and past prescription marijuana expenses. The ruling is precedent setting, so it would seem that the issue of whether or not marijuana is a prescription drug or not is now defined.


I haven’t heard of any such issues in Alberta but, from my perspective as a licensed accident and sickness insurance agent, I would be very proactive in advocating for any client that was denied coverage for any prescription medicine that falls within the authority of a provincial doctor to prescribe. Plans managed by Trusts can be less inclusive in what they cover, but they are subject to the same insurance rules if they’re set up as a group benefits provider. Trying to understand the legalities of what and why such differences have occurred is strange to me. Does anyone have some insight?


Regardless of the interesting asides about the processes, it is heartening to note that the very real and effective benefits of this drug are now being acknowledged, not only by the medical community but also in the legal precedent set down about its prescribed use.


According to the Financial Post, the returns on investment for the legal operations are also clearly catching up with the new reality. I’ve often written and opined that the social costs incurred in fighting against this naturally growing weed that has been scientifically shown to be far less harmful in its use than other legal mind-altering substances has been a huge drain on our social networks. Every dollar legally earned in these enterprises reduces by a hundredfold the criminal distribution networks activities. Investment capital seems to be getting on board with this new reality.


Public Confusion about Residential Flood Coverage

Apparently, the general public is totally and completely confused as to what is covered and what isn’t when it comes to any form of catastrophic loss, especially flood damage. A recent survey by Public Safety Canada has concluded that over 40% of homeowners believe that the federal government will initiate relief programs in the event of catastrophic overland flooding.


As we all know, the government’s perspective on flood relief has changed substantially now that “flood” coverage is generally available through private insurers. The initiative to cover flood by private insurers began after the severe flooding issues that occurred right across the country throughout 2013, but the private insurers’ response has been less than 100% inclusive in making this available to the people most likely to be affected by overland water. Since 2013, we haven’t seen any really intense overland water incidents in Western Canada, although some limited damages have occurred in the East. Given this relative lull, our industry should steel itself for the response that’s going to come about the next time major losses occur, like in 2013. People in those areas with catastrophic losses are going to look first to their insurers. When they see the limitations and lack of coverage in the private forms, the pressure will immediately come to bear upon the various governments to deal with uninsured losses. The overall result will be that everyone will be unhappy and looking for someone to blame. Insurance brokers will as usual get the worst of it.


The federal and provincial Disaster Financial Relief Programs all require verification that the losses incurred could not have been covered under the homeowners insurance policy. Some of us can remember when the government required a letter from the insurers (not the broker) verifying that the losses a client had were not covered under the insurance form. While claims service is an adjusting function, the task fell to the broker to facilitate the insured’s need for that letter. Can you imagine assessing coverage availability for each of the thousands of people affected by the July 2013 Alberta floods with the kind of coverage options available today? Is the home within 300 meters of running water? Was the damage a sewer backup or an overland flood event? Did you offer the insured coverage and explain the limitations sufficiently? All I can say is that it’s going to be ugly when (not if) this situation presents itself again.


The public is not going to be aware of the limitations that will present themselves long after the reports of financial ruin and uninsured losses occur following the events to come. A few news articles such as one in The Star have presented the issue as a caution that the public should read the fine print in their policies. While many of us would read this perspective as a win for the industry, most of the public would see this fine print exclusion as “just another example of the insurance professional’s questionable reputation.” In this article, the writer who is a lawyer calls his insurance broker and is “surprised” to find out that seepage isn’t covered and that an insurance policy isn’t a maintenance contract.


As a broker, you’d best make certain that your E&O coverage is in good standing and hope for the best when dealing with water damage claims. You can also mitigate the possible problem by being very clear about the coverage limitations for these perils and collect the best evidence you can that you’ve explained them to the insureds before they leave your office. That best practice is one we should be using for all coverage, isn’t it?


If the government wants to get out of having to pay claims for uninsured catastrophic losses, I believe it should set up a facility to cover them: a risk sharing pool for mandatory property damage from overland flood and earthquake. The coverage should come with every policy and include a statute limitation for these perils as a percentage of the policy limits (say 10%). The premium generated should be estimated and pooled like other facility association premiums, and the insurer should adjust every claim for the peril accordingly. Extra coverage to policy limits should be available at the discretion of the insurers and at the premium they decide to charge. In this manner, every insured would be aware of the minor and insufficient limits of coverage and of the option to purchase appropriate limits. That way, we cover our assets when consumers are upset that they don’t have enough coverage in place. The added benefit of the adjudication process would be that the government wouldn’t have to administrate the claims process for insureds who are in a zone where additional coverage can’t be obtained. Such claims would simply be an extension of the adjusting done for the risk sharing pool. Unfortunately, the probability of such a program happening anytime soon is dubious at best.


Prairie flood forecasts are “moderate to severe” and qualified by the speed of the spring thaw and the likelihood of precipitation. In other words, no one has any idea as to what might happen, just what could.


In Closing

Some things you can change and others you can’t. One of my father’s frequent rejoinders when I was complaining about the inevitability of certain things was that “Ducks quack. There’s no point in getting angry at them because they do!” That thought is frustrating and calming at the same time!


Anatidaephobia is the fear that somewhere, somehow, a duck is watching you!


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:  employee benefits  medical marijuana  overland flood  residential flood  sewer backup 

Share |
PermalinkComments (0)
 

Local & Global Economic Forecasts, Demise of Commissions, Taxi vs. Ride Sharing

Posted By Thom Young, February 14, 2017

Happy Ground Hog Day—Global and Local Forecasts

Since the fat, privileged rodent named Punxsutawney Phil apparently found the day too nice to run back into his burrow, this scientific process of long-term weather prediction has determined that winter will not soon be over and spring 2017 will not arrive earlier than normal. One wonders if good old Phil has some scientific equipment down in the ground that is giving him some confidence that the earth is in fact warming at an ever increasing pace. Hard to say, but it’s a safe bet he’s not watching Fox News!

Regardless of the bulletins from Gobblers Knob Pennsylvania, the real scientific reports clearly show that the past two years have been the warmest since we’ve been keeping records. Sceptics keep challenging the conclusions: the data is limited and inconclusive, the time frame of the measurements is limited, other variables are at play, etc., etc. Even considering these concerns, the information those of us in the risk management business have to analyze gives us a basis for concern. Regardless of statistical variances and the inconclusive outcome of an analysis, the probable outcome is significant enough to demand that we develop a plan to mitigate the risks.

Actuaries around the globe are already using predictive loss formulas for rate adjustments responding to the variables in losses predicted by models allowing for global warming. Reserves are being established to provide for severe weather losses. Reinsurance treaties are being negotiated for catastrophic losses using rate allowances for increased incidents of hurricanes, tidal surge, and changing weather patterns that produce more frequent and more severe weather systems. Loss ratios that are better than predicted continue to generate significant ROE for the insurers as a whole, which continues to keep the marketplace very competitive for most classes of business. In a strange way, even with the upward actuarial adjustments for increased loss, the expanding insurance marketplace is producing competitive benefits for consumers. I believe we will continue to see this market producing a positive outcome until a very severe catastrophic loss occurs.

Fairly accurate predictions about the performance of the insurance industry are not that difficult to make using the information we have from historical results and predictive modeling. The math is not that difficult and recorded variances can be explained. However, one uncertain variable needs to be identified and qualified in any discussion about economic performance, that being the economic performance of other industries and sectors. Globalized trade is as important to the economic returns in our industry as in any other.

Our world has become so interdependent on the delivery of goods and services that no economic unit can survive on its own. Reinsurance arrangements today transfer risk for losses all around the globe. For example, the Fort McMurray catastrophe had a global effect. Homeowners not only in Canada but also in cities on every continent are seeing a portion of their homeowners premium set aside to cover the insured losses in Fort McMurray and a little extra for the possibility of another Canadian community going up in flames. Likewise, when Australian brush fires destroy a community, the Santa Ana winds blow wildfires through the suburbs of Los Angeles, or even the French Riviera sees communities in flames, we all become part of the risk transference. Through the risk transference and sharing facilities of reinsurance, even a homeowner in Red Deer contributes premiums into the pool that funds the payment of those global claims.

I was recently at a seminar discussing the evolution of business models and how they are affected by disrupters. This term seems to be the new buzz word for those people and situations that force situations to change and adapt, often for better outcomes. Corporate emphasis has for a long time been focused on finding team players and implementing systems that support the status quo, but research seems to show that the evolution of successful strategies often comes from those who “think outside of the box” or “challenge the norms.” While many successful business people have long known this strategy to be productive, the concept is making the rounds as a new business model. Certainly, the discussion above regarding predictions of a continuing stable market for the insurance business is focused exclusively from the perspective of the “norms” challenging our business. Continuing and new situations such as the effects of climate change are being dealt with in the normal way. The best laid plans can always be disrupted by irrational and unexpected factors. Such disruption must be considered in light of the current economic and political events unfolding in our world today.

Outside of the capital in play in our business to meet the reserve requirements set out by the insurance regulators, this money isn’t always in play as cash waiting pay claims. Funds for all kinds of developments and investments are sourced from the funds managed by insurers until such times as they are needed to pay claims. These are managed in a balance of liquidity and security to generate much of the “investment income” that supplements the results of the underwriting profit or loss when determining income for our insurers. Disruption in our economy can have devastating effects on the insurance industry. As we saw most recently in 2008 and other times in recent history, the decline in the value of investments as a result of the failure of capital markets can very quickly see insurers trying to line up their business written with the capital values they are holding in reserves. This shedding of market share is the primary cause of a hard market. Hard markets and soft markets are never a good thing for our business. Every investment manager hopes for stable markets moving in predictable directions, either up or down.

Turning to the 800 pound orange gorilla in the room for a moment, the calamity that may come about by the disruption of international trade agreements and the removal of regulatory oversight of the finance business is what’s keeping the financial managers that I know up at night. The threat of 20% or 30% tariffs imposed on trade networks that have evolved to remain competitive in the new global supply chains and markets should concern everyone. This kind of disruption will not be good for anyone, particularly the USA, and failure of the American economy would be devastating to all of us. At the same time, the exit of Great Britain from the European market without bilateral adjustments with the whole of the EU will no doubt tip international trade on its side as well. The times are changing and my fingers are crossed that the reality of fair balanced cooperation for the good of us all will eventually be the reality we get in the end. So far the consequences of irrational disruption seem lost upon the man who thinks he’s running things down south. The wakeup call will no doubt be loud and confusing when it comes.

The Demise of Commissions?

Want to work as a true broker? No set commissions? Our associates in the life insurance business are facing a new challenge in regards to the way in which we are remunerated. A number of people hold the belief that agents should be allowed to charge a fee for service for their work with no set compensation percentage on the value of the amounts the client invests (see “The Higher-Cost, Higher-Service Future of Investing Advice"). The threat to ban commissions is real. On January 10th, 2017, the Canadian Securities Administrators (CSA) published CSA Consultation Paper 81-408 – Consultation on the Option of Discontinuing Embedded Commissions (Consultation Paper) suggesting the need to transition to a direct pay arrangement, where the investor directly pays the dealer’s compensation. Such an arrangement certainly would resolve the disclosure issues that always seem to arise, but would it make any difference in the long run? How would this work in the General insurance industry? This discussion has come up many times over the years about the insurers quoting their product on a net basis and leaving the broker to add commission to the bill. General insurers often start talking about this when a hardening market puts price pressure on holding market share. The thought is that, if the insurers have to forego revenue to remain competitive, the broker should too. I’ve never really seen the sense in that argument, but then I’m a broker at heart!

The life insurance agent’s main lobbying association Advocis isn’t taking this proposal sitting down. Advocis has launched a digital campaign targeted at both financial advisers and their clients. Financial Advice for All is a micro-site that outlines the issue of banning commissions and how it will affect Canadians. I wonder how General insurance brokers and agents would feel about the challenge of this kind of regulation affecting their business.

Thinking of Buying a Taxi?

Following along with the topic of business disruption and the effect on norms, the taxi business certainly seems in dire need of adaptation to the competitive pressure coming from Uber. Recently in Las Vegas, I learned that many taxi drivers are participating in the Uber model along with their regular taxi business. Either the meters in the taxi or the Uber app is collecting the money. Vegas Taxi drivers are notorious for scenic routes and special shortcuts to pad their fares. Uber seems to be keeping everyone honest. Those less technically proficient in the use of apps on their phones are stuck with the taxi meter. Those with the Uber app are getting directly where they’re going at a fair price with the tip included.

I don’t think that buying a taxi business would be a bright idea these days. I’ve written many times about the livery business and the manner in which it has evolved. The advent of Uber and Lyft has reduced the taxi business to something more like a bus service for moving large groups of people from specific locations or sectors to other sectors. The individual looking for a lift home or to a function from home is not looking for a cab service anymore. Uber is cheaper, more reliable, and more pleasant to use than any taxi ever.

I was introduced to Uber in Ottawa when we were bouncing around the capitol lobbying on behalf our industry. I had ridden to town in a cab from the airport. The cab was filthy, the driver was indifferent, and between texting while driving and using his hands-free function to have a loud discussion with an equally loud associate, he left me very unhappy with the transportation experience. At one point I wished to ask him a question about the route he was taking and ended up trying to yell over the discourse going on in the front. When he did give me his attention, he had no idea what I was asking him anyway.

The normal fare for a shuttle from my Phoenix house to the airport is $70 plus tip. Taxis are reluctant to come as far out as the urban setting where I live but will take me from the airport to my house for around $100 plus tip. Uber recently picked me up in a very nice, clean, four-door car and delivered me to the airport for $37.85, tip included. Hard to see the shuttles and the taxis staying afloat for long with that kind of price competition.

A survey by Angus Reid shows the consensus is that the Uber guys should be subject to the same rules and regulations as the rest of the livery business. Properly qualified drivers and equipment are expected by the consumer. Uber says this isn’t a problem.

In Closing

This is the second edition of Young’s Stuff for 2017. I hope you’re finding it enjoyable and thought provoking. Share your thoughts and open dialogue with all who are receiving it. Feel free to post in the blog link on the IBAA website or on LinkedIn, Facebook, or Twitter. I’m always looking for feedback and ideas. The direct email link below comes only to me..

 


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:  business disruptors  capital reserves  catastrophic loss  commissions  global economy  global warming  life insurance  orange gorilla  reinsurance rates  ride sharing  transfer of risk 

Share |
PermalinkComments (0)
 

A Healthy Lloyd’s Outlook and Software for Falsehoods

Posted By Thom Young, January 20, 2017

Apologies for the missed issues since September. I’ve been pretty busy for the past couple of months due to travel through four provinces and five states, a convention and trade show, Canadian Thanksgiving, American Thanksgiving, two company Christmas parties, Christmas and New Year’s celebrations, along with some particularly time-consuming business projects. This project is now in its sixth year and, for the most part, I’ve made that deadline every two weeks without very many interruptions.


A number of people have approached me at various functions asking if I’m still writing and indicating that they aren’t receiving the email with Young’s Stuff in it. The full text version of the essay is not sent out by email anymore because IBAA is striving to keep to a minimum the number of emails sent to members. When the blog is posted on the IBAA website, those who have subscribed through the website are emailed a link to click on and open in a web browser. (You can subscribe through the Blog Subscriptions section in your profile.) A link to these blogs is also included in IBAA’s monthly bippler email. Some of you may have missed the link and not forwarded it on to your staff because the link was buried under other information and promotions. IBAA has informed me that the new bippler format will open with a link to the most recent editions of Young’s Stuff. I do strive to get information into this essay that’s of some value to all members of our industry. Hopefully that information is important enough to get circulated to the staff at the brokerages who receive it. I’ve also been posting links to Young’s Stuff on Facebook and LinkedIn and sending links to it via Twitter. If you see something in my stories that you think should be shared, don’t hesitate to send it on if you know how.


For my “old” friends who have difficulty with links and such other complicated internet and computer terms, send me an email and I’ll send you the blog in text form so you can have your assistant print it out for your later reading pleasure. If you’re reading this, you obviously somehow have found the link on the IBAA site. Just in case you want to forward it on to someone who isn’t as astute as you are, here it is:


http://www.ibaa.ca/blogpost/1251553/Young-s-Stuff


If you don’t know how to copy and paste a hyperlink, ask someone younger than you in your office for some help.


It Almost All Began (and Continues) at Lloyds

If anyone is telling you that our industry is suffering in any of the world markets, don’t believe them. Lloyds has posted another record year of over 1.4 billion pounds in profit for just the first six months of 2016. While a number of insurers seem to be floundering around with lack-luster results and less than stellar projections, good old Lloyds continues to show how it’s done. Lloyds is leading the way for expansion of the insurance industry in Eastern markets, and the numbers appear to indicate they’re doing it right. As Europe and North America continue to pull out of the economic malaise that began nearly nine years ago, the future seems bright. The Lloyds financial performance model is unique, but Lloyds goes to great lengths to make it comparable in review to what people are used to, even though the ownership structure at Lloyds is also unique. According to the published financials (see Insurance Business), Lloyds seems to be producing an enviable return on equity of about 8% and is having absolutely no trouble attracting capital investment to meet the reserve requirements of its business model (which well exceeds those legally mandated in any jurisdiction). This strength means that rates will remain fairly stable in the immediate future and, barring any huge catastrophic losses in the coming months, Lloyds will be sending out huge dividends on its reporting date. How well Lloyds performs indicates how the industry will, at least in my opinion anyway!


One wonders, though, how Lloyds is going to deal with the Brexit issue, which is certain to impact its UK operations. As the UK pulls out of the European Union, Lloyds will likely have more difficulty keeping the staff that is now able to move seamlessly between their home country and the UK for work and lifestyle. Still, with modern technology people can work wherever there’s a good internet connection. The main impact will be that they’ll be spending their paycheques somewhere else. The leadership at Lloyds has clearly indicated that they are not going to leave London as a result of the Brexit vote and their outlook for the future is more of the same. The Brexit issue will, in my view, have more of an impact on the UK than on Lloyds anyway. Time will tell, but barriers to the free flow of commerce are not a benefit to anyone in this new-world economy where (at best guess) the assembly of any complicated product includes nearly 25% of parts and materials made in another country. Trade barriers of any sort that could interrupt these complicated supply chains will make for serious challenges in the ability to deliver a competitively priced finished product.


Is Big Brother upon Us?

I was recently discussing with some colleagues the use of linguistic analysis software in the adjudication of claims. Science seems to have developed some pretty reliable technology that can analyze speech patterns to determine whether or not someone is telling the truth in a discussion (see The New York Times). No longer the stuff of science fiction, this kind of program is apparently surprisingly cheap to acquire and implement. The analysis is done in real time and available to the user during the interview process.


Imagine that you’re called into your manager’s office to discuss just about anything, and your boss is constantly glancing at his laptop during your discussion. Is he dealing with emails while talking to you, or is he looking at a graph measuring your sincerity in your answers to his questions? Are you really in favour of his proposal or just telling him what he wants to hear? How do you feel about the new person he hired? How do you feel about his decision on the firing of a colleague? In the normal course of interaction with your manager, you formulate your answers to protect your position in the hierarchy of the organization. I’m not talking about lying in your answers but about answering in such a way as not to harm your relationship with your boss and your future in the organization. Is this new tool that gives your supervisor the further ability to analyze your responses a personal intrusion into your privacy? Some think that good managers already have the people skills that give them this ability, but studies show that such is not the case. Analysis of a software review of people’s opinions about the truth of answers showed that 57% of the answers reviewed were accurately determined to be false by human beings while the software was able to determine 70%. That’s a 23% improvement in accuracy. How would you implement this software into your life choices? Imagine running a review of an investment proposal or perhaps a financial report on a company in which you are involved. The real question is whether our personal relationships will be tempered by degree with an application on our smart phone that is running a truthfulness review of what we’re being told in real time during our discussions. I know my mother didn’t believe some of the excuses I gave her for many things, but I got the benefit of the doubt more often than not. Can you imagine those same discussions with an amber or red light flashing on her smart phone indicating that the story I was telling was clearly not being bought by the software analysis?


In our business, the process of claims adjudication is currently using this technology when collecting information on claims reports. I don’t think there are any precedents yet where this review would be the single deciding factor in denying or limiting a claim, but no doubt it is influencing the adjuster’s review of other factors when verifying claims reports. Brokers often have a hard determining the adjusters reasoning for a position taken on a claim. This software may be the “secret” part of the equation working against your client. I guess a broker could easily record a discussion with a claims adjuster and run it through this software to verify the answers too.


Technology is advancing at a huge rate and will continue to be the prime disrupter of many businesses, and very definitely ours!


Winding Up


The New Year is here! The reset of the calendar marks the end of our very small planet’s complete revolution around our rather insignificant sun and the 2017th year since the majority of us agreed that the modern era began. Archaeological research reveals many other methods of measurement based on other assumptions, but the trip around the sun seems to be a common denominator in how most calendars work. Another common denominator is the perspective that each culture marks the significance of the New Year as a time to wish each other good health and prosperity in the coming year. For all of my readers, I certainly endorse this tradition and wish you well in the coming year.


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:  Brexit  claims  lie detection  Lloyds  technology 

Share |
PermalinkComments (0)
 

Government Auto, Online Competition, Run for Childhood Cancer

Posted By Thom Young, August 17, 2016

Is It Just Me, or Does Everyone Else also See Our New Government Moving on an Imaginary Mandate of Change?

You know, I do my best to remain apolitical in these little stories that I write, but it’s often difficult when commenting on things the government does that may affect our industry. Certainly, the adjustment in perspective necessary to understand the actions of this philosophically different government is readily apparent. Take its initial swift move to implement action on the labour-standards obligations for family farms with Bill 6. This resulted in the agricultural community rolling machinery and people up to the legislature to express disapproval for the impact it would have on their business operations. Traditionally, the family farm has been insulated from the normal stringent labour standard legislation.  Previously exempt from coverage and costs of participation in Workman’s Compensation insurance, the small family farmers saw this new legislation as an expensive intrusion into their traditional operations.  Family farms had exceptions for certain classes of employees in addition to exclusions under labour standards legislation for family workers. Their political response appeared to catch off-guard the new government that believed this new legislation would be welcomed by farmers.  It is understandable with a new government, particularly one imbued with youth and inexperience, that this type of change would be unfamiliar territory to the electorate. However, one might reason that the public reaction would prompt the government to ponder the public expectations of their mandate.

Recently, the government announced its decision to review automobile insurance regulations in the province. Many in our industry have been quite concerned that this review might be the first step towards a government-run automobile insurance scheme. When our previous superintendent of insurance was seconded to Finance to work on a “new” project, the new government’s interaction with the industry  sprouted rumours: would the legacy of the NDP Provincial Government in Alberta be a public automobile insurance plan?

Facts make little difference when measured against political ideology. Counting our three provincial auto-insurance schemes, only a half dozen government automobile insurance programs exist in the world. In most cases, they have resulted from a lack of competition in an extremely small market, allowing insurers to impose severe underwriting restrictions and unfettered, uncompetitive pricing on those who need mandatory coverage. In each jurisdiction that has experimented with a public automobile scheme, underwriting limitations and pricing increases brought about political pressure to ensure that coverage would be available to all at a fair price. Those who have been around the business long enough to remember the auto reforms imposed upon our industry by the former government may recall that, at that time, a hard market left insurers trying to reduce their market participation to meet their reserves and struggling to deal with reinsurance treaty limitations. At one point, for over 90 days, the only market accepting “new” automobile insurance applications was the Facility Association. Regular markets were flagging clients for non-renewal for any dumb thing they could imagine. When the public is disrupted in any way, their frustrations are quickly heard by their elected representatives. Thankfully, the auto reforms proved to be adaptable to the needs of the public and the insurance industry. What could have happened then should not be lost on anyone. Market realities can spur action by governments to limit the impact of any business on their constituents.  In British Columbia though, a new dimension was introduced to the equation. The change came about through the election of a government with a new political ideology. Government auto insurance was one of the mandates it was elected upon, and the government moved quickly to fulfill that mandate.  Will this election be seen as a mandate for our new government to follow a new ideology? Perhaps in the next election auto insurance will be a focus of the platform, potentially determining the future of our industry.

One way or the other, this topic will be up for much discussion in the coming years.

More Competition or Less?

I was reading an article in Insurance Business magazine about the withdrawal of Google Compare from the U.S. internet insurance marketplace. Google Compare provided a price-comparison shopping point for insurance customers and was supported by charging a fee for directing clients to specific insurers. Google pulled the plug on the product in the spring of this year, apparently because the insurers were not that enthused with the results. Brokers in the U.S. were happy to see Google leave the marketplace. They claimed the withdrawal was a win for the independent-broker approach to marketing. The focus of the article seemed to be that brokers shouldn’t be claiming the withdrawal as a victory because online competition for insurance is still ubiquitous, and we shouldn’t drop our guard.

Rating engines have been around forever. In Canada, an interactive internet-rating company has been around since the beginning of the online information age. In the U.S., many companies such as Progressive and State Farm use their own in-house rating engines to give clients not only their quote but also their competitors’. Certainly, large brokers who write for many different companies are already competing in this process since they check several companies to find the best rate for a call-in customer. Of course, the questions asked by the brokers are the same as the filters used by the rating engines, but the broker’s experience in interpreting those filters gives the customer’s quote validity and is a better assurance that the policy will be issued at the rate quoted. Frequently, online clients think they have a lower quote than they really do until an answer on the application changes the response. Unfortunately, clients don’t always get the difference between marketing and reality.

Is calling around for quotes any different from doing an online survey? Online is faster, but discussing your circumstances with a professional insurance adviser leads to better accuracy. The review of coverage needs is definitely better in an in-person setting with a professional. How many of you have ever had the discussion with a call-in client that begins, “Do you write for this company or that company?” Often they’ve already got a quote or have been told by a friend how low company A’s price is. These callers are looking to find an adviser to validate the information, and look after them at the point of sale and when they have a claim. I don’t really mind if the customer shops around and then looks for a trusted adviser to respond to these items. Even the least-proficient insurance broker should have little difficulty doing a better job for the customer than a computer. Some might cite an exception here or there, but in truth I’ll stand by that statement.

The more complicated the product, the less it lends itself to successful comparison shopping. Even a very well-designed computer application cannot assure a correct answer to the question “what does that mean?” when the applicant is interacting with it. No matter how many “click here if you’re confused” buttons there are, the reassurance of another human being when you don’t understand is unbeatable. Now don’t get all smug about this limiting factor. New computer interaction programs bring the human dimension into the process with the “click here to chat with a real person” button. However, when the little box pops up and informs you that “all our advisors are busy right now, please be patient, the approximate wait time before we get around to you is 20 minutes,” you can understand the limitations in the service level of this online medium. When you then pick up the phone, call the company, and hear the identical message, you know how important the call really is to the company. After that frustration, why not call a broker a shop rule that when the phone rings the third time, anybody who isn’t with a customer better answer it? Are you getting the picture of the service commitment of these alternate providers now? Don’t let anyone tell you that brokers compete on price. Brokers compete on service. So long as we remain dedicated to providing superior service, our future in the insurance business is assured! Of course, “your mileage may vary,” but then again I’m a half-full kind of guy. While things change, I still believe that cars don’t take a different route to the same destination just because they go faster. My conclusion is that the broker service model will remain strong through the technological evolution we continue to experience.

Run for Childhood Cancer

I occasionally use this medium to promote or endorse a good cause, and I hope you will indulge me with one here. Recently, I was approached to help out an old friend who is the new director of a fundraising program to assist families coping with kids who have cancer and to further the researchers in finding a cure for kids with cancer. Many of you may recall Rob Siroishka from his time working in our industry. He is now active in a number of different projects, the most importance of which I think is the "Run for Childhood Cancer” fundraiser that takes place in September of each year. This charity had been receiving terrific support from the oil and gas industry until the industry’s realignment last year. Since then, the charity has suffered a decline of about a third of their support. Rob reached out to his friends and a number of us stepped up to help them recover from the loss of funding, but more can still be done.

Recently, I toured the research facility of Dr. Mahoney at the Children’s Hospital Research Institute that is the recipient of the funds raised through the Believe in the Gold efforts. Believe in the Gold is the charitable organization that hosts the run and manages the fundraising. These funds provide assistance to families who are struggling with the challenges of a child fighting cancer. They also provide funds for the ground-breaking research into immunotherapy treatments configured uniquely for children’s cancers that has had some promising results. While immunotherapy has had tremendous success in treating many kinds of adult cancers, the unique physiology of growing children presents many challenges in order to achieve the same success rates as in adults. Even small successes here will produce life-changing results for many of these children and their families.

If you’re a runner or even enjoy just a stroll along the Bow River pathways, find some sponsors to raise some money for this good cause. If you’re a business owner looking to get behind a charity that can make a real difference in the world, you might want to look into this a little further too. Personal donations are also appreciated. To find out how to join and sponsor, go to the Believe in the Gold website: http://believeinthegold.ca/campaigns/run-for-childhood-cancer, or get in contact with Rob at 403-542-2660 / email robsiro@shaw.ca.

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:  competiton  government auto insurance  NDP and insurance  online insurance  Run for Childhood Cancer 

Share |
PermalinkComments (0)
 

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 

Share |
PermalinkComments (0)
 

Stampede Breakfast, Brexit Effect on Industry’s Economy, GIC Elections

Posted By Thom Young, July 14, 2016

Yahoo! Ride ’em Strong!

Our annual Stampede Breakfast event has come and gone again. Last Wednesday morning was cool with threatening skies all around our venue but, other than a wisp of some misty sprinkles, no rain appeared until after our event came to a conclusion. Attendance seemed to be a down slightly from previous years, perhaps because of the threatening weather. It certainly did not deter those who did come from having a good time.

World-champion chuck-wagon driver Kurt Bensmiller came down once again with his wagon, donated his time, and made the day for a long line up of young children with his attention. The cowgirls in attendance were all anxious for a selfie with him. Many took pictures and obtained autographs. His wagon sponsor once again this year was the Tsuut’ina (Tsuu T'ina) Nation who provided an elder who performed blessings and songs of his people to honour our gathering. Perhaps he contributed to our avoidance of the foul weather in the rest of the city that morning. I wonder if he also helped Kurt win his heat that night at the Rangeland Derby.

Allen Christie and his band once again put on a terrific show, straying often from his country music roots to give the crowd some unique rock-and-roll performances. You can tell an event is going well if the band is enjoying itself, and Allen played 20 minutes longer than he was contracted!

Some controversy arose about how long this event has been going on. Our poster announced the 23rd year, but I’m certain that the first one took place in in 1992, the year before the event’s co-sponsor Southland Registrations opened. I think we had less than a 100 people show up the first year. Now over a thousand come each year. A company regional VP told me that his July broker contacts are mostly covered at our event on the Wednesday of Stampede week, and that this was his 10th year there. Hope to see you there next year!


Brexit Revisited

This topic continues to be in the forefront of our industry news along with the current mess made of the political process in the UK. A new prime minister has taken over and is charting what may well prove to be a costly unpopular course for the country. The “leave” constituency is taking the place of the “stay” representatives of the same ruling party. This expression of the democratic process in parliamentary democracy is sometimes difficult to comprehend. A change in party leadership produces a new government without an election, and the direction of the body politic changes mid-term, not to suffer a public-confidence test until the next general election. As is increasingly becoming clear to most of the voters in the UK, the process of leaving the European Union will not be without at the least short-term negative factors. A day of political reckoning that will overturn the results of this last silly referendum may well be at hand. Strange times.

From an industry perspective, the uncertain economic factors have had immediate impact on the investment side of the insurance business. As everyone should know, the profitability of our business and its ability to meet its obligations are directly impacted by the return on the premiums managed until the claims are paid. Sometimes companies invest these monies in self-administered funds that are industry specific, such as mortgage funds and the like. To simplify, these funds also attract other investors who share in the wealth generated by them. Large commercial-property projects are often funded in this way. Acting almost like a mutual fund for institutions, successful returns on the money held make these funds very attractive to investors. However, concerns about the viability of the investments can stimulate investors to remove their money from these funds, even when the returns are good. When funds are withdrawn, liquidity can be a real issue. Investments in long-term mortgages and the like can’t be easily turned into cash, so all these funds have time limitations on redemptions. That time allows the fund administrators to find other investors who will provide the cash needed to pay back those who have jittery feelings and want out. According to Insurance Business, Aviva and Standard Life have suspended redemptions on billion-dollar UK property funds in order to protect the interests of their investors. As you might imagine, a lot of investment institutions now have to deal with the “jittery feelings” that Brexit has caused with the resulting uncertainty about the economic future.

Amid the shouts of “The sky is falling, the sky is falling,” even a promise of huge returns on share investments doesn’t seem to be having the desired bolstering effect on those values. As Insurance Business notes, the share values continue to slump.

As I write, some stability seems to be returning to these markets, but we’ll have to wait to see if stability will return soon. Nonetheless, the implications of the falling stocks in our global marketplace extend to our country and throughout the whole of our industry.

General Insurance Council Elections Are Here Again

I’m always amused by the stakeholders’ consultation meetings that the Alberta Insurance Council hosts for insurance licence holders each year. This year, I attended both the one in Edmonton and the one in Calgary. Around a couple of hundred people showed up at each and, after a brief report from the chair, the usual questions were raised. As usual, the Life guys complained about the price of the licence and their processes; then one of the General guys got up and complained about having to listen to the Life guys complain. This time, the idea was voiced that separate stakeholder meetings should be held for those in General and Life insurance—a silly idea as the discussions clearly didn’t warrant that kind of attention and the numbers represented at the meeting wouldn’t justify any ruling one way or the other. What distressed me, though, is that many of the weighty issues I’ve been dealing with as a member of the General Insurance Council for the past three years (and years earlier) weren’t really the main focus of the discussions. When I attend industry functions (meetings of IBAA or the Blue Goose and the like), someone invariably corners me to discuss one of these issues passionately. Where were they during these consultations? A mystery to me.

In Alberta, licensing and discipline of General insurance licence holders is administered by the General Insurance Council. This council is made up of 3 elected insurance brokers, 2 appointed public members, 2 direct-writer agents sent by CADRI (their industry association), and 1 General insurance-company employee sent by IBC (the General-insurance industry association). Each serves for a three-year term, and they can be re-elected or nominated for two consecutive terms. A call for nominations for the election of 2 insurance brokers has been emailed out to all brokers holding a licence. My term is up, and I have been nominated for election to a second term.

If you are a broker holding a general insurance license, you will soon receive an email with a link defined by your licence number that will allow you to vote for your representation on this council. Unfortunately, of the more than 6000 brokers who are eligible to vote, often less than 1000 actually make the effort. We fought long and hard to get a voice in the regulatory process, and that voice is often challenged as irrelevant or unrepresentative because of the lackluster participation in the selection process.

With the email linking you to the voting survey, you will also receive a necessarily brief bio of the individuals running for election. Make this review and election a top priority, and encourage your fellow brokers to do the same. The brokers who sit on this committee are the ones who review the misconduct investigations that are brought forward for discipline hearings. They should bring the very unique broker perspective of how the industry works and an understanding of the process through which a responsible broker deals fairly and ethically with the challenges that present themselves in our business. They should also have an interest in keeping the regulatory process simple, effective and, most importantly, fair: fair to the licence holders, fair to the companies, and fair to the public. Bureaucracies can often overtake the interests of its departments, and strong and effective leadership is often the only way to reign in their intrusion into the process of a self-regulating body. I know that you will choose the person you think will be the best for the job, if you in fact make a choice. Sadly, though, I also know from past experience that many will not even bother to open the email to participate in the process. Such apathy reduces the effectiveness of the process and, consequently, the results as well.

As your representative on the GIC, I’ve been working very hard on the licensing issues that brokers have been dealing with in Alberta. Getting people over the licensing hurdle and into our business has been difficult in the past few years. Hopefully, the many changes that have been made and those that are coming will produce positive results. If they don’t, we’ll be revisiting the issues to find out why and fix the problem. The proposal for equivalencies continues to sit on a desk somewhere in the process of government approval. Alberta remains the only province in Canada that doesn’t recognize the value of our industry’s professional designations and forces people who have already invested their own time and money into taking examinations that benefit no one. Perhaps the government considers other issues more pressing, but the broker who is trying to buy a business and can’t get past the level 3 licence examination would surely disagree. People with CAIB, CIP, and other advanced degrees such as MBAs are having difficulty with the process. This process is just wrong and should be fixed, shouldn’t it? If you choose to vote, I would be happy to receive your endorsement and will work hard for you over the next three years. If I’m successful, this will be my second term and likely my last “kick at the cat” because I will be long past my prime when I’m eligible to run again!

Many other issues are at stake as well. My email address is below and my phone still works if you’d like any more information. You can also read my profile on LinkedIn.

In Closing

Do you know how difficult it is to get the appropriate number of words into this essay during Stampede week? Well, the rest of my day is set: off to the rodeo and then to the Zac Brown Band concert tonight! Edmonton will get its own version of our Stampede in the coming weeks, and each small town will enjoy a summer celebration that honours our Western heritage! The good and honest values represented by these celebrations are the same ones shared by all decent human beings who believe in the strength of community, fellowship, and fair hard work! Get out and have fun. Don’t step in any political commentary that might have fallen out of the back of a farm animal!

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:  Allen Christie  Brexit  CAIB  designations  General Insurance Council  investment  Kurt Bensmiller  licensing  Stampede breakfast  Tsuut’ina (Tsuu T'ina) Nation 

Share |
PermalinkComments (0)
 

Ride-Sharing Policy, Brexit, Storms and Systems

Posted By Thom Young, July 5, 2016

SPF 9 for Ride-Sharing Companies

The Alberta headline for the week is all about the SPF 9. George Hodgson sent a memo on June 28th to all IBAA members outlining this new automobile form, how it works, and where it applies. I can’t add anything of substance beyond the very excellent explanation given, so I’ve simply reproduced it below:

Superintendent Approves SPF 9 for Ride-Sharing Companies & Their Drivers

Uber and other ride-sharing drivers experience a unique mixture of personal and commercial exposures. The new SPF 9, if purchased by the Transportation Network Company (TNC), is designed to function with the owner's personal policy and to kick in when commercial coverage is required. How does this coverage work and what does it mean to you as a broker?

The driver's risk is broken into 4 categories that reflect the personal/commercial exposure:



The personal owner's policy covers exposures until the driver logs into a TNC. Upon login, some coverage from the SPF 9 could be available if the owner's policy does not provide coverage and the SPF 9 will provide coverage when the driver has accepted a ride and is en route to pick up. The policy does not cover street-hailed passengers.

What the SPF 9 Means for Brokers

  • Transportation Network Companies would purchase this commercial policy. The standard application form SAF 9 for this policy is attached to the Superintendent's bulletin.
  • The following endorsements are approved for use with the SPF 9: SEF 44 (Family Protection), SEF 23 (Mortgage), SEF 21A and 21B (Blanket Basis Fleet), SEF 13D (Limited Glass), SEF 13H (Hail Deletion), SEF 20 (Loss of Use), and SEF 43 R&L (Limited Waiver of Depreciation).
  • Fleet rating programs may be used with the SPF 9.
  • Drivers for a TNC should disclose that they are a driver to their broker as this is a material change in risk. Brokers should record and rate the risk appropriately on the SPF 1 owner's policy. In some cases, this may mean re-rating the risk as a class 07.
  • Brokers should be able to explain to their clients when their owner's policy (SPF 1) will provide coverage and when the TNC's policy (SPF 9) would provide coverage.

For full information please read the attached Superintendent of Insurance Bulletin.

For further information, please contact Rikki McBride, Chief Operations Officer, IBAA, at rmcbride@ibaa.ca / 1-800-318-0197 ext 101 / 1-780-702-3715.


The industry has taken up the opportunity offered for this coverage in the Alberta marketplace. I’m told that ING has effective coverage through a national brokerage firm for the Uber ride-sharing operations. The coverage works much like an umbrella policy by picking up the commercial exposure where it exists and leaving the personal exposure and rating in place. As IBAA later clarified, the all-comers rule will not apply to TNC driver’s personal insurance applications due to the partial commercial exposure. It will be interesting to see if the personal-lines underwriters will accept this policy as mitigating the extra exposures incurred, look to limit their participation somehow, or apply a limited-experience rating to the equation. All of us are closely following the industry response. As this new set of circumstances is only a week old as I write, I look forward to seeing how it may evolve in the marketplace. If anyone has any insights on this change in our marketplace and how smooth its implementation will be, I’d be very happy to hear from you!

Everyone Is Talking about England These Days

Headline story 1: The English have been beaten at their sport (football/soccer) by the Icelandic national team made up of mostly part-time players with few professional prospects (until now) and coached by a dentist who volunteers his time to help the boys out.

Headline story 2: The English have passed a referendum to withdraw from one of the largest and most successful trade packages ever put together.

Imagine. Over the past three hundred years, successive conquering armies have expended men and resources for the authority to control and govern the European continent, and none have been able to make a go of it. Tired of the waste from competition within the virtually identical genetic haplogroup, the people came together in the name of trade and commerce and formed an economic union that allowed each other to share in the strengths of their markets without interfering with their local traditions and rulers. Wow, was that an achievement, and without a drop of blood shed anywhere! Under the heading that you can’t make everyone happy, many argued the worth of the deal, but the benefits couldn’t be denied. Like the North American Free Trade Agreement, national interests were respected while the free flow of goods between the signatories was promoted to the advantage of everyone. Further, the European Union enabled the citizens of each country to move freely over each other’s borders to pursue education, residency, and employment on a level playing field. What a concept! The union seemed to be a win for everyone by every measurement, and particularly for the United Kingdom. With UK dominance in the financial services sector, its competitive advantage as the main player in these European Union markets brought it huge gains from its participation. Well, along comes political discussion and the economic considerations seem to become unimportant. To placate the body politic in England, the political leaders agreed to hold a referendum on remaining in the European Union and began campaigning vigorously for the “remain” side of the question. For all intents and purposes, winning the vote to "remain" seemed to have slam-dunk certainty but, as we are seeing in many political contests at the moment, the expected logic of the electorate doesn’t seem to apply anymore.

With seeming illogic, the “leave” side carried the day by a margin of less than 2%, and financial markets worldwide are still reeling in shock.  All the positive economic factors in play can’t seem to win an argument against a xenophobic rant that is rooted in the myth of ancient prejudices and promotes the fear of nationalistic failure. Sadly, the process of becoming something bigger and better—of adding the best of your own worth into the mix and of benefiting yourself and everyone else—is too often overtaken by promoting fear of change and fear of those who are different.

The real loser here will be the UK people. Their “United” Kingdom is showing further cracks in solidarity at the prospects of leaving the European Union, and their currency devaluation will hamper their ability to import raw materials for the competitive production and sale of their goods ("U.K. Businesses in Limbo Due to Brexit"). Their education will now be limited by political geography and increased costs. Getting a visa isn’t always easy. Their ability to draw on an elite work force through unfettered access to competitively priced labour markets will further interfere with their current market advantages ("U.K. Businesses in Limbo Due to Brexit"). While some will be happy to proclaim control of their own destiny, that control decreases when people and companies become uncompetitive and difficult to deal with in today’s global marketplace.

What will the future bring for the relationship between the UK and the EU? I believe the UK will soon see the error in its ways. In the process of disentangling themselves from this trade pact, the people will see that they’ve been sold a bill of goods by the “leave” side of this contest. While they were convinced of the positives, they will soon be willing to trade those for the benefits they had by staying. None of this process will be quick. The political turmoil will continue for several months, and the demand to revisit the discussion will dominate the next political contest. History is written from the perspective of those who win in the end, and I believe that those who promoted Brexit will not later be held in high esteem. We shall have to wait and see though. In today’s political environment, I’m increasingly less certain of how things will eventually turn out. Am I getting older and more confused, or has anyone else noticed this unpredictability?

Still, one thing seems certain: with the dominance our industry has in the European marketplace through the stepping stone of England, our industry will suffer if the UK leaves! As Autonomous Research reports, the insurance business is already struggling and will likely slow further with Brexit.


Summertime and the Living Is … Easy (?)

Watching the wild and wacky weather shaking itself out over our part of the prairies these days brings to mind many concerns about the continued discussions about overland water and sewer backup. When a whole community such as Woodlands in South Calgary is completely surrounded and cut off by water from a local storm, I question once again the engineering of our storm runoff systems. On the other hand, when nearly 200 centimeters of hail shut down the main north-south highway in the province for a whole afternoon, I find myself once again in awe of what Mother Nature can toss into the mix whenever she feels like it.

In Closing

I’m presently enjoying my grandchildren while camping out in front of the Ponoka Legion—our 10th year at the same location for the rodeo and chuck-wagon races, boondoggling on the grass. It’s fun to see the teenagers just as excited about the show now as they were 10 years ago. While we’re roughing it out here, the inevitable summer storms are rolling through and pounding us off and on with rain and wind. It’s tornado season. Thankfully the damage has been relatively minimal. Let’s hope it remains so. The prediction is for Canada to be sunny and warm. The flag is proudly flying off the back of our motor home! I hope all of you enjoyed the Canada Day weekend. I know we did.

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:  all-comers rule  Brexit  flood  hail  ride sharing coverage  sewer backup  SPF 9  TNC  Transportation Network Company  Uber  wind 

Share |
PermalinkComments (0)
 
Page 1 of 5
1  |  2  |  3  |  4  |  5
more IBAA Courses and Events

2017-06-13 » 2017-08-31
Convention Educational Sessions (Recorded)

2017-07-24 » 2017-07-28
Licensing Level 1 Immersion - Calgary

Featured Members

Online Surveys
Membership Software Powered by YourMembership  ::  Legal