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Hands-Free Distractions, Google Coming and Going in Insurance, Insurance Myths

Posted By Thom Young (Full first name: Thomas Clifford John), March 1, 2016
Well, here I am blowing past my own production deadlines once again. To shatter the misconception out there that I’m retired, the truth is that I’m often very busy managing many different projects for both my business and my involvement in our industry. True, some days are filled with long walks on the beach, but others are filled with trying to get a couple thousand legible and entertaining words onto a document or preparing a critical review of the educational standards by which we approve people for different license levels in our business. When those objectives overlap, often the beach wins!

The half dozen responses on the last issue were heartening to receive. I guess some sensed that I was questioning my commitment to continuing this project. Fear not, I still enjoy the work, although sometimes it’s easier to accomplish than others. I usually clip your responses and save them in a newsletter topic file that is constantly undergoing revision. I’m often asked where I get the ideas for the things I ramble on about. These emails are a great source. They often stimulate further dialogue on the issue. I receive 40 to 60 emails every day. Some come from RSS feeds that I have set up to monitor the media reports on our business and its issues and some come from readers like you who want my ideas on some topic. All direct inquiries get a direct response . . . eventually. I also read many industry journals that keep me up to date on issues. Beyond those sources, I interact with many of you at different functions and events and make notes of our discussions. So far, one issue or another always seems to get legs. When I run out of ideas, you’ll be the first to know.

For the record though, I’d like to acknowledge and thank those who’ve written me. Your kind words are the best compensation for the work I do on this project!

Think Hands-Free Means Safer Driving? Think Again

The other day, I was having a rather animated discussion with one of my automobiles. Yes, you read that correctly; I was arguing with my car. This vehicle is equipped with the most advanced voice-recognition technology and interpersonal interface available in the automobile world today which, in my view, is saying that it is programmed to frustrate. It returns every turn of phrase I make and every verbal direction with a question that is irrelevant to what I am trying to accomplish. When this inanity leaves me without a civil response, it responds to profanity with “Pardon, please rephrase the question.” Then it adds to my frustration by ignoring any attempt to override the voice feature by manual input. In short, I’m not getting along very well with this car. My other car has a similar feature and the relationship there isn’t much better.

The real point of this amusing anecdote is that I’m experiencing these frustrations with a device that’s supposed to make my use of it easier all the while I’m hurtling down a busy freeway at 105 kilometres per hour or more. I’m using a hands-free device to avoid being in violation of the distracted-driving legislation but find myself more distracted than I would have been by simply picking up my phone or GPS unit and initiating the interaction manually. So much for public safety under the law.

I’ve always taken the approach that distracted-driving legislation is a necessary response to the real problem of people who won’t discipline themselves and drive properly. Granted, driving while texting, watching a movie, reading a book or newspaper, putting on makeup, or plucking eyebrows distracts from attention to the road and its conditions. However, I contend that the accidents caused by people who do these things are not caused by distracted driving so much as by poor driving. If you’re a good driver, you understand the limitations and risks involved in undertaking anything while driving, whether that be drinking coffee or answering the phone. Technology may eventually limit the ability to be stupid while driving, except, of course, if you’re arguing with your car. New innovative software and technology is coming but not soon enough in my opinion as the technology in use in automobiles is about 10 years off the current mark and woefully inadequate to the task.

For years, we’ve been encouraged to use hands-free kits for mobile phones to avoid the danger of using only one hand on the wheel, but that practice may also be risky. A new study from the University of Utah has found that drivers take up to 27 seconds to regain full attention after using voice-activated commands on their phone or controlling the radio or other devices. Even systems that are deemed better at understanding and processing voice commands distract drivers for up to 15 seconds. Of the three main virtual assistants, Google Now was found to be the most intuitive and slightly less distracting than iPhone’s Siri and Microsoft’s Cortana. Some people are able to manage these distractions better than others through avoidance and practice, others not so much.

The argument on electronically distracted driving will never really end until the technology eliminates the discussion by mitigating the dangers in the activity. For the insurance business, the answers are in a review of the numbers. Arizona has no distracted driving legislation for using a telephone or other electronic device, but it maintains comparable loss ratios to other jurisdictions. It also has some of the lowest automobile insurance rates in the U.S. and doesn’t seem be in any crisis . . . yet.

Don’t get me wrong. If you’re weaving all over the highway putting on your makeup or texting, the Arizona Highway Patrol has the legislative authority to cite you for driving incorrectly. You just won’t get charged for having a telephone up to your ear.

Google Is Coming, Google Is Coming, . . . Google Is Going?

Several months ago, much ado arose about the possibility of Google entering our Canadian market and introducing price comparison links for automobile insurance. You may be interested to note that Google has globally abandoned its price comparison efforts. I guess it was too complicated to be profitable. Rumors continue to swirl that Google’s parent company, Alphabet, may make inroads on the life side by buying AIG’s operations, but most of the people I know in the life insurance part of the business claim that it’s just wishful thinking on the part of the sales and distribution network that would like to see some stability in ownership of AIG that would add confidence to their operations. Who knows, but insurance, particularly property insurance, remains a complicated relationship-based commodity. Those who try to operate outside of that model quickly find themselves at odds with their customers when the service issues arise.

Insurance Myths and Misunderstandings

When you finish your presentation to your clients and see them to the door, do you believe you’ve really made that connection described as the meeting of the minds on the main issues? Are you mostly convinced that the customers have a good understanding of the coverage you’ve arranged, the reason you put it together that way, and the manner in which it will work for them if they sustain a loss? The Insure.com survey says that, for the vast majority of clients, the process is lost to them. It’s a good exercise for insurance professionals to review this survey so that they can focus on the confused points when discussing them with clients.

A survey of 2,000 adults asking whether eight insurance-related statements were true or false revealed some interesting insights as to just what your client doesn’t know about insurance.

The Insure.com survey, which all the questions asked were false, found the most common sources of misinformation extended from insurance for houses and red cars.

For instance, 52 per cent of respondents were confused about how to properly insure a house with many of them believing a house should be insured for its market value when in fact it should be insured on the basis of reconstruction costs.

Depending on location if individuals are insuring on the basis of market value they could be significantly under-insuring or over-insuring their homes.

Below are the myths, the realities and gender breakdown of those who believe the myths are true.

Myth 1: I should buy insurance coverage for my house based on its real estate market value.

  • 52 per cent think it's true (45 per cent women, 55 per cent men).
    Reality: Buy coverage based on a home’s cost to reconstruct (materials and labour).

Myth 2: Red cars cost more to insure because they get pulled over for speeding more.

  •  46 per cent think it's true (52 per cent women, 48 per cent men).
    Reality: Car colour doesn't affect insurance rates.

Myth 3: If I cause a crash with extensive damages to others, my auto insurance company can cancel me immediately.

  • 44 per cent think it's true (50 per cent women, 50 per cent men).
    Reality: If an insurer wants to drop a customer due to claims, it generally has to wait until the policy period is up.

Myth 4: Small cars are the cheapest to insure.

  • 40 per cent think it's true (42 per cent women, 58 per cent men).
    Reality: Small and mid-size SUVs and minivans are generally the cheapest to insure. Small cars are not, often because they're chosen by more inexperienced drivers who tend to make claims, and because passengers incur more expensive injury claims.

Myth 5: Comprehensive auto insurance covers everything and anything.

  • 32 per cent think it's true (41 per cent women, 59 per cent men).
    Reality: Comprehensive coverage is tragically misnamed. It covers only narrow portions of possible problems, including car theft, storm damage, animal collisions and vandalism.

Myth 6: Thieves prefer to steal new cars.

  • 29 per cent think it's true (42 per cent women, 58 per cent men).
    Reality: It's more lucrative to steal old cars and sell them for parts.

Myth 7: If my friend borrows my car and crashes it, their insurance will pay for damage.

  • 25 per cent think it's true (48 per cent women, 52 per cent men).
    Reality: You and your insurance are on the hook when someone else drives your car.

Myth 8: Out-of-province speeding tickets can't follow you home.

  • 13 per cent think it's true (34 per cent women, 66 per cent men).
    Reality: Oh yes they can.
(Insurance Business)

Keep those email comments coming. I really do appreciate the feedback.

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:  AIG  Alphabet  distracted driving  Google  hands-free technology  mobile phones  voice recognition  Young's Stuff subscription 

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Troublesome Flood Coverage, Uber Legislation without Industry Backup, Mark Prefontaine Seconded, Blog Activity

Posted By Thom Young (Full first name: Thomas Clifford John), February 22, 2016

Troublesome Flood Coverage?

The introduction of another company’s coverage for overland water (used to be called flood) leaves me underwhelmed with the industry’s attempts to meet the needs of our customers adequately. The underwriting of these products seems limited only to those who are outside of the red zones demarcating high risk for overland water damage. Since the number of insurers even willing to provide this coverage remains minimal, adverse selection will likely favour those who don’t get on the bandwagon. Only those who live where the flood risk is the highest will want to purchase the coverage. Those who don’t live in those zones won’t want to share the cost for claims and return on equity through their premiums and will seek another provider. Well, we’ve been here before, and history repeats itself.

A recent article in Canadian Underwriter magazine sums up a lot of the data being developed to map the risk of flood coverage in Canada. While the accuracy of the models in use can be easily challenged, data management, even with suspect data, is the baseline necessary to determine an actuarial model of rate. As I’m often reminded when I think of those very difficult classes in statistical analysis that I endured way back in the day, even poor data enables easier adjustments in the equation than hypothetical estimations. Although all actuarial prediction is really hypothetical, I know several actuaries who will spend tremendous energy vigorously arguing the scientific merits of their predictions, even when the historical accuracy is different. Such is the mystic nature of number manipulation. Regardless, the data from the research shows that "20% of Canadian [households] could be qualified as high risk, based on our metrics and about 10% of those would be considered very high risk and that's about 1.8 million households." That percentage implies 18 million households and numbers that should lend themselves well to actuarial predictions on the average loses per household from flood. If the actuarial mapping results in the application of a proper rate for these risks, then the competitive contest for these risks will have a proper outcome. If not, then little interest will be generated for continuing to provide coverage for this peril, and we’ll be back where we began.

Of course, identifying the risk exposure is the first part of the process. Knowing that 1.8 million homes are at an ultrahigh exposure to the peril won’t be very helpful until the frequency of loss is determined. In reality, we have no records for most of North America that are relevant for losses of any type over 150 years old. Forest fires, flood, and earthquakes that occurred over 100 years ago had little consequence to any large group of people simply due to the demographics of that historical era. If 10% of the dwellings in Canada incurred such a loss in any calendar year, people would clearly be concerned about the availability of coverage in Canada, but that’s not the way catastrophic losses work. Flood losses usually occur in a small localized area on an infrequent basis. We toss around terms like 100-year, 500-year, and 1000-year floods as if they have meaning when, in fact, these descriptions are only an excuse for the lack of mitigation efforts.

I still believe that flood coverage needs some form of statutory basic wording so that the competition between the insurers is based on risk selection and premium, rather than on limiting the coverage through different definitions of the peril. As brokers, we should not be forced to present our solutions to the clients based on the shortcomings of one company over another in the definition of the insured peril. That process is confusing to the public, fraught with errors and omissions exposures for each of us, and goes against the principles by which we currently manage the competition between our insurers. When the choices go beyond the cost and drill down into the wordings, how do you assure clients that what you are giving them the best option in the market? How do you know which company has the most comprehensive coverage when you have no access to its wordings? When we present options to our customers, will we have to provide a disclaimer that “better coverage may be out there, but this proposal is the best I can do?”

Some may say that forcing statutory wording upon the insurers is unfair and that a residual risk-sharing facility could allow those companies that prefer an alternative wording to cede their risks into a pool. Australia and England follow this practice to provide an even playing field in the market for these coverages. In these jurisdictions, the capital necessary to backstop these losses comes from government guarantees that insure neutral charges to the insurers. Strangely enough, the losses in these pools have been manageable and have produced positive cash flow. Stability appears to have some advantages over time.

The efficacy of flood coverage in Alberta will not be tested until the next significant flood event. I, like most observers in our industry, will be watching closely to see if this recent private-corporate response will mitigate the amount of money our governments end up throwing at these losses. Whether the premiums for the coverage produce underwriting surpluses or deficits will also be interesting to see. Time will tell.

As I reflect on the review of yet another “new” overland water endorsement and attempt to determine what makes it better or worse than the other three I’ve looked at, I’ll close this discussion today by once again pointing out that I’m not alone in my continued insistence that consistency is preferable to total confusion. We need more industry leaders calling for an agreeable wording that sets a baseline for overland flood coverage and standardizes the coverage. While supporting the need for consistency, Philip Cook, CEO of Omega Insurance Holdings Inc., suggests another approach to consider—developing catastrophe coverage that would respond to a variety of catastrophic losses.

Municipal Uber Legislation without Industry Backup

Many articles have appeared in the press about the municipal legislation that Edmonton City Council passed to address this new (old) form of ride sharing, and most of them are touting it as the new model for municipalities across the country to address the issue in their locations. The legislation didn’t make everyone happy and was particularly unpopular with the taxi owners and drivers who see this new entrant into the livery business as direct competition to them in their highly regulated and access-regulated marketplace. Still, it was an attempt to find a compromise that addresses the reality that Uber is here to stay, and ignoring it or waiting for it to go away is not likely going to change that. The legislation requires Uber drivers to match the level of insurance protection that is in place for the traditional taxi industry. While the model seems to resolve a number of issues, it unfortunately fails to address the fact that the insurance industry has yet to introduce the new coverage products. So far, I’ve seen one company announce that a new product is coming, but I’ve seen no information yet as to what it will look like or cost, or when it will be actually available. Some companies have tightened their underwriting procedures and included questions that specifically ask if customers are using their vehicles for ride sharing, while others are polling clients on renewal for confirmation of their current use. Meanwhile at the regulatory level, no changes have been made to the SPF 1 in Alberta (or elsewhere) regarding ride sharing of any sort, the SEF 6 has not been modified to allow for Uber-like exposures and rating, and no additional endorsements regarding ride sharing have been created. Under the automobile regulatory regime, any such changes would have to be approved by the Superintendent of Insurance in Alberta for use, and, as far as I am aware, nothing is pending on these.

While the Edmonton municipal authorities have addressed the problem, everything else remains in limbo pending the application of the insurers for new tools and the approval of the regulator for their use. So, despite all the optimistic articles on this topic, nothing has changed so far.

If anyone has anything new to share on this issue, I’d be happy to hear about it.

Mark Prefontaine Seconded

Speaking of the regulator, did you know that our current Superintendent of Insurance, Mark Prefontaine, has taken a new temporary role within the finance ministry? While our government has made no official announcement as yet, the following memo about Mark was posted on the Pension Information page in the Alberta Treasury Board and Finance website:

Effective January 11, 2016, Mark Prefontaine will be taking a one year secondment within Alberta Treasury Board and Finance as Senior Assistant Deputy Minister. Mark will be working closely with the Deputy Minister and will be responsible for  key organizational strategies and will oversee and manage special projects and priorities spanning across government, the department and multiple divisions of Treasury Board and Finance.

Please be advised that Nilam Jetha (see bio) will be the Acting Assistant Deputy Minister of Financial Sector Regulation and Policy (FSRP), and also the Superintendent of Pensions, Insurance, and Financial Institutions. Nilam has been with FSRP for the past two years in a project management capacity, and brings over 25 years of Government of Alberta leadership experience to the role.

I suspect that in due course additional information will be distributed. However, I would have expected/appreciated a more widely spread official government message assuring us all of continued stability in the regulation of our volatile industry. In a memo on February 18, 2016, George Hodgson assured us that IBAA will continue to have a good working relationship with the Superintendent’s office, that he has met with Ms. Jetha, and that Mark will assist her throughout the transition. That message may help quell uncertainty among IBAA members, but the transition affects more than those in the association. Official reassurance from the government that the course of the department will remain steady should be a priority.

In Closing

As I sit here in Playa del Carmen looking out over the pool and the beach, I’m reminded in the top right corner of my computer that the weather in High River is less than 10 degrees off of what we’re enjoying here. The pool is likely cooler though!

We could use some more subscriptions to this blog. The distribution list (while rising) has deteriorated substantially since we made it necessary to get to the website to view it. Please let your staff know that it is still being produced and easily available. Website interaction on any of the issues I’m going on about is also lacking. I’d very much like this blog to initiate a dialogue with several people on some of these points. Come on, folks. Give it a try!

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:  catastrophic risk  E&O  livery business  Mark Prefontaine  Nilam Jetha  overland flood insurance  ride sharing  SPF 1  statutory coverage  Superintendent of Insurance  Uber  Young's Stuff subscription 

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Cyber Security, Direct-Line Changes in the Industry, Optical-Recognition Vehicle Registration

Posted By Thom Young, February 2, 2016

The Evolution of Cyber Security

Logging into a work station hasn’t really changed much in the last 20 years. Some IT managers have tried to improve the locks at the gate but, no matter their efforts, people still seem to find a way to defeat the safeguards put in place. If you’re like me, you likely keep a file somewhere with all the passwords for the various places you need to access on your computer. While the practice isn’t recommended, it’s sort of necessary, isn’t it? My file is four pages long. I have a good memory, but not that good. Most of my passwords also contain minor deviances from each other. The similarity helps me remember them without needing to go look in this file. That practice too is not recommended, but I’ve been using that system to manage my passwords since I studied cryptology as a young soldier nearly 45 years ago. Back then, we learned that any password could be cracked with enough time. The effectiveness of a password then as now is determined by the time necessary to crack it. No matter how complicated a password you use for any application, the improvement in computing power and speed are constantly reducing the time needed to break the code. Recently, I’ve been using a password-management program to remember a number of my logins. This program claims to use an algorithm to store my password, and this filter changes routinely to provide a very secure storage site. I’ll stick with the story I’m telling though: all passwords can be cracked with enough time and effort, no matter how you calculate them.

The amount of effort invested in trying to access a password has to be valuable relative to what you get out of it. I’m quite sure that no one is going to invest much time trying to access my account with the American Philatelic Society, but maybe they’d be willing to put supercomputer power to work on my banking or business logins. I’m flattering myself with my own importance here, but I think you’ll understand my point.

I’ve been following a number of articles on cyber security recently and noted one in Canadian Broker magazine citing the most common passwords in use today. Despite all the warnings, few of us seem to take heed or even care. Here’s the latest list of the top 20 most-used passwords:

Rank
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
Password
123456
password
12345678
qwerty
12345
123456789
football
1234
1234567
baseball
welcome
1234567890
abc123
111111
1qaz2wsx
dragon
master
monkey
letmein
login
princess
qwertyuiop
solo
passw0rd
starwars
Change from 2014
Unchanged
Unchanged
Up 1
Up 1
Down 2
Unchanged
Up 3
Down 1
Up 2
Down 2
New
New
Up 1
Up 1
New
Down 7
Up 2
Down 6
Down 6
New
New
New
New
New
New

A programmer friend of mine advises me that he has a simple little application on a thumb drive that will try all of these (and some not listed) on any login in less than 10 seconds. Apparently, you can download this app off the internet. If you’re using these passwords for any application login, I think you should immediately consider changing them to something more secure.

A strong password needs to be at least eight characters long and should contain both upper and lowercase letters, at least one number, and at least one non-numeric or alphabetical character. It should be a random group and not contain a complete name in letters. The longer the password following the same principles, the more secure it is. As I stated at the outset of this discussion, all passwords are breakable, but the stronger it is, the longer it takes to break it and, therefore, the better protected the data past the password becomes. Microsoft has some good advice on this subject.

Recently, much talk has circulated on the future use of biometrics as the new standard for a secure login. Essentially, some indicator unique to you, such as your fingerprints, retinal scans, heartbeat, palm print, voice analysis, or facial features, can’t be easily duplicated by a computer hacker or thief. This biometric identifier can be read by your computer, often without the need to install a special piece of hardware. Almost all laptops and notepads now come with a built-in camera. All that is needed is the correct facial-recognition software to provide only you with access without having to input anything on the keyboard. Likewise, audio filters and touch pads determine fingerprints and such.

Facial-recognition software is advancing at such a tremendous pace that retail establishments commonly use it to track customers in their stores. A computer program tags their images with data on when they come, what they purchase, and what their preferences are. The information is available for analysis and target marketing later.  I’ve seen this kind of software demonstrated in conjunction with an office data-management system similar to that used by many brokers in their offices now. When clients walk in the door, the program notifies reception with their names and CSR. Depending on the program’s configuration, the CSR can be automatically advised that the clients are in the waiting area, and either a computerized reception station informs the clients that the CSR will be out to meet them momentarily or the receptionist is prompted to say the same thing. All this information is integrated on the CRS’s workstation or tablet with the production records in the clients’ records and files. This is quite an efficient process compared to that just a few years ago. A number of American banks are also using this technology to increase safety and security for their customers and the business.

I wonder what new developments we’ll see in the future. I also wonder what inroads will be made into personal privacy when customers’ movements are tracked by facial-recognition software and the retailers share the information among themselves. Will we walk into the grocery store to find a basket already containing all our usual items and a few special ones being promoted by the store? I don’t know how I’d feel about that marketing. I also don’t know if a negative view would make any difference because the change seems to be inevitable.


Direct-Line Changes in the Industry

Last week, we were all a little surprised to learn that the Royal Bank of Canada decided that its general-insurance returns weren’t adequate to its needs and reached an agreement with Aviva Insurance for RBC’s P&C purchase. This acquisition initially sounded to me like a good deal for our industry—another major bank admitted it had been unable to compete on a level playing field and was vacating the business. In fact, the reality seems to be that Aviva has purchased RBC General Insurance Company’s general-insurance book of business and appointed the company to represent its products in the same manner as any other broker. While I’m now not so sure anymore that this transaction is a win for our business, I am sure that it’s not a loss.

We compete in a competitive marketplace. As brokers, we have better choices for our customers than most of our competitors. Direct writers, whether they be offshoots of company players on the broker side of the game or agents for a stand-alone business, cannot effectively compete with the brokerage channel on price or product. This difference has always been the case and continues to be the reality of the insurance marketplace in North America. Aviva partnering with RBC Insurance isn’t going to change that reality. Neither will Intact expanding its direct channels in the marketplace nor, as I read today, Economical introducing a direct channel, affect that difference. These efforts by any insurers are doomed to lack-luster returns and short-lived efforts just so long as we as brokers get out there and compete for our market share. We excel at giving the best service to our customers and finding the best insurance solutions for them in price and product, so we don’t need to fear anyone in our market. Time will tell if this new venture between Aviva and RBC will be a success.  However, as brokers, we should all continue with excellent customer service so that we continue to beat RBC in competition.

Manitoba Gets Rid of License-Plate Stickers

When talking about technological advances, the simple process of eliminating license-plate stickers for registration renewal, as Manitoba has done, doesn’t at first seem like much of a big deal. So what if, in Alberta, it would eliminate the annual ritual of obtaining a new expiration sticker and putting it on your license? However, the reason these stickers have become redundant is just a small sample of how the technical advancements of optical recognition have progressed. The dash camera that is becoming standard on all police cars is connected to the provincial database through the computer in the police car and can read any license plate from quite extraordinary distances and instantly determine the registration status. The sticker, on the other hand, relies on the human eye’s limited vision and can determine only its validity. Wired cars are the new norm. Soon the digital repository of information relative to the owner and operators of the car will become part of the digital record available to law enforcement. Tracking stolen vehicles and citing drivers for infractions will become an automated process. Photo-radar tickets will contain the identity of the drivers, an automatic adjustment to their driving records, and a link to the insurer’s databases. Immediate adjustments in premium can be determined and the real function of UBI will come into play. Customers will be charged for the true underwriting risk immediately. Talk about an incentive to change behaviour! The duties of traffic police will be not much different than those of the parking authority—digitally recording infractions and violators. The world is going to continue to change.

In Closing

I’m hoping the take up of people following my column continues to increase. The new format allows IBAA members to make comments directly on the blog and share thoughts not only with me but also with other readers. If you prefer, you can email me instead with any comments you’d like to make. Just remember to subscribe to the blog (under Your Network in www.ibaa.ca) so you receive notice of its publication. Looking forward to hearing from 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:  Aviva  banks  biometrics  broker channel  cyber security  direct writer channel  IT  license plate  optical recognition  passwords  RBC  telematics  UBI  vehicle registration  Young's Stuff subscription 

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IBAA Convention, RIP David Bowie, Uber Regulation and Coverage, IBC’s 2016 Top-Ten Consumer Tips, Financial Scams, Blog Notices

Posted By Thom Young, January 19, 2016
I can’t believe we’re on the second issue of the new year already. I’d be reminding people to write 2016 on their cheques a few years ago, but I don’t know many people who use cheques anymore. I think I’ve written two in the past year, and remembering what date to put on them doesn’t seem to be much of an issue anymore. The times do continue to change, don’t they?

I received a notice the other day for the IBAA 2016 convention on May 15–18 at the Fairmont Banff Springs. This will be a fabulous opportunity for you and your key people to network with insurance brokers, insurance industry partners, and regulators—and even to meet me in person! Outside of all the partying, you can attend insurance education sessions, welcome IBAA's incoming president Julia Marshall, get involved at IBAA's Annual General Meeting, and connect with the Insurance Brokers Association of Canada and IBAA board members and staff. Where else do you get the chance to meet with some of the best minds (did I mention that I’d be there) in the industry? I’m sure someone has a record somewhere of how many of these I’ve attended, and I know others who’ve attended nearly twice as many as I have.

The price of attending this annual event is a bargain from my perspective, especially if you get your application is in before the end of this month so you’re eligible for the “early bird” discount of $100 on the whole convention package. The early bird savings ends at the end of this month, so get your registration in now! You can do it online by clicking here.

An Ode to Excellence—the Passing of a Musical Legend or the Making of One?

The past week recorded a sad note with the news of the death of David Bowie at the rather young age of 69. Cancer took this very talented fellow from us too early in my view. Although a number of people I know have no idea who he was, his influence on the world we live in was extraordinary. I think the first time I heard the word androgynous it was in the context of Bowie’s rather outlandish stage presence in wildly coloured outfits, crazy makeup, and even crazier hairdos that left many wondering about his gender. All this was at a time when the pluralistic perspective that many of us share today was just in its infancy. Still, the music he produced transcended the outlandish projections he used to sell it. He was one of the pioneers of music videos at a time when technology didn’t lend itself to easy sharing, and his absolute excellence as a musician and performing artist identified him as leader in his field. He did very well as an actor as well.

Artistic talent doesn’t always translate to genius, but most artists have exceptional abilities beyond those we see in their art. Bowie was one of those people. In the latter half of the 1990s when the music industry was suffering the effects of advances in technology that brought about devaluation of musical works, Bowie bundled his work into a bond asset (Bowie bonds) that allowed him to value his work for a period of time and to raise the money in the bond market for an effective return. Subscriptions to Bowie bonds were taken up mostly by the insurance business. The rate of return was very good and, unlike the majority of derivatives put together at that time with mortgages and leases, proved to hold its value to redemption. Bowie proved to be an astute financial manager as well as a talented performer.

I recall a very warm evening in September 1983 when I attended a Bowie concert at Winnipeg Stadium. Part of the Serious Moonlight tour, the concert was the largest ever held in Winnipeg with over 40,000 people in attendance. I can’t say that at the time I was a huge fan, but I had an appreciation for a number of his tunes. The promoter of the venue in Winnipeg was a client of ours at the bank I worked at, and the future mayor of Winnipeg offered front-row tickets that were gratefully accepted by several serious looking bankers. I thought I looked a little out of place and actually felt a little old, but the show remains one of the very best I’ve ever attended. The music was perfect and the stage antics outstanding! RIP Ziggy!

More about Uber

It seems you can’t go a week or more without hearing something about Uber in the mail and in the industry press. The files I keep with ideas for these blog articles have so much discussion about ride sharing that I’m having trouble keeping the notes in one place. The first item of interest is the effect of “surge” pricing in the Uber application that made headlines in Edmonton and elsewhere. The price you pay for a ride with Uber seems to operate on a kind of sliding scale. The more the demand, the higher the price. This pricing is fair according to Uber because it encourages a competitive response from participating drivers (they can make more money) and the increased pricing is very well disclosed to customers with text alerts and notices as the increases are determined. Great for Uber and their drivers, but no so much for the consumer.

Responsibly arranging for transportation after celebrating on New Year’s eve saw one fellow watch his $150 car ride turn into a nearly $1200 charge to his credit card. While Uber is standing by its story that the price is fair, that view is not likely shared by the fellow caught in this bind or by the regulator or members of the public who demand protection from these kinds of scams. As I’ve written before, the reason the livery business is so highly regulated is the graft and abuse it attracts. Even with modern technology notices in place, this business seems to need a high degree of regulation to ensure that the public isn’t getting screwed. I’m sure Uber would disagree.

Reasons for regulation to ensure fair play in a marketplace abound, and Uber or any other kind of public service is not exempt from them. An interesting article in the Globe and Mail makes a good case for regulation, focusing particularly on the exploitation of the drivers.

On the other hand, the old rule of supply and demand has brought about a responsible reaction to this new exposure that our customers participating in a ride-sharing program have presented to our industry. Aviva has taken the initiative to introduce an endorsement providing a reasonably priced endorsement to an automobile policy to allow for the occasional use of an insured vehicle for these purposes. I expect soon that competitive pressure will bring other companies to the marketplace, and the matter of uninsured drivers will, for the most part, be removed from this discussion. I note as well that a number of companies are verifying their underwriting confirmations with their clients during renewal and putting them on formal notice that they are not covered when using their vehicles in ride-sharing programs. These efforts should go a long way to deflate the “No one told me” defence that we’ve seen when insurers decline to participate in any losses involving a ride-sharing scheme.

Doubtless, I’ll be visiting this topic once again in the coming weeks.

Insurance Bureau of Canada Top-10 Consumer Tips for 2016

Pass these tips on to your clients. They’re definitely good talking points to initiate a review of coverage with your clients. While they may seem like just common sense, any adjuster will tell you that common sense isn’t very common!

IBC's Top-10 Tips for a Safe New Year
  1. Review your insurance policy to ensure that you have adequate coverage.
  2. Shop around to find the right policy for your own unique situation.
  3. To prevent possible slips and falls, keep your walkways and front stairs clear of snow and ice.
  4. Create or review your family emergency plan.
  5. Update your home inventory list by adding new items, including gifts received over the holidays. Note the approximate value of the items, including makes, models, serial numbers, and any other identifying marks.
  6. If necessary, hire an appraiser to determine the value of works of art or jewelry to avoid a possible claims misunderstanding.
  7. Take photos or a video of your home's contents.
  8. Keep your home inventory list, and photos or video of your home's contents, in a safety deposit box, a fireproof safe, or in another secure location away from your home.
  9. If you are renting, ensure you have tenant's insurance. A landlord's policy will not typically cover your personal belongings or liability.
  10. If you have questions, speak to your insurance representative.
For further information, contact IBC's Consumer Information Centre at 1-844-2ASK-IBC.

I used to offer to keep my clients photos and inventory lists in their files. Now a days it’s even simpler to add this stuff digitally to the client records so that their own records are backed up with yours—just another simple thing to help your clients.

Be Careful Out There, People

While we often take for granted our own security in today’s interconnected world, scams continue to circulate because they work. Every day someone is caught up in one of them. I receive between 40 and 60 email messages daily, and just about every day I get a notice that my personal information has expired at one bank or another or that my PayPal account is in need of an update. I bank online and know that my bank will never email me to ask for an update. All real bank communications are done on a secure link when I sign in. Even with those, I may call the source directly to confirm the process. I’m cautious because I follow a discipline learned from experience that not all things are as they seem to appear, particularly when communicating with people you can’t confirm by remembrance. Ensure you talk with your clients and staff about these scams so that people are wary and aware. I had a message the other day that Revenue Canada had issued an arrest warrant for me and I’d better call the given number right away or there’d be big trouble. Sometimes these things are amusing. Still, it’s annoying to know that people get caught up in them.

If it looks too good to be true, it probably is. The advance-fee scam is a version of “I’ll send you a cheque, you deposit it, and then send me a small fee to cover my costs of doing you this favour.” Sometimes they mail you a cheque that looks real enough but, if you deposit it, the cheque will be returned as phony. Of course, the fee you sent will be long gone by the time you find out. Currently, FSCO has sent a warning that “Allstate winners” in Ontario are being sent phony cheques from “Allstate.” No doubt, this scam will make its way here. Catching the perpetrators is difficult, and the scammers multiply like flies. Take one down and two more pop up. Be careful, and let your clients know that their insurance companies will not likely ask for a fee if they send them a cheque.

In Closing

I’m wondering how many are enjoying this new hyperlink delivery system for this column. I don’t seem to be getting the feedback on controversial subjects that I did before. Am I boring you, or has everyone had too much to do over the holidays? I suspect the more likely case is that people don’t know that they need to subscribe to receive notices that a new blog was posted. Please go to the Your Network page on www.ibaa.ca. Follow the links through to the Young’s Stuff blog. Make sure you've logged into the IBAA website so the system knows who is subscribing. At the top left of the page, click “Manage Subscriptions.”

Young's Stuff subscription

If you have some ideas or thoughts on topics you’d like to see covered here just comment on the blog or drop me an email anytime.

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:  bonds  David Bowie  finance  financial scams  fraud  IBAA convention  IBC  Insurance Bureau of Canada  IT  livery business  regulation risk management  ride sharing  safety tips  taxi regulations  Uber  Young's Stuff subscription 

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New Year Changes, GAP Insurance, New Beginnings for Refugees

Posted By Thom Young, January 5, 2016

And a New Year Is Upon Us

Looking back at 2015, it’s hard to imagine the changes we have seen take place. Who could have predicted that oil would fall to below $35 dollars a barrel or that the Canadian dollar would drop to below 72 cents? Who’d have thought we’d ever see an NDP government in Alberta or the fall of a fiscally successful Conservative government in Canada to a party running on expanded deficits and relaxed social mores? I wonder what 2016 will bring us.

I’ve little doubt that at some point we’ll see a return to normalcy here in Alberta, but who knows what that means? Alberta’s provincial politics have always been split by an urban versus rural dichotomy. While the turbulence this causes is easy to see in the internal workings of all the parties, the recent imposition of the urban perspective on the operations of family farms has crystallized the divisions in that party.

Discussing politics in a public forum is dangerous. Trying to remain neutral on the issues is bound to annoy as many people as you please. As I’ve often said, change is good. New people with new ideas and perspectives always make for better responses to the challenges of governing a growing society. The world my father envisioned was much different than the one my generation created. My children are shaping the future for my grandchildren who will no doubt one day also complain about the new generation taking over and find fault with the manner in which things are done. I often tell my friends who start ranting about the way thing were, the way young people dress these days, or corruption in politics that they are beginning to sound like my dad did. When I join in, I often remind myself too!

I’m a fan of folk music. The mixture of poetry and rhythms has always intrigued me. Much like writing, the medium provides clarity and lets you communicate with the world in a powerful manner. One of the first folk songs I learned was written in 1964 by a then 23-year-old poet who still can’t sing a lick but paints pictures with words that become masterpieces. His real name is Robert Zimmerman but you probably know him as Bob Dylan. His big hit from 1964 is as poignant and true today as it was when I was just 11 years old!

Come gather ’round people
Wherever you roam
And admit that the waters
Around you have grown
And accept it that soon
You’ll be drenched to the bone
If your time to you is worth savin’
Then you better start swimmin’ or you’ll sink like a stone
For the times they are a-changin’
(http://www.bobdylan.com/us/songs/times-they-are-changin)


I don’t know how that would sound set to rap music, but the message wouldn’t be changed.

GAP Insurance

Have you heard of GAP insurance? Your clients may approach you with information about it from someone else and ask you to explain it. If they do, pay close attention to the description they give, the literature provided by the salesperson, and their perception as to whether or not the purchase of this coverage is “optional” within their agreement to purchase the automobile or equipment in question.

This product is sold mostly by auto and equipment finance dealers to clients who are financing their purchases beyond the values of them. It may also be introduced to clients who are refinancing their current loans. GAP stands for Guaranteed Asset Protection and in effect covers the lender for shortfalls in the underlying insurance. While it can be used for automobile financing, it is by definition a property coverage and, therefore, falls outside of the provisions of regulatory restrictions in wordings for automobile policies. The coverage has been around a while in the U.S. and England, and has been marketed in Alberta from other Canadian jurisdictions. Soon it will be subject to a restricted license regulation requiring the people selling this product to meet some minimum requirements to ensure the public is protected, or at least that the sales people are accountable to someone if they violate the regulations.

Of particular concern to me is that the product is ripe for tied selling with undue influence. Much like the issue I have with creditors selling life and disability insurance products with their loans, the position of influence these people have with regard to the underlying transaction gives the purchaser the perception that the loan may not be approved unless the “optional” insurance product is purchased. As with insurance, anything that will reduce the risk (in this case, of granting credit) will influence the terms and conditions (in this case, of the loan). I’m fine with an ultimatum for the client that says “get the insurance or no loan,” but not if it transfers into an ultimatum that says “take our insurance or no loan.” This product is particularly at risk for this transfer since it has, as yet, little competition. We can’t sell it through our markets and can obtain it only (at this point of writing) through a sub-broker arrangement with a Manitoba broker, even though our office represents the company that sells this product. Without a competitive market for the coverage, a loan offered with this coverage as a condition isn’t giving the customer any options but to purchase it from the same person offering the loan.

The regulations concerning this new product are being considered along with the restrictive licensing. While I cannot presume what the regulations will actually look like when they clear the superintendent’s offices, the license holders will most likely be mandated to disclose fully their compensation for arranging the coverage, and they will also likely be mandated to disclose fully to the customers that the coverage is not a prerequisite to getting the financing.

I’m not a fan of the coverages and have opposed its introduction into our Alberta marketplace. I don’t see it as a benefit to Alberta consumers and, if I did, I would prefer that it be available only through properly licensed brokers who understand the product and coverages, rather than through a permit holder in an auto or equipment dealership. Still, as the coverage is being sold extra-provincially, finding a way to regulate it is better than letting it be sold without supervision.

My research on this product in other jurisdictions shows it’s very lucrative for the insurers offering it with loss ratios below 10%. The fee structure for the sellers is unregulated and normally capitalized into the loans being insured, so it’s quite lucrative for them as well.

New Beginnings for Many

I’ve never been a fan of making New Year’s resolutions, especially when they’re about changing negative behaviour—eat less of this, do less of that. The process is doomed to failure in our northern confines. At the coldest and gloomiest time of our year, do we really want to give up something that gives us comfort? Nope—the best days to set in action a plan for positive personal change is when the winter darkness begins to release its grip on us and the sun starts to warm our days. The snow melts and the trees bud. Finding the discipline to carry forward a self-improvement plan is much easier when the land reawakens with the promise of new life. Wait for spring to give up the donuts and buy the gym membership. Your new exercise machine is less likely to be a clothes hanger in the laundry room when you can work on it in daylight! That’s how I see it, anyway.

Speaking of new beginnings, it was heartwarming to see refugee families from Syria, Iraq, and Afghanistan being welcomed in cities across Canada. Much of our country is built on the backs of immigrants from around the world, and Canada has been in modern times a beacon of hope to those trying escape oppression in foreign lands. In my life I’ve seen refugees arrive in my country from Hungary, Czechoslovakia, Cambodia, Vietnam, Lebanon, Uganda, Somalia, and a half dozen other places. I’ve often wondered how difficult it must be to leave your homes to secure your family’s safety in a strange country. I know many didn’t choose to come to Canada but came because it was a safe place. Once they got here, they quickly set down roots, got their kids educated, got themselves jobs, and built businesses that have contributed immensely to our nation’s wealth. They are very proud Canadians!

I’ve heard many naysayer’s arguments over time. One of the current rants is that the young men should stay and fight for their rights in their own country. Another is that we should look after our own in need before we reach out to help others. Some say we should slow down and do better background checks to ensure these people are not a threat to our society. Each of these naysayer’s arguments has a little bit of truth that gives their lame arguments some validity. Still, the reality is what it always has been. In the chaos and fog of war, millions of people are displaced and on the move, their homes destroyed, their communities razed to rubble, and they leave with little more than the clothes on their backs and the coins they have sewn into them to pay the cost of fleeing to safety. We cannot stand idle and watch them suffer. While it’s easy to make excuses to do nothing, it’s just as easy to find reasons to do something. A young couple at the airport the other day were offering people from a foreign land toques and gloves they had recently bought. The gesture wasn’t a lot, but it was something. If all of us do something, we can make the world a better place. It doesn’t have to cost anything to be a decent human being! Put your fears behind you and put on that welcoming smile. You’ll be surprised by the smiles you get back!

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:  change  Conservative  credit-granting institutions  federal government  GAP insurance  Guaranteed Asset Protection  NDP  provincial economy  provincial government  refugees  rural  tied selling  urban 

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Licenses, Equivalencies, and Exams

Posted By Thom Young, December 16, 2015

Licenses, Equivalencies, and Exams

As a member of the General Insurance Council, I’ve spent a lot of time recently with issues surrounding this topic. I’ve been sitting on sub-committees for issues related to marking equivalencies for license levels 1, 2 and 3. Decisions have been made and sent to the Superintendent’s Office to prepare amendments to the regulations. Amendments to the regulatory standards are not easy to achieve. The many dynamics in the process include political review and oversight. Each step of the process is painfully slow.

You might wonder why this matter wasn’t addressed with the license regulation revisions that put into play new rules for each of these license levels. Well, I can only note that I wasn’t on the council when this occurred. It’s as much a mystery to me as it is to you. I’ve been arguing within the industry and with the regulator for about 15 years on the need for regulatory recognition of educational achievements in industry and academic courses. If people invest their time and effort to achieve professional recognition in a standard that far exceeds (my opinion here) the bar set by the regulator, they shouldn’t need to prove that knowledge to the regulator as long as the industry approves of the standard and, particularly, if the industry operates a recognized professional educational program designed to set the students above the norm. I’ve always lobbied for Alberta to be a leader in these areas but, ironically, the initiative did not arise in Alberta until these courses got the regulatory nod in other jurisdictions. Did I mention that this process is painfully slow and tempered by competing interests and different points of view? The General Insurance Council has agreed to equivalencies for Licensing Levels 1, 2, and 3 in CAIB and CIP courses. Now we await the regulation adjustments that will provide options for the AIC exams and the industry course exams. When you get your memo on this issue from the AIC, I would encourage you to talk to your association representatives on any matters that concern you and ask them to carry your concerns forward to the regulator. As with all group efforts, much of what has been achieved is a compromise of perspective, and that’s sure to annoy as many people as it pleases.

The AIC exam issue continues to confuse and evolve to new standards. A committee of academics and GIC members has reviewed the curriculum from which the exams are prepared and, in consultation with industry stakeholders and educators, agreement has been reached on the Level 1 curriculum. Educators will now be able to prepare a course of study to help students pass the exam. The curriculum design document for Level 1 License exams can now be viewed on the AIC website. This document contains the topics for study and the weight of the questions by category. The bugaboo about “soft-skill” questions has been addressed by removing all of these types of questions. (As the pass on these questions was better than that in most other sections, we hope that this change doesn’t cause a drop in pass rates.) The major emphasis in the exam is on insurance technical knowledge—where many believe it should be. If we devote the majority of teaching/studying time to this subject, pass rates should greatly improve. Technical knowledge was a struggle even before the changes to the exams and will continue to be for the Level 1 and 2 exams after the coming changes. Please look for the AIC information releases on its website and in the mailings being distributed. The details here are not an official update on these matters, but simply general terms from my own perspective.

The Licensing Level 3 examination is currently under review. Along with the many schools of thought on the form and content of the examination, some even question the need to pass an exam to qualify for a Level 3 License. At the present time, to become a Level 3 broker you are required to hold a Level 2 License for a two- year period. At Level 2, the highest technical components of knowledge are tested, and the technical duties and authorities of the Level 2 License holder, as well as the representations of insurance matters to the public, have no limit other than the regulatory requirement to work under the supervision of a Level 3 License holder. The Level 2 agent is required to understand the regulatory and licensing issues completely. The required knowledge is not exceeded by a Level 3 agent. The single difference is the Level 3’s duty to endorse the applications personally within an agency or brokerage for License 1 and 2 employees. Understanding insurance-based ethical and professional responsibilities of a broker are fully required of a Level 1 License holder and tested. The test of this component is no different for any license level, so why are we retesting it? That leaves a Level 3 agent with administrative issues that may well be necessary to manage any business properly, but should the regulator be testing business knowledge or acumen before granting a permit to start a business? Is that the role of the insurance regulator? Does doing so provide any additional protection to the buying public?

No bar is set for any other business or profession that limits entry to the competitive practice of the profession. I cannot reconcile with the history of business the requirement that those with the capital needed to start a business, the confidence of their suppliers to endorse and sponsor their application for a Level 3 License, and the technical knowledge of the craft needs to be tested to obtain the right to compete. So far as I can recall, not a single example of disservice to the public under any provision of the Insurance Act has been linked to a person’s inability to run a business properly. Nor can anything be properly tested that will provide further assurances to the public that people starting any kind of business will be successful in this regard.

The problem with setting a bar to entry in any business is it limits the free flow of capital that drives new initiatives and adds an additional bureaucratic step that complicates the process of succession. There’s much more to discuss and debate on this topic, but I'm going to stop here. Let me know if you’ve any thoughts. I’d be happy to represent them for you in my role on the General Insurance Council.

Wrapping up this topic, I should note that the new Level 1 exams will be coming into play early in the new year. With the clearer and more concise curriculum design outline, success in training new entrants into our business should improve substantially. The implementation timing for Levels 2 and 3 is being driven by a sense of urgency, but the wheels of progress turn slowly when trying to appease so many perspectives. Deadlines were pushed back once because, at the 11th hour in the Level 1 review, a letter from an industry association was received that resulted in the entire process being revisited. I can’t deny that the review produced a better outcome, but I can observe that it could have been delivered in a more timely fashion. The process continues!

Here Comes Santa … and All That Stuff

Another year is just about over, and all the little ones are anxiously awaiting the arrival of Christmas morning hoping they get the gifts they have asked for. For some, this is the most wonderful time of the year. For others in need, not so much. Imagine that the premise of the whole celebration is to share with each other the treasures we have. These treasures are not distributed equally though. We have the power to make a difference in the world. A dollar to the food bank, a hamper in the food-bank box at the grocery store, $20 dropped for the Sally Ann. Wish someone a Merry Christmas. Sing a Christmas carol with a little one. Never underestimate the power of caring—the single most important act you can do to both improve your life and someone else’s. It’s contagious, so pass it on.

I hope these holidays find you surrounded by friends and family within ear of young children playing and laughing and that you have to suffer through a meal’s blessing given by an old person glad to have the floor for the occasion of it. May these things give you joy and make you happy for the good things in your life. In my life, I count each of these moments as special and hope to encourage others to find the enjoyment as I do.

For those who don’t share the Christmas tradition, all the fuss we make of it must be interesting to you. I hope you find the joy in our message that is also to you: Peace on earth and good will to all!

See you all next 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:  Alberta Insurance Council  CAIB  CIP  General Insurance Council  licensing courses and exams  Licensing Level 1  Licensing Level 2  Licensing Level 3 

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Marketing Seasons, Remembrance, Alberta Fiscal Health, UBI Behaviour, Oil and Gas

Posted By Thom Young, December 1, 2015
Updated: November 30, 2015

How Many Days until Christmas?

Now that the flap over Christmas decorations displayed before Remembrance Day is over, I guess we can enjoy the real beginning of the Christmas season, unless of course you celebrate American Thanksgiving. Before people protested that a change to the Christmas marketing season prior to Remembrance Day was disrespectful to veterans, they complained about Christmas marketing before American Thanksgiving. Historically, the fall decorations celebrating the harvest were removed during the last week in November, and up went all the Christmas decorations. Music in the shopping malls quickly changed to classic carols, and lineups to see Santa began. The current transitional marketing seasons seem to be working. The vast majority of shoppers don’t seem to mind that the seasons run together. If they didn’t like the atmosphere being created for them, they wouldn’t go to the malls.

Speaking as a veteran, I believe that if you took a moment out of your busy life on November 11th and thought for a minute about all those who have made a sacrifice for their nation, and if you wore a poppy in remembrance, then that “remembrance” is good enough for me. I wouldn’t be bothered a bit if you were putting up Christmas decorations while you did that. While I’m sure I do not speak for all veterans, most of the veterans I know feel the same way. In my youth, at eleven minutes after eleven on November 11th, buses and cars pulled over on the street and men stood with their hats off and their heads bowed, school was interrupted for announcements, and then all stood for a brief silent tribute in memory of all who served. This unified action of Canadian citizens was quite a thing to witness and participate in. Many of our citizens vividly remembered the horror of war as they were survivors of it, so the act of remembrance was very real to them. Still, after this short meaningful tribute was over, people got back in their cars or went back to their desks and got on with whatever it was they were doing. The practice of devoting a whole day and a civic holiday to remember our veterans came much later. Now that very few of the generation that participated in the 2nd World War are left, I sometimes wonder what they would have thought of the new generation’s take on this act of remembrance and the controversies that always seem to arise about it. For my generation of veterans, the seemingly endless attempt by others to find things that are disrespectful to veterans is both annoying and confusing. Lest we forget.

Interesting Times in the Fiscal Health of the Province of Alberta

So far the political transition for Albertans and especially for those of us who have business dealings with our provincial government has been interesting. On the energy side of things, no consideration has been given to any relief for this industry that is suffering from the steep decline in oil prices. As no one has any control over the price of any internationally traded commodity, no fault can be found with the government for the price of oil. However, as the industry once again goes into hibernation to await the return to profitability that increased oil prices will bring, some declarations of support and patience from our government would provide some confidence for both investors and industry leaders on what the future will hold. Instead, we see next to nothing of any substance and no leadership whatsoever. The capital risk takers will not likely have much incentive to take this opportunity to improve their operations while awaiting a market correction. The rumours persist that increased royalties and environmental restrictions are in the offing. Nothing like being kicked when you’re down, is there?

Our Albertan economy is not as tightly tied to the yoke of the oil and gas industry as it was in the mid-1980s when the collision of international price volatility and domestic resource policies saw capital flee and production grind to next to nothing. Still, the current situation is unsettling with the large number of variables at play here. Suffice to say that the oil and gas industry in Alberta is not very happy with the current competitive environment that will continue to slow down production and shelve large projects until confidence returns.

On a positive note, the surplus supply of labour and equipment has greatly reduced development costs. Perhaps now would be the time to put that advantage to work in repairing and improving the infrastructure of our province. Maybe another lane on that QE2 would improve safety and reduce travel times. An actual ring road around Calgary would improve the transport of goods. Highway 2 south still wanders through a half dozen little towns and would be improved with freeway completion. In the north, twinning completion on Highway 63 to Fort McMurray and Highway 43 to Grande Prairie would save many lives.

The distribution of oil and gas ties together economic and environmental considerations. Our country is self-sufficient in production of oil and gas but can’t find a way to reconcile the benefits of that reality with a distribution system that gets raw materials to the refinement centres and the product distributed around the nation. Instead, we compete for delivery of unrefined product from foreign sources that subject us to wide price fluctuations driven by international events. Whoever thought this plan up has to be asked why. Discussion of building a pipeline to deliver the product from source to market now results in a huge uproar about the environmental implications. This is confusing given that the oil going to those production facilities now is floating up Canadian rivers, rolling along on Canadian railroads, and being pumped through aging pipelines from the shore facilities. The potential for an environmental catastrophe in the current model is more pronounced than bringing the product to market on a new pipeline. Perhaps we should now ponder this mystery from an economic perspective, rather than the political one.

People Behave Better under Supervision

A recent report on the use of UBI in Canada observes that installing in an insured’s car a device that monitors driving behaviour produces better driving. Who’d have thought? A couple of years ago, I predicted that the main benefit of UBI to the public would be the change in behaviour (and thus fewer claims) that would result from this monitoring. The benefits of UBI continues to be an interesting philosophical discussion within the industry as, statistically, the benefits for the insurer in using UBI to select better risks may well now outweigh the use of UBI to make better risks out of the drivers using it.

This debate continues in the U.S., where UBI data have been collected 10 more years than in Canada. The active monitoring of underage driving behaviour in the U.K. has been producing huge benefits in both selection and the modification of behaviour of this class of business. The stellar results in regard to this class of business makes one wonder if its use should be mandatory.

Certainly, the continued development of smart technology is changing all facets of our industry. Most smart phones record continuous data on your location, speed of movement, and other information such as the temperature. The introduction of the data from these devices into trial evidence is now routine in both civil and criminal law. New automobiles are coming with built-in LTE Wi-Fi. Within the next 10 years, your new automobile will have all the features of your phone built directly into it and will sync with your phone whenever you enter your vehicle. Real-time video recording of all that is happening in and around your vehicle or what people are doing to it will be built right into the vehicle’s CPU, so disputes as to fault for anything will be much simpler to resolve. As this technology continues to develop, some people may not even see the fact that they are being monitored while using it, while others will increasingly raise public debate on where personal privacy ends within and without your home. In particular, we’ll all need to reconsider the authorities we give people to use our personal information and images as the significance of that license continues to change.

Looking into the Future Is Fun

While predicting the benefits of new technology on our business and society is interesting, we need to remember that many things change while others remain the same. Constancy is particularly true of human nature. Roman philosopher Marcus Tullius Cicero, born around 100 years BCE, influenced many things still felt today. Of particular note, his writing on the constitutional regulation of people’s rights and the division of power in a republic are still found in contemporary teachings on the subject. We often hear little snippets of his ideas on many things quoted to support opposing sides of a debate. On state funding though, his thoughts rarely deviated. I do enjoy one of his best quotes:

 "The Budget should be balanced, the Treasury should be refilled, public debt should be reduced, the arrogance of officialdom should be tempered and controlled, and the assistance to foreign lands should be curtailed, lest Rome will become bankrupt.  People must again learn to work instead of living on public assistance."—Cicero, 55 BCE

Even today, I don’t think you will find too many tax-paying people who would disagree with this perspective on things. As we in Alberta ponder the irony of throwing out a fiscally irresponsible government and replacing it with a more generously philosophical group in protest, the teachings of the past should not be forgotten.

In Closing

I received a memo from my staff the other day reminding me that it’s time to get the annual Christmas letter done. In all the years I’ve been in business, I’ve written a brief one-page essay each Christmas to share with our customers and our business partners. For me, there is no greater reminder that the holiday season is soon upon us. The challenge to keep that message new, refreshing, and relevant is an interesting one. For now, the challenge of hosting American Thanksgiving is more pressing.

The news is focusing on roads closing due to snow storms and cold weather. Bundle up, people. Winter is just starting!

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:  budget  privacy  provincial economy  Remembrance Day  telematics  UBI 

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Cat-Risk Preparedness, Overland Flood Clarity, IT Basics for Insurers

Posted By Thom Young, November 17, 2015

Cloudy with a 50% Chance of a 5.5 or Greater Earthquake in the Next 10 Years

In our technologically advanced world, we are often underwhelmed by our ability to predict natural events with any degree of certainty yet overwhelmed when experts predict calamities and trends. Meteorological predictions beyond three days in the future retain little more than a 50% accuracy rating, which, as any statistician will tell you, has the same certainty as flipping a coin in the air. As I’ve often noted, the science of weather modeling really only began in the 1970s when the first weather satellites were launched and began collecting rudimentary data that advanced the understanding of weather in general and, particularly, of hurricanes. As modern technology has exponentially increased the amount and type of data upon which the science is based, the science continues to evolve. New data sometimes contradict the old hypotheses and provoke new insight. The National Oceanic and Atmospheric Administration (NOAA) and its one of its partners, the U.S. National Weather Service, meet to determine warnings and updates about the upcoming hurricane season.

The accuracy of this information may depend on perspective. A statistical review from a Houston newspaper claims NOAA’s predictive analysis is accurate “6 out of 10 times, or twice as often as chance would predict” based on the average number of hurricanes per year, and the NOAA website confirms this ratio of around 50%. Further, the Houston article indicates that the accuracy assessment was affected by the small sampling. All that considered, the information seems about as helpful as standing at the edge of the ocean and reading the Farmer’s Almanac.

Seismologists are predicting a catastrophic earthquake and tsunami in the Pacific Northwest—much like the 2011 event that occurred in Japan—is inevitable, could happen at any time, and would involve the heavily populated areas of Seattle and Vancouver. They opine that the magnitude of such an earthquake is indeterminable but that the area is long overdue for a “big one” and calculable pressures along known fault lines are the highest they’ve ever seen. References abound to the specter of a disaster along the lines of that portrayed in the movie San Andreas, but saying that a major earthquake is inevitable is no more useful than forecasting another eventual ice age. The motivation to prepare is substantially reduced if the inevitability has no sense of urgency or expiry date. Inevitability also evokes fate: if nothing can be done to avoid the disaster, getting ready for it won’t be the number one item on a list of things to do “someday.”

The governments charged with protecting us from disasters are allocating money to build shelters and create emergency resources. Emergency protocols are being practiced. I predict these efforts will not be enough. The “big one” will overwhelm the infrastructure in place and the ensuing chaos will include devastating personal suffering and economic turmoil, much like that we’ve seen in Japan and Indonesia. These countries are still trying to recover from the effects of earthquakes and tsunamis. I advise everyone to be prepared! Put together a survival kit. Make sure to have at least 12 liters of water and three days’ dry food per person in your household. Have a heat source available that isn’t dependent on the probably crumbled infrastructure. Hope that after 72 hours either you have been evacuated or the infrastructure will be available for use. Your cell phone and lights will not likely work very well if at all when the floors collapse, so plan for the worst. Those who consider the contingencies and possible responses will have a better chance of survival.

Enough of the doom and gloom! Chances are the big one won’t happen in the next 100 years. Toss that coin often enough and you’ll eventually be right!
 

Confusing Overland Water (Used To Be Called “Flood”) Coverage

These past weeks have seen several announcements and a number of reports from various insurers on their participation in this coverage for personal-lines risks. If those of us in the industry are confused, we won’t likely be able to assist our customers in understanding their options for coverage. If your clients are insured with company A, they have coverage for sewer backup so long as a flood doesn’t occur either 72 hours before or 72 hours after (I think). With company B, as long as they are outside of the red zone by any waterway, we might be able to cover them for sewer backup—unless the overland water reaches a point higher than the imaginary line, but maybe not for overland water (I think). Company C is putting together another new wording that doesn’t match the wordings of Company A or B but has the same intent. Company D is considering their options. What a mess this has become! Without standard wording, how do we develop an informed recommendation to the buying public? The confusion is getting worse with every new wording announced in the competition for personal-lines business. Can anyone say E&O nightmare? Am I the only one who is looking to the horizon in anticipation of the next serious water event in Alberta? What kind of claims mess will we be sorting out as a result? Need I remind everyone that three days of rain such as we had in 2013 can produce a similar event? Sure, mitigation efforts are underway, but the assurances are coming from the same engineers that approved the construction of numerous housing developments impacted by the July 2013 event.

The deviations from a norm cannot be sanctioned in package wordings. For the process to work, all industry players must offer a similar promise to respond to a similar event. They cannot limit or exclude things that are covered by the wordings already in place. The differences lead to confusion in the marketplace and undermine the confidence of consumers in the advice they receive from agents and brokers.

Package policies were developed to provide consumers a common and expected minimum coverage and to provide insurance companies with a basis for competition. The rule in the development of standard IBC package policy wordings was that everyone would build from the same basic wording so every consumer could be assured that the basic coverage was identical from company to company. Beyond that, each company was free to enhance its coverage and provide all the extras it wished to consumers, excluding modification to the Statutory Conditions, which were still required. This rule of consumer protection seems to have changed with overland flood coverage. Since definitions and limitations are all over the place, brokers are in a precarious situation (E&O risk, as well as professional reputation) when trying to advise their clients, and the public may be unsure of what is covered and the value of their premium dollar.

We need to act now. Broker and consumer associations must call for clarification of this matter. IBC should be looking for consistency among its members on the wordings in use to define overland flooding and the limitations of its availability. The public properly expects that what they are buying from an insurer is defined the same way no matter how it is packaged or which  insurer they choose.
 

Should Insurers Buy an IT Company?

I was amused by a recent article in which the author suggested that an insurer should purchase an IT company. The headline caught my eye as I determined that finally someone was on the right track to resolving the IT nightmare that we endure. The archaic legacy systems that the insurers continue to use are inefficient, slow, and limited. The continued attempts to improve accessibility and efficiency by introducing unworkable “portals” that offload inefficiencies onto the broker cost the industry millions of dollars in administrative costs and stress. Since I was hot under the collar before I even started to read the article, imagine my surprise when I found that the article was only suggesting that such a purchase would help insurers understand and mitigate cyber risk. The author’s view that risk mitigation would be the main benefit certainly suggests he doesn’t understand the issues, at least those at stake from my perspective.
 

In Closing

I have followed the geese and am writing this column from the side of my pool. Please send me a note about things you’d like to hear about. It’s hard to stay focused on insurance issues without your feedback.

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:  catastrophic risk  consumer protection  E&O  earthquake  hurricane  IT  overland flood insurance 

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Opportunities in Change, Baseball’s Effect on Insurance, Uber Is Coming, Self-Driving Cars, Alberta Budget

Posted By Thom Young, November 3, 2015

Opportunities in Change

Shortly after the stunning defeat of the Alberta Conservatives, I wrote a rather lengthy column called “Change Is Good, Donkey,” which focused on the positive side of changes that affect our society. The phrase originates in the children’s movie Shrek, when Donkey, the ogre’s sidekick, laments that recent changes are so terrible they can never be overcome. Shrek imparts this phrase with such effectiveness that I often quote it to emphasize that negatives caused by change more often reflect one’s internal circumstances than real hindrances of the future. Rethinking your approach to new circumstances presents an opportunity to correct deficient processes and to find better ways to take advantage of new circumstances.

I like to think I’m a half-full kind of guy and have always attacked problematic issues with the perspective of “what can we learn?” and “how can we build on this?” While this perspective is not always easy, it leads to growth. Whether you’re running a business or deciding where you’re going in life, you will always suffer setbacks that can crush you or provide an opportunity to focus on what can be done to ensure that they either don’t happen again or won’t affect you as badly. Changes will test your resolve, your point of view, and your perspectives on many things, but adapting to these inevitable changes is the only option that will improve your outcome.

The recent changes in the Canadian political landscape present some opportunities. New and younger people with different perspectives are taking control of many areas. Certainly, that can’t be bad.

Canadian evolution into a more pluralistic and tolerant society is truly something to be celebrated. In recent years, we seem to have been more able to find fault with our differences than to enjoy the strength of our diversity. We have plenty of need to fear (and protect against) extremism in any form but need not sacrifice the strength of a Canadian mosaic to feel safe from it.

We certainly have much room for people who are looking for a safe place to live, raise their families, and build their net worth through honest hard work for others and through the use of their own capital and expertise to build businesses that contribute greatly to our economy. We also understand the difference between an economic migrant and a refugee from conflict and persecution. Our nation is second to none in care and compassion. We’ll take our share of migrants in the normal ebb and flow of things, but we’ll do more than our share for the world’s refugees in need. Our country has been built on the hard work of indigenous people and migrants of different creeds and nationalities from all over the world. They are all Canadian. Don’t let anyone tell you that they don’t give more than they take in need!

While we have justified the use of many organic and synthetic substances to alter our moods and allow for revelry, regulated permission to use the fruit of the vine has not followed through to the bud of the bush. Our prisons have far too many people in them as a consequence, black-market gangs flourish, and the amount we expend trying to eradicate its use has proven to have little effect. Clearly, the legalization and regulation of marijuana will produce a much better outcome.

Our country’s new leader is young and inexperienced, but he doesn’t appear to be naïve or foolish. If he accesses the wisdom of his elders and treads carefully into the areas in which he is unsure, then I’ve little doubt that we have nothing to fear from his leadership. If he doesn’t do these things, his passing influence will be of little consequence to our country. I’ve always said we get the kind of government we deserve in our democracy. Change will come and balance the good and the bad.

Finally, don’t let any of my ramblings here convince you that I’m stumping for one political regime or another. I remain apolitical in this journal as always. We can’t affect any immediate change in our political circumstances, but we can find opportunities to exploit to our benefit, and we can hold this new government to the standard of service it has promised the people. In truth, our Canadian political parties do not stray very far from that mystical centre line of governance. I have every confidence that the leaders of all our political parties work to advance what they see as the best interests of the Canadian people. For that they should be respected, at least until the next contest begins.
 

Baseball’s Effect on Insurance

There’s got to be a way to tie in a sports discussion with an insurance perspective. When the Blue Jays were struggling to keep their World Series chance alive, it must have been hard to remain focused in that mecca of insurance offices located in Toronto. More than a few insurance faces could be found in the crowd shots broadcast during the game, and the rest of the country (even though they, too, were following the contest closely by whatever means available) was complaining about underwriting service being slow from the Toronto head offices. When it comes to Major League Baseball, Toronto is the only skin in the game for Canadians. I remember in my youth that the Canadian favourites were as varied as our vast nation’s regions and that the country stood still during the final innings of any World Series. An American sports journalist recently discovered how baseball-crazy Canada can be when he absentmindedly posed the question “What do Canadians know about baseball; isn’t hockey their game?”

I was reading a recent article about baseball with an insurance angle. Matt Harvey, a first-string pitcher for the New York Mets, had surgery to repair his arm in 2013 and was advised by his doctor to sit out this year’s playoffs so that the repair could heal. Not wanting to sit out but at the same time not wanting to end his career by not heeding the doctor’s advice, he sought a way to transfer his risk to those willing to bet on his being able to both perform and heal at the same time. His broker, Scott Boras, was able to secure him an insurance policy for his future contracts. So if you’re a fan of the Mets, their pitching roster remains full on account of the efforts of an insurance broker!
 
I wonder if this discussion could fall under the age-old debate between underwriters and brokers that there are really no bad risks, just bad premiums. Just think, the insurance industry may well be partly responsible for the failure of Marty McFly’s prediction of a Cubs’ World Series win in 2015. One could look “back to the future” for the last time we saw a Trudeau in office and the Blue Jays win a pennant. I guess history is doomed to repeat itself.

Uber Is Coming! Uber Is Coming!

Technology is driving change faster than municipal governments can respond. I recently walked past an “Uber drop off” sign that was hanging from a parking pylon outside Cesar’s Palace in Las Vegas. A small space for about two cars was set aside. When I asked the valet about it, he said no one was using it as the drivers can’t tell one passenger drop off from another and that pickups happen on the street because the Uber drivers don’t want the hassle of working their way through the lobby entrance. Apparently, the app lets the passenger find the Uber vehicle at any convenient location. Still, more than 50 people were lined up at the taxi pick up, and taxis were picking them up as fast as they could.

For those following the news, reports continue from Toronto, Edmonton, and Calgary about attempts to deal with Uber’s impact on the highly regulated livery business. With or without regulations, Uber appears to be making inroads, and the public is slowly but surely taking up the service. At the same time, we’re advising our clients that their insurance will likely not respond to their needs if they participate in Uber. Discussions with claims and underwriting people around Alberta verify that at least a half dozen or more claims have been denied on account of participation in the Uber service. One company has announced that it is working on a solution to provide a coverage extension for this kind of use, but so far it seems to be caught up in the painfully slow process of regulatory adaptation to worldly changes, so insurance confusion continues. If anyone has any current insights on this and would like to share them with me, I would be most thankful for your contribution.
 

Self-Driving Cars

My article on this topic received quite a bit of feedback. One writer was less than optimistic that there’d be any real advances coming anytime soon. From his perspective, the unreliability of the technology, particularly the sensor interfaces in the automobiles, was demonstrative of the shortcomings likely to restrict the further development of driverless cars. I’m not so sure he’s right. The cheap parts that now monitor the performance of the automobile may not give the central processing unit reliable data on which to act, but I would argue that the current CPU (that is, the driver) isn’t sufficiently intelligent enough to react to the information from its own human sensors already. Ask any garage mechanic about the conditions vehicles arrive in as a result of the operator failing to react to little things like the warning light for the oil pressure or the intense shaking of the car as a result of a wheel wobble or even the lack of functional braking ability due to inattention to the sensor warnings? At least a mechanical CPU would deal with its programming to get the problem sensor repaired or replaced. The more critical the sensor, the greater urgency would be for the programmed reaction.

CBC articles recently reported that Ontario has prepared legislation on the use of self-driving automobiles for implementation in January 2016. The requirement that licensed operators be behind the wheel of the vehicles they’re not in control of is confusing, but most perspectives on new things from the government DMV always are. Certainly, the requirement for a licensed operator negates the insurance issues, doesn’t it? Confusion will reign, no doubt, but those of us who have negotiated the roads in downtown Toronto might think that self-driving automobiles give hope for improvement over the competence of most current drivers. I wonder when the program will be expanded to Alberta.
 

Be Careful What You Wish for  . . . Politics

I’ve been reviewing the Alberta budget with great interest. Was the election promise of a balanced budget just a pipe dream? The Alberta Advantage seems to be waning. We’ll doubtless be discussing the need to implement a regressive PST soon, perhaps combined with an increase in the national regressive GST adjustments. Fortunately, we will get to vote on these issues in the next elections that are only four short years away. I can hardly wait!
 

In Closing

We are quickly coming up on Remembrance Day. If you live in or near Calgary, get down to Memorial Drive and stop to walk around the field of crosses that are set out in honour of the fallen. Each one of these crosses has the name of a Southern Albertan who died in the conflicts we remember. It is an awesome tribute to those who made the ultimate sacrifice for their country and their beliefs. Put on your poppy and pause for a moment and reflect on that!

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:  baseball insurance  driverless cars  federal government  livery business  provincial budget  provincial government  ride sharing  Uber 

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Flood Coverage Confusion, Demise of the Broker, Driverless Cars, AIC Online License Application

Posted By Thom Young, October 7, 2015
Well, the frost is certainly on the pumpkin in Southern Alberta. As a rather large flock of Canada geese heading directly south flew right over my place, the last one looked back at me as if to ask “What are you waiting for?”  Our fall departure for the southern climes has been delayed since our usual date coincides with the birthday of our middle grandchild. We’re not allowed to be away until after that. Besides, I’ve still got much to get done here this fall, so my Canadian perspective on things remains pure at the moment.

Flood Coverage Confusion

In addition to the usual number of interesting things to talk about at the couple of industry gatherings I’ve attended in the past few weeks, “flood” coverage and its limitations seems to have generated quite a bit of confusion. Many people are concerned about the new limitations on sewer backup endorsements that insurance companies are slipping into customer renewals. The implications for E&O exposure on the broker side are staggering. Clients may think they have coverage but don’t if the proximate cause is “overland water.” If a nearby creek over flowed its banks 72 hours before or after the sewer backup, then the proximate cause is “overland water.” In the past, many of us wondered why sewer backup would respond when the proximate cause was flood, an uninsured peril. Questions of this nature used to be answered with a blank stare, but now an actual wording limits the cover. Do clients still have good coverage? Try explaining the coverage and all the limits and exclusions when, as a broker, you’re not sure about the benefits yourself. The real kick on this will come with the next major flood event, which could be next year or not for five. The interpretation and, more importantly, limitations and exclusions of these coverages will not be firmly established until we meet up with a catastrophic loss. I worry about my customers and the way these changes impact my responsibilities to them.

Advice on the “overland water” coverage provided by various companies is even more difficult. The only wording I’ve been able to secure is the one from Aviva. I’m told that The Co-operators has one on the market and that Wawanesa and Intact are soon to enter into the competitive fray, but I’ve no idea how one product compares with another. Explaining the differences must be very confusing for a personal-lines CSR. A jaded person might suggest that the new coverage isn’t sufficient enough to move forward with a competitive response in any great urgency. We are back to the original conundrum with flood coverage. The coverage needs to provide adequate distribution of risk and sufficient premium to deal with claims. These are interesting times for insurance brokers and even more confusing for the buying public. Oh well, who needs brokers? I’m sure an internet link will eventually provide all the correct answers.

The Demise of the Broker

Once again the industry press is predicting that insurance sales intermediaries (the fancy legal term for sales people) are on the road to redundancy. According to those who claim that you can find online information to purchase just about anything without any assistance, sales people are irrelevant, an unnecessary distraction, and perhaps an annoyance. Online information sites are becoming better, they claim, and giving intelligent choices with proper information prompts to allow the consumer to purchase increasingly complicated things without the need for a company representative. These statements are all true but, and it’s a big BUT, one of the most important parts of arranging a contract that promises to do something in the future is the meeting of minds when the deal is struck. When only one mind is in play, the value of the contract is uncertain because of potential misinterpretations. The legality of the contract may be suspect as well.

Look, I’m not one of those anti-tech people. I’m all for using any available distribution method to get our products and services out to the public, but at the end of the process a real person must negotiate the interests of all parties to the transaction to ensure that their real needs are met and the legal process of the contract is respected. I support the notion that the value added of a properly trained insurance adviser will continue to be an important part of the distribution process for all insurance products. Any suppliers (insurance companies) that fail to understand the support they get from such an individual risks their business success. All of the technical simplifiers, online applications and quotes, information algorithms, coverage prompts, and flashy digital pictures used by the insurance companies serve only to drive to the finished transaction between two people, the insured and the broker/agent. The manner of this meeting could be changed by technology, but the importance of it and the value to all parties won’t be.

Speaking of Human Redundancy, What about Driverless Cars?

As the technology continues to advance in this field, we are very close to the tipping point where these vehicles become a reality in the norm. No longer just a strange thing, they will be reliable and cheap enough to become a common sight in many jurisdictions. Getting to this stage won’t be easy. Many hurdles will need to be jumped before the legislation becomes uniform enough to operate these vehicles in different jurisdictions. Further, the reliability of these vehicles in operation will need much demonstration, documentation, and proof. Who is going to insure these vehicles? Who is the insured? Current legislation in Alberta would likely see the vehicle insured in the facility market. The insured would be the owner of the vehicle as per the statute wording of the SPF 1, which defines who is insured. The owner would include the driver whether that be a computer with AI capability or your brother-in-law who borrowed the vehicle while visiting town. The driver will need to be more properly defined, but such definition is not an insurmountable obstacle as the usual operator (normally the owner) would be produced for the application record. In my view, the functional manner in which that person operates the vehicle or delegates its operation would be irrelevant (I repeat, in my view—legal disclaimers abound—this is my opinion). Definition of the driver may have some grey areas that may challenge the regulators, but let’s hope they’re looking at it now and have some kind of contingency in place to deal with it when it happens. Our Alberta regulatory response to changes in our business has tended to follow the leaders instead of making good changes for our market by being the leaders (again, IMHO)!

If anyone thinks we’re talking about something way off future, think again. On last report, 48 vehicles are being operated in a California Google study. These vehicles operate in a highly dense urban environment and function extremely well all on their own, with no human intervention in the completion of their assignments. Yes, some minor accidents have involved these vehicles, but none of them can be defined as at fault—so long as you don’t use the other drivers’ distraction at a driverless vehicle as an excuse. The tests incurred some minor injuries in accidents but, again, they were due to the manual operation of the vehicle by technicians. No reports have been made of any traffic violations in the operation of these vehicles. While only four states have made provisions for autonomous vehicle operation, their use will doubtless soon be expanded to new jurisdictions in short order.

The concept of a self-driving automobile lets the mind wander into some interesting possibilities. For example, in a Top Broker editorial, Jeff Pearce discusses flying cars.

Certainly, driverless cars have a huge number of benefits. All of the advantages of having a chauffeur come to mind.

That $26 a day you pay in parking won’t be much of an issue. Just send your vehicle away to wait for you to tell it to come pick you up. Where you send it might be an issue, but I’m sure you could program around that hitch.

Auto theft would become an issue of the past. Imagine trying to steal a car that’s driving you to the police station, emitting an alarm, and has already sent the police a picture it has taken of the crook trying to steal it. Following that logic, your vehicle can become part of your home security system, keeping an eye on things around the house and reporting suspicious activity to you.

What about the kids needing to get to the rink or to dance? No more juggling schedules or negotiating with other parents to get them there and back—just send the car (or the other parent’s car).

Studies claim that the average person who lives and works in a high density urban environment spends as much as four months of their adult life looking for a parking place. Imagine how many more clients you could see if your car just dropped you off and came back to get you when you were done. Your productivity would increase substantially.

The technology has huge implications for the insurance industry, most of them very positive. Loss ratios on automobile insurance are composed substantially by administration and adjudication costs. Imagine the elimination of arguments regarding fault by the ability to review 360° digital recordings of the accident scene prior to the accident, during the accident, and after the accident? Much less discussion will be needed to determine who did what and who should have done what. The mind boggles. In some insurance markets, recording technology is already making a difference with the mandatory use of GoPro technology in commercial automobiles. We’re moving that way here too as the price of this technology declines. The price won’t be an issue when it comes built into your next automobile.

The mind can wander into the future. We can embrace new technology and work with it, or not. Based on my own musings here, the positives far outweigh the drawbacks. We certainly won’t be talking about distracted driving anymore, and underage drivers will be in a different class than they are now. The future is ours!

New Technical Frontiers

Speaking on the issue of technology advancement ….

As one of your representatives on the General Insurance Council, I’ve been working to resolve an amendment to the cumbersome regulations surrounding the DR’s role in recommending an individual for a license. As it now stands, only the DR is able to sign the application to sponsor an individual for a license. The DR is not able to delegate this authority to any other individual in the office. While this duty likely isn’t much of a burden for those operating a smaller shop with only one office and a few employees, the larger the brokerage, the more cumbersome this requirement becomes. New hires in branch offices are often stuck in an unproductive limbo waiting for the paperwork to get completed to give them the proper authority to act as an agent. If the DR is away on holidays or sick leave, further unnecessary delays can occur. In the logical flow of things, particularly in a multiple-office brokerage, the branch or office managers are responsible for the all functions of their location. They recruit, hire, and train new staff and are entrusted with all the duties of a self-directed senior manager except the submission to the regulator to transfer or change the license of one their employees. The DR in head office needs to sign the paperwork physically. I’ve maintained for years that this requirement is inefficient, impractical, and unnecessary. I know many other DRs share my perspective.

Recently, the AIC sent out an email advising of new online provisions for Levels 1, 2, and Probationary New License Applications. If you have not done so already, I strongly suggest that you familiarize yourself with the contents. Transfers and Level 3 General applications are still being handled in the old manner, but I’m told these procedures will also be updated. DRs can now delegate supervision of these online application preparations. DRs still need to endorse the submission to the AIC, but, now that it’s online, DRs can review and digitally endorse the transaction from wherever they are. This provision should provide greater efficiency and speed up the process.

I wonder what the take up is and will be on this processing ability and if it will in fact reduce the amount of paperwork. I will be asking questions about the new process at the upcoming GIC meeting and encourage your feedback on this topic. While I’m supportive of these changes, I still feel the process can be adjusted to provide for the complete delegation of the DR’s authority within larger organizations. I can’t seem to get the point across that the delegation of authority doesn’t negate the responsibility. Please let me know what you think.

In Closing

It’s hard to remain focused and unbiased given the political climate at the moment. It’s hard to be complacent with so many issues before us and so many different points of view! Still, as I voice my opinions in this column, I want simply to remind everyone to exercise the right to express your opinion at the ballot box. I cannot stress enough that this ability is your ultimate right to self-determination. Your vote can help change the things that are bad in the world and make a difference for everything that needs to be supported. This right has been fought for through many generations. The equality demonstrated by the line ups at the voting booths is one not shared by many other people in our world. Tyrants and brutal cultural influences that mute the voices of the people don’t belong in a modern society. Many young people in our new technological society don’t see the need to use this franchise or don’t believe their actions make any difference. They see the “trending” perspective instantly on issues and can’t understand how slow the process of a functioning democracy is to change. That slow process becomes even slower when people don’t vote. Politicians won’t think about to your concerns if they know that listening to your problems won’t get them a vote. Make a difference and get involved. Get out and vote. If you don’t care enough to get out and vote, you can’t later complain about what the government is doing!

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  Aviva  Aviva overland flood policy  broker channel  competition  customer service  DR authority  driverless cars  Google  GoPro  Intact  online insurance  overland flood insurance  sewer backup insurance  The Co-operators  Wawanesa 

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