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Government Auto, Online Competition, Run for Childhood Cancer

Posted By Thom Young, August 17, 2016

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

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

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

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

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

More Competition or Less?

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

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

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

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

Run for Childhood Cancer

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

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

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

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

 

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

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Political Changes, Online Crime Increases, Overland Flooding Competition, AIC Update

Posted By Thom Young, June 2, 2015

To Quote Shrek, “Change is good, donkey”


When it comes to change, I’ve always sat with the optimists. Change of any sort can be disruptive and difficult for some, but it always brings with it new perspectives and new opportunities. Analyzing the effect of change in your marketplace gives you a competitive advantage, particularly if your competitors are slow to react or quick to react in the wrong manner. Being the first one with a positive message will always win you more credibility than harping about the difficulties the change will bring. Change is inevitable in all things; dealing with it is your only option. How you deal with it will determine how it affects you.

The political front is certainly a different landscape before us in Alberta. Doubtless, people had more than enough of the ruling regime and demanded change. You can debate whether or not the change they have effected is the kind of change they wanted, but that won’t change the outcome. The popular vote certainly did not go to the new ruling party but, with the right of centre divided and the left of centre united, the first past-the-post outcome in this three-horse race was assured almost from the get go. In a democracy, the will of the people cannot be denied, and we will have to deal with whatever changes are produced on that account.

The insurance industry will experience a number of years of trepidation. The NDP perspective on auto insurance is a threat to our businesses, and a hard market (should it arise even for a short period of time) would bring the political forces to bear upon this issue. Unfortunately, auto insurance wasn’t part of the discussion in this past election, and one would believe this topic presents no immediate threat. Our industry in Alberta has never faced this kind of threat before, so it would be wise to begin to prepare and strategize for possibility of the discussion. Interesting times?

One might observe though that the previous government wasn’t as kind to us as we all thought it should be. Premium roll backs on auto insurance were somewhat disruptive, not to mention financially difficult for us. Brokers in particular had to suffer commission charge backs, often arriving in a different fiscal period. The return of money spent because of a misguided belief that the public had been mistreated by rates was more than a minor inconvenience to many brokerages. That, followed by the introduction of auto insurance reforms that continue to interfere in the natural competitive market for auto insurance in Alberta, doesn’t support the notion that a right-of-centre government is better for our circumstances than the new incoming one.

Those of us who have registry offices have direct experience with the ineptitude of the previous government. A succession of nearly a dozen different ministers has proven a lack in the simple understanding of the challenges of running a business where your revenues are limited by regulations while your expenses increase unchecked. Registry agents have been doing their best to convince the government that fees charged the public should be adjusted through a fee model taking into account the factors that affect revenues and expenses. While the model is logical from a business perspective, for over 10 years the service fee received by registry agents has remained the same even while the government has increased its fees substantially over the same period. Considering just the increases in rents and salaries in Alberta over this 10-year period, it impossible to understand why requests for fee increases to account for these fell on deaf ears, particularly from a government that is supposed to be cognizant and supportive of business issues. I don’t believe you’d find too many registry agents who felt that the previous government was their “friend.” Who knows what’s in store for these businesses under the new government? The success of the registry agent service-delivery system in Alberta is the idol of governments everywhere. Will the government follow the principle that, if it isn’t broke, don’t fix it? We will have to wait and see.

I for one am looking for the new opportunities that will present themselves to us in short order.

Online Crime Continues to Increase


phishingRecently, an item circulated purporting to be from the Canadian Revenue Agency asking for credit card information in order to deposit your tax refund directly to your credit card account. This followed recent notices from CRA that the office would like to do away with cheque refunds and have you initiate a direct deposit for your refunds. CRA has a great site for this—safe, secure, and easy to use. Unfortunately, the email purporting to be from CRA wasn’t from CRA. The link took you to a site that sure looked like CRA’s but, of course, was a new twist on an old internet scam called phishing. An email purporting to be from a bank or insurance company asks you to click on a link and confirm your data. Once you do so, the data you input is stolen in a form of identity theft. Every day people are caught in this scam and the thought is always the same: “It looked real.” Well, that’s the point.

Protecting Canadians from online crime, new laws are now in effect and bring new rules about data management and cooperation with investigations. Still, other than on TV, law enforcement officials who are the least bit interested in investigating this kind of crime or have any of the skills necessary to actually do so are hard to find. Focusing on the most heinous of crimes involving distribution of images and abuse of children, these new laws are the first step to bringing actual legal discipline to our new communication technology, but we are a long way from consequences.

My advice on this remains the same. Unless you initiate the contact and are on a secure website indicated by the lock symbol, put none of your information on the internet. If in doubt, call the company and verify they are who they are. The electric company won’t even talk to you about your account without verifying who you are by asking you questions. You should not have more trust in the process than they have. Verify and confirm—sensitive information should be shared only when you are certain you are sharing it with the right people.

People caught up in the so-called CRA phishing scam gave out their SIN number, name, address, birth date, and credit card data—all the information necessary to begin the process of identity theft. The consequences of this might not be discovered for years. Don’t get caught by this.

The First Competitive Response to Overland Flooding Coverage


As has been predicted, the markets’ response to the Aviva overland flood coverage has seen a new entry in Alberta with the Co-operators’ announcements last week.

The broker side has some new competition through this product from the direct writers. We are still awaiting updates from other markets on this, but this announcement is certain to put additional competitive pressure on them. If anyone has heard any current rumours, I would be interested in hearing about them.

AIC Stakeholder Sessions Have Been Completed


AIC stakeholder sessions were held in the past two weeks in both Edmonton and Calgary. I attended only the Calgary meeting but had updates on the issues raised in Edmonton. It was nice to see that the very vocal life-insurance minority who had been clamoring for relaxed entrance standards determined to let these meetings pass without making a spectacle of themselves once again. It was also nice to see the interest from the General Insurance community expressed on the examination and education issues. Updates were provided on the efforts underway to improve the pass/fail rates on the examinations without reducing the standards of education needed to both enter our business and advance within it. The process of establishing equivalencies for professional designation holders and matching education providers' courses to other jurisdictions was discussed as well. Two General Insurance sub-committees are working hard on these issues and hope to provide actionable decisions on both issues by the end of July. If you have opinions on these matters and would like to ensure that they are brought to the attention of the people working on these issues, please don’t hesitate to forward them to me. As a sitting member of the General Insurance Council, I will be happy to ensure that your thoughts on these issues are heard.

The AIC also reported on the licensing cycle, which is well under way. If you haven’t received an email from the AIC on this matter, you’re not recorded properly in the system. All license holders are personally responsible to ensure that their licenses are in good standing before they represent themselves to the public. This means your Continuing Education Credits need to be up to date, your declarations made, and your licensing fee paid by the end of June or you are not eligible to receive compensation for selling insurance. Make this process a priority, people.

I’d like also to mention that you are now required to know your CIPR number. This number identifies you across most Canadian jurisdictions and enables things like your CE credits to be followed wherever you are licensed. Your CE certificate now requires your CIPR identification, so all education providers are asking for it. Make you know what it is and have it with you when you are signing the attendance sheets.

In Closing


Summer is almost here. Time to go for a bike ride!

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  broker channel  CIPR numbers  CRA  direct writer channel  insurance license renewal process  licensing courses and exams  NDP and insurance  online crime  overland flood insurance  phishing  The Co-operators 

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