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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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