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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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