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Climate Effects on Insurance Stability, Distracted Driving Continues, National Tissue and Organ Donation, Canadian Senate Tragedy

Posted By Thom Young (Full first name: Thomas Clifford John), April 27, 2016

Climate Change Effects on Insurance Stability

In my recent musings through the industry press, I came across an interesting article on climate change entitled “The Earth’s Temperature Has Just Shattered the Thermometer.” Why the insurance industry in particular hasn’t gotten on board with the current flavour of the debate on global warming or, as we’ve come to hear it called now, climate change has always been a mystery to me.

I occasionally hear a smidgen of concern from underwriting gurus and the odd senior executive for the belief that climate change is going have a huge impact on the earth, but there really hasn’t been a full-blown united expression of belief that dire consequences will come about if action isn’t taken immediately to reverse the effects of human influence on the earth’s climate. In my private discussions with a number of senior people in our industry, a nagging doubt persists about the causal relation of human beings to climate change. Often the science of climate change itself is doubted. Some point out that the historic and geological records display wide swings in climate around our globe and that archeological records during human habitation show long periods of cooling and warming in unidentifiable cycles with indeterminable causes. With little consensus on what actually happened, scientists themselves speculate on what caused the last ice age to occur and what caused it to end.

The insurance perspective is unique. In our business, predictive cycles are critical to the success of our enterprise. We share and mitigate loss risks. Actuarial analysis is a predictive science. Assumptions about future events are based on historical data, and those predictions are adjusted by applying variables such as changes in climate, demographics, or even chance. The insurance analysis can get very complicated and inexact, for example, integrating variables such as ethnicity, cultural behaviour, DNA analysis, and the now-mapped human genome. Definitive conclusions are not necessary in actuarial analysis to allow for their possibility and calculate the mathematical probability. (Thinking about such calculations, I’m glad I decided to be a broker, rather than an actuary. Several times in my insurance career, I’ve listened to actuaries debate the validity of their calculations. I have always come away from those meetings with a great degree of confusion—and a throbbing headache.) Thus the divergent views on climate change may be irrelevant to an insurance-based risk analysis.

Regardless, I take exception to the claim in the above article that the effects of global warming may bankrupt our business. Hogwash! Long before our well-capitalized and reserved guarantees would not be honoured, the whole financial sector would need to have collapsed. If anyone is concerned about such a potential collapse, I’ll bet I could find some insurance executives to support increased rate surcharges to build special reserves for that purpose. The thing is, though, the surcharge would have to be shared by all market participants, so the regulator would have to mandate it. In the political realm, I think the science needs to be a little more exact.

As I am finishing up this piece, my morning newsfeeds contain this dire warning:

UN Calls for Long-Term Climate Stability
The world faces even greater catastrophic weather incidents unless leaders vow to go further to cut greenhouse gas emissions. The head of the UN Office for Disaster Risk Reduction is today (Apr. 21) calling for signatories of the Paris Agreement to go beyond existing commitments.

“It is clear that weather and climate are implicated in 90% of major disaster events attributed to natural hazards. Droughts, floods, storms, and heatwaves have the potential to undermine many developing states’ efforts to eradicate poverty. Climate change is adding to pre-existing levels of risk fuelled by exposure and socio-economic vulnerability,” Robert Glasser said.

He called for the more than 160 countries that have signed the Paris Agreement to “scale up the level of ambition” to cut emissions or face the “real danger of being overtaken by the rapid pace of global warming.” (Insurance Business)


Let the political discussions begin.

Distracted Driving Continues Unabated

According to Sgt. Glenn Bangs, the number of distracted-driving tickets issued in Edmonton seems to increase year over year. Police in Edmonton say that “the worst offenders are people 33 to 44 years old.” In 2012, 4597 distracted driving tickets were issued in Edmonton, jumping to 5197 tickets in 2013, 5285 tickets in 2014, and 5928 tickets in 2015.

Statistics, damned statistics. Were exactly the same efforts made by the Edmonton police force each year? Likely not, but the statistics make a good angle for a story, don’t they?

Regardless, the anecdotal evidence on distracted driving finds most in agreement that the activity is not abating anywhere in any way. Either the increasingly severe penalties and increased efforts at enforcement seem not to deter the activity, or not enough time has been factored into assessing the result. Since January 1st, 2016, fines for this infraction in Alberta have increased to $287 and, more importantly, add three demerit points on the driver’s license. These demerits brings the activity into our realm, and now insurers are able to select against and charge for the increased risk that these people present. A whole calendar year or more will pass before the deterrent effect of these costs will be measurable.

I’ve always been on the fence on this subject, and I’m still looking for the statistical link between the activity and increased claims costs. So far, I’ve yet to see any unbiased assessment that supports such a claim. I’m not arguing that the activity is safe or that it should be allowed, just wryly observing that incidence of loss overall doesn’t support the conclusions of many.

Technology is available to limit the use of cell phones in automobiles. Perhaps, as with seat belts, such controls should be mandatory. Someone with three distracted-driving tickets in Alberta would owe nearly $1000 in fines and incur 9 demerit points, leaving the Facility as the only carrier willing to insure such a driver. The extra cost of installing limiting technology in such a person’s vehicle would look like a bargain in comparison.

Clearly, this debate must continue before a resolution to the problem will present itself. When I was a young lad, the largest distraction while operating a motor vehicle was drinking and driving. The rules weren’t very severe or enforced. Many didn’t believe it was a problem, and people who pronounced their proficiency at operating a motor vehicle after consuming considerable amounts of alcohol were unchallenged by the majority. Statistics and science proved them wrong, and the social rules that allowed for drinking and driving started to change. The seriousness of the act and the carnage it produced became a significant social issue that produced stronger and more effective penalties and intolerance for the activity to the extent that effective enforcement is now the norm and the results life changing. We will continue to monitor this issue closely.

National Tissue and Organ Donor Week

If you attended an Alberta Registry Office last week, you may have noticed that the clerks were wearing a lanyard to bring attention to the need for organ and tissue donors in Canada. The Alberta Registry Association has undertaken this cause to promote donor registration in the Alberta. The voluntary process for collecting the permission of Albertans to donate their organs and tissues is woefully inadequate to the need. Currently, 120,000 people are on waiting lists for transplants, and that number seems only to be rising. The simple act of registering to make this huge humanitarian contribution takes only a minute and can end up giving the gift of a healthy life to someone living on the edge of finality or with the limitations of an easily corrected disability. Please make this a topic for discussion in your household. It costs you nothing and improves the community around you. When you next visit a Registry Office for any service, consider asking for assistance in registering yourself for this donation. You can even do it now yourself at MyHealth.Alberta.ca.

I believe that donation consent should be implied, meaning that approval is implied unless someone registers to opt out. People would then be required to make an effort to register their objection and to think about the donation. Tens of thousands of people would be removed from waiting lists and receive the simple procedures that would improve their lives. In a perfect world, everything would be perfect, wouldn’t it? Do have this discussion. It is important!

The Senseless Tragedy of the Canadian Senate

One of the most controversial articles I’ve written, as measured by the reader response, was my observations on the Duffy trials and tribulations. My point regarding the unnecessary existence of the Red Chamber in the workings of our Canadian parliamentary system brought a number of comments about the sober second thought envisioned by Sir John A. MacDonald, the need for an unbiased review to restrain the mob of democracy, and the belief that an august group of esteemed Canadians could bring some influence upon political realities. I responded to these writers by observing that the current structure of our senate meets none of the desires envisioned for it and that, without any political will to fix the problem, perhaps the senate could be done away with by a consensus. Well, that demolition is not likely in my lifetime.

The declaration by the judiciary that senator Mike Duffy has been found innocent of all charges brought against him is not a declaration that his actions were moral, just, or even wrong, but one that reinforces the wanton abandon of accountability to the people of all the senators in our Canadian senate.

I predicted that Mike Duffy would not be convicted of the charges brought against him. Political pandering and media circus aside, there was never any inkling of any rules broken or laws broken. The legal review affirmed that no expense rules existed to begin with. Mr. Duffy can now expect to be reinstated in good standing to his position and fully reimbursed for any holdbacks on his compensation and expenses. Likely a jig will be danced, particularly by those who were waiting to see if any charges might be brought against them for similar claims. In the end, the shame of it all is that the cost of all of these proceedings, including Mr. Duffy’s defence costs, will be borne by the Canadian taxpayer. No doubt though, the shame will neither be great enough nor the cost absurd enough to stimulate any action to correct the deficiencies!

In Closing

Once again, with the wonderful spring we’re having, watch for the two-wheelers on our roads and highways. Look twice. The most common accident between a car and a motorcycle occurs when the car turns in front of the biker. The first thing car drivers always say is that they didn’t see the biker. The truth is that they weren’t looking for them.

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:  actuarial analysis  catastrophic risk  climate change  distracted driving  organ and tissue donation  regulation risk management  senate reform  senator Mike Duffy 

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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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Risk Management—Common Sense, Regulation, and Insurance—Organ and Tissue Donation

Posted By Thom Young, April 7, 2015

Risk Management in the Modern Era

There’s an email that circulates among the older folk that observes it’s amazing we all have lived so long. We had none of the currently omnipresent restrictions on our play activity. Common sense was the process that guided us into to doing the right thing. Those without common sense often suffered the fate of Darwinism—their failure to survive the challenges of our youth and their inability to contribute to the gene pool made our species stronger. That was the theory then, anyway. I think of this principle when I travel to third-world countries where things seem to work their way through without all the intrusions. Ultimately, some fail to use common sense and suffer the expected consequences.

In an old story about an American lady who fell into a hole in a sidewalk on a downtown Mexico City street, the statement of claim contained all the usual boiler plates—the city and its contractors were negligent in allowing this terribly dangerous obstacle to exist and should have taken many steps to protect the public from injury. The defense of the case was simple—the city produced seven days of video monitoring the hole in the sidewalk exactly as it was when the plaintiff fell in it. By the city’s account, over 3700 people passed by the hole (which had a pylon on both sides of it) and no one fell in it. Case dismissed? Well, not entirely. The city had to pay a small amount and cover the legal costs of the plaintiff, but the award was abnormal by Canadian standards. The plaintiff was found 90% responsible for her own damages because she failed to watch where she was going. The contractor was fined for failing to follow the city regulations that require holes to be covered and proper barriers in place to prevent the public from injury.

Often people lose sight of the reason for regulations concerning individual behaviour. As a motorcyclist who spends a lot of time in the U.S., I’m often asked why I wear a helmet all the time when I ride. The reason is simple: it protects me. The law really isn’t my motivator. When my second child was born, the law still did not provide any incentive to wear a seat belt in an automobile, but we decided to purchase a car seat for our new baby. From the day the car seat was installed, everyone wore a seatbelt in my car to ensure that one of us would survive to look after the guy in the car seat. Funny thought, but a true story. The adjustment period was difficult for the older child who had become accustomed to bouncing around the car and sitting in her (unseat-belted) mother’s lap or sleeping in a bassinette set down on the back the seat. It’s amazing we survived. The aforementioned car seat was likely the cause of many injuries as it was banned from use about ten years after I bought it.

A lot of the risk management procedures that have become regulations initially developed in our industry as attempts to limit the costs of poor individual and business practices. Intense analysis of the causes, consequences, and costs of losses informs the highly competitive selection process in our industry, and we have become very good at it. Our activities eventually prompted the public authority to enact regulations to limit the damage from those individuals who fail to follow the risk-management discipline developed by our industry. Often we hear about the zealous regulator creating obstacles that are both expensive and unnecessary, but these regulations come about not as a result of altruistic attempts to protect people so much as through the reality that limiting personal injury or property damage through regulations reduces the cost to the state in dealing with them. Those who fail to follow the discipline needed to manage their own risks properly offload the costs of this behaviour onto the state which, as the ultimate insurer of the people, receives adverse risks with no selection or mitigation other than by regulation. An actuary might call this the ultimate adverse selection process.
 

How To Make a Difference in Someone Else’s Life

If you’re around a registry office in our province this month, you’ll see a number of initiatives being made to encourage people to sign the authorization to become a tissue donor when processing an Alberta Health card change. National Organ and Tissue Donation Awareness Week (NOTDAW) is from April 19th until April 25th, 2015. Registry agents will be asking about organ donation and providing informational material in support of giving permission for organ donation. Registry agents will be wearing green lanyards showing their support for this cause.

I find it difficult to understand the need to have a discussion about such a simple thing as allowing your earthly remains to be put to some good use helping another before they are discarded in a ritual of remembrance of what a person gave to the world. No matter how much money you amass and leave to help others, nothing could equal the difference you could make in other people’s lives by simply agreeing to donate tissue and organs. This gift of health and recovery is simple, painless, and important.

Did you know that over 4500 people in Canada are on waiting lists to receive organ transplants and thousands more are waiting for tissue donations? That’s 4500 people in pain and suffering whose lives are diminished by a need that is so simple to fill. Over 700 Albertans are on that waiting list for organ transplants.

So here’s what you need to do. Stop what you’re doing right now. Get out your Alberta Health Card, flip it over, and read what the back says. Discuss it with your family, sign it, and have one of your family members witness it—painless and productive work here, ladies and gentlemen, work that will make a difference in the lives of others sooner than you think!

If you haven’t got an Alberta Health card, or the one you have is old and ratty, get on down to the nearest Registry Office and order one. This is one of the few government services that is still provided for free. After you sign it you can laminate it too!

While much information is available on organ and tissue donation, the Alberta Health website posts some handy FAQs.

While on this topic, I have long said that the premise of organ and tissue donation should be an implied consent and not a formal one. That is, if you don’t have a stated and recorded objection to it, then agreement to donate should be assumed. A consent form should not be required in the normal process. Those who object should have a place to record their wishes and have them honoured, but, otherwise, donation should be a mere formality of notice to family members when organs and tissues are harvested to help others. This debate needs to continue, and I offer this opinion in closing to stimulate that discussion.

In Closing

March has come and gone in its usual chaotic manner. I can’t say it came in like a lion or went out like a lamb as our winter was only a brief inconvenience in Western Canada anyway. Spring, for what it is, has begun in Alberta, and the promise of the new year begins with the cycle of tilling and planting. Economic prospects are not as bad as predicted, nor as good as they could be. We will soon be before the polls once again, asked to choose which brand of conservative principles we wish to govern our prosperous and successful piece of Canada. This is a cynical observation my friends, no need to challenge me on it.

Sheldon Casavant, illusionistWe are very quickly coming up on the annual IBAA convention, which this year will be held in beautiful Lake Louise. I am as always looking forward to meandering around that venue in my highland garb and will of course be very happy to see in person many of you who have taken the time over the past year to dress me up or down on my commentary here.

Looking forward to it!

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:  common sense risk management  insurance risk management  organ and tissue donation  regulation risk management  risk management 

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