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Claims Regulation Needed, UBI Technology

Posted By Thom Young (Full first name: Thomas Clifford John), March 15, 2016

Ethical Regulation Needed for Adjusters

Diamonds and gold are valuable, but reputation is priceless. We invest much time and effort into promoting our business. We stand on the ethical values of professionalism and proclaim that the manner in which we honour the promises made to our customers, along with our attention to their legal obligations, uphold the principles of justice and fairness. With those proclamations comes the legal truth that those who provide insurance contracts are held to a higher standard than the norm in their dealings with the public and that those who sell them are expected to represent customers’ interests ahead of their own. All the good work that is done 99.9% of the time can be set aside by the actions of one representative of our business who takes a tact in the process that is found to be unfair. Even worse than the personal shame of being found unfair due to an error, the perception that preconceived maleficence led to unfair practices leaves us all standing accused in public eye.

I’ve ranted before about the need to license adjusters who adjudicate the claims process just like we license the insurance agents and brokers who arrange the contracts. Such a license could subject adjusters to a code of conduct and ensure the regulatory oversight that would enforce accountability to the public and the industry. No directive of an irresponsible corporation could override that accountability or excuse the failing of it. Accountability to peers accompanied by the need to accept personal responsibility for our actions sets us apart from the warranty claim manager at the auto dealership or the customer-service manager at the bank. The public gains a degree of confidence that exceeds the norm when this process is demonstrated to be in action as customer complaints arise. While our business holds itself to high ideals, human nature doesn’t always meet the bar we’ve set for fairness in our actions.

Recently, the actions of ICBC (the B.C. government insurer) failed on all the points of fairness in its dealings with an insured. According to Insurance Business, the court found ICBC culpable in the groundless malicious prosecution of a 69-year-old immigrant woman. In her decision, Justice Susan Griffin wrote, “Mr. Gould’s handling of the file reveals that, rather than operate from a presumption of innocence, Mr. Gould operated from a presumption of guilt in respect of Mrs. Arsenovski.” The court was so appalled by the manner in which this person was treated that the unusual award of punitive damages were assessed against the insurer.

Our industry press was quick to report on this event. Some have criticized that this legal decision will make it harder to deter fraudulent claims and that the costs of insurance will continue to sky rocket on account of it. While the case may affect the industry’s attempts to limit fraud in claims settlement, the evidence presented in the case was unchallenged. The individual was subjected to a serious disservice by the insurer. The fraud here was the adjuster representing himself as a fair player in our business. Others may take a different perspective, but I see this judgement as a fair outcome against unfair actions by the insurer.

Technology Marches On

UBI continues to evolve. The original intent of a simple device that measures a couple of significant factors against the driving habits of insureds to allow better underwriting selection of better drivers continues to be dwarfed by the technological advancements in the equipment used to do the monitoring.

The other day, Costco wheeled out a pallet of Cobra dash cameras to the front entrance of the electronics department. The cameras were on sale for $99 US, and I couldn’t pass up a new tech toy at that price. This unit has all the of the gadgets employed in the popular GoPro camera rig but coupled with a GPS location program and sensors that measure acceleration, deceleration, turning speeds, and distance travelled. All this is recorded on a 2.1 GB mini-card (an 8.5 GB card is available) that loops the last 2 ½ hours of driving time in the visual, audio, and data record. All I could say about it was “wow.” I took more time getting it out of the package than I did to install the unit in my SUV. Plug and play and away we go with that tingly feeling all men get with new electronic toys.

Twenty five years ago, I had a client who was instrumental in the development of GPS tracking technology and was part of a pilot program installing the company’s equipment in a number of auto and equipment fleets. At the same time, the company was testing the use of video recording in conjunction with GPS tracking. I had a great deal of difficulty finding anyone to insure this equipment. I remember it was about the size of a large piece of luggage weighing nearly 20 kilos and recorded nearly three hours’ use of the vehicles in which it was installed. The cost of this sophisticated piece of technology was around $15,000, and it didn’t really work that well. As I recall, the recordings were in black and white because of the expense and power needs of colour cameras at the time. Overall, it was pretty archaic compared to this little thing I just acquired that sits in the palm of my hand and can record up to 8 ½ hours of 1080 dpi quality video and sound.

If you’ve received any of the little automobile accident video clips that are always circulating, you’ll recognize the quality and utility of these devices. Here’s one that is current. Certainly from a claims perspective, determining who’s at fault and evaluating all the contributing and limiting factors in the liability assessment is a no-brainer when you have a real-time high-resolution digital record of the incident you are investigating. The recordings can limit fraudulent claims as well. A European insurance executive friend of mine with operations in Russia indicated that his company won’t insure any vehicles operating there that aren’t equipped with one of these units. Accidents are most often reviewed from the perspectives of those involved because both drivers have these camera. As I’ve indicated in previous comments on this topic, your new vehicle will soon come with this equipment installed. The benefits of it should be obvious to everyone, except perhaps the people whom we shouldn’t be insuring anyway.

The thought occurs to me that perhaps I ought to be getting some kind of a discount on my insurance for installing this device in my SUV. I have this vehicle insured with Progressive, which lets me be my own service representative with the help of a local agent. To clarify, that just means I do all the work on my policy changes, handle all the communication with the insurer, and he gets the commission for it. He’s a nice guy, and the price I pay is the same whether or not I deal with him, so I don’t mind that he gets a commission for my work. I chose Progressive (with this agent’s help) when I first insured a car in the U.S. because it was the only insurer that would give me credit for my Alberta driving record and didn’t care that my driver’s license wasn’t from the state in which I’m insured. While I’m looking into this discount, I should also find out about the regular UBI device that Flo goes on about all the time. We’ll see if this vehicle that sits in a hot garage for six months of the year will get a better rate than the one I use full time. We’ll see what their underwriters say. Maybe I should call Flo.

In Conclusion

I began this essay complaining about the lack of integrity in an insurer’s claims adjudication process that makes us all look bad. I also took issue with the industry’s somewhat disingenuous fear that the court ruling would impact the industry’s struggle to limit fraud. While I don’t disagree with that assessment, I would rather that the emphasis be focused on the actions of the insurer in this circumstance than upon the plaintiff who was found to be blameless.

If you want to discuss the costs of fraud in the insurance business, you need not look any further than the settlement of section B auto insurance claims. You can determine immediately who’s coaching the insureds when they produce invoices and certificates of a course of treatment that match exactly the benefits provided in the coverage. In Alberta we’ve limited the amounts somewhat with legislation, but in Ontario the no-fault provisions of the insurance provided and the prepayment allowances that came about through the auto insurance reforms over the past 10 years show where the fraud money is going. I saw a preview of an interesting show scheduled to air on CTV on March 12th. The episode of W5 called “The Claim Game” explores the rampant graft and waste that has come about through the manipulation of the claim process by care providers and the absolute lack of regulatory review and correction by the government to limit it. The reporters correctly connect the dots between the amounts paid in claims and the amounts paid in insurance premiums and put the blame for escalating auto insurance costs on the real culprit. While the mantra of insurance corporate greed is often chanted in the political arena, the reality is becoming clear. As a friend of mine often used to say, you can have whatever kind of insurance scheme you want so long as you are willing to pay for it. If you didn't get to see this episode of W5, you can view it on CTV’s website.

It’s strange being in Alberta at this time of year and the only snow I can see is on the mountains. Nice not to have to plow the drive way though.

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:  adjuster  Cobra dash camera  customer service  ethics  fraud  GoPro  ICBC  insurance industry reputation  insurance regulation  IT  Progressive Insurance  risk management  telematics  The Claim Game  UBI 

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

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

How Many Days until Christmas?

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

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

Interesting Times in the Fiscal Health of the Province of Alberta

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

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

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

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

People Behave Better under Supervision

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

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

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

Looking into the Future Is Fun

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

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

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

In Closing

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

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

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

Tags:  budget  privacy  provincial economy  Remembrance Day  telematics  UBI 

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Risking Utmost Good Faith, Fraudulent Cop on the Payroll, UBI Conference

Posted By Thom Young, March 10, 2015
Updated: March 11, 2015

The Risks of Utmost Good Faith

Uberrimae fidei is the Latin version of the extra requirement for a legal insurance contract between an insurer and an insured. This condition requires that the insured must disclose to the insurer anything adverse or inordinate about the risks to be insured. After a loss, the insurer can challenge in court whether the customer was playing fairly in what was disclosed. This condition differs from that in other legal sales agreements where that old Latin term caveat emptor applies. Once sales agreements are signed, sealed, and delivered, the buyer is assumed to have done due diligence and expected to suffer the consequences of the vendor’s silence on matters undiscovered. When I teach insurance law, I tend to ramble on about this obscure difference in the way insurance contracts are dealt with versus the routine manner in which other contracts are made. The idea of a legal standard of excellence that ensures that both parties to an agreement are dealing with each other fairly is one of those thing that makes our business special!

Everyone talks about price, but few understand the promise of insurance. Both those buying and those selling insurance hold no real high ground here. At the outset, we do our best to run all insurance applicants through the filter to determine that they have a better-than-even chance of not having a loss, while purchasers do their best to limit their information in the hope that they obtain a better price for the coverage. In providing answers only to the questions asked, purchasers expect to get what they paid for, but the reality is they will get what they paid for only if they deal in good faith and disclose everything the insurer needs to understand the risk fully. Explaining this principle to non-insurance people often is confusing and becomes even more so when the information not provided becomes available in the claims-investigation process.

We sell only a promise to pay. To ensure that promise is kept, we must make our clients aware of the consequences of not providing us with all the information. The insurers we represent need to know their part in this promise too because the expectation that they are to deal in good faith is provided in the contract as well. Claims professionals are expected to deal with insureds in a fair and comprehensive manner in order to get them all that they are due under the contract. Perception of unfair treatment is the number one reason for the public’s view of insurers as being incompetent. These criticisms are often due to a misunderstanding of the process which produces unreasonable expectations. As brokers, we are often culpable as we did not properly explain the process at the outset of arranging the policy, but, even when we do it right, opinions differ on what replacement means, and we all know that owners almost always perceive ideal conditions and value. Still, it is not all that uncommon to find a claim in process where the insurer’s claims examiner seems to be dealing unfairly or, if not “unfair,” then with a certain arrogance that isn’t reserved just for the broker who is trying to find information but also imparted directly to the client. When such a situation occurs, what can you do?

Essentially, the only thing you can do is approach the claims examiner on behalf of your client to see if you can negotiate a logical conclusion to the impasse. Often, the claims examiner is unaware of the issues. An offer has been made to settle the claim with the genuine belief that it is fair and reasonable and meets the conditions of coverage. The insured has not relayed objections to the adjuster in fear of further impasse on the areas in which they agree. As the advocate for the insured and the company, a broker has to listen to both sides of an argument carefully and try to find some common ground. Whichever side is being unreasonable needs to hear a logical explanation as to why, and the broker needs to remember that the bearer of bad news is rarely received with enthusiasm. Taking the company’s correct position back to the client is sometimes difficult, but, if it is a correct one, then it is the task you must complete. Taking the insured’s correct position back to the company can be even more difficult, since you risk fracturing the business relationship with the company. Pointing out the error in the ways of a sometimes senior person representing an incorrect position rarely goes well for the broker, but it is your job.

I remember once having a discussion with a very arrogant claims examiner who had taken a ridiculously wrong position on a claim for my client. I was being diplomatic and direct when this person became entrenched in a final position and very arrogantly stated an unwillingness to consider alternatives and that the client didn’t have any options in the matter. I said of course the client had options and I would have to explain them to the client. When the adjuster asked what options, I replied, “They have the legal option to sue you, and would you please provide for my client a proof of loss form immediately so they can.” A period of dead silence on the other end of the phone was quickly followed up with the threat that we wouldn’t be dealing with that company for very much longer if the adjuster had anything to do with it.

Here’s where you realize that you’ve just stepped in something warm and odorous.

I don’t know if I beat the adjuster to the district manager for that company or not, but I do know that I was doing a political two step for several days trying to get the whole story in front of the senior people of the company for a fair and impartial review. Thankfully as well, my partner at the time was as good at getting me out of trouble as I was getting into it. At the end of this story, everybody won. The client won because the company agreed to settle the claim in the correct manner as prescribed by the insurance contract. Our brokerage won because our reputation for standing up for our clients when they were right was made very clear to a company with a real problem in their claims management, and the company won when it dealt with the real problem it had. I think the claims examiner won too as a hard lesson was learned about not writing a cheque that your credibility can’t cash.

Being a broker isn’t easy sometimes, but dealing in the utmost good faith is necessary to meet the terms of an insurance contract and is something all of us should remember and review from time to time!

How Bad Do You Have To Be To Get Fired?

According to the Brampton Guardian, a police officer representing the Region of Peel, Ontario, has been on administrative leave with full salary for almost four years. This fellow was topping up his retirement fund by cooperating with a bunch of crooks who were filing false claims against a number of insurers. To support the claims, he fraudulently completed police accident reports for a nominal $6000 a pop. The fraudulent claims paid totaled just under $1 million. Since first arrested in the spring of 2011, he has been on administrative leave with full pay and benefits, but wait—there’s more! Several weeks ago, this fine fellow was convicted of more than 40 charges of insurance fraud, breach of trust, and obstructing justice. He’s awaiting sentencing, which isn’t scheduled until May 29th. The perversity of this set of circumstances makes one wonder who’s in charge of the asylum?

Under the collective agreement governing police officers in Ontario, this all is perfectly normal. After his sentencing, a hearing will apparently determine if this guy should remain on the force or not. Kind of makes you wonder, doesn’t it? If I were a resident in Peel, I would not be very happy about my tax dollars continuing to pay for this kind of silliness! Nothing has been said about restitution orders or other remuneration. Our industry will no doubt bring civil charges against the guy for the money owed, but it’s hard to collect from a criminal! This guy legally carries a weapon around with him too.

Some might say that the wheels of justice move in strange ways, but no justice is in play here. It will be interesting to see what the sentencing brings. I’ve marked my calendar to follow up on this case and will report to you in due course!

Telematics and UBI Continue To Make the News

Our association is once again promoting the Insurance Telematics Canada 2015 conference, which will be held in Toronto at the Westin Prince Hotel, April 23rd to 24th 2015. If you are interested in attending, check out the registration and information package.

If you register before March 27th, you can save yourself $100.

I’ve been invited to attend but have other commitments for that time frame.

We’ve seen a lot of discussion on telematics in the industry press lately, much of it coming out of the promotions circulating for this event. I remain very cautious on what benefit, if any, telematics will bring our industry. Certainly, better data mining will provide for better risk selection and categorization, but—and that’s a very large but—overall, the activity will not reduce the costs of insurance for the general pool. In my view, it will simply provide some short-term competitive advantages to those able to make first use of the data being generated. At the end of the day, the dollars in claims paid and administration will be very similar. Some consumers might benefit initially, but that benefit will come at the expense of those who will be losers in the selection process. The end result will be an unsettled marketplace with considerable instability for the consumer that will not see anyone the winner. More so, the disruption may well attract regulatory overview and interference to ensure that the public is not disadvantaged in the selection process.

While others may well disagree, I continue to believe that consumers will experience no real benefit from telematics, and the industry will experience only a limited short-term competitive advantage unless an industry activity reduces claims or reduces administration costs. I have to concede that the use of UBI in regards to the underage marketplace can be demonstrated to reduce claims and change dangerous behaviour, so I have no argument about applying it here. However, other than that, much more discussion is necessary.

In Closing

It wouldn’t be a winter issue without discussing the weather somewhere. Spring is clearly around the corner regardless of how much snow and cold the East receives. I am back on the mainland once again and looking forward to more seasonal weather. I hope you are enjoying it as well.


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.

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Tags:  auto fraud  telematics  UBI  utmost good faith 

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