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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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12-Storey Bonfires, Insurance Reputation, Uber Regulation, UBI Costs and Benefits

Posted By Thom Young, September 22, 2015
Updated: September 28, 2015

12-Storey Bonfires?

The issue of risk management for wooden buildings has arisen again with the Quebec government’s endorsement of safe practices for the construction of mass timber buildings up to 12 storeys.

Risk management and assessment is one of the most important parts of the broker’s role in the underwriting process. In order to price the exposure to loss properly, the necessary information must be collected to determine the chance of loss and to categorize the class of risk. On the commercial side, we often extrapolate this data from the design and architectural plans prepared for the project. These are frequently used in underwriting and rating Course of Construction coverage, and rating, as with all buildings, is determined by the type of construction and the materials used. Imagine being presented with plans for a 12-storey building of frame construction. Logically, your first thought might be that these people are nuts. You might be right.

For a very long time, the logic that you couldn’t safely build a building out of wood more than three storeys high went unquestioned. Engineering limitations of the materials and construction techniques were simply inadequate to build safely beyond this height, though many tried and often with disastrous results—disastrous in the construction phase and deadly in the completed stage. The history of many communities is peppered with stories about this or that great fire and its resulting loss of life. Building codes and regulations were developed and have limited the devastation caused by fire damage in frame structures, but they have in no way eliminated the losses. In particular, several large communal structures such as nursing homes and row-housing units have suffered total-loss situations from lightening and the ensuing fire, as well as from wind storm. The damage to these structures has also often caused loss of life. We can still go a long way to improve the safety of these types of structures, and I believe we should.

tall apartmentFrom our perspective as insurance advisers, we are concerned about the availability of coverage and the impact of large losses on the pricing our customers face. We should also, however, be concerned with providing them good advice about the exposures they might now face. Ultimately, the cost of any loss works its way through to rating for that type of risk, and we know what damage catastrophic losses can do to the marketplace. Today, six-storey frame structures—the regulated height allowed by building codes in most Canadian jurisdictions—are commonly built. Building codes have no national standards but, for the most part, the various provincial regulations are much the same. Engineering quirks in the building codes play with the definition of storeys in some jurisdictions, transferring the first floor into a part of the basement so what looks like seven storeys may be defined as six by that province’s building codes. Still, a whole lot of wood is going into these structures. As we’ve seen in B.C., Alberta, and Ontario, they can and do make for spectacular total losses during their course of construction. After completion, we’ve also seen how a small fire originating on a balcony can transfer to a multi-million-dollar loss in just a few minutes. While political pundits are quick to argue about the costs of insurance imposed upon their constituents, few seem to understand the function that insured losses play in the development of a fair price for an insurance policy covering varied risks. If a condo owner or tenant has a $100,000 unit loss in this type of dwelling, it takes a very long time to recover the costs of such claims through minor rate adjustments, especially if 20 or more people are impacted in the same loss for similar amounts. I’ll leave the math to you, but one fire in a condo complex could produce a 25% increase in the cost of insurance for all condo-unit owners in the territory and a like adjustment to the condo corporation’s costs for insurance too. These costs are simply passed on to the occupants through assessment or rent. This risk is something to consider when asked by your clients why their rates have increased once again.

The Quebec endorsement of twelve storeys also raises the issue of special interest groups, such as the forest-product producers and the construction associations, who come to the political pundits with requests for changes in building codes. While politicians regularly question the insurance industry about the high cost of insurance, the ramifications for their constituents of approving these code changes is often ignored. Great proposals that extol the benefits of increased jobs and lower housing costs are often on the song sheet of building associations when making the case for a building-code review. They are convincing tales in persuasive language but include little discussion of the potential down side and review of the actual experience. I think only four to five years ago (or so) the first six-storey frame condo complex in B.C. was approved for development. While still in the framing stage, a fire completely destroyed the building. Fire departments in Surrey and surrounding towns were overwhelmed by the intensity of the blaze and could do nothing to limit the loss except to keep it from spreading. The loss was insured but had an immediate impact on the course-of-construction coverage rate that is still felt today.

Oh, Those Damned Insurance Companies!

While holidaying in southern B.C., we were once again exposed to that seemingly more common natural disaster of forest fires. Fires to the south in the U.S.A. were producing copious amounts of smoke and ash, making breathing and seeing difficult for some. The usual sunny and warm late August afternoons and evenings were very unpleasant in many areas. The usual spectacular sunsets were replaced by the sinking sun looking more like a moon glowing through the haze, while the mountains in the distance would periodically flare up in bright red eruptions, sending plumes of smoke into the upper atmosphere. The results were apparent through much of Alberta, and relatives as far to the east as Winnipeg were complaining about the air quality.

Driving on the southern route took us through the community of Rock Creek, which used to be like so many other rural B.C. Interior communities, a hodgepodge of modular homes, very old mobile homes, and newer mansion-like retirement homes built along the riverside where the land is cheap and the ambiance is superb. The town of Rock Creek on the southwest side of the river is now, for the most part, leveled. The fire showed no preference for either the old shacks and mobile homes or the new million-dollar mansions, reducing them to piles of white ash. The heat was so intense that even the concrete foundations were reduced to soft sand. Total losses are both the easiest and hardest claims adjustments to make. The comment that “at least there was no loss of life” does little to diminish the tragedy for those who have lost everything.

Discussing the event, a local businessman in a nearby community indicated that a number of his clients had suffered losses. Without knowing my involvement in insurance, he began to rag on about the insurers who he’d been told were already “short changing” their insureds. He reported one of his clients had already been told by his insurer that he’d have to downsize after the fire. I began asking for more details as I was confused by this position. “Was it a new home?” “Yes.” “Was it his primary residence?” “Yes.” “So why wouldn’t the guaranteed replacement cost clause put it back the way it was?” “What’s a replacement cost clause?” he asked. The fellow soon realized I was in the insurance business and changed his tone about the bad insurance company taking advantage of their mutual customer. Some friendly discussion revealed that this fellow had rented some scaffolding to the customer, and the home, along with an addition he was building, was a total loss. I began to wonder if the customer had advised his insurers about the addition. Conclusions are difficult without all the facts, but it struck me as odd. Insurance companies are collectively responding with extraordinary measures to meet the needs of their clients in the face of an insurable and, for most part, insured catastrophe. Nonetheless, the public perception remains twisted and maintains the notion that insurers try to take advantage of their customers by not living up to the terms of the contract with them. This lack of faith has become a common theme in my writing. I seem to run into it too often. We have much work to do to improve the public’s perception of the industry.

Uber Again

Well, it seems I’m not the only one calling for amendments to the regulations regarding Uber. Edmonton City Council is considering new legislation governing vehicles for hire. While most changes in this kind of legislation tend to annoy most everyone equally, we can hope that any adjustments will provide oversight to the unregulated activities of Uber. On the product side, Intact has taken a lead with its new offering, determining that the risk is in need of coverage and that the risk is insurable. It has announced an initiative in consultation with provincial regulators and Uber to develop a product to meet the needs of both parties. This initiative will likely put competitive pressure on other insurers to get involved as well. Personal-lines auto underwriters seem quite agitated when discussing exposures in the Uber business model. Perhaps they will get an endorsement to offer our clients. Time will tell.

UBI Again

This topic never seems to go away. Those who follow the industry press may have seen me quoted in a recent article. I was approached for my thoughts on Allstate’s new patented approach and to provide some commentary as to how I see UBI “turning the industry on end.” Well, I don’t see any real significant changes to what we do coming about through the introduction of UBI in the Canadian market. Our neighbours to the south have been using UBI for about five years now and have not seen any real disruption in their marketplace. Where it’s been introduced, we’ve seen the competitive offering of a group of major insurers match any gains in market share through it by offering their own versions. Loyalty to brokers and companies hasn’t been negatively impacted. Further, the inference that the data gathered affronts clients’ privacy has not been supported. No privacy complaints regarding UBI have been brought against any insurer. I suspect our Canadian experience will not be dissimilar.

About the savings provided through UBI, I say the product just allows for selective underwriting and disrupts the classes of risk by introducing new classes. The amount of money that is needed in the pool of auto insurance in any province is not reduced by UBI, so, where its take up is substantial, the cost of the claims in these new classes will be shifted to the old. This transfer introduces a political reality that will attract the regulators’ attention. A 25% reduction for one group will net a 25% increase for another group. That won’t get good press anywhere. While some will say that the “new” group should fairly pay its actual costs based on the losses, remember that the premiums paid by the many should cover the losses of the few. Disrupting this principle with a business model based on new technology will not be considered fair by those paying the extra premium required to maintain the financial reserve needed to pay claims. Wow, heavy philosophical insurance stuff here!

Costs aside, any technological changes that reduce losses have a positive impact on the insurance marketplace. UBI fails to deliver on this principle as well, with one exception—young drivers. Where young driver’s behaviour is monitored and corrected through the use of UBI, claims decrease by as much as 40%. The real savings to these drivers class don’t have to be absorbed by other classes. While these savings are a big plus, the most important part of the story is that UBI monitoring of these drivers results in a 70% reduction in bodily injury and death. If we can get our kids through their learning-to-drive years without serious accidents, then we’re really onto something good. In a perfect world, we’d make this mandatory, wouldn’t we?

In Closing

Fall is in the air. Thankfully, early snow in the foothills didn’t last very long. The forecasts for some very warm weather in the coming weeks seem overly optimistic, but those excellent weather prognosticators are calling for a warm winter on account of El Nino. We’ll see.

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:  building codes  construction associations  forest producers  insurance industry reputation  Intact  Quebec regulations  special interest groups  timber-frame buildings  Uber  UBI 

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Uber Confusion

Posted By Thom Young, August 27, 2015
Holidays continue to cut into the production schedule. Attempts to get this done have been made in four provinces and one other country. Thank you for your patience.

Uber? This innocuous Germanic word is one of those strange ones that can mean a number of different things depending of the turn of the phrase. Loosely meaning about, over, or even better depending on the inflection or context of the phrase it is used in, it has made its way into the English language as a noun referencing several different business enterprises. From our insurance perspective, it means confusion on automobile coverages for people involved in a ride-sharing program. In its simplest form, a ride-sharing program hooks you up with people who share the cost of a trip to a common destination. The Uber phone app simplifies the contact process and makes it immediate. Confusion arises, however, with the commercial aspect: a person with a perfectly good automobile and some free time can offer Uber services at a fee, which makes it a livery business with driving services and automobiles for hire.

The structure of the modern taxi business has evolved from a chaotic free for all. In the beginning, drivers with a horse and buggy could cruise the streets of a town or village offering rides for a fee to whomever they wished at whatever rate they wished. Following pure capitalist form, at busy times rides cost more than when the demand was limited or when the competition was intense, and equipment standards and driver qualifications were virtually irrelevant. The term caveat emptor (buyer beware) certainly applied as customers had no assurance whatsoever that their interests were being protected, and they were often injured in person or in pocket by the services offered.

The public was not very well served, and the industry had quite a reputation for both taking advantage of their customers and caring next to nothing about their safety. Additionally, the industry was rife with graft and crime—routes and stops were often controlled by organized criminals who ran a protection racket skimming money from even the most honest hack. Because of this reality, the taxi business became and still is a highly regulated and intensely supervised business. Rules cover everything from the condition of the vehicle to the kinds of insurance needed to operate a taxi. Further, becoming a taxi operator requires a fairly large investment of capital to obtain first a license and then a vehicle. It’s not hard to imagine why the taxi business is up in arms about wide-open competition from a group of independent, unregulated, and unsupervised operators who have none of the regulatory expenses to deal with and can cherry pick the best locations and clients with a technological advantage. Those of us who participate in our highly regulated industry should be a little understanding of how unfair this discrepancy is to the honest hard-working cab drivers.

Considerable evidence is mounting that people providing and taking ride-sharing services through Uber are not properly insured. Public liability coverage is a bit of a grey area as Uber does purport to provide some form of overlapping coverage for those who participate. While I have looked at the wording, I’m not prepared to make a committed statement to either its adequacy or inadequacy until someone challenges it before the courts and the Canadian judiciary weights in on the scope of coverage. I do know from my cursory review that there are enough potential gaps to drive a cab through. Certainly, the statutory conditions in the owner’s SPF 1 would preclude any payment for physical damage incurred by a vehicle in this service. The conditions involve two issues of disclosure and change of use and touch on a specific exclusion. No coverage would apply outside of the statute coverages for the third party under section A and occupants under section B, and the owner would be liable for reimbursement if these coverages were triggered under the statute.

Many of us have had a number of clients approach us over the past couple of months about their coverage when providing this service. No doubt, we all have been clearly conveying the short comings of their policy for this ride-sharing service and clearly warned them about the possible consequences of losses that might occur. If you’ve been unclear or vague on the topic, you should rethink your position. The Superintendent of Insurance offices have circulated a memorandum to all General insurance license holders on what they feel are the short comings of both the personal coverage for the undisclosed use of a vehicle in the Uber program and the apparent short comings they see in the much-vaunted insurance coverage that Uber claims will protect the service providers. We’ve already seen a number losses in which people who have been participating in the Uber program found themselves uninsured for their own physical losses and in doubt about the limits of coverage for third parties.

These stories have recently made their way into the industry press and supplement the frequent news coverage of cab drivers’ angst over the encroachment of the Uber system on the taxi market and the discord amongst civic authorities on Uber’s interference in the regulation of the livery business. Uber is certainly here to stay. If the regulatory authorities want to reign in the effects of Uber’s disruption of regulations and lack of insurance protection for all participants in the Uber process, they need new legislated tools to do so. The regulatory authorities need to quit whining about the change and respond to it. Municipal and provincial entities need to produce new enforceable regulations and begin policing them. As a broker, I’ve got nothing but bad news for my customers about their personal insurance coverage and really little in the way of reasonable options to present my clients if they want to obtain coverage for this exposure! On top of that, my clients are being told by Uber not to worry because they are covered by its policy, a statement we know to be untrue!

Remember when all we had to worry about was our clients delivering pizza with their private passenger insurance coverage?

That’s all for this week—from Manitoba, Mexico, Saskatchewan, Alberta, and BC. Follow the bouncing ball!

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:  livery business  public liability  ride sharing  SPF 1  statutory coverage  taxi fees  taxi regulations  third-party liability  Uber 

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Stampede Breakfast, Normal Prairie Weather, Will Rogers' Common Sense

Posted By Thom Young, July 28, 2015
Updated: July 23, 2015
I love summer!

Well, for those of you working out of Calgary and area, the end of this month will likely be much more productive than the beginning. The greatest outdoor show on earth annually bites into business productivity for the first two weeks of each July. Once the Stampede is over, work catch up begins. While efficiency experts debate the value of invested time and effort in this kind of frivolity, in my opinion the positive gains in business promotion and employee morale far outweigh any losses perceived by the brainy bunch! And the work always seems to get done.

This tradition of ten or more days celebrating part of our Western culture is well received by the insurance industry in the Calgary area. In 1993, we felt a customer-appreciation day was in order and sent out invitations to all our clients and brochures to all our neighbours announcing that we’d be having a stampede breakfast on the Wednesday morning of stampede week. I think about 300 people showed up that first year, and we determined the promotion to be a smashing success. The next year, when Southland Registrations opened, we partnered with this sister firm to expand the event. We hired a band and invited underwriters. On average, some 1000 people began to show up for breakfast. As our efforts continued to evolve, we hired a better band and chuck wagons with drivers who signed autographs and posed for pictures. Even our competitors began to drop by and wish us well. About five years ago, we declared this an all-industry event and began promoting it with everyone associated with the insurance business.

The usual turn out is between 1500 and 2000 people browsing through our head-office parking area. Some people wait as long as half an hour for a pancake and a couple of sausages. 50/50 tickets are sold to raise money for the food bank and, on the whole, a great social gathering occurs.

Lundgren and Young Stampede Breakfast This year our stampede breakfast was again a great success. The numbers attending were toward the higher end of the scale and a terrific time was had by all. Those who had their picture taken on the chuck wagon with Kurt Bensmiller will be glad to know that he took it all at the Stampede this year. We’re proud to be associated with the Bensmiller wagon racing team, and it was really nice to see my friend Buddy Bensmiller hop up on his son’s wagon as he took his bows after winning the Rangeland Derby on the last day of Stampede. Buddy retired from racing two years ago and his son has carried on the family tradition of winning chuck wagon races and championships. You can’t beat that kind of succession planning success!

Sewer Backup, Overland Flooding, and “Normal” Prairie Weather

Just west of Calgary, two summer storms blew through the bedroom community of Chestermere Lake. The first storm resulted in a quick downpour of hail followed by a torrent of rain, which resulted in storm sewer systems backing up and the water finding its way to the lake by whatever route was available. Overland flooding occurred in a number of homes. Storm sewers and regular sewers backed up for a number of residences in the community. Two days later, another storm complicated the cleanup efforts of the residents with an almost identical set of circumstances. Some people just can’t catch a break.

These events drew a lot of media attention, many referencing the previous flooding issues a couple of years ago in Alberta, even though that event had no similarity whatsoever to this relatively normal weather event. In this case, the community in question is relatively new, the area affected by the infrastructure’s failure to deal with a normal weather event was minor, and the number of residents impacted was limited to some 300 homes. These details do not limit the impact on the individuals in question, but the media seemed overly focused on the tribulations of those affected. This slant was tempered somewhat when one of the people mentioned in an interview that this event wasn’t as bad as the last one they had.

I had some personal discussions with an affected insured who questioned why his policy didn’t cover sewer backup, a question that was somewhat surreal as the coverage was through a limited form provided by a nonstandard market for problem risks. The insured in question had three prior claims for sewer backup in the past four years—all for amounts in excess of $100,000. The incumbent insurer had refused to renew, and finding this insured coverage even on a limited form was not an easy thing. Still, the insured seemed to feel that the fact that he was not covered for this repeated and unmitigated event was the fault of our industry and not the failure of the municipal engineers or the home builder who plunked his home foundation in the middle of the reservoir draw without providing a non-obtrusive path for the water to take—never mind the wisdom of the insured in refinishing and refurbishing a part the home that has now been under water four times in the past five years without taking into account the reasons for the problem. No doubt, the provincial disaster relief fund will find a way to push some more good money after bad on this risk as well.

This weather event has brought a number of reflections and interpretations on the new wordings in use by some insurers, particularly the limiting of time in the process of adjudicating a claim. What defines the results of an overland flooding event in which our insured was not affected but his neighbours experienced a sewer backup within the 72 hours following the overland flooding event, even if the sewer backup was not consequential to the overland flooding event? I’m getting a headache thinking about this one. The claims adjusters are following the old axiom: when in doubt, deny!

These issues still call for much work.

As I finish this column, severe weather is tracking through the centre of our province. Communities to the south of Edmonton are being pummeled by intense hail and rain storms, and tornado watches are in effect. The normal midsummer Prairie weather continues.

Common Sense Ain’t So Common

Way back in the ’70s when I was working on a diploma in business management, I remember a rather lengthy discussion about common sense. Many may concede truth to such simple aphorisms as “never judge a book by its cover” or “too many cooks spoil the broth.” Others like these come in the life-instruction manual passed down to us by the sages of wisdom in our families and communities. Rarely are any of them questioned, but every once in a while someone will point out that many of them can be seen as contradictory and confusing. The axiom that “many hands make light work” overtakes the point about the cooks, doesn’t it—well, at least when it comes to something other than making soup?

One of the most well-known purveyors of good old folksy wisdom is the often-quoted Will Rogers. While he spent a short time on the planet, his meanderings continue to inspire and amuse. Here’s a piece about him and some of his sayings for your midsummer amusement:

Will Rogers"Never squat while wearing your spurs."

Will Rogers, who died in a 1935 plane crash, was one of the greatest political sages this country has ever known.

Enjoy the following:
  1. Never slap a man who's chewing tobacco.
  2. Never kick a cow chip on a hot day.
  3. There are two theories to arguing with a woman.
  4. Never miss a good chance to shut up.
  5. Always drink upstream from the herd.
  6. If you find yourself in a hole, stop digging.
  7. The quickest way to double your money is to fold it
    And put it back into your pocket.
  8. There are three kinds of men:
    The ones that learn by reading.
    The few who learn by observation.
    The rest of them have to pee on the electric fence
    And find out for themselves.
  9. Good judgment comes from experience, and a lot of that comes from bad judgment.
  10. If you're riding' ahead of the herd, take a look back every now and then
    To make sure it's still there.
  11. Lettin' the cat outta the bag is a whole lot easier'n puttin' it back.
  12. After eating an entire bull, a mountain lion felt so good he started roaring.
    He kept it up until a hunter came along and shot him.
    The moral : When you're full of bull, keep your mouth shut.
About Growing Older ...

First ~ Eventually you will reach a point when you stop lying
About your age and start bragging about it.

Second ~ The older we get, the fewer things seem worth waiting in line for.

Third ~ Some people try to turn back their odometers.
Not me; I want people to know 'why' I look this way.
I've traveled a long way, and some of the roads weren't paved.

Fourth ~ When you are dissatisfied and would like to go back to youth,
Think of Algebra.

Fifth ~ You know you are getting old when everything either dries up or leaks.

Sixth ~ I don't know how I got over the hill without getting to the top.

Seventh ~ One of the many things no one tells you about aging
Is that it's such a nice change from being young.

Eighth ~ One must wait until evening to see how splendid the day has been.

Ninth ~ Being young is beautiful, but being old is comfortable.

Tenth ~ Long ago, when men cursed and beat the ground with sticks,
It was called witchcraft.
Today it's called golf.

And, finally ~ If you don't learn to laugh at trouble,
You won't have anything to laugh at when you're old

In Closing

Well, that’s enough for this run. Those keeping track will note that I took a little break on the last deadline. It was sort of planned and some might say deserved. I’ve had a very busy summer so far and, believe it or not, much of it revolves around work for our industry. That’s not much of an excuse though, and, yes, I do know where to look for sympathy so you can keep your dictionary references to yourself. I hope all of you are enjoying our all-too-brief Alberta summer. Before the next issue, I will have traversed through four of our Canadian provinces and no doubt will be feeding a healthy crop of mosquitoes in each of 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:  Chestermere flood 2015  overland flood insurance  sewer backup  Stampede 

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Using Both Direct-Online and Broker-Channel Distribution Impacts Consumers and Industry

Posted By Thom Young, July 2, 2015

How about the Weather?

Typical for an Alberta summer, the weather this week has been stiflingly hot and dry up to Canada Day—difficult to endure in an RV without power—and then the predicted thunderstorms created a general turn to semi-constant rain and much cooler temperatures. Huddling around the propane campfire in the Ponoka Legion parking lot last night was a much different experience from what we’d expected according to the weather reports. There’s a profession for those who like a challenge—no credit for whatever good happens but all the blame for whatever unexpected turns out. Even better, try being a climatologist who attempts to make sense of the overall picture based on the weather details extrapolated from archaeological records. Are they, like us, looking to the past to predict the future?

“We’ve seen the enemy and it is us”

Variations of this comment have been used to describe the process whereby in many endeavours we seem to be the authors of our own misfortune. If I had to give direct credit for it to anyone from memory, I would attribute it to the character named Pogo in and old newspaper comic called Alley Oop. In the historical cycle of a changing insurance marketplace, we’ve seen this process operating more than once and seem to be about to go through it again in Canada.

A decade ago in England, insurance companies rushed to offer their automobile insurance products over the telephone, and the brokerage ranks suffered tremendously from lost market share. Insurers that traditionally had been great supporters of the brokerage distribution model indirectly undermined brokers with telephone solicitation schemes that allowed the consumer to deal directly with the insurers. The presumption of doom came down upon the English insurance brokers who feared greatly for their future.

The effect of this change in market approach caused severe market disruption in England. While some brokers didn’t survive, most did. The real losers in the process were as usual the consumers. The average price of an automobile policy didn’t really change that much, but the price differential sure did. Straightforward accounts that were easy to deal with received the most benefit in price discounts, leaving the more complicated ones to pay increased premiums into the pools. Slicing up the pie into smaller pieces doesn’t create any more pie as anyone who’s had unexpected guests arrive for dinner well know. Consumers were eventually treated to the reality of discounted service and the loss of an advocate to add value to the claims process. Pricing realities in a competitive market also led consumers to seek assistance from a broker or “agent” who could make sense of the complicated product they were buying. Ultimately, the purchase of reliable insurance (any kind of insurance) is not a do-it-yourself project accomplished by pressing numbers on a telephone in response to robot-generated questions, nor is it any easier to accomplish by clicking boxes on an internet website. Doubtless, the process of obtaining the quote can be done in this manner, but understanding and analyzing the risk is a much different story.

The universal capital marketplace continues to believe that the builders of better mousetraps can arrange for the world to beat a path to their door. While the newest “door” is the internet, what we’ve seen so far is a landscape filled with much communication but little in the way of service. Insurers in Europe, the U.S.A. and Canada, as we know, have been flirting with attempts to improve their market share through this new communication device, yet those who are making the best use of it and having the most success with it are using it, not to change the process, but to streamline and improve it. Much like the call centres that now seem to add to the client’s experience and reinforce the broker’s or agents’ efforts, the internet markets that seem most successful are those that integrate the adviser process. Agents or brokers remain the key contact point, while routine service issues are dealt with by service centres. Rating and quoting is subject to the broker’s or agent’s review of the client’s interaction and the underwriting issues that always seem to arise in the process. This is the experience of Progressive in the U.S., and other U.S. companies who have tried the direct approach are losing ground to them in the market. Safeco, as an example, had a direct-writing internet arm and ended up assigning the client-service issues by zip code to its agents. Safeco could neither provide the proper expertise in the market nor give timely, effective service to its clients using the direct approach. Further evidence suggests that using brokers in this manner is much more cost effective than the direct approach, but some companies believe they will have different results. I don’t think they will.

Insurance company executives have much to juggle. They are surrounded with all kinds of advice givers and people extolling the benefits of every new gizmo or gadget that is said to improve the company’s competitive position and to preserve it from others who might effectively use the gadget. The newer the technology, the harder it is to decide. The digital marketplace is exploding companies, and brokers are actively using it to compete with each other, get the customers, and give the service. Digital technology will improve the process, but it won’t change the manner in which the product is sold or delivered. Any insurance executive who believes it will, is losing sight of the process and will, ultimately, pay the price in lost market share. Insurance executives who betray the loyalty of their business partners, be they brokers or employees, by competing directly with them in the marketplace will suffer a worse fate than having to regroup and respond to the market changes. They will be bypassed by those who have taken the time to understand the dynamics of this new communication device called the internet and who have effectively changed their communication strategy to enhance the process of customer service. Their “new” direct approach will fail horribly, and the impact on the clients will put our industry in disrepute again.

All of us are well aware that one of our major markets in Canada has determined to go down this path of competitive realignment in the Canadian market. Of particular concern is the branding. Any business would find difficulty explaining to its customers the difference in price and service of the products sold out of its shop versus those sold directly by its suppliers. A client who walks into a broker’s office with a quote bearing the name of this market will be very confused as to why the broker can’t match that quote when that company’s plaque is on the broker’s wall. Once again, our industry will be confusing our market and doing a real disservice. This company may well find itself bumping up against regulatory obligations in several provincial jurisdictions and will certainly see itself under regulatory review. If a company provides a quote to a consumer, it had better stand behind it at whichever location bears its name. It’s only logical.

One might hope that the company involved will have another look at its business plan. If the company is determined to compete directly with its broker representatives, then fine, but at least it should brand its product differently so that brokers are not confusing the public. The superior service that I, for example, provide my clients under its name needs to be distinguished from the slip-shod, second-rate direct internet approach the company is going to give them. Additionally, when that company’s clients come back to me disappointed with the company’s direct internet service, they won’t be looking for a quote from that company. Caveat emptor!

wagon wheel

Stampede Me

Lundgren & Young is holding its annual stampede breakfast on July 8th, 7:00–10:00 a.m., 9705 Horton Road SW in Calgary. Come on out to this all-industry event, enjoy a good pancake and sausage breakfast, and listen to live country music. While reveling in the stampede show, mingle with the insurance industry folks in the know. If you know the right people, you can get a glass of the good orange juice.

While on the topic, don’t be afraid to stampede me with emails sharing your thoughts. They provide good fodder for future articles.

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:  branding  broker channel  consumer confidence  direct writer channel  insurance industry reputation  online channel 

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Western Economic Drive, Senate Reform, Alberta Rodeos

Posted By Thom Young, June 19, 2015
Updated: June 18, 2015

Go West, Young Man, Go West

This phrase originated in the U.S. in the early 1800s and is credited to various individuals giving advice to young people about seeking a better future in the land of opportunity. Doubtless, this was good advice for many during those times. Eastern cities were struggling under the crush of their population growth, and business opportunities were limited by the dominance of large corporations manipulating the capital for growth. Economic policies in place caused severe cycles of boom and bust development, and the standard of living for city dwellers was limited at best. North America was simply the storage house for European economic interests, and little in the way of finished products were manufactured for anything other than domestic use. “Hewers of wood and drawers of water” is the economic description of the mercantilism that controlled economic development in this new land. The farther you went away from the dominance of business interests represented in the Eastern cities, the better your prospects of developing an independent enterprise that allowed you to grow your capital value with the development of new towns and cities. These opportunities especially presented themselves in the West.

I know in my family history, the idea of exploring new opportunities has always been seen as an adventure. The German-English word Wanderlust roughly translates to a thirst for adventure. Those who seek such things are natural risk takers with deep-seated optimism. A letter written by one of my ancestors in the late 1700s talks of the journey to “the Canadas” and the seven-week sailing that had them becalmed for two weeks off the coast of Newfoundland, in sight of land with no means of getting to it. They finally made it to Quebec City where they disembarked from the ship and boarded a steam boat to Montreal. The steam boat exploded on the journey with over 400 lives lost and only three of the seven in my family’s party surviving. Still, after somehow making it to Montreal, they continued on to what is now the Kitchener-Waterloo area of Ontario and staked property to build a new life. That farm did well until the last of that generation passed in the early 1900s. The next generation left in the early 1880s repeating the westward movement to new land and opportunities near Neepawa, Manitoba, again staking out the land and working it to support a large family. My great-great grandfather William Forrest Young was an insurance broker and real estate agent who went on to become a scion in Canadian finance. On his retirement from the corporate world, he homesteaded once again at Russell, Manitoba, where he passed in 1935, leaving a large family to wrestle with the estate, nothing of which was left when my turn came up.

For my first visit as an adult to Calgary, the bank I was working for decided I could improve my sales skills by attending the Xerox PS II course held in the Calgary offices of Xerox Canada. My boss and I were both sent, likely because he didn’t want to be upstaged by the new guy who actually had some sales experience. While I learned a lot about financing from this guy, he would fail at selling cold water in the desert. The course was a good one but, like all of the bank courses, the study was combined with much socializing. I remember one of the places we ended up at was the East End Petroleum Club, which was in a corner of a rather seedy hotel. There I was introduced to a young fellow named Ralph whom people (I thought) jokingly called the mayor. I was amused to find out at some later date that he actually was the mayor of Calgary and was further amused to learn that at this rather unusual luncheon gathering I had been introduced to much of the business elite in Calgary. This was 1980—the bust cycle of our resource development had just begun. Calgary was really a cow town then, but it had a strange optimism about the future. Native Calgarians were hard to find, and the large group of people from many different places, all chasing the dream, refused to be swayed from their belief in this promised land, no matter what the economic indicators and Eastern prognosticators had to say. I was strangely convinced of this too and determined that someday I would follow that dream and see what opportunities I could find. It took us almost seven years to get back to Calgary, but we haven’t looked back since. Alberta has been good to us and will continue to be so. As my departed friend “the mayor” put it, the West is where it is happening, and the Alberta Advantage is making certain that we are leading the way into the 21st century!

I was recently reading a Forbes magazine article on employment opportunities. While the article references the U.S. economic conditions, the economic makeup of our country has little difference, and the conclusion the article draws about the best opportunities being in the West is likely just as accurate for Canada. The centre of power and population influence continues to shift westward. This shift will produce a very interesting reality in the coming decade, especially with the movement of the political spectrum that we are now seeing.

Does Our Canadian Senate Continue to Demonstrate Its Irrelevance?

Of all the meanderings I’ve written, the most number of items hitting my inbox came from a short bit that I wrote about the Canadian Senate when the Duffy expense scandal first became news. I commented then that the Senate, this unrepresentative left-over from the British parliamentary system made to parallel the British House of Lords, made no sense to me, and I was stead firm in the belief that Canada would be better served by either making it an elected and accountable institution or by doing away with it all together. As we see in the ongoing reports of ineptitude and outright fraud in the audit of their financial workings, senators cut from whichever political party are equally inept in their dealings with public money. Despite the stinging review, no method seems to be in place to correct the deficiencies or to demand these people be held to account for the theft of public funds either through willful intent or ignorant understanding.

Canadian Senate-Red ChambersUnlike the British House of Lords, which was established to appease landed gentry in the transition to democracy, our Canadian senators are appointed at the whim of the leader of the country at any given time. The thought was that this group would be made up of the most qualified of the Canadian elite in academic and business endeavours and would provide a slow, determined review of parliamentary decisions and make recommendations to benefit the process. Right from the very start, however, the “Red Chamber” became populated by political hacks rewarded for their service to whichever political power controlled their appointment. The provision of sober second thought in review of legislation was never effectively accomplished, and those in the know can confirm that historically the activities of the members of this group as whole rarely met the standards for honesty and integrity that we expect from the lowest elected official. This review of these senator’s expenses has clearly shown that, no matter which side is represented or who appointed them, the unabashed consumption of whatever can be scooped out of the public trough has gone on unchecked for decades and that the prospects for correction of the deviant behaviour will continue unabated until such time as Senate reform makes its way onto the agenda of Canadian concern. Unfortunately, Senate reform falls under the heading of constitutional reform and as such puts in play the competing interests of the provinces and the federal government with the demands for change and compensation unrelated to the discussion. The current government cannot be anymore blamed for the Senate’s ineptitude than any previous one, nor does it have any desire to reopen the divisive constitutional debate that would be required to effect changes. Who could blame them considering the total failure of previous attempts for unanimity? Let us all remember that the last successful attempt to amend the Canadian constitution resulted in appeasement and compromise by way of a notwithstanding clause providing a provincial entity the right to opt out of the unanimous provisions of the group or even the legal determination of the highest courts in the land. Simply comprehending that discourse is enough to confuse and annoy, yet it is where we sit with this discussion.

I would leave you with the thought that the next round may well have to come from the provinces, not the federal government. Canadians would have to demand action from their provincial leaders to deal with these matters. To quote my dear departed Nana on this matter, “It will be a long row to hoe!”

Off to the Rodeo

A sure sign that the summer months are here in Alberta is that the rodeo and chuck wagon circuits have begun. I have made the trek to Ponoka to secure the best parking site for my RV so we have a short walk to the rodeo grounds and are far enough away from the redneck party group to enjoy our evenings. The weather is starting out pretty normally with the looming possibility that the High River show will be rained out but the Ponoka rodeo will go on rain or shine. If you’re going look for us at the grounds, I’ll be the guy wearing the cowboy hat!

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:  economics  rodeo  Senate  Senate reform  Western Canada 

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

Posted By Thom Young, June 2, 2015

To Quote Shrek, “Change is good, donkey”

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

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

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

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

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

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

Online Crime Continues to Increase

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

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

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

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

The First Competitive Response to Overland Flooding Coverage

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

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

AIC Stakeholder Sessions Have Been Completed

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

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

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

In Closing

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

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

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

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World Happiness, No Falling Sky on Broker Distribution Channel, Nepal Relief

Posted By Thom Young, May 19, 2015
Updated: April 28, 2015

World Happiness Report

Canadians are apparently the 5th happiest people in the world. You wouldn’t know it watching the news lately. The recently released "World Happiness Report" has rewarded us Canadians with a rather good standing in ranking our approach to life and the satisfaction that we receive from it. These kinds of “studies” and expert reports are always amusing to me, particularly when determining the source and the funding of the work that goes into “research” on such a topic. These reports and discussions, as near as I can tell, originate from the United Nations. As these things often go, a discussion may have started between a couple of bureaucrats about how happy a place our planet is and then an application was made to obtain funding to look further into the problem. Now, perhaps I’m raining on the parade here thinking about all the troubles in our world, but the United Nations could probably better use its resources to find a solution to things like getting clean drinking water to all the people who live in our world or producing a plan to promote pluralistic harmony between people shooting at each other. Still, they were given funding for measuring the temperature of happiness. Of course, the interesting talking point in these important announcements is where different countries sit in the ranking. In order to spare you the tedious task of mulling through the 176-page report referenced in the link above, I’ve listed the top 30 countries ranked by happiness below:
  1. Switzerland (7.587)
  2. Iceland (7.561)
  3. Denmark (7.527)
  4. Norway (7.522)
  5. Canada (7.427)
  6. Finland (7.406)
  7. Netherlands (7.378)
  8. Sweden (7.364)
  9. New Zealand (7.286)
  10. Australia (7.284)
  11. Israel (7.278)
  12. Costa Rica (7.226)
  13. Austria (7.200)
  14. Mexico (7.187)
  15. United States (7.119)
  16. Brazil (6.983)
  17. Luxembourg (6.946)
  18. Ireland (6.940)
  19. Belgium (6.937)
  20. United Arab Emirates (6.901)
  21. United Kingdom (6.867)
  22. Oman (6.853)
  23. Venezuela (6.810)
  24. Singapore (6.798)
  25. Panama (6.786)
  26. Germany (6.75)
  27. Chile (6.670)
  28. Qatar (6.611)
  29. France (6.575)
  30. Argentina (6.574)
While I was originally going to list only the top 10, I decided to expand that number to 30 to include a fair representation of European countries in the review. I have been fortunate to have been in 17 of the countries referenced and could give a firsthand opinion on the accuracy of the research for those. In that regard, I don’t have much argument with the results of this study. The conclusions as to the reasons why the rankings came out the way they did are for much further discussion.

One can clearly see the correlation between the standards of living and the rankings, but a few anomalies appear in the mix. Certainly, the inference of cultural differences doesn’t leap out from the report. For the most part, those who live in a country with a high standard of living and a fair political system seem to be winning the contest to be happy. You may find a different answer in your review. An interesting read. I, like most of you, already knew that Canada is one of the best places on the planet to live, and that fact makes me very happy!

The Sky Is Falling, the Sky Is Falling

insurance umbrellaFrom Walmart to Google, everyone seems to want into the General insurance business. The best method of distribution continues to be up for much debate, and our industry press likes to stir the pot with this popular topic. The headlines often begin with a dire prediction that the independent broker network is under attack again, and our imminent demise is predicted because some new and improved method of distribution will gobble up our market share. Now, far be it from me to give the impression that there are no threats to your market share in this competitive environment. We deal with the realities of it each time we quote a new piece of business or service our existing clients. Still, most of us seem to win our share of new business and hold onto our existing clients.

No doubt, this isn’t the case for everyone—not everyone should do well in a competitive market. A well-run insurance brokerage will always be responding to competitive pressures to correct failures and reward successes. Production reports are reviewed at least monthly and comparisons are done at least quarterly. Trends are identified quickly and a market response made to correct deficiencies. This is the norm in any service business, from the corner grocery to the multinational distributor. If you’re not taking care of your business in this manner, then you are vulnerable to the next competitor who calls your customers, and you won’t know you’re not taking care of business until it’s too late to fix the problem. Often people who fail in this manner are quick to announce to the world that outside influences overtook their business unfairly. The reality is more apparent than that.

Over the years, I’ve watched many good producers make a very good living in our business. When you review how they accomplished that, it usually boils down to customer service backed by good processing systems. These producers are the ones who are in tune with their marketplace and are usually the first to identify a trend in the market that poses a threat to their business. The entry of a new player undercutting the market in rate or underwriting silliness puts pressure on your market share and makes retention of your clients difficult. Fortunately, the rules apply to these new players too. A couple of decades ago, when we were constantly being visited by new competitors such CIBC, the Bank of Nova Scotia, and Canada Trust, we saw them “cherry picking” the best customers with rate and coverage enhancements that couldn’t be matched by our markets. Many brokers were very alarmed about the business they were losing, and producers were suffering badly against this “unfair” competition. Still, the rules of the marketplace applied to these new entrants, and the discipline of competitive factors came to play on them very quickly. No doubt, the banking executives holding their insurance divisions to account for failing to obtain a sustaining market share while losing money with the product had a lot to do with these companies either leaving the marketplace entirely or increasing their rates and refining their product to match the norms in the marketplace. I know for a fact that the claims service and customer service provided by these entities had a lot to do with their failure to advance in the marketplace. I actually recall a high-value client who we had lost to the Canada Trust program telling me that the $300 Canada Trust saved him on his home insurance didn’t amount to any savings when he factored in the nonsense he had to go through just getting hold of the adjuster assigned to his claim. Every time he phoned, he went through the call centre dance and ended up at the beginning of the story with a new person. Competition works, people. When the service you’re providing fails to meet the needs of your customers, they won’t be your customers for long.

You should remember the number one rule:

If we don’t look after our customers properly, someone else will!

You have my permission to copy and paste that phrase onto a full-sized piece of paper, print it out, and put on all your CSR’s desks.

So Google is coming? Well, who cares? I will do a better job than Google of looking after my customers, and I know you can too! The broker distribution network is in good hands, and the solutions we provide for our customers are better than any direct writing influence. You just need to remind your customers continually of that truth. Contact them at renewal, stay on top of the coverages and the rates with the companies you represent, and give your clients the best choices for them. The first of those best choices is always you!

Asia Once Again Dealing with Huge Natural Disaster

On April 25th, the people of Nepal had their world turned upside down. One of the largest earthquakes in living memory shook the mountains and valleys of this small impoverished country and its neighbour Tibet. The very urban city of Katmandu had suffered a similar earthquake in the 1934, but then it was simply a small village with few structures built of any significance. The damage then, while significant, has no comparison to this current event. As in many third-world countries, the urban development has been rapid and without engineering discipline. Building codes and the logic of civic engineering intermesh with ancient customs so that many of the rules we’ve become accustomed to are bypassed and overlooked. When the earth shakes, the buildings fall down in total destruction, taking many of the residents with them.

Initial estimates of several thousand dead seemed very optimistic to those who have studied natural disasters. While the tally at this point of writing is approximately 5000, the recovery effort has only just begun. With little in the way of heavy equipment to clear away the tons of rubble, the search for survivors is now fruitless. Doubtless, the number of fatalities will soar into the tens of thousands. The small villages of several hundred or a few thousand in the steep valleys have been isolated by avalanches and, while at this juncture the news is focusing on what’s happening in Katmandu, others report that many of these communities are not just isolated but also entombed by the rock that has fallen from the mountains. Surely, this event will be on record as one of this century’s largest natural disasters.

Earthquakes can happen anywhere and are about as predictable as rain. Even the best forecasters can declare the certainty of the event but cannot provide details as to when and with what severity. While many experts will forecast probabilities, without certainty, little attention is paid to them by anyone. Nothing except the strange behaviour of animals gives any forewarning of an earthquake. Even the strange behaviour of animals gives little advance warning that can be used to initiate any action to mitigate the effects of this natural event.

The earthquake in Nepal occurred along fault lines in the earth where two tectonic plates are grinding away against each other at the rate of some 5 cm per year. This physical action over millions of years has produced the world’s highest mountains, and the tremendous pressures produced by this action are often released in sudden cataclysmic earthquakes. The fierce movement of the hard rock produces the most damaging results of any earthquakes and brings with it the largest loss of life. In such an area, you would think that buildings would be constructed to reduce the risk, but they are not. The technology exists and is known as can be evidenced by the ancient temples and palaces that are still standing after centuries of earthquake movement.

We need to do what we can to help the hundreds of thousands of people who have been displaced by this event. In the global village, the idea of brokers helping the community expands geographically. Our federal government has again initiated the matching program—matching our personal funds with government funds to help those in need. If you can spare a dollar or two, it will double in benefit. Details about the program can be found in the Nepal Earthquake Relief Fund webpage. By the time you read this column, only a few days will be left to get your money into this plan. Many companies also match employee donations to worthy charities. Our social and civic responsibility is to help where we can.

As we continue to follow the events in Nepal, we should be reminded again that natural disasters can occur anywhere at any time. Recently, a large earthquake occurred off our west coastline near Haida Gwaii, hitting a sparsely populated area without many high-rises to worry about, but it was still damaging and frightening. The Haida Gwaii earthquake was similar to that in Nepal where hard rock realigns itself in rapid violent movement, not like the slow undulating kind of earth movement usual to the Southwestern U.S. quakes. Still, either can be devastating depending on several factors. The numbers given to the event are difficult to understand as a factor 6 can be as damaging as an 8 depending on the geology of the epicenter. No matter what size, the event is terrifying to those experiencing it. The largest North American earthquake recorded occurred in 1811 at New Madrid, Missouri. Estimating the size is difficult, but the record shows that shock waves traveled through the earth raising the ground 10 to 20 metres as they emanated from the epicentre. The earth readjusted to the extent that the Mississippi River actually ran backward against itself for several days before finding a new course. Destruction from such an event today would see present-day St. Louis reduced to nothing but rubble and the loss of life unimaginable. Here in Calgary, a seismic fault runs diagonally northwest from the south east part of the city to just south of Cochrane. You can see the fault’s strata while driving on Highway 22 and then to the west on Highway 1. One can only speculate when the last realignment of this fault line took place, but certainly its results are evident in the geology. Will it move again?

We have a kit in our vehicles that gives us a 48-hour fighting chance in the event of an emergency. Are you prepared? I heard an interview with a resident of the Queen Charlotte Islands where he spoke of his ready bag by the door. I haven’t got to that point yet, but maybe I should.

In Closing

Time commitments of conventions and holidays have me writing this piece several weeks before it is due to be distributed. I apologize if the flow of the discussion isn’t as timely and topical with regard to current events as it usually is. I’ll get back on track on the next issue, I promise!

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:  broker channel  customer service  Google  Nepal Relief  Walmart  World Happiness Report 

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Plan, Budget, Forecast, and Prediction Differences; and Then Some Puns

Posted By Thom Young, May 5, 2015
Updated: April 22, 2015

What Is the Difference between a Plan, a Budget, a Forecast, and a Prediction?

I belong to several business discussion groups, and this question was recently posed in a LinkedIn blog from the Harvard Business Review (Harvard Business School). Usually, the issues are more pragmatic than philosophical, and I always gain some insights by following the interaction between people here. The forum is an international one as well, so the discussion isn’t as dominated as some by American perspectives on issues—not that American perspectives are bad, but discussions about the uniquely different aspects of American social structure tend to get off into the political realm, which, in my view, is irrelevant to the point of discussing business management and sales. Product development, sales distribution, human resources, and corporate culture transcend any kind of political structure. Producing a profit is a universal goal. The manner of getting there is the crux of the debate.

There is an old saying that “those who fail to plan, plan to fail.” The essence of business management is about planning. Budget, forecast, and prediction are very important parts of the planning process: you can’t have a plan unless you do the research necessary to put together a budget of the costs to achieve a goal, and you can’t prepare a budget without doing the research necessary to forecast results and make predictions in your budget. These interrelations are the essence of a proper plan.

Poor planning is better than no planning! Why? Well, if you have a plan and measure your progress against the plan, you develop a report card that allows you to change your method and correct errors in the assumptions made in putting the plan together. The result of doing this process properly makes your plan work. Sounds simple, doesn’t it? The whole of this process takes many years to learn, but learning it properly will make a world of difference in your life and give your business a much better chance of success.

The essence of planning is reviewing information relative to the goal. Setting the goal is the hard part. What do you want out of your efforts in life? Platitudes like “to be successful” or “to be happy” or “to live a good life” sound nice, but they don’t have much substance in the planning part of setting a goal. You have to get in front of that person in the mirror and have a long, hard discussion about what those platitudes mean. Then you can start figuring out how to achieve them. Success means many different things to many different people. The same can be said about being happy and living a good life. This hard heart-to-heart discussion with yourself has to quantify those things. Do you want a big house and lots of money? Now you’re getting to the nib of the matter, because identifying what you want is the first part of working out what you need to do to get it.

Many people think that luck forms a large part of the path to success. I’ve often said that it’s strange how hard these lucky people work to stay focused on their goals and keep on the path to achieve them. Business planning is no different than personal planning and, especially in our business, the component parts are easy to break down no matter whether you are the owner, a department manager, or a CSR. Your income and success are tied directly to your production results. Your market share or the size of the book of business you manage determine your income level. If you make your employer money, you make money. It’s not rocket science. You are a cost centre in which the biggest part of the cost is your earnings. Support and other component parts of your position—like premises, advertising, and administration—all form part of the costs of employing you. If those costs exceed the revenues you produce, you better have a plan to correct that or the matter will be taken out of your control. The only difference between receiving a commission on your work or a predetermined salary is that your performance review comes with every pay cycle if you’re on commission. The business owner is no different: if the revenues from operations fail to produce sufficient returns to keep the lights on and the employees employed, corrective action must be taken quickly or a total failure comes quicker than you think. Most sales-oriented businesses (which are virtually all business) have less than 90 days of working capital to keep the doors open if the revenues fall below the breakeven point. Fast action is necessary to protect the business if sales objectives aren’t met.

In my years in private business, I’ve learned the hard way about the need for proper planning and review of budgets and forecasts. The old adage that “wise people don’t make errors in judgement but errors in judgement often make people wise” sort of follows along the lines of “don’t make the same mistakes twice.”

I cannot stress enough that setting goals and preparing a plan to achieve those goals is the way to become successful. Decide what you want, and put in place the action plan needed to achieve it. Stop and review your progress at regular intervals, and determine both what has hindered you from meeting your objectives and what has helped you exceed them. Do more of the latter. Do this long enough, and you’ll find yourself surprised by what you have achieved. Others will notice your success before you do!

I could share much more with you on this topic and, as I have promised in the past, will revisit it again in the future!


Everyone Needs a Good Laugh Every Now and Then

After talking about such a serious subject, having a good laugh is in order! These posts have been circulating on the internet.

Here’s an amusing twist on words and puns.
  • How does Moses make his tea? Hebrews it....
  • Venison for dinner again? Oh deer!
  • A cartoonist was found dead in his home. Details are sketchy.
  • I used to be a banker, but then I lost interest.
  • Haunted French pancakes give me the crêpes.
  • England has no kidney bank, but it does have a Liverpool.
  • I tried to catch some fog, but I mist.
  • They told me I had type-A blood, but it was a Type-O.
  • I changed my iPod's name to Titanic. It's syncing now.
  • Jokes about German sausages are the wurst.
  • I stayed up all night to see where the sun went, and then it dawned on me.
  • This girl said she recognized me from the vegetarian club, but I'd never met herbivore.
  • When chemists die, apparently they barium.
  • I'm reading a book about anti-gravity. I just can't put it down.
  • I did a theatrical performance about puns. It was a play on words.
  • . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
  • I didn't like my beard at first. Then it grew on me.
  • Did you hear about the cross-eyed teacher who lost her job because she couldn't control her pupils?
  • When you get a bladder infection; urine trouble.
  • Broken pencils are pretty much pointless.
  • What do you call a dinosaur with an extensive vocabulary? A thesaurus.
  • I dropped out of the communism class because of lousy Marx.
  • All the toilets in New York’s police stations have been stolen. As of now, it appears the police have nothing to go on.
  • I got a job at a bakery because I kneaded dough.
  • Velcro—what a rip off!

For me, Sinko de Mayo is truly a day to celebrate. Few people have come to know the “true” origin of Sinko de Mayo. I’m pleased to set the record straight. A little known fact is that, back in 1912, Hellmann’s mayonnaise was manufactured in England. In fact, the Titanic was carrying 12,000 jars of the condiment scheduled for delivery in Vera Cruz, Mexico, which was to be the next port of call for the great ship after its stop in New York. This would have been the largest single shipment of mayonnaise ever delivered to Mexico, but, as we know, the great ship did not make it to New York. The ship hit an iceberg and sank, and the cargo was forever lost. The people of Mexico, who were crazy about mayonnaise and were eagerly awaiting its delivery, were disconsolate at the loss. Their anguish was so great, that they declared a National Day of Mourning, which they still observe to this day. The National Day of Mourning occurs each year on May 5th and is known, of course as Sinko de Mayo. Go out on this day, grab a couple of slices of Wonder Bread and a jar of Hellman’s mayonnaise, and have a party. You know I will!

In Closing

If all goes according to plan, you’ll be receiving this on the 5th May. The date "is observed to commemorate the Mexican army's unlikely victory over French forces at the Battle of Puebla on May 5, 1862, under the leadership of General Ignacio Zaragoza Seguín. In the United States, Cinco de Mayo is sometimes mistaken to be Mexico's Independence Day—the most important national holiday in Mexico—which is celebrated on September 16” (Wikipedia). Le ruego a mis amigos mexicanos que me perdones por burlarse de su lengua.

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  business plan  economic forecast  economic prediction  economics 

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