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A Healthy Lloyd’s Outlook and Software for Falsehoods

Posted By Thom Young, January 20, 2017

Apologies for the missed issues since September. I’ve been pretty busy for the past couple of months due to travel through four provinces and five states, a convention and trade show, Canadian Thanksgiving, American Thanksgiving, two company Christmas parties, Christmas and New Year’s celebrations, along with some particularly time-consuming business projects. This project is now in its sixth year and, for the most part, I’ve made that deadline every two weeks without very many interruptions.

A number of people have approached me at various functions asking if I’m still writing and indicating that they aren’t receiving the email with Young’s Stuff in it. The full text version of the essay is not sent out by email anymore because IBAA is striving to keep to a minimum the number of emails sent to members. When the blog is posted on the IBAA website, those who have subscribed through the website are emailed a link to click on and open in a web browser. (You can subscribe through the Blog Subscriptions section in your profile.) A link to these blogs is also included in IBAA’s monthly bippler email. Some of you may have missed the link and not forwarded it on to your staff because the link was buried under other information and promotions. IBAA has informed me that the new bippler format will open with a link to the most recent editions of Young’s Stuff. I do strive to get information into this essay that’s of some value to all members of our industry. Hopefully that information is important enough to get circulated to the staff at the brokerages who receive it. I’ve also been posting links to Young’s Stuff on Facebook and LinkedIn and sending links to it via Twitter. If you see something in my stories that you think should be shared, don’t hesitate to send it on if you know how.

For my “old” friends who have difficulty with links and such other complicated internet and computer terms, send me an email and I’ll send you the blog in text form so you can have your assistant print it out for your later reading pleasure. If you’re reading this, you obviously somehow have found the link on the IBAA site. Just in case you want to forward it on to someone who isn’t as astute as you are, here it is:

If you don’t know how to copy and paste a hyperlink, ask someone younger than you in your office for some help.

It Almost All Began (and Continues) at Lloyds

If anyone is telling you that our industry is suffering in any of the world markets, don’t believe them. Lloyds has posted another record year of over 1.4 billion pounds in profit for just the first six months of 2016. While a number of insurers seem to be floundering around with lack-luster results and less than stellar projections, good old Lloyds continues to show how it’s done. Lloyds is leading the way for expansion of the insurance industry in Eastern markets, and the numbers appear to indicate they’re doing it right. As Europe and North America continue to pull out of the economic malaise that began nearly nine years ago, the future seems bright. The Lloyds financial performance model is unique, but Lloyds goes to great lengths to make it comparable in review to what people are used to, even though the ownership structure at Lloyds is also unique. According to the published financials (see Insurance Business), Lloyds seems to be producing an enviable return on equity of about 8% and is having absolutely no trouble attracting capital investment to meet the reserve requirements of its business model (which well exceeds those legally mandated in any jurisdiction). This strength means that rates will remain fairly stable in the immediate future and, barring any huge catastrophic losses in the coming months, Lloyds will be sending out huge dividends on its reporting date. How well Lloyds performs indicates how the industry will, at least in my opinion anyway!

One wonders, though, how Lloyds is going to deal with the Brexit issue, which is certain to impact its UK operations. As the UK pulls out of the European Union, Lloyds will likely have more difficulty keeping the staff that is now able to move seamlessly between their home country and the UK for work and lifestyle. Still, with modern technology people can work wherever there’s a good internet connection. The main impact will be that they’ll be spending their paycheques somewhere else. The leadership at Lloyds has clearly indicated that they are not going to leave London as a result of the Brexit vote and their outlook for the future is more of the same. The Brexit issue will, in my view, have more of an impact on the UK than on Lloyds anyway. Time will tell, but barriers to the free flow of commerce are not a benefit to anyone in this new-world economy where (at best guess) the assembly of any complicated product includes nearly 25% of parts and materials made in another country. Trade barriers of any sort that could interrupt these complicated supply chains will make for serious challenges in the ability to deliver a competitively priced finished product.

Is Big Brother upon Us?

I was recently discussing with some colleagues the use of linguistic analysis software in the adjudication of claims. Science seems to have developed some pretty reliable technology that can analyze speech patterns to determine whether or not someone is telling the truth in a discussion (see The New York Times). No longer the stuff of science fiction, this kind of program is apparently surprisingly cheap to acquire and implement. The analysis is done in real time and available to the user during the interview process.

Imagine that you’re called into your manager’s office to discuss just about anything, and your boss is constantly glancing at his laptop during your discussion. Is he dealing with emails while talking to you, or is he looking at a graph measuring your sincerity in your answers to his questions? Are you really in favour of his proposal or just telling him what he wants to hear? How do you feel about the new person he hired? How do you feel about his decision on the firing of a colleague? In the normal course of interaction with your manager, you formulate your answers to protect your position in the hierarchy of the organization. I’m not talking about lying in your answers but about answering in such a way as not to harm your relationship with your boss and your future in the organization. Is this new tool that gives your supervisor the further ability to analyze your responses a personal intrusion into your privacy? Some think that good managers already have the people skills that give them this ability, but studies show that such is not the case. Analysis of a software review of people’s opinions about the truth of answers showed that 57% of the answers reviewed were accurately determined to be false by human beings while the software was able to determine 70%. That’s a 23% improvement in accuracy. How would you implement this software into your life choices? Imagine running a review of an investment proposal or perhaps a financial report on a company in which you are involved. The real question is whether our personal relationships will be tempered by degree with an application on our smart phone that is running a truthfulness review of what we’re being told in real time during our discussions. I know my mother didn’t believe some of the excuses I gave her for many things, but I got the benefit of the doubt more often than not. Can you imagine those same discussions with an amber or red light flashing on her smart phone indicating that the story I was telling was clearly not being bought by the software analysis?

In our business, the process of claims adjudication is currently using this technology when collecting information on claims reports. I don’t think there are any precedents yet where this review would be the single deciding factor in denying or limiting a claim, but no doubt it is influencing the adjuster’s review of other factors when verifying claims reports. Brokers often have a hard determining the adjusters reasoning for a position taken on a claim. This software may be the “secret” part of the equation working against your client. I guess a broker could easily record a discussion with a claims adjuster and run it through this software to verify the answers too.

Technology is advancing at a huge rate and will continue to be the prime disrupter of many businesses, and very definitely ours!

Winding Up

The New Year is here! The reset of the calendar marks the end of our very small planet’s complete revolution around our rather insignificant sun and the 2017th year since the majority of us agreed that the modern era began. Archaeological research reveals many other methods of measurement based on other assumptions, but the trip around the sun seems to be a common denominator in how most calendars work. Another common denominator is the perspective that each culture marks the significance of the New Year as a time to wish each other good health and prosperity in the coming year. For all of my readers, I certainly endorse this tradition and wish you well in the coming year.

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:  Brexit  claims  lie detection  Lloyds  technology 

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Stampede Breakfast, Brexit Effect on Industry’s Economy, GIC Elections

Posted By Thom Young, July 14, 2016

Yahoo! Ride ’em Strong!

Our annual Stampede Breakfast event has come and gone again. Last Wednesday morning was cool with threatening skies all around our venue but, other than a wisp of some misty sprinkles, no rain appeared until after our event came to a conclusion. Attendance seemed to be a down slightly from previous years, perhaps because of the threatening weather. It certainly did not deter those who did come from having a good time.

World-champion chuck-wagon driver Kurt Bensmiller came down once again with his wagon, donated his time, and made the day for a long line up of young children with his attention. The cowgirls in attendance were all anxious for a selfie with him. Many took pictures and obtained autographs. His wagon sponsor once again this year was the Tsuut’ina (Tsuu T'ina) Nation who provided an elder who performed blessings and songs of his people to honour our gathering. Perhaps he contributed to our avoidance of the foul weather in the rest of the city that morning. I wonder if he also helped Kurt win his heat that night at the Rangeland Derby.

Allen Christie and his band once again put on a terrific show, straying often from his country music roots to give the crowd some unique rock-and-roll performances. You can tell an event is going well if the band is enjoying itself, and Allen played 20 minutes longer than he was contracted!

Some controversy arose about how long this event has been going on. Our poster announced the 23rd year, but I’m certain that the first one took place in in 1992, the year before the event’s co-sponsor Southland Registrations opened. I think we had less than a 100 people show up the first year. Now over a thousand come each year. A company regional VP told me that his July broker contacts are mostly covered at our event on the Wednesday of Stampede week, and that this was his 10th year there. Hope to see you there next year!

Brexit Revisited

This topic continues to be in the forefront of our industry news along with the current mess made of the political process in the UK. A new prime minister has taken over and is charting what may well prove to be a costly unpopular course for the country. The “leave” constituency is taking the place of the “stay” representatives of the same ruling party. This expression of the democratic process in parliamentary democracy is sometimes difficult to comprehend. A change in party leadership produces a new government without an election, and the direction of the body politic changes mid-term, not to suffer a public-confidence test until the next general election. As is increasingly becoming clear to most of the voters in the UK, the process of leaving the European Union will not be without at the least short-term negative factors. A day of political reckoning that will overturn the results of this last silly referendum may well be at hand. Strange times.

From an industry perspective, the uncertain economic factors have had immediate impact on the investment side of the insurance business. As everyone should know, the profitability of our business and its ability to meet its obligations are directly impacted by the return on the premiums managed until the claims are paid. Sometimes companies invest these monies in self-administered funds that are industry specific, such as mortgage funds and the like. To simplify, these funds also attract other investors who share in the wealth generated by them. Large commercial-property projects are often funded in this way. Acting almost like a mutual fund for institutions, successful returns on the money held make these funds very attractive to investors. However, concerns about the viability of the investments can stimulate investors to remove their money from these funds, even when the returns are good. When funds are withdrawn, liquidity can be a real issue. Investments in long-term mortgages and the like can’t be easily turned into cash, so all these funds have time limitations on redemptions. That time allows the fund administrators to find other investors who will provide the cash needed to pay back those who have jittery feelings and want out. According to Insurance Business, Aviva and Standard Life have suspended redemptions on billion-dollar UK property funds in order to protect the interests of their investors. As you might imagine, a lot of investment institutions now have to deal with the “jittery feelings” that Brexit has caused with the resulting uncertainty about the economic future.

Amid the shouts of “The sky is falling, the sky is falling,” even a promise of huge returns on share investments doesn’t seem to be having the desired bolstering effect on those values. As Insurance Business notes, the share values continue to slump.

As I write, some stability seems to be returning to these markets, but we’ll have to wait to see if stability will return soon. Nonetheless, the implications of the falling stocks in our global marketplace extend to our country and throughout the whole of our industry.

General Insurance Council Elections Are Here Again

I’m always amused by the stakeholders’ consultation meetings that the Alberta Insurance Council hosts for insurance licence holders each year. This year, I attended both the one in Edmonton and the one in Calgary. Around a couple of hundred people showed up at each and, after a brief report from the chair, the usual questions were raised. As usual, the Life guys complained about the price of the licence and their processes; then one of the General guys got up and complained about having to listen to the Life guys complain. This time, the idea was voiced that separate stakeholder meetings should be held for those in General and Life insurance—a silly idea as the discussions clearly didn’t warrant that kind of attention and the numbers represented at the meeting wouldn’t justify any ruling one way or the other. What distressed me, though, is that many of the weighty issues I’ve been dealing with as a member of the General Insurance Council for the past three years (and years earlier) weren’t really the main focus of the discussions. When I attend industry functions (meetings of IBAA or the Blue Goose and the like), someone invariably corners me to discuss one of these issues passionately. Where were they during these consultations? A mystery to me.

In Alberta, licensing and discipline of General insurance licence holders is administered by the General Insurance Council. This council is made up of 3 elected insurance brokers, 2 appointed public members, 2 direct-writer agents sent by CADRI (their industry association), and 1 General insurance-company employee sent by IBC (the General-insurance industry association). Each serves for a three-year term, and they can be re-elected or nominated for two consecutive terms. A call for nominations for the election of 2 insurance brokers has been emailed out to all brokers holding a licence. My term is up, and I have been nominated for election to a second term.

If you are a broker holding a general insurance license, you will soon receive an email with a link defined by your licence number that will allow you to vote for your representation on this council. Unfortunately, of the more than 6000 brokers who are eligible to vote, often less than 1000 actually make the effort. We fought long and hard to get a voice in the regulatory process, and that voice is often challenged as irrelevant or unrepresentative because of the lackluster participation in the selection process.

With the email linking you to the voting survey, you will also receive a necessarily brief bio of the individuals running for election. Make this review and election a top priority, and encourage your fellow brokers to do the same. The brokers who sit on this committee are the ones who review the misconduct investigations that are brought forward for discipline hearings. They should bring the very unique broker perspective of how the industry works and an understanding of the process through which a responsible broker deals fairly and ethically with the challenges that present themselves in our business. They should also have an interest in keeping the regulatory process simple, effective and, most importantly, fair: fair to the licence holders, fair to the companies, and fair to the public. Bureaucracies can often overtake the interests of its departments, and strong and effective leadership is often the only way to reign in their intrusion into the process of a self-regulating body. I know that you will choose the person you think will be the best for the job, if you in fact make a choice. Sadly, though, I also know from past experience that many will not even bother to open the email to participate in the process. Such apathy reduces the effectiveness of the process and, consequently, the results as well.

As your representative on the GIC, I’ve been working very hard on the licensing issues that brokers have been dealing with in Alberta. Getting people over the licensing hurdle and into our business has been difficult in the past few years. Hopefully, the many changes that have been made and those that are coming will produce positive results. If they don’t, we’ll be revisiting the issues to find out why and fix the problem. The proposal for equivalencies continues to sit on a desk somewhere in the process of government approval. Alberta remains the only province in Canada that doesn’t recognize the value of our industry’s professional designations and forces people who have already invested their own time and money into taking examinations that benefit no one. Perhaps the government considers other issues more pressing, but the broker who is trying to buy a business and can’t get past the level 3 licence examination would surely disagree. People with CAIB, CIP, and other advanced degrees such as MBAs are having difficulty with the process. This process is just wrong and should be fixed, shouldn’t it? If you choose to vote, I would be happy to receive your endorsement and will work hard for you over the next three years. If I’m successful, this will be my second term and likely my last “kick at the cat” because I will be long past my prime when I’m eligible to run again!

Many other issues are at stake as well. My email address is below and my phone still works if you’d like any more information. You can also read my profile on LinkedIn.

In Closing

Do you know how difficult it is to get the appropriate number of words into this essay during Stampede week? Well, the rest of my day is set: off to the rodeo and then to the Zac Brown Band concert tonight! Edmonton will get its own version of our Stampede in the coming weeks, and each small town will enjoy a summer celebration that honours our Western heritage! The good and honest values represented by these celebrations are the same ones shared by all decent human beings who believe in the strength of community, fellowship, and fair hard work! Get out and have fun. Don’t step in any political commentary that might have fallen out of the back of a farm animal!

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:  Allen Christie  Brexit  CAIB  designations  General Insurance Council  investment  Kurt Bensmiller  licensing  Stampede breakfast  Tsuut’ina (Tsuu T'ina) Nation 

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Ride-Sharing Policy, Brexit, Storms and Systems

Posted By Thom Young, July 5, 2016

SPF 9 for Ride-Sharing Companies

The Alberta headline for the week is all about the SPF 9. George Hodgson sent a memo on June 28th to all IBAA members outlining this new automobile form, how it works, and where it applies. I can’t add anything of substance beyond the very excellent explanation given, so I’ve simply reproduced it below:

Superintendent Approves SPF 9 for Ride-Sharing Companies & Their Drivers

Uber and other ride-sharing drivers experience a unique mixture of personal and commercial exposures. The new SPF 9, if purchased by the Transportation Network Company (TNC), is designed to function with the owner's personal policy and to kick in when commercial coverage is required. How does this coverage work and what does it mean to you as a broker?

The driver's risk is broken into 4 categories that reflect the personal/commercial exposure:

The personal owner's policy covers exposures until the driver logs into a TNC. Upon login, some coverage from the SPF 9 could be available if the owner's policy does not provide coverage and the SPF 9 will provide coverage when the driver has accepted a ride and is en route to pick up. The policy does not cover street-hailed passengers.

What the SPF 9 Means for Brokers

  • Transportation Network Companies would purchase this commercial policy. The standard application form SAF 9 for this policy is attached to the Superintendent's bulletin.
  • The following endorsements are approved for use with the SPF 9: SEF 44 (Family Protection), SEF 23 (Mortgage), SEF 21A and 21B (Blanket Basis Fleet), SEF 13D (Limited Glass), SEF 13H (Hail Deletion), SEF 20 (Loss of Use), and SEF 43 R&L (Limited Waiver of Depreciation).
  • Fleet rating programs may be used with the SPF 9.
  • Drivers for a TNC should disclose that they are a driver to their broker as this is a material change in risk. Brokers should record and rate the risk appropriately on the SPF 1 owner's policy. In some cases, this may mean re-rating the risk as a class 07.
  • Brokers should be able to explain to their clients when their owner's policy (SPF 1) will provide coverage and when the TNC's policy (SPF 9) would provide coverage.

For full information please read the attached Superintendent of Insurance Bulletin.

For further information, please contact Rikki McBride, Chief Operations Officer, IBAA, at / 1-800-318-0197 ext 101 / 1-780-702-3715.

The industry has taken up the opportunity offered for this coverage in the Alberta marketplace. I’m told that ING has effective coverage through a national brokerage firm for the Uber ride-sharing operations. The coverage works much like an umbrella policy by picking up the commercial exposure where it exists and leaving the personal exposure and rating in place. As IBAA later clarified, the all-comers rule will not apply to TNC driver’s personal insurance applications due to the partial commercial exposure. It will be interesting to see if the personal-lines underwriters will accept this policy as mitigating the extra exposures incurred, look to limit their participation somehow, or apply a limited-experience rating to the equation. All of us are closely following the industry response. As this new set of circumstances is only a week old as I write, I look forward to seeing how it may evolve in the marketplace. If anyone has any insights on this change in our marketplace and how smooth its implementation will be, I’d be very happy to hear from you!

Everyone Is Talking about England These Days

Headline story 1: The English have been beaten at their sport (football/soccer) by the Icelandic national team made up of mostly part-time players with few professional prospects (until now) and coached by a dentist who volunteers his time to help the boys out.

Headline story 2: The English have passed a referendum to withdraw from one of the largest and most successful trade packages ever put together.

Imagine. Over the past three hundred years, successive conquering armies have expended men and resources for the authority to control and govern the European continent, and none have been able to make a go of it. Tired of the waste from competition within the virtually identical genetic haplogroup, the people came together in the name of trade and commerce and formed an economic union that allowed each other to share in the strengths of their markets without interfering with their local traditions and rulers. Wow, was that an achievement, and without a drop of blood shed anywhere! Under the heading that you can’t make everyone happy, many argued the worth of the deal, but the benefits couldn’t be denied. Like the North American Free Trade Agreement, national interests were respected while the free flow of goods between the signatories was promoted to the advantage of everyone. Further, the European Union enabled the citizens of each country to move freely over each other’s borders to pursue education, residency, and employment on a level playing field. What a concept! The union seemed to be a win for everyone by every measurement, and particularly for the United Kingdom. With UK dominance in the financial services sector, its competitive advantage as the main player in these European Union markets brought it huge gains from its participation. Well, along comes political discussion and the economic considerations seem to become unimportant. To placate the body politic in England, the political leaders agreed to hold a referendum on remaining in the European Union and began campaigning vigorously for the “remain” side of the question. For all intents and purposes, winning the vote to "remain" seemed to have slam-dunk certainty but, as we are seeing in many political contests at the moment, the expected logic of the electorate doesn’t seem to apply anymore.

With seeming illogic, the “leave” side carried the day by a margin of less than 2%, and financial markets worldwide are still reeling in shock.  All the positive economic factors in play can’t seem to win an argument against a xenophobic rant that is rooted in the myth of ancient prejudices and promotes the fear of nationalistic failure. Sadly, the process of becoming something bigger and better—of adding the best of your own worth into the mix and of benefiting yourself and everyone else—is too often overtaken by promoting fear of change and fear of those who are different.

The real loser here will be the UK people. Their “United” Kingdom is showing further cracks in solidarity at the prospects of leaving the European Union, and their currency devaluation will hamper their ability to import raw materials for the competitive production and sale of their goods ("U.K. Businesses in Limbo Due to Brexit"). Their education will now be limited by political geography and increased costs. Getting a visa isn’t always easy. Their ability to draw on an elite work force through unfettered access to competitively priced labour markets will further interfere with their current market advantages ("U.K. Businesses in Limbo Due to Brexit"). While some will be happy to proclaim control of their own destiny, that control decreases when people and companies become uncompetitive and difficult to deal with in today’s global marketplace.

What will the future bring for the relationship between the UK and the EU? I believe the UK will soon see the error in its ways. In the process of disentangling themselves from this trade pact, the people will see that they’ve been sold a bill of goods by the “leave” side of this contest. While they were convinced of the positives, they will soon be willing to trade those for the benefits they had by staying. None of this process will be quick. The political turmoil will continue for several months, and the demand to revisit the discussion will dominate the next political contest. History is written from the perspective of those who win in the end, and I believe that those who promoted Brexit will not later be held in high esteem. We shall have to wait and see though. In today’s political environment, I’m increasingly less certain of how things will eventually turn out. Am I getting older and more confused, or has anyone else noticed this unpredictability?

Still, one thing seems certain: with the dominance our industry has in the European marketplace through the stepping stone of England, our industry will suffer if the UK leaves! As Autonomous Research reports, the insurance business is already struggling and will likely slow further with Brexit.

Summertime and the Living Is … Easy (?)

Watching the wild and wacky weather shaking itself out over our part of the prairies these days brings to mind many concerns about the continued discussions about overland water and sewer backup. When a whole community such as Woodlands in South Calgary is completely surrounded and cut off by water from a local storm, I question once again the engineering of our storm runoff systems. On the other hand, when nearly 200 centimeters of hail shut down the main north-south highway in the province for a whole afternoon, I find myself once again in awe of what Mother Nature can toss into the mix whenever she feels like it.

In Closing

I’m presently enjoying my grandchildren while camping out in front of the Ponoka Legion—our 10th year at the same location for the rodeo and chuck-wagon races, boondoggling on the grass. It’s fun to see the teenagers just as excited about the show now as they were 10 years ago. While we’re roughing it out here, the inevitable summer storms are rolling through and pounding us off and on with rain and wind. It’s tornado season. Thankfully the damage has been relatively minimal. Let’s hope it remains so. The prediction is for Canada to be sunny and warm. The flag is proudly flying off the back of our motor home! I hope all of you enjoyed the Canada Day weekend. I know we did.

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:  all-comers rule  Brexit  flood  hail  ride sharing coverage  sewer backup  SPF 9  TNC  Transportation Network Company  Uber  wind 

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