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Motor Vehicle Renewal Notice Changes, Self-Driving Cars, Crazy Laws

Posted By Thom Young (Full first name: Thomas Clifford John), April 12, 2016

Changes in the Way the Government Communicates with Us

It’s funny how bureaucrats think. The resolution of a problem often seems to ignore the effect of the action that resolves it. Political considerations seem to be reviewed with a self-induced euphoria about the positive effects the action will have. When the change turns out to be unpopular or unworkable, it’s rare for anyone to own the reason for it.The changes to motor vehicle license renewal seem to be a case in point.

The folks who make the policy at Service Alberta (that’s the department that manages things like motor vehicle license registrations and renewals) have determined that they will save postage and handling costs if they stop mailing renewal notices to the public for their license plate renewals, and the public will be so much happier to receive their renewal notice via email instead of by mail. Now, if I was introducing a service like this to my customers, I think I’d have a plan in place to advise them of this change on their last renewal, give them the opportunity to update an email contact listing, and require them to visit an interactive website in order to open such an account with me. Then I’d send out a confirmation reminder via email perhaps 90 days or so before the expiry requesting confirmation of the new arrangement. If I didn’t get a reply, I’d send them the old paper-style renewal again and remind them of the need to register their email address before the next renewal. After several cycles that way, then I’d actually call them to get things organized or determine that they don’t have the capability of communicating this way and put them in a special category for paper communication on the next renewal. In our business, we’re interested in keeping these people happy with the way we are dealing with them so they don’t seek better service from our competitors. The government doesn’t really have any competitors, so the incentive to care isn’t so great.

Failing to care is a sure-fire recipe for annoying everyone. There’s really no one to complain to about this change in service either. You can go yell at your registry agents, but they don’t have anything to do with setting the policy and, in fact, have already fought with the bureaucrats to get a workable system in place for these renewals. Those in charge think it’s all going to work out fine. I have my doubts.

As insurance brokers, our services to our customers often do not coincide with the motor vehicle license renewal cycle. People who move to our province need to get insurance before they can register their vehicles. Their policies are effective on their first registration. Since the motor vehicle license renewal cycle is based on alphabetized names, it will not likely coincide with the insurance renewal. Nonetheless, we could provide a helpful service to our clients by letting them know about this new government policy. Here’s the nuts and bolts of it:

Effective April 1, 2016 (no joke here), renewal notices will no longer be processed by regular mail. If you haven’t registered for an email advisory with the government directly or with one of the registry agents that offer this service (not all do), then you’d better make a calendar reminder somewhere to ensure that you renew your vehicle registration prior to its expiry. There is an exception: if you are over 70 years of age or have a disability, you will receive a mailed renewal notice until next April when everyone will be treated the same. I’m not sure how they are tracking disabled people, but they do have a way to track age. If you don’t fall into either of the aforementioned categories and don’t feel a calendar reminder will be effective, sign up for an email reminder using one of the following three methods.

The latter allows you to choose email, text, or both email and text messages.

Time will tell if this new “service” brought to you by the Government of Alberta is a success or if it fails to meet the needs of the Alberta public. No doubt the government will save a substantial amount on postage, but those who fail to renew their registration on time will produce additional general revenues for the government. The fine for driving a vehicle with an expired license plate tag is $230 dollars. Worse still, the officer has discretion to impound your car until you produce the valid registration for it. In addition to being stranded on the side of the road, the cost does not stop at the fine. Depending on where you are, about $200 more could be added to the cost for the tow and impound fees plus the taxi ride to the registry and the impound lot. It’s not small potatoes when you add it all up. If you are caught with expired registration while getting a ticket for something else, you can find yourself quickly having a $1000-day with zero entertainment value.

One of my favourite quotations is “I’m from the government, and I’m here to help you!” Good luck with that!

Self-Driving Cars

I keep hearing all these reports about the challenges of insuring self-driving automobiles. What’s the fuss about? The owner of the automobile is responsible to ensure the vehicle and its operation regardless of who the driver is. The SPF 1 anticipates that the driver will hold a “license,” or specifically, that the owner believes the driver does when care and custody of the vehicle is given over. The driver is also expected to have a “legal capacity” and not be impaired. The only challenges to insure vehicles driven by computers, then, seem to be that the computer must have a license and the insurer must be willing to assume the risk. Licensing is mostly a regulatory issue. The experience of the computer programs that will be driving these cars could be easily determined from the computer records of these programs in operation. In general, I think that experience will show the computers are much safer drivers with reduced losses, but I might be having a bout of wishful thinking here.

If the computers produce the substantially better loss experience they are predicted to, then the end result will be much lower payouts for insured losses that will have a positive effect on the business, won’t it? If overall claims decline, then everyone benefits.

Still I’m confused about all the hype about how to insure these risks. I’m quite certain that insurers will lineup to participate in that pool.

Some Crazy Laws

In Florida, if you tie your elephant up at a parking meter, you have to put money in the meter or you’ll be fined. Here are some other crazy rules and regulations that actually are laws on the books:

16 crazy rules
  1. In England all Hackney vehicles (taxi cabs) must have a bale of hay and a bag of oats with them at all times.
  2. All Danish vehicle operators must check under the car before they start it to be sure there’s no one underneath.
  3. Eating or drinking anything while driving a motor vehicle in Cyprus is against the law!
  4. In Luxembourg all vehicles must have windshield wipers even if they don’t have a windshield.
  5. In Russia you can be fined for driving a dirty car!
  6. In Germany it is illegal to run out of gas while driving on an autobahn!
  7. In Spain you are required to have an extra pair of glasses in your car if you wear glasses!
  8. In some cities in Spain you can only park on the odd numbered side of the road on odd days and the even side of the road on even days. Failure to comply will see your car towed.
  9. In Scandinavian countries you are required to have headlights on at all times.
  10. In Estonia it is required that you have two wheel chocks in your automobile at all times.
  11. In Turkey you are required to have a safety kit in your car that has a fire extinguisher, reflective triangle and first aid kit, you must show this to the police when stopped or you will be fined.
  12. In France all vehicle have to have a Breathalyzer in them and there is a fine of 11 euros if you can’t show it to the police when asked.
  13. All cars on the road in Serbia must have a tow bar and a 3 meter tow rope.
  14. In Manilla you are not allowed to drive on Mondays if your license plate ends in 1 or 2.
  15. In Japan if you splash a pedestrian driving through a puddle you will be fined $65.
  16. In Singapore it’s against the law for a driver to come within 50 meters of a pedestrian but pedestrians aren’t allowed to walk on the roads either.

Never underestimate the ability of legislators to come up with silly rules and regulations to “protect” you. Remember my favourite quotation, “I’m from the government, and I’m here to help you.”

In Closing

I trust everyone is enjoying this unseasonal weather. It seems too early to declare that spring has sprung, but tell that to the trees that are budding out and tulips pushing through the garden. All the same, don’t count Mother Nature out. She’s sure to toss another winter storm at us before summer comes. As you’re out enjoying this balmy weather, please look twice for motorcycles. The life you save may be mine!

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:  autonomous cars  motor vehicle license renewal  motorcycle  self-driving cars  Service Alberta  SPF 1  vehicle registration 

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Troublesome Flood Coverage, Uber Legislation without Industry Backup, Mark Prefontaine Seconded, Blog Activity

Posted By Thom Young (Full first name: Thomas Clifford John), February 22, 2016

Troublesome Flood Coverage?

The introduction of another company’s coverage for overland water (used to be called flood) leaves me underwhelmed with the industry’s attempts to meet the needs of our customers adequately. The underwriting of these products seems limited only to those who are outside of the red zones demarcating high risk for overland water damage. Since the number of insurers even willing to provide this coverage remains minimal, adverse selection will likely favour those who don’t get on the bandwagon. Only those who live where the flood risk is the highest will want to purchase the coverage. Those who don’t live in those zones won’t want to share the cost for claims and return on equity through their premiums and will seek another provider. Well, we’ve been here before, and history repeats itself.

A recent article in Canadian Underwriter magazine sums up a lot of the data being developed to map the risk of flood coverage in Canada. While the accuracy of the models in use can be easily challenged, data management, even with suspect data, is the baseline necessary to determine an actuarial model of rate. As I’m often reminded when I think of those very difficult classes in statistical analysis that I endured way back in the day, even poor data enables easier adjustments in the equation than hypothetical estimations. Although all actuarial prediction is really hypothetical, I know several actuaries who will spend tremendous energy vigorously arguing the scientific merits of their predictions, even when the historical accuracy is different. Such is the mystic nature of number manipulation. Regardless, the data from the research shows that "20% of Canadian [households] could be qualified as high risk, based on our metrics and about 10% of those would be considered very high risk and that's about 1.8 million households." That percentage implies 18 million households and numbers that should lend themselves well to actuarial predictions on the average loses per household from flood. If the actuarial mapping results in the application of a proper rate for these risks, then the competitive contest for these risks will have a proper outcome. If not, then little interest will be generated for continuing to provide coverage for this peril, and we’ll be back where we began.

Of course, identifying the risk exposure is the first part of the process. Knowing that 1.8 million homes are at an ultrahigh exposure to the peril won’t be very helpful until the frequency of loss is determined. In reality, we have no records for most of North America that are relevant for losses of any type over 150 years old. Forest fires, flood, and earthquakes that occurred over 100 years ago had little consequence to any large group of people simply due to the demographics of that historical era. If 10% of the dwellings in Canada incurred such a loss in any calendar year, people would clearly be concerned about the availability of coverage in Canada, but that’s not the way catastrophic losses work. Flood losses usually occur in a small localized area on an infrequent basis. We toss around terms like 100-year, 500-year, and 1000-year floods as if they have meaning when, in fact, these descriptions are only an excuse for the lack of mitigation efforts.

I still believe that flood coverage needs some form of statutory basic wording so that the competition between the insurers is based on risk selection and premium, rather than on limiting the coverage through different definitions of the peril. As brokers, we should not be forced to present our solutions to the clients based on the shortcomings of one company over another in the definition of the insured peril. That process is confusing to the public, fraught with errors and omissions exposures for each of us, and goes against the principles by which we currently manage the competition between our insurers. When the choices go beyond the cost and drill down into the wordings, how do you assure clients that what you are giving them the best option in the market? How do you know which company has the most comprehensive coverage when you have no access to its wordings? When we present options to our customers, will we have to provide a disclaimer that “better coverage may be out there, but this proposal is the best I can do?”

Some may say that forcing statutory wording upon the insurers is unfair and that a residual risk-sharing facility could allow those companies that prefer an alternative wording to cede their risks into a pool. Australia and England follow this practice to provide an even playing field in the market for these coverages. In these jurisdictions, the capital necessary to backstop these losses comes from government guarantees that insure neutral charges to the insurers. Strangely enough, the losses in these pools have been manageable and have produced positive cash flow. Stability appears to have some advantages over time.

The efficacy of flood coverage in Alberta will not be tested until the next significant flood event. I, like most observers in our industry, will be watching closely to see if this recent private-corporate response will mitigate the amount of money our governments end up throwing at these losses. Whether the premiums for the coverage produce underwriting surpluses or deficits will also be interesting to see. Time will tell.

As I reflect on the review of yet another “new” overland water endorsement and attempt to determine what makes it better or worse than the other three I’ve looked at, I’ll close this discussion today by once again pointing out that I’m not alone in my continued insistence that consistency is preferable to total confusion. We need more industry leaders calling for an agreeable wording that sets a baseline for overland flood coverage and standardizes the coverage. While supporting the need for consistency, Philip Cook, CEO of Omega Insurance Holdings Inc., suggests another approach to consider—developing catastrophe coverage that would respond to a variety of catastrophic losses.

Municipal Uber Legislation without Industry Backup

Many articles have appeared in the press about the municipal legislation that Edmonton City Council passed to address this new (old) form of ride sharing, and most of them are touting it as the new model for municipalities across the country to address the issue in their locations. The legislation didn’t make everyone happy and was particularly unpopular with the taxi owners and drivers who see this new entrant into the livery business as direct competition to them in their highly regulated and access-regulated marketplace. Still, it was an attempt to find a compromise that addresses the reality that Uber is here to stay, and ignoring it or waiting for it to go away is not likely going to change that. The legislation requires Uber drivers to match the level of insurance protection that is in place for the traditional taxi industry. While the model seems to resolve a number of issues, it unfortunately fails to address the fact that the insurance industry has yet to introduce the new coverage products. So far, I’ve seen one company announce that a new product is coming, but I’ve seen no information yet as to what it will look like or cost, or when it will be actually available. Some companies have tightened their underwriting procedures and included questions that specifically ask if customers are using their vehicles for ride sharing, while others are polling clients on renewal for confirmation of their current use. Meanwhile at the regulatory level, no changes have been made to the SPF 1 in Alberta (or elsewhere) regarding ride sharing of any sort, the SEF 6 has not been modified to allow for Uber-like exposures and rating, and no additional endorsements regarding ride sharing have been created. Under the automobile regulatory regime, any such changes would have to be approved by the Superintendent of Insurance in Alberta for use, and, as far as I am aware, nothing is pending on these.

While the Edmonton municipal authorities have addressed the problem, everything else remains in limbo pending the application of the insurers for new tools and the approval of the regulator for their use. So, despite all the optimistic articles on this topic, nothing has changed so far.

If anyone has anything new to share on this issue, I’d be happy to hear about it.

Mark Prefontaine Seconded

Speaking of the regulator, did you know that our current Superintendent of Insurance, Mark Prefontaine, has taken a new temporary role within the finance ministry? While our government has made no official announcement as yet, the following memo about Mark was posted on the Pension Information page in the Alberta Treasury Board and Finance website:

Effective January 11, 2016, Mark Prefontaine will be taking a one year secondment within Alberta Treasury Board and Finance as Senior Assistant Deputy Minister. Mark will be working closely with the Deputy Minister and will be responsible for  key organizational strategies and will oversee and manage special projects and priorities spanning across government, the department and multiple divisions of Treasury Board and Finance.

Please be advised that Nilam Jetha (see bio) will be the Acting Assistant Deputy Minister of Financial Sector Regulation and Policy (FSRP), and also the Superintendent of Pensions, Insurance, and Financial Institutions. Nilam has been with FSRP for the past two years in a project management capacity, and brings over 25 years of Government of Alberta leadership experience to the role.

I suspect that in due course additional information will be distributed. However, I would have expected/appreciated a more widely spread official government message assuring us all of continued stability in the regulation of our volatile industry. In a memo on February 18, 2016, George Hodgson assured us that IBAA will continue to have a good working relationship with the Superintendent’s office, that he has met with Ms. Jetha, and that Mark will assist her throughout the transition. That message may help quell uncertainty among IBAA members, but the transition affects more than those in the association. Official reassurance from the government that the course of the department will remain steady should be a priority.

In Closing

As I sit here in Playa del Carmen looking out over the pool and the beach, I’m reminded in the top right corner of my computer that the weather in High River is less than 10 degrees off of what we’re enjoying here. The pool is likely cooler though!

We could use some more subscriptions to this blog. The distribution list (while rising) has deteriorated substantially since we made it necessary to get to the website to view it. Please let your staff know that it is still being produced and easily available. Website interaction on any of the issues I’m going on about is also lacking. I’d very much like this blog to initiate a dialogue with several people on some of these points. Come on, folks. Give it a try!

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:  catastrophic risk  E&O  livery business  Mark Prefontaine  Nilam Jetha  overland flood insurance  ride sharing  SPF 1  statutory coverage  Superintendent of Insurance  Uber  Young's Stuff subscription 

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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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