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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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Flood Coverage, Broker-Direct Balance, Stampede Breakfast, IBAC (CAIB) Volunteers, Orlando Massacre

Posted By Thom Young, June 21, 2016

Flood Coverage

In my discussion of federal political advocacy last issue, I mentioned that the politicians all seem to be very aware of and interested in our industry’s response to the need for flood coverage. I’m always quick to mention the terms “overland water” and “sewer backup” in the discussion because people need to know that the changing dynamics of these coverages seem to be merging them into one. In order to drive flood coverage towards premium adequacy, you can’t have one without the other in some markets. It’s a saleable perspective: if you are in an area where you should be concerned about a sewer backup, you should be also concerned about overland water. Most people will agree that the proximate cause of most sewer backup is actually overland water. Combining the two coverages eliminates “the chicken and the egg” claims discussion that generates public confusion and protest when one side of the street is covered. This random coverage is an ongoing issue because many companies are still not providing any coverage for “overland water” perils and are offering only the old “sewer backup” endorsement. This competing coverage is now both a public issue and a broker E&O nightmare.

The failure of the insurers to develop a standard of coverage that is set out in common wording and is used by all companies referencing this protection will likely be a major issue for our business. No company or insurance adviser is immune from the confusion that will arise with the next catastrophic loss in a major urban centre. If we as brokers are advising clients to take coverage with one company or another but are confused by the variances in the wording and the special limits for “overland water” or “flood” coverage, we will not be able to describe the differences sufficiently for the client to understand the coverage and make an informed choice. Consequently, we will be held responsible for any shortfall in the coverage that causes the client an uninsured loss. Of course, the insurers will suffer the same challenges and may even be found liable to the public for failure to set a standard of coverage, but any liability charges would be years after the headlines sullying our reputations have long passed.

The political perspective on disaster relief programs may further jeopardize public good will. Some provincial and federal politicians have suggested that the programs in place for uninsured losses from flood can now be reviewed and the budgets for them limited so that these funds can be freed up for other needed programs. Well, the reduction may not be that simple. As most brokers will tell you, “overland water” coverage is excluded for those living within 300 meters of running water and the new forms won’t likely even cover “sewer backup” for these folks. When these exclusions become apparent after the next weird weather event, don’t be surprised if you’re asked to explain what happened. I can’t help but note that, as I write, the community of Dawson Creek is suffering from just this kind of thing. I know everyone’s tired of hearing me quip that we are just three days of rain away from a repeat of the 2013 flooding that devastated Calgary and High River. I recently toured some of the work underway to mitigate the Highwood River’s potential to create havoc again. While mitigation is happening, we’re far from prepared to deal with the kind of flood we saw just three years ago.

Nature Abhors a Vacuum—Eventually Everything Finds a Balance

The issue of “broker” companies entering into the direct-writing business is always foremost in discussions between brokers. Of particular concern is the manner in which the competition takes place and the use of the data accumulated from the customers for further sales and marketing by both the brokers and the company. The other main concern remains the name by which the competition takes place. It should be clear to anyone that competing with your brokers by using the same name as that used to write the business the broker sends the company is seen as a breach of trust, a violation of the exclusivity anticipated in the contract between the broker and the company and just downright wrong! To further belabour the point, the public is also very confused when they see the same name on the insurance contract that is on the broker’s wall and advertising. They expect to receive service and advice from the broker. Well, this confusion will of course sort itself out, eventually. If a “broker” company wants to be a “direct writer” under the same name as it is a “broker” company, then it will damage the relationship. Their support from brokers may wane to their detriment. All things being equal, I believe they will either have to commit fully to participating in the marketplace one way or the other.

With more competition in the direct-writing market, the direct writers may well be gearing up to hold their market share by offering their products at the same price through the brokerage market. According to Canadian Underwriter, “CAA Insurance Company announced on Thursday (June 16, 2016) that it has appointed 17 ‘well-known and experienced brokerage firms across Ontario’ to provide its customers with more choice.”

This is quite a move for an affinity-group insurance company. Would a membership in the Automobile Association come as part and parcel with an insurance application? I wonder as well if the agent will get a fee for this part of the transaction. Auto clubs have affected the insurance industry before. The roadside assistance endorsement SEF 35 was created to provide a direct competitive response by the insurance industry to the entry of automobile clubs into the automobile insurance markets. An actual Auto Club package that provided some of the auto club services such as mapping and hotel planning used to be sold by brokers for one market. Now most that has gone by the wayside—no need to spend an hour talking about a road trip with someone when you can simply Google a route (complete with turning directions) and immediately get a whole bunch of information on all the amenities you might need on your trip. As in most of the travel industry, technology has taken over the heavy lifting, leaving little money for the service providers, but the affinity group of auto-club members continues to survive. In Alberta, their operations seem quite healthy, and they compete actively in the insurance and travel marketplace. I wonder if they will be appointing Alberta brokers to represent them. If not, I’m pretty sure they’ll be watching the success of the Ontario efforts closely. I know I will be.

Stampede Breakfast in Calgary, Wednesday, July 13, 7:00–11:00 a.m.

9705 Horton Rd. SW, CGY, Southland parking lotCome and join around 1500 of our closest friends for a regular old-fashioned western whoop up. There’ll be lots to eat, world famous chuck-wagon drivers, line dancers, and a live band. It’s our 23rd time, and I think we’re starting to get it right. This has turned into an “all industry” event that you don’t want to miss. It starts early enough that even the 15 people in Calgary who do any work that week can get in on the fun before they get to the office.  

IBAC Volunteer Work—CAIB Review

I’m working my way through the chapters of CAIB 2 covering business interruption and crime coverage and reviewing their content for relevancy and accuracy in our ever-changing marketplace. Reacquainting myself with the material is interesting: I find I learn more by teaching than I ever did by studying. As I’m plodding along with this project, the thought crossed my mind that those of you far more in tune with the current market than I am might have helpful contributions to these topics. If you, do I’d be happy to include them in my overview of the suggested changes to the instruction program. For example, we’ve come a long way from the old 3D wording as the basics for crime coverage, but all the new package stuff just builds on the old foundation. I wonder if tossing out the basics might hinder comprehension of the reasons the new package works the way it does. Many of you are far wiser on this topic than I, so I’d welcome your ideas. The email address below is my personal one. Feel free to drop me a note.

In Closing

Real life is stranger than fiction—watching the news these days sure hammers that saying home. The events unfolding to the south of us make me pause and reflect. The aberration that occurred in Orlando leaves me simply overwhelmed with grief for the people killed and injured and their families. I can make no comment that makes any sense of this. It is just so sad. Something has to be done. While I can hope for change, the lack of it after the massacre at Sandy Hook leaves me with a fatalistic view, believing that it will continue to get worse before it gets better. Pray I’m wrong!

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  CAA  CAIB  competition  direct writer channel  disaster relief  Hill Day  insurance industry reputation  mitigation  Orlando massacre  overland flood insurance  sewer backup insurance  Stampede breakfast 

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