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Summer Storms, GIC Elections, Problems with the Level-3 Licence Exam

Posted By Thom Young, August 12, 2016

The Lazy Days of Summer Are upon Us

We continue to have an exceptionally weird summer here in Alberta. Someone told me that Calgary had more rain in July than Edmonton and that the total amount topped the usual annual precipitation for the city. All I know for certain is that every day in Alberta seems to end with severe weather warnings for many places. While we were in Ponoka at the beginning of July, a tornado formed almost directly over us. It touched down less than two kilometers away, took the roof off a home under construction, and threw a porta-potty into the trees, making quite a mess. Luckily, the amount of damage was negligible. Still, I’m left wondering what could have happened. On the ridge east of Aldersyde where I live, we have watched the severe storms moving from the north west to the south east through Calgary, Okotoks, and High River, soaking our place with large amounts of rain. We’ve seen many funnel clouds, and hail storms are almost routine. Cutting the grass is becoming a full-time job!

The summer storms have produced some catastrophic losses for our industry, and summer is far from over yet. The Fort McMurray fire has been declared the worst insurance disaster in Canadian history, a record previously held by the 1991 Calgary hail storm. This past weekend saw parts of Calgary dealing with wind, hail, and overland water—all in one afternoon. Will we start seeing claims settled under the new “flood” wordings? The response of those who were not offered the coverage and have now suffered an uninsured loss will be interesting. Can any of you enlighten me with examples of any such situations?

Elections for the General Insurance and Life Insurance Councils

If you hold a General or Life insurance license, you should have received an email link to the Election Buddy website for voting. This link is configured uniquely to the email in your AIC profile. If your email address has changed, contact the AIC and have this corrected so you can vote. Voter apathy is a concern, especially given the history of how the election was created. Before the 1990s, the superintendent of insurance would choose agents for the position on the councils. Industry pressure to make the process more representative initiated a change to the process, and we were given the ability to vote for candidates. Ballots were mailed out but yielded extremely poor returns. The electronic voting system has been in use for quite a few years, but the response rate is rarely much above 10%. Please stop what you’re doing, and invest 10 minutes of your busy day by clicking on that link and choosing a candidate to represent your interests in the regulatory process.

Six candidates are running for the two openings on the General Insurance Council. My term has expired and I am running again. If I am successful, I think this will be my last time on the General Insurance council. I am going into my second term, candidates are allowed to serve only on two consecutive 3-year terms, and I am getting close to retirement. Sherif Gemayel, who is an IBAA director, is also running. If you click on each candidate’s name, you can read a brief bio. The entire process of going to the website, reading each bio, and selecting two candidates will take you less than 10 minutes. Do it right now! If you have only 10 minutes, do it rather than read the rest of this essay! If you have a life-insurance licence, you will have received an email for this election between three candidates as well. Roy Jaques is running again and has served the life-insurance licence holders well. Again it takes less than 10 minutes to click the link, review the list, and make a choice. When a regulatory change or review arises that you do not like or have thoughts to share, you can open the conversation with “I voted for you….” You will likely have more influence in the outcome.

If you’ve read this far without voting, let me remind you once again. Go to the email from Election Buddy, make your choice, and then come back to read the rest of this entertaining epistle. It will wait for you!

Don’t you feel better that you did that?

Alberta Level-3 Licence—the Designated Representative for Your Brokerage

Let me apologize to those of you who have no interest in the Level 3 issue. While this discussion might be boring for you, I would appreciate you mentioning to your DR that she or he might be interested in this article.

When a brokerage started up, it used to have to register its name with the AIC. The name was then linked to the brokers working there, and that was pretty much it. The regulations on “holding out” are quite simple. The brokerage advertises itself. The broker employee licences are managed by the DR for the corporation (including the DR). All these staff are bound by the regulations governing all General Insurance agents. Other than the regulations specific to the role of a DR (supervising the activities of sponsored agents and notifying the AIC when an agent is terminated), the rules for market conduct of the brokerage are the same for the agents.

A couple of years ago, a new regulation that required the DR to pass an examination came out of the blue. While it did not specify what had to be tested, the direction from the government to the AIC was clear: DRs are to be tested. No one recalls any industry consultations that implied a need for this testing. DRs in other provinces aren’t tested. I certainly would have had an opinion on this requirement if I’d been asked. I first became aware of the new testing requirements when people started calling me to complain about the difficulty in passing this exam. The pass-rate for the Level 3 exam continues to be ridiculously low. Strangely, most of the people having difficulty with this exam are long-term, experienced brokers. Many of the new people attempting and failing it have demonstrable academic skills, business degrees, and advanced management experience, all of which should have made a reasonable test of their aptitude and the understanding of a DR’s role a breeze. Either the test is not focusing on what these people were studying, they were studying the wrong stuff, or the educators in our business are teaching the wrong material. Regardless of how the change occurred and who is to blame, the problem is serious for our industry. In my role as one of your broker representatives on the General Insurance Council, I have been working very hard to fix it by sitting on the licensing course-curriculum review committee for all three levels of licensing as well as on the equivalency committee.

This spring, we made recommendations to the government to amend the regulations and approve particular equivalencies for Levels 1, 2, and 3 licensing exams. While the process of government approval on this is painfully slow, I have heard that progress is being made to get this implemented. I am not holding my breath for an immediate response, but I am hopeful. We have amended the curriculum of study for both Level 1s and 2 licensing. Level 1 was implemented several months ago, and we have seen some improvement in the pass rate. It is still under 40%, which in my view is unacceptable, but it is steadily improving from the low 20s when we began the process. The General Insurance Council is working with the education stakeholders to help them further understand the curriculum necessary to pass the exam. After each review, the results seem to improve, and we seem to be moving in the right direction: even before the exams changed as a result of the curriculum review three years ago, the pass rate for the Level 1 licence exam was never higher than 48% over all. Individual course providers have had better results than the average. The new Level 2 examinations, based on the revised curriculum, were introduced last month. The initial results from a very small sample show a mid-40% pass rate, and we are hopeful that for Level 2 we have found the balance we were looking for. Time will tell. The Level 3 examination remains the same convoluted and confusing thing it has been since the exams for this level were introduced.

The committee has so far done a lot of work to make the testing of the DR commensurate with the role. As all the technical insurance material is tested in Levels 1 and 2, we have removed it from the course curriculum for Level 3. The requirements for the information necessary to run a business, not relative to the regulations, have been reduced to an appropriate level. However, we have no unanimity on these requirements. Some believe the exam should test a level of proficiency that is beyond the reach of regulations governing our business. I am not in that group.

I believe we should not even need an examination to become a DR. What a DR really needs to know for regulatory obligations is covered in two pages of the regulations. A DR should have a Level 2 licence and have been in the business for two years. The management and organizational material, as well as the insurance technical knowledge, is already tested in the Levels 1 and 2 licences. The role of a DR is not hierarchical either in the gathering or the exercising of expertise. Often in larger brokerages, the DR is an HR function, while in the smaller ones the DR also empties the waste baskets and answers the phones. How do you test for proficiency at the level necessary for a 100-person brokerage or a 3-person brokerage and be fair? How do you permit the smaller brokerages to start up and become established in the usual manner without creating a very challenging barrier with a complicated exam designed for proficiency not needed in a small brokerage? Eliminating the need for an exam is an option, but complicated, because it would involve a change in regulations. The best solution is to make the exam relative to the role of all DRs at the lowest common denominator.
I have strong views about regulations limiting access to our business and will not bore you here with a thousand-word essay on it. I ask you to think about these issues because the AIC is going to send all DRs a survey. The direction of the Level 3 licensing study and testing will be guided by the responses received. I am told the survey will be out in the coming weeks, and I am looking forward to seeing good participation in this process. The relevance of the representative process that results from the voting for members of the councils is often challenged because voter response is so low. When I have dug my heels in on an issue, I have been told that I am not representative of brokers because so few actually participate in the voting process. I certainly hope that each DR will grasp the serious need for input and a positive result on this issue. At least a half dozen smaller brokerages are currently in a holding pattern on the sale and the succession of their businesses due to the difficulty of getting this Level 3 licence in place, particularly in the rural communities. This problem needs to be fixed now.

Those who is not Level 3 licence holders will not get this survey but may well have some ideas on this topic that are important. Do you think you might want to own a brokerage some day? If so, you will need to get a Level 3 licence. Send your opinions directly, and I will make sure they are reviewed by the General Insurance Council. (I will meet with members of the council in person if I am successful in getting elected to another term.)

In Closing

That’s it for this issue. We’re off to points west for a couple of weeks, hopefully to get away from the never-ending rain and thunder storms. I’ll have to get some heavy equipment in to cut the grass when I get back!

If you haven’t voted yet, please do it now!

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:  elections  flood  General Insurance Council  hail  Licensing Level 3  tornado 

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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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