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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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IBAA Convention—Highlights and Benefits

Posted By Thom Young, May 30, 2016

Another Convention Come and Gone

Attending your industry association’s convention is one of the most important things you can do to ensure the success of your own enterprise. While this rule applies to those who pursue a vocation in any industry, it is especially true in the General insurance business. As we compete for the same customers, the ensuing competitive environment provides the public with a better outcome on price and service. Knowing who your competition is and what they’re doing is a very important part of the process and, in a complicated business such as ours, being aware of what’s new and developing is critical to remaining competitive.

Attending convention lets you study the issues affecting your market to determine why you’re losing clients to someone else. It also provides information about ways to react to changing markets and conditions ahead of your competitors—and we all know that change in our industry is inevitable. Peeking into the future at a convention helps you prepare for it. No matter what industry publications you follow, nothing gives you a better firsthand look at what’s available than walking around the industry trade show. Anyone with a solution for your problems is there vying for your business—insurers, Broker Management System suppliers, claims-response companies, adjusters, contractors, special-risk markets, education suppliers, human-resource companies, you name it. With their competitors nearby, you can quickly and easily compare their products and prices. Talk about getting a competitive advantage!

Beyond the trade show, the convention offers many opportunities for networking and information gathering. Seminars offer insights into the evolution of the business, with the added bonus of obtaining those much needed Continuing Education credits just before your licenses are due for renewal. Even better are the meetings and the gatherings hosted by the companies you deal with (or don’t) in informal, comfortable settings. Getting one-on-one time with the heads of Canadian insurance companies provides interesting insights into the problems our business is facing and how to mitigate them. Advance notice on the roll out of new products or, even more important, changes to existing ones is often timed to coincide with these gatherings so the senior managers can gauge the enthusiasm for their planned changes and adjust them if necessary prior to release. You can’t put a price on this investment of time and resources.

If you haven’t attended convention because you’re not sure that there’s a cost benefit to the time or the money spent, I think you’re making a mistake. If you can’t be away for the whole 3+ days, attend at least a day or so. IBAA provides attractive pricing for these options. If you’re interested in finding out what your association is doing for you and the direction its advocacy group is leaning into the political winds, the Annual General Meeting is a must. It's free for all members to attend and to ask questions. You might also be so inclined to get further involved in the process and put your name forward when the calls for nomination are sent from local councils and the IBAA executive and board of directors. If you get involved as a regional representative or board member, you could actually have a say in the direction of the association and make the policy. Your ideas are as good as anyone’s, so get them out there.

Did you know that this year was Larry Heron’s 53rd time attending the AGM? He was president of the organization in 1981 (Insurance West). When his record of attendance was announced, someone poked me and jokingly asked how many more years until I catch up with him. I had never really given any thought to the number of times I’d attended. Working backwards with a failing memory, I believe this year was my 27th consecutive AGM. I credit a lot of my success in this business with my involvement in IBAA. From the contacts I’ve made to the help I’ve received with issues throughout the years, any costs I’ve incurred have been repaid many times over. I certainly recommend that you attend as often as you can.

For those of you who didn’t attend the convention, one of the high points was (and frequently is) the CEO panel. A group of willing insurer CEOs assembles to express their views on current events, postulate on the challenges, and opine on the future of the insurance industry. Here are my takeaway from the discussions:

  • This year, eight CEO attended: Greg Somerville from Aviva, Karen Gavan from Economical, Jean-François Blais from Intact, Gene Paulsen from Peace Hills, Bob Tisdale from Pembridge, Rowan Saunders from RSA, Duane Sanders from Travelers, and Jeff Goy from Wawanesa.  Front and centre was the Fort McMurray wildfire, evacuation, and tremendous losses the people have suffered. All company representatives discussed the need to help these folks through the claims process as quickly as reasonably possible.
  • The consensus at the AGM on supporting market distribution through digital access was resoundingly echoed by the CEOs. All the insurers are moving in this direction. While the digital market could be a disrupter, we’ve been dealing with it for a decade now. Further, making the product easier to buy does not change the dynamics of customer service formulae. The real test for service in our business arises when the client has a loss. As yet, no digital interface successfully deals with the needs of clients when they have a claim. Personal contact is still critical to keeping the client happy.
  • We now have a UBI product available through Pembridge. Others are soon to follow.
  • Several panellists spoke to the need for brokers to “catch up” on the tech side of things.
  • As a broker who remains frustrated with the inability of the companies to get their database systems to allow a Single Entry Multiple Company Interface on any line of business, it amuses me when insurers say brokers are behind on technology. For 20 years we’ve heard excuses such as security, connectivity, and legacy systems, yet I believe a cooperative and workable solution to this problem doesn’t exist because the companies see database management as a competitive advantage, rather than as a tool of process. The Canadian Banking system moves much more data than insurance companies do over a network built cooperatively through the Canadian Payment association. The banking system not only provides a secure platform for customers and members but also meets the need for customization to each bank’s processes. You can use your bank card at any ATM, regardless of provider. In the insurance world, we’re still arguing about which line numbers of the database have what data in them and cannot come up with a consistent way of sending and receiving data. Please don’t tell brokers they need to catch up on technology when insurers cannot provide a viable digital solution. “If you build it, we will come!”
  • Quite a bit of discussion focused on the continued need to both prevent and mitigate claims through all means possible. Referencing Fort McMurray and other fire losses that may become more serious due to climate change, separating communities from the boreal forests in Canadian communities should be a priority. Enhancing building codes and introducing bylaws that require all roofs to be constructed of non-combustible material was suggested as a responsible approach, much like similar undertakings recommended to mitigate flood losses.

I always enjoy the enlightening and informative perspectives of the CEOs who agree to participate. Where I have unanswered questions at these events, I am often fortunate enough to be able to ask the individuals directly at the many social functions at convention (although I don’t always get an answer). Had I had the opportunity to ask the panel directly, I would have questioned the wisdom of competing with their own distribution channels under the same name. A separate entity creates a level playing field for broker competition. Oh, well, I know the question has been asked and answered!

In Closing

I enjoyed seeing many old friends and colleagues in Banff last week and was encouraged to hear that the work I put into this blog is appreciated. Even more inspiring, I heard from many new people who look forward to this little essay and value the perspectives I try to present. Of course, they do not agree with everything I write, but stimulating discussion and debate on issues that affect us is really the aim of an editorial opinion, isn’t it? While I don’t often get accused of being timid with the issues, I go to great lengths to be respectful and fair to both sides of the debate. That perspective is often a challenge, particularly when I find myself passionate about a topic. So far, reader support seems to indicate that I am meeting that goal.

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:  CEO panel  Fort McMurray  IBAA board involvement  IBAA convention  Single Entry Multiple Company Interface  technology  wildfire 

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