Canadian Underwriter Dec/Jan 2020

December 2020/January 2021

YOUR GUIDE TO INSURANCE SUCCESS. SINCE 1934

EXECUTIVE OUTLOOK 2021 WHAT A POST-COVID P&C INDUSTRY WILL LOOK LIKE

BOGEYMAN FOR BROKERS Why the economic impact of COVID is keeping brokers awake at night

Clint Smith

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INTERVIEW

THE PANDEMIC’S EFFECT ON WESTERN CANADIAN BROKERS

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A MUST-HAVE SKILL SET FOR TODAY’S BROKER

LESSONS FROM HOME TO TAKE TO THE OFFICE

HOW TO HANDLE ADDITIONAL INSUREDS WITHOUT DISPUTE

All pros sarah tung, fcip AVP — Senior Casualty Underwriter

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CONTENTS Volume 88, No. 12 (December 2020 | January 2021) YOUR GUIDE TO INSURANCE SUCCESS. SINCE 1934

CANADIANUNDERWRITER.CA

F EAT U R E S

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Outlook 2021: Insurer executives Executives of Canada’s leading P&C insurance companies paint a picture of what the industry will look like in a post-pandemic world

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OUTLOOK 2021: BROKER EXECUTIVES COVID-19 has turned the brokers’ traditional in-person approach upside-down. How things will change for brokerages after the pandemic is over

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ECONOMIC UNCERTAINTY The second wave of the novel coronavirus is upon us, and that has everyone anxious. But brokers are also worried about the economic fallout of the pandemic. Here’s why...

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TRUSTED ADVISOR, PART 4 Brokers are wearing a new hat when it comes to the value-added services they provide clients. The colour is “risk advisor red”

Clint Smith, Chief Operating Officer, Andrew Agencies Ltd.

canadianunderwriter.ca | December 2020/January 2021

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We click.

The future is digital. Let’s explore it together. Find out more about our specialty insurance and surety solutions.

Trisura Guarantee Insurance Company is a Canadian owned and operated Property and Casualty insurance company specializing in niche insurance and surety products. We are a proud supporter of the Insurance Brokers Association of Canada. www.trisura.com

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Twitter: @cdnunderwriter

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15 FROM THE EDITOR

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18 Clint Smith

Deal or No Deal?

PERSPECTIVES 9 Readers respond to our recent stories on pandemic business interruption coverage, condo deductibles, the war for talent, and more…

DECLARATIONS 12 Broker compensation What recent survey results tell us about an ongoing shift in the broker compensation model

INTERVIEW

The COO of Andrew Agencies reveals the brokerage’s acquisition strategy and how COVID-19 has affected western Canadian brokers

50 Live events

IN EVERY ISSUE

What insurance professionals can do to make sure the return to live events during COVID doesn’t turn into a claims nightmare

46 Lessons learned Brokers quickly pivoted when they had to work from home. What they must remember from their success when they return to their offices

16 NEW OFFERS 17 BIG MOVES 17 SUMMARY

52 Alberta Cats

HANDBOOK

13 BY THE NUMBERS

Why Alberta has been snakebit by some of Canada’s worst natural disasters and what that means for insuring the region going forward

44 DEAL TRACKER

PEER TO PEER 54 Neutral view

RECOVERY 15 Social Inflation

48 Additional insureds

It’s the biggest emerging concern for P&C leaders, and they cast much of the blame on litigation funding

What your clients should watch for when they sign agreements that add another party as an additional insured

Consolidation can introduce the appearance of a conflict of interest. Why forensic engineers may be the antidote

canadianunderwriter.ca | December 2020/January 2021

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been rated A++ for the 12th year in a row.

Visit hsb.ca HSB Canada

Š 2020 The Boiler Inspection and Insurance Company of Canada (HSB Canada). All rights reserved.

FROM THE EDITOR MANAGING DIRECTOR

Sandra Parente sandra@canadianunderwriter.ca 416-510-5114 EDITOR-IN-CHIEF

David Gambrill david@canadianunderwriter.ca (416) 510-6793 MANAGING EDITOR

Adam Malik adam@newcom.ca ASSOCIATE EDITOR

Greg Meckbach gmeckbach@canadianunderwriter.ca

Deal or No Deal?

ONLINE EDITOR

Jason Contant jcontant@canadianunderwriter.ca ART DIRECTOR

Ellie Robinson

Intact makes a splash with its intention to buy not only RSA Canada, but its parent company in Europe

ADVERTISING AND MARKETING CONSULTANT

Pam Chodda Young pam@newcom.ca (416) 510-5122 PRODUCTION MANAGER

Karen Samuels PRINT PRODUCTION MANAGER

Lilianna Kantor NEWCOM MEDIA INC. CHAIRMAN AND FOUNDER

Jim Glionna PRESIDENT

Joe Glionna VP, SALES

Melissa Summerfield CHIEF FINANCIAL OFFICER

Trish Saltys, CA, CPA DIRECTOR OF CIRCULATION

Pat Glionna

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5353 Dundas Street West, Suite 400, Toronto, Ontario M9B 6H8 Tel: (416) 614-2200 Fax: (416) 614-8861 Canadian Underwriter is published twelve times yearly by NEWCOM MEDIA INC. All rights reserved. Printed in Canada. The contents of this publication may not be reproduced or transmitted in any form, either in part or in full, including photocopying and recording, without the written consent of the copyright owner. Nor may any part of this publication be stored in a retrieval system of any nature without prior written consent. © Since 1934, Canadian Underwriter has been the voice of Canada’s insurance industry - a monthly* magazine providing the highest quality and most relevant news and insight to insurance professionals from all segments of Canada’s property and casualty insurance market. The magazine is delivered on a direct-request circulation basis to nearly 18,000 senior decision makers nationally, including insurance brokers, risk managers, insurance and reinsurance company personnel, claims managers and adjusters. Since its beginnings, Canadian Underwriter has been a link between all segments of the insurance industry, providing insurance professionals with award-winning coverage of industry issues, trends, news, personalities and events - written by Canada’s leading insurance journalists. *The 2020 publishing schedule was temporarily adjusted due to COVID-19 resulting in 9 issues, including 3 double issues. Subscription Rates: 2020 Canada 1 Year $51.95 plus applicable taxes 2 Years $75.95 plus applicable taxes Single copies $10 plus applicable taxes, except $49 plus applicable taxes for July issue featuring annual Statistical Guide. Elsewhere 1 Year $71.95 Subscription Inquiries/Customer Service Pat Glionna (416) 614-2200 pat@newcom.ca GST Registration number 890939689RT0001 Second Class Mail Registration Number: 08840 Publications Mail Agreement #40063170

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ot long ago, before COVID-19 was a global pandemic, Intact Financial Corporation’s CEO Charles Brindamour hinted in February 2020 that Intact was on the prowl for an acquisition. At the time, Brindamour was commenting on the company’s 2019 Q4 earnings in a conference call. “Quite frankly our objective is to get back to mid-teens ROE,” Brindamour said of the firm’s Canadian P&C operations. “Once we feel we are there, this is where you capture growth and try to maximize margins where you can, depending on the market.” Fast forward to 2020 Q3. During the COVID-19 pandemic, the P&C industry as a whole has been labouring to make a 5% ROE, while Intact reported an operating ROE of 16.9%. That’s in the mid-teens, so you know what that means — growth. And now Canada’s Number 1 insurer is offering to buy the parent company of the country’s Number 7 insurer, RSA Canada. The proposed $12-billion deal would see Intact and the Danish P&C firm Tryg buy RSA plc. If the regulators approve it, the deal would be the biggest deal in Canada since Desjardins bought State Farm’s Canadian operations in 2014. Such a deal is projected to increase Intact’s annual premiums written by approximately 30%, from $10 billion to $13 billion (Intact’s current market share is just north of 15%). The next runner-up in the food chain, Desjardins, reported $5.2 billion in net premiums written in 2019, representing a 9.15% market share at the time. At first blush, the Intact-RSA deal doesn’t appear to be big enough to engage Canada’s market watchdog, the Competition Bureau of Canada, which takes an interest in cases if market share is in excess of 35%. One big question for Canadian brokers right now is whether this deal erodes consumer choice in a market in which capacity is already scarce. On this point, brokers’ reviews have been mixed. Many believe there is more room for consolidation within Canada. Others point out that the deal will have different implications across the country, with market consolidation being more of a concern in some regions than others. Time will tell what the true impact of the deal will be. But expect more consolidation from others in response to the biggest fish getting bigger.

Return undeliverable Canadian addresses to: Circulation Dept. Canadian Underwriter 5353 Dundas Street West, Suite 400, Toronto, Ontario M9B 6H8 Tel: (416) 614-2200 ISSN Print: 0008-525 ISSN Digital: 1923-34

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What this Vancouver plaintiff’s lawyer says about pandemic business interruption coverage October 27 The story: Consumers with an all-risk or all-perils policy should be covered for business interruption losses, Vancouver-based personal injury lawyer Tony Vecchio says.

Eric says:

canadianunderwriter

How COVID made it easier to win the ‘war for talent’ October 28 The story: The pandemic might actually help with talent acquisition in Canada by allowing recruiters to leverage technology to tap into a larger, global talent pool, a recent blog said.

This guy is so cute. Obviously he didn’t spend a second looking at wordings. He “feels” it should be covered. So, therefore, it is. He fits right into the current generation, though.

Frank Cain says: As often as I have said it in these pages, I will say it again: Insurance for a pandemic is not insurance, since it flies in the face of the premiums of many paying the claims of the few. That’s how insurance works and survives. But if we’re going to deal with semantics, then let’s drop the term “all-around” from the English language if we’re going to quibble with “all-risk.” Before the pandemic, “all-risk” was obviously acceptable for use in general insurance practice as an expression, and not as a cumulative function (any more than “all-around” is), since it was left to the precise wording of the conditions that qualify loss. Stop looking for ways to make insurance something it isn’t. There’s enough noise already with the Babylonians spinning around in their graves.

Eric Lapenis says: Every time I see the term “all-risk” used in a lease or insurance requirement, I reply with advice that the policy form is “broad form” (if applicable). We need to stop using outdated terms like “all-risk” and “boiler and machinery,” since these aren’t accurate descriptions of the policy forms or coverages.

This decision on a $5,000 deductible could motivate condo corporations to change their bylaws October 28 The story: If strata (condo) corporations wish to charge back deductibles to unit owners, they need to change bylaw wordings to eliminate language that requires the corporations to prove unit owners were negligent in a damage loss, a B.C. Civil Resolution Tribunal ruling has found.

Eric Lapenis says: Well the good news is this wording already in exists in the vast majority of strata buildings in B.C. with over six units. They need to change it back to a situation where negligence is a requirement. Buildings need to be forced to replace plumbing, install braided dishwashing lines, install water sensors and other mitigation actions to reduce water damage. We can’t continue assessing the losses to condominium owners’ policies or those costs will continue to rise as well.

TBA says: Any condo corporation in B.C. that changes the standard bylaws of the Strata Property Act wording to “negligence” is ridiculous. The act is plain and simple if just left alone. The bylaws/ act states the corporation can sue for the “common expense” deductible if the unit owner is “responsible” — this is the key word. Unfortunately, on advice of the legal systems, corps are told to change their wording, causing the current mess we are in right now with insurance in B.C. and, really, all over Canada.

Photos: ©iStock.com

Phil Dynes says: A very interesting read, as very counter to the traditional “downtown” view of the world.

Why this client can only recover $50,000 on a $2.7-million commercial crime claim October 16 The story: A Quebec court ruled that an electronics distributor, which lost almost $2.7 million in a scam in which accounts payable staff were duped by cybercriminals, cannot claim under policy wording covering funds transfer fraud.

ClearPay says: This can happen to anyone! Stay vigilant. Brokers and carriers using our service do not have to exchange account numbers — a key preventative measure to fraud.

canadianunderwriter.ca | December 2020/January 2021

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TAKING CARE OF BUSINESS IN SPECIALTY LINES How Economical Insurance is giving Commercial Insurance brokers and customers more choice and confidence After completing a robust financial turnaround over the last couple of years, Fabian Richenberger, Executive Vice-President, Commercial Insurance has been leading the charge for Economical and has created the foundation to become a market leading commercial insurer. On a daily basis, the Economical team strives to improve both the broker and customer experience by implementing modern methodologies but also by focusing on ‘traditional service and responsiveness’. They are seeing success and the proof has been in the numbers — in Q3 of 2020, Commercial Insurance at Economical achieved underwriting profitability again. This success has been driven by strong and disciplined underwriting alongside broad-based broker relationships. Through comprehensive investments, the Economical commercial team is finding ways to support a simpler, straightforward experience for business customers through innovations in service delivery with the goal of achieving a market-leading position, Richenberger emphasized: “As an example, we’re rapidly growing in specialty lines and building a market-leading team with deep expertise and new product offerings which are effectively growing and diversifying our business with our key broker partners.” These expanding capabilities reflect an exciting progression in the overall transformation Economical

has been undertaking for a few years, and specifically for the evolution of its commercial business. The Specialty Lines department is led by Obaid Rahman, VP Corporate Underwriting & Specialty Lines, with the following established leaders building new specialty lines products: • Kevin Perry, VP, Surety, who joined the company in 2020 and is rapidly expanding surety bond capabilities • Dan Camillo, AVP, Specialty Energy & Property, who launched this new line in 2019 • Glenn Woodard, AVP Professional Liability, who is expanding our capabilities in Directors & Officers (D&O) and Errors and Emissions (E&O) Especially through these uncertain times, Economical is well equipped to make thoughtful and strategic moves within Commercial Insurance, to provide even more value and product capability to support its broker partners and customers alike. Additionally, Economical recently announced a new and significant relationship with Uber in Canada, demonstrating its growing abilities and ambition. “The new relationship with Uber is part of our wider strategy to expand our capabilities, increasing the scope of our book of business and complementing our regular P&C business with new specialty lines products,” said Richenberger. “We’ve been working to create a balanced and profitable portfolio and focusing on driving growth with our broker partners through increasing sophistication in our pricing and underwriting capabilities.”

“I’m proud of the advancements our commercial teams have made over the last three years and I am grateful for the tremendous support we have been receiving from our broker partners. We’re also excited about what’s ahead of us as we drive to transform into a top commercial market, while we prepare to become a public company. As we continue to pursue innovation in our business, we pair deep insurance industry expertise with partnerships in technology that should create an exceptional experience for our brokers and business customers.”

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PROPERTY | AUTO | BUSINESS Economical Insurance includes the following companies: Economical Mutual Insurance Company, Family Insurance Solutions Inc., Sonnet Insurance Company, Petline Insurance Company. ©2020 Economical Insurance. All Economical intellectual property, including but not limited to Economical® and Vyne™ related trademarks, names, and logos are the property of Economical Mutual Insurance Company and are registered and/or used in Canada. All other intellectual property is the property of their respective owners.

declarations Post-pandemic Growth p.13 l Social Inflation p.15 l New Offers p.16

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HIGHLIGHTS

COMPENSATION

The shift in how brokers are paid Compensation models based on performance continue to rise in popularity. A look at what some brokerages are doing and why…

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OVID-19 has wreaked havoc on the Canadian economy in general, but it doesn’t seem to have made a serious dent in brokers’ compensation. Brokers report that, overall, their performance-based compensation models have worked and adapted well to the ongoing pandemic. According to Canadian Underwriter’s 2020 National Broker Survey, principals have increasingly turned to performance-based compensation to improve brokers’ performance over the past couple years — up 20% from 2018 to 2020.

CAPTIVE TREND | NOV 16 Interest in captives naturally increases as capacity dwindles during a hard market, but now even mid-market or smaller organizations are considering captives as an alternate way to transfer risk, panellists of a Canadian Underwriter webinar observed. 12

December 2020/January 2021 | Canadian Underwriter

B Y J A S O N C O N T A N T, Online Editor

Of the more than 80 brokerage principals surveyed this past summer, when the pandemic was still in its early stages, 71% reported performance-based compensation had been either “beneficial” or “highly beneficial” over the past two years in improving the performance of their brokers. This is the third straight year that interest in performance-based compensation has increased. In the 2018 National Broker Survey, only half (51%) of broker principals ranked performance-based compensation as a best practice, rating

it between eight and 10 out of 10. Last year, the number rose to 63%. Canadian Underwriter’s national broker surveys don’t define performance-based compensation. On one end of the spectrum, a 100% commission-based model means that a broker’s income is directly reflective of his or her sales output; on the other end is a fully-salaried model, where a producer is paid an annual salary with no commission. In between are hybrid compensation models, which include a base salary and commissions. Alberta-based brokerage Surex oper-

ONTARIO WINDSTORM | NOV 16 Claims adjusters are monitoring if damage caused by an Ontario windstorm will meet the $25-million threshold of a natural catastrophe, although early indications are that it won’t be as severe as the $600-million windstorm that hit the province in 2018.

Photos: iStock.com

DECLARATIONS ates on a 100% commission structure for its team. Ryan Kirk, Surex’s vice president of distribution for eastern Canada, said that the COVID-19 pandemic hasn’t “really had a significant effect in a negative way” on the brokerage’s compensation structure. Part of the brokers’ commissions at Surex are based on renewals, so there have been cancellations due to many clients not being able to make payments due to a job loss or reduced hours, for example. However, because Surex is a digital brokerage, “we’ve actually seen an increase in the amount of new business that we have received over the past eight months,” Kirk reported, as standard bricks-and-mortar brokerages are not operating as normal. “Though our brokers may have seen a bit of an effect [with] the cancellation of clients, we’ve actually seen a wave of increase in new client business as well,” Kirk said. “It’s kind of evened itself out. “It goes two ways. We always want to make sure we do what we can for our brokers — and again, they’ve not taken a hit — but we do sympathize with our clients quite a lot based on a lot of the calls we’ve had to take during the last eight months.” In line with the findings in the 2020 National Broker Survey, Kirk said Surex has found that when interviewing candidates for broker jobs, “you are hearing more about people coming from brokerages where…more performance-based compensation is being offered than it has in the past.” For Adam Mitchell, president of Whitby, Ont.-based Mitchell & Whale Insurance Brokers Ltd., he hasn’t had to change or modify commission rates because of the pandemic. “Our model worked well and adapted well [to the COVID-19 situation]; I would say our changes are more because

FIRE FOLLOWING | NOV 13 Fire following a severe earthquake in the Vancouver area could cause more than $10 billion in damage, an ICLR study found. It calls for the municipality to establish alternative sources of water supply to fight anticipated fires arising from the quake.

Photos: iStock.com

BY THE NUMBERS

Post-pandemic growth Commenting on the economic impact of the global COVID-19 pandemic, Swiss Re Institute said global insurance markets “have withstood this year’s recession better than we initially expected.” In a recent sigma study, Swiss Re presented its forecast for the North American P&C insurance market next year as follows:

FINANCIAL PROJECTIONS

North American P&C Market Premium Growth*

Profitability: ROE Average

1.4%

2.7%

5.3%

6.6%

2020

2021-22

2020

2021-22

Profitability: Underwriting Results**

Profitability: Investment Results**

1.5%

1.0%

6.7%

9.0%

2020

2021-22

2020

2021-22

* Real growth, compound annual growth rate ** As a percentage of net premiums earned. Encompasses property, casualty, and also health insurance

we are growing and maturing as a company,” Mitchell said. Mitchell was asked how the pandemic has changed brokers’ compensation packages, if at all. “This has pushed us to be more transparent and advance a report card for most every position in the company,” he responded. “It was important to me, during COVID more than ever, that everyone know how they are

doing and [have] a path towards making more via raise, bonus, commission or other [compensation method].” Mitchell said the brokerage is on a path, a “multi-year journey,” to create the best place to work in the industry. “Compensation is a huge part of this,” he said. “If people can join a growing company, a winning team, have a good time and make more, why not?”

CONDO CREEP | NOV 13 The hard market in commercial property coverage for condo corporations is now affecting individual condo and strata unit owners, LowestRates.ca reports, with 16% increases for Alberta and B.C. strata unit owners, and a 3% increase in Ontario.

canadianunderwriter.ca | December 2020/January 2021

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GROWING EXPERTISE

CONTACT US

Civil / Structural

Infrastructure

Construction

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Materials

Cranes & Aerial Lifts

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Electric Power and Machinery

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Chemical

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1-800-527-0168 (Toll Free) 416-917-4141 (Main) contact@haagcanada.ca haagcanada.ca

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DECLARATIONS

EMERGING RISKS

Taming social inflation Social inflation essentially describes insurers' increasing legal costs. Why insurers are pinning this primarily on the rise of litigation funding B Y A D A M M A L I K , Managing Editor

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roperty and casualty insurance executives are waving red flags about litigation funding, which they believe is the primary driver for the biggest emerging risk they’re facing — social inflation. “I would bold and underline that,” Matt Wolfe, president of Aon Reinsurance Solutions Canada, said during an Insurance Institute of Ontario webinar in September. “[Social inflation] is, I think, the Number 1 topic of discussion, typically in the U.S. insurance market.” Social inflation describes the rise of insurance claims costs because of increased legal costs. Litigation is increasingly expensive for a variety of reasons; among them, more litigation,

WINTER TIRE SAFETY | NOV 12

Auto claims frequency appeared to be 6% lower for vehicles with winter tires than those without winter tires, Manitoba’s public auto insurer concluded in a recent study. That translates into 1,152 claims avoided in Manitoba during the winter of 2017-18.

Photos: iStock.com

more plaintiff-friendly judgments, or higher jury awards. Wolfe uses the example of an auto insurance loss that used to settle for $2 million now settles for upwards of $8 million. “Clearly, that is going to grow here, and that poses some unique challenges to settling cases early and, in my view, effectively for the customer,” said Andrew Steen, president of Berkley Canada, during an October Insurance Institute of Ontario webinar. There is no general consensus as to why there has been such a rise in social inflation. Wolfe hypothesized that it could be younger generations more willing to punish businesses and insur-

ers. “We don’t necessarily know what it is, but it’s the single-biggest topic of discussion when I sit with very senior reinsurance experts.” Litigation funding is one main driver of social inflation, leaders agree. It’s an arrangement whereby a third-party company (i.e. not the plaintiff’s law firm) agrees to fund all or part of the plaintiff’s costs in a lawsuit. In return, the third party recieves a portion of the win or settlement. If the plaintiff loses, the third party loses its investment. Litigation funding is behind social inflation growth in the U.S. and Australia, said Bernard McNulty, chief agent of Canada for Allianz Global Corporate &

GROWTH TARGET | NOV 10 Intact Financial Corp. is aiming to grow its brokerage subsidiary to a $3-billion-a-year operation, CEO Charles Brindamour told investment banking analysts recently. That's a 50% increase over the $2 billion in premium the brokerage transacted this year. canadianunderwriter.ca | December 2020/January 2021

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NEW OFFERS Specialty. “It’s just starting in Canada, really. It’s just getting off the ground." The advent of litigation firms has expanded settlement amounts, McNulty says. Since litigation firms are getting a larger chunk of the settlements, plaintiffs are asking for larger awards to recoup the costs paid out to litigation funding firms. “That’s a really, really big issue and reinsurers fear that premiums, both on the original insurance premium and on the reinsurance premium, are just not keeping pace with that impact on social inflation,” Wolfe observed. McNulty echoed those concerns for insurers. “We insurers will start to pay higher settlements because of that. And unfortunately that will ultimately be reflected in rate.” Trying to peg what costs are going to be in the future is a difficult challenge, Steen said. “These things will always show up as elevated claims dollars being spent across liability lines of business. Really tough to get a handle on that. But we will continue to see elevated cost as a result of this phenomenon as long as they persist.” Paul Rand, the Canadian chief investment officer for commercial litigation funder Omni Bridgeway, thinks litigation funding has been getting a bad rap from the insurers. Funders are cautious investors, he observes in a recent online piece for Canadian Underwriter. If a case fails, they lose their investment. And so they are focused on meritorious, not frivolous claims. Also, Rand notes, litigation funding promotes access to justice. Be that as it may, McNulty expects to see more complex personal injury cases settled, and not taken to trial, as a means to avoid higher awards and keep commercial premiums in check. “We are very realistic about the value of a case,” McNulty said. “If we can settle a case and can understand the liability and damages before a trial, we’re going to settle that case before trial.”

MARKET WITHDRAWAL | NOV 6

After exiting British Columbia’s auto market, Intact Insurance said it would consider returning to the market only if it is not restricted to offering optional coverages while competing against a government monopoly.

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December 2020/January 2021 | Canadian Underwriter

CAA MYPACE Vendor: CAA Insurance Company Target Audience: Consumers in Atlantic Canada What it Does: Provides pay-as-you go auto insurance to low-mileage drivers

CAA MyPace is now officially available to drivers in Nova Scotia. The pay-as-you-go auto insurance program became available to drivers in New Brunswick Dec. 1 and will be available in Prince Edward Island on Feb. 15, 2021. It was first announced in Ontario by CAA Insurance Company in May 2018. The program gives motorists the ability to monitor how much they drive and pay for auto insurance based on that mileage. It mostly benefits people who drive less than 9,000 kilometres per year. CAA MyPace uses a telematics device that is plugged into the vehicle and connects to a mobile app or web portal, allowing motorists to track how much they are driving and pay for auto insurance based on that mileage. Drivers start with a base rate and are charged in 1,000-km increments.

COVID-19 INSURANCE AND ASSISTANCE PLAN Vendor: Allianz Global Assistance Target Audience: Travellers What it Does: Provides up to $1 million in coverage for emergency medical treatment related to COVID-19

Travel insurance provider Allianz Global Assistance has launched its COVID-19 Insurance and Assistance Plan. The plan provides up to $1 million in coverage for emergency medical treatment related to COVID-19, along with additional benefits. It is offered through Allianz Global Assistance’s national distribution network of travel agency and insurance broker partners. COVID-19 Insurance and Assistance Plan offers coverage for international destinations, including the United States, by encouraging travellers to seek medical treatment and follow quarantine protocols if they test positive for COVID-19 while abroad. Allianz Global Assistance’s product is available for purchase on a standalone basis and can be bought to supplement other standard, out-of-country medical plans that may limit coverage for COVID-19. The plan includes coverage for quarantine meals and accommodation, and for insureds who are denied boarding due to a COVID-19 screening.

FLOODFLASH+ Vendor: FloodFlash Target Audience: Large businesses What it Does: Provides a pre-determined payout when flood water reaches the client’s selected trigger depth

FloodFlash, a registered coverholder at Lloyd’s of London, has launched the newest iteration of their commercial flood insurance: FloodFlash+. FloodFlash originally began protecting businesses in the United Kingdom in areas of high risk of flooding. The new FloodFlash+ product provides larger corporations worldwide (including in Canada) parametric flood cover. It is designed to support risks and portfolios with a flood premium between £20,000 (about CDN$34,000) and £1 million (about CDN$1.7 million) annually. FloodFlash provides a pre-agreed payout when flood water reaches the client’s selected trigger depth (using proprietary sensors attached to the insured property). Policies are underwritten by a panel of the largest insurers and reinsurers in the world. FloodFlash+ clients can select multiple sensors for a single site, cover multiple properties in a portfolio under a single policy, or include third-party data from river gauges to provide further validation of their cover.

TIGHTENING OVERSIGHT | NOV 4 Canada’s solvency regulator now requires local branches of foreign companies in Canada to document the flow of funds between the Canadian branch and its home office outside of Canada. Also, the definition of branch managers now extends beyond just chief agents. Photos: iStock.com

DECLARATIONS BIG MOVES

SUMMARY FLOOD INSURANCE

New market entrant in Canada launches with a familiar face Haag Global has picked the former CEO of Giffin Koerth, now known as 30 Forensic Engineering, as its leader

WHO: Chris Giffin CURRENT ROLE: CEO, Haag Canada P&C EXPERIENCE: 32 years PROFILE: Founded Giffin Koerth, now known as 30 Forensic Engineering, and expanded the firm from four engineers to more than 60 engineers, scientists, and experts working in 13 different practice areas of forensic engineering, loss mitigation, and remediation.

Forensic engineer Chris Giffin, former CEO of 30 Forensic Engineering, is heading up the Canadian expansion of Dallas-based Haag Global Inc. As the new CEO of Haag Canada, Giffin is based in Toronto, the company said in September when announcing its expansion. For the property and casualty insurance industry, Haag Canada provides forensic engineering, loss remediation and mitigation, physical damage quantification and appraisal, and risk and project management. Giffin co-founded Giffin Koerth Forensic Engineering in 2002 and led the firm for about 16 years. Giffin Koerth changed its name to 30 Forensic Engineering in 2016, and Giffin sold his interest in 30 Forensic about two years later. Co-founder Ron Koerth sold his interest in 2015. Giffin began his forensic engineering career in 1988. “Chris’ exceptional vision, professionalism, and expertise align perfectly with the quality and integrity that we value so highly as a company,” Haag Global CEO Justin Kestner said in a release.

Christopher Bartlett is the 2020-21 president of the Canadian Independent Adjusters’ Association. He is the supervisor of commercial claims at Crawford & Company (Canada) Inc. He took over as CIAA president in October from John Jones.

Michael Alwyn is Sedgwick’s new president of operations in Canada. Alwyn joined Sedgwick in 2017. Most recently he served as Sedgwick’s chief operating officer for Canada and has more than 30 years of experience in claims adjusting.

PANDEMIC PREMIUM | NOV 2 Global P&C insurers would need to collect business interruption policy premiums for 150 years to make up for projected global pandemic-related losses of more than US$4 trillion in 2020, the Geneva Association found in a recent study. Photos: iStock.com

Commercial insurer FM Global has promoted James P. O’Brien to lead its new Canada and specialty industries division. O’Brien has worked for Rhode Island-based FM Global since 1989. He is now senior vice president, Canada, and specialty industries division manager.

Canadians aren't acting on flood risk Partners for Action Almost every Canadian living in a floodplain believes homeowners bear at least some responsibility to protect their property from flooding, but few are taking action, according to a recent study by the University of Waterloo’s Partners for Action. “For example, most of the survey respondents have not installed sump pumps (55%),” the group says in the report Canadian Voices on Flood Risk 2020, which surveyed 2,500 people living in designated flood-risk areas across the country. "Half have not elevated valuable items in their basement. “Unfortunately, this leaves homeowners on the hook to suffer costly damages.” Only 6% of Canadians knew they were living in a floodplain, the survey results show. More than half of the study's respondents (56%) strongly agreed that homeowners living in designated flood risk areas should be required to purchase flood insurance — but less than a quarter (23%) have done so. About half of respondents do not know whether their current insurance policy covers different types of flood damage. The study also shows an opportunity for brokers and insurers to have more discussions with Canadians living in flood-risk areas. When asked if their insurance representative had spoken to them about potential options for home flood insurance, only a quarter (26%) said they had. Most did not know whether their current insurance policy covers overland flood damage. Of respondents who had submitted flood damage claims to insurance companies in the past, 83% received a payout. “Most homeowners just assume they have flood insurance,” said Jason Thistlethwaite, associate director at P4A. “Many don’t, and spend thousands out-ofpocket for unexpected cleanup. Even if you live nowhere near water, this lack of awareness costs us all through higher insurance premiums and taxes to fund relief efforts.”

INSURING FUTURE PANDEMICS | NOV 2

The Insurance Bureau of Canada is “in the early stages of exploring what a pandemic risk transfer mechanism would look like with the federal government,” its head of policy told brokers at the Insurance Brokers Association of Ontario’s annual convention.

canadianunderwriter.ca | December 2020/January 2021

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CLINT SMITH, Chief Operations OfďŹ cer, Andrew Agencies Ltd.

BROKERS

WESTERN PERSPECTIVE Meet Clint Smith, chief operating officer of Manitoba-based Andrew Agencies Ltd., which recently acquired several brokerages in Saskatchewan. Smith gave us his take on the challenges brokers face in Western Canada, the response to the COVID-19 pandemic, and the inside scoop on his brokerage’s digital strategy. By Greg Meckbach, Associate Editor

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cu | How is the integration of recently-acquired brokerages going? The integrations are going very well. We have a fairly strong acquisitions team that has been involved in our integration process for some time now, and we follow a pretty strict playbook. The outliers would be the mapping of data from different broker management systems into our system, but thankfully the IT team at Custom Software is very competent. We have not had any challenges that we have been unable to resolve. The real key is the dedication of the staff in the acquired offices. We have been very fortunate to acquire some first-in-class insurance professionals; that makes the integration much easier.

cu | What trends are you noticing in property insurance pricing? Pricing has been tough over the last couple of years. There continues to be a steep increase in pricing in all lines of business. It has become a big challenge for brokers because the consumer is very price-conscious right now. Obviously, not all companies make price adjustments at the same time. As brokers, we need to be able to explain to our clients that they need to look at the ebb and flow of market pricing over a longer period of time. The hard commercial market is really taking its toll on clients and on brokers. At a time when a lot of businesses are already struggling with the effect of COVID-19, it is really becoming a challenge for clients and brokers.

cu | Is it taking a lot longer now to renew policies or to approve applications for new business? It seems to be that way, not so much in personal lines, but definitely on the commercial side. Insurers are being more selective in new business that they’re quoting. We’re

also finding that they are being selective in what they are keeping and renewing. We’re starting to see carriers say of certain sectors, “That is not a line of business that we want to be in anymore.” This can even happen on renewals of clients that have been with the same insurance carrier for 10 or more years. So, it is a hard market in terms of our ability to quote. In some cases, we’re finding that we’re getting renewals very close to renewal date. In those situations, it is really tough for us to have a thorough review with the customer prior to renewal. That is not all the fault of the insurance companies: We need to streamline things a lot more. A lot goes into underwriting, and a lot goes into assessment of risks, assessment of clients, and assessment of segments. I think we’re going to find that certain brokers are probably going to start to limit what they are capable of doing. I think the bigger brokers are going to be able to supply more specialized types of products, while some of the smaller, individual shops will find some of those products are becoming too specialized; they just don’t have the staff or capability to deal with it. For these reasons, you are going to see consolidation among brokerages and acquisitions go on for a little while yet.

cu | What are you observing in the hospitality sector? The policies for hotels and bars have really been a problem. It seems to be a segment of the economy that every insurer is getting out of covering right now. Using our own organization as an example, I think we’re down to maybe one or two markets that will even look at it. A lot of those older hotels and bars had association policies and even the associations are walking away from those risks. I think a lot of older hotels are having a real problem finding insurance coverage right now. Restaurants have always been interesting. Some restaurants

canadianunderwriter.ca | December 2020/January 2021

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are managed very efficiently and are very clean and organized, while others are not so much. So a fair bit of work goes into underwriting restaurants, and I can understand why insurers are scrutinizing those risks a little bit more. COVID hasn’t helped either, especially with the restaurant and hospitality segment being hit really hard by social distancing policies arising from the pandemic. I think some of those companies are even having a hard time paying their bills.

cu | How has COVID affected western brokerages? COVID has had a tremendous impact on Western Canada. I think the insurance industry has been somewhat insulated so far, because property and auto customers still need insurance. But we have definitely seen the market shrink, with many companies selling assets and vehicles, laying off staff, and looking for cost savings anywhere they can find to stay afloat. Initially, there was the fear factor: “What is going to happen? How quickly is going to happen? What protocols do we need to put in place?” For customers, we wanted to make sure they felt comfortable coming to our offices. We wanted to facilitate over-the-phone transactions and the opportunity for our people work remotely. We did not want to be offside [of public health regulations] by not putting proper safety protocols in place. The initial adjustment in our offices was a bit of a challenge. We were able to adapt to working remotely from home fairly quickly and that helped us out. Our main goal was to keep as many of our staff working as possible and not lay anyone off. We were very fortunate that we were able to keep our people working. Managing anxiety levels for management, staff, and customers was — and will be — a key component to this as we move forward. With the talk of second waves and about 5% of businesses failing in the next 12 months, we still have challenges ahead. 20

December 2020/January 2021 | Canadian Underwriter

PROFILE

CLINT SMITH Title: Chief Operations Officer, Andrew Agencies Ltd. Industry experience: More than 20 years of experience with Andrew Agencies in various capacities, including broker, investment advisor, branch manager, vice president and chief operations officer. Education: CAIB accredited

cu | On that note, a recent estimate said 5% to 7% of small businesses in Canada could disappear following a second wave of COVID-19. Are brokers in Western Canada concerned? It is concerning, especially out here in Western Canada. A predominant industry out here is oil and gas, which has really been impacted significantly, especially in the last couple of years. That has had an impact not only in Alberta, but in Saskatchewan and Manitoba as well. We have seen a lot of that industry going backwards. We have got to come to a realization that we’re going to have to work together on addressing climate change over time. If we chop off the head of oil, it is going to have a huge impact, especially on the western economy. I don’t think the east understands how much impact it’s going to have on the entire country.

cu | How are brokers using technology to serve consumers, taking into account the preference — and sometimes, during COVID lockdowns, the necessity — to shop online? A lot of the brokers I am talking to out

here in Manitoba, Saskatchewan, Alberta, and British Columbia are looking to build a better client interaction. We want to use technology to develop platforms within our brokerages that will allow us to interact with our customers the way those customers are interacting with other types of industries. Everybody wants to do their business digitally. In the small towns, you can see at the local post offices and FedEx depots that people are buying products online through Amazon and other online sites. A lot of people want to do business with insurance brokers that way. Some brokers are building customerfacing portals with a vision of providing clients with a self-serve environment to quote insurance coverage, bind coverage, view policy documents and wordings, obtain a pink card, file a new claim, view claims data and progress reports, pay bills and do policy changes. Right now, that is where our journey is at. Within our organization, we’re building a customer-facing portal to allow our clients to log in securely and conduct business without having to actually come into our brokerage office, if they wish to do business online.

We are here for you. So you can be there for them. Our mission to enable brokerages and insurers to safeguard and protect what matters most in people’s lives is more important today than ever before.

Let’s do this together.

appliedsystems.ca

COVER FEATURE l INSURER EXECUTIVE OUTLOOK 2021

2021 FORECAST

INSURER EXECUTIVE OUTLOOK

Photos: iStock.com/ MicroStockHub/FG Trade/wildpixel

We asked executives from leading Canadian property and casualty insurance companies what a future, post-COVID-19 world will look like, and how the industry might prepare for it.

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INSURER EXECUTIVE OUTLOOK 2021 l COVER FEATURE

I

f anything, 2020 proved the industry can respond quickly to changing circumstances. But being able to stay ahead of changes may prove to be one of the biggest challenges that insurers are preparing for moving forward. For the Canadian property and casualty insurance industry, responding to circumstances arising out of COVID-19 has been a huge challenge since March, when the World Health Organization first declared COVID-19 to be a global pandemic. Commercial clients have been on a constant merry-go-round, opening and closing as social distancing rules to prevent the spread of the virus have tightend and relaxed. As a result, the insurance needs of business clients shifted constantly, at volumes the industry has never seen before. Meanwhile, Canadian businesses laid off their employees in droves, leading personal lines consumers to inquire about premium relief as their household budgets tightened. Insurers can take credit for rapidly adapting to these scenarios. They stepped up to provide customers with relief options including auto premium relief measures, revisiting risk portfolios, waiving certain fees, and finding solutions for clients left in precarious positions as a result of a cratering economy. But the work does not end there. And some might argue the challenges that lie ahead in a post-COVID world may be even more challenging than what we saw during the pandmic. Apart from shifting where consumers work, where they drive, and how they live their daily lives, COVID has highlighted consumers’ changing expectations about purchasing insurance. In a physically distancing world, digital services have become more important. And let’s not forget about the other challenges facing insurers. First, the hard reality is that several types of business lines have become unprofitable to write, the byproduct of soaring claims costs. But when COVID took out the economy, it took down interest rates along with it. With the reduction in investment income, profitable underwriting has taken centre stage. We asked key P&C industry leaders how business will change post-COVID-19. In alphabetical order, here’s what they told us...

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Raymond Chun President, CEO TD Insurance

“The insurance industry has demonstrated its adaptability and flexibility in the face of change — historically and throughout the COVID-19 pandemic.”

The world around us continues to change and we’re all feeling the ongoing impact of COVID-19. Throughout the pandemic, we have demonstrated that we can adapt quickly to execute with speed and deliver for our customers — even in the face of a global health crisis. We’re incredibly proud of the relief measures we have delivered to support our customers across Canada when they needed us the most. Payment deferrals and premium adjustments helped alleviate some of the financial burden many have felt. To keep customers, colleagues and communities safe, we adapted quickly to a new virtual environment while all 20 of our Auto Centres remained open so our frontline colleagues could continue to do the essential work needed to support our customers. The stay-at-home economy of 2020 has also shown us that customer demand for direct online insurance purchasing is no longer a convenience but a necessity. As we move on from the initial pandemic response, TD Insurance’s long-term strat-

egy includes our ability to adapt to an evolving and uncertain economic environment while adjusting our approach to meet shifting customer behaviour. The insurance industry has demonstrated its adaptability and flexibility in the face of change — historically and throughout the COVID-19 pandemic. Digitizing insurance is a clear opportunity for the industry. We must keep up with customers’ digital expectations, take advantage of technological advances that drive self-serve capabilities, and bring the customer experience into the 21st century. It’s important for us to stay ahead of the pace of change. We continue to make strategic investments in our digital self-serve capabilities, artificial intelligence, and use of advanced analytics to build creative products and new services that deliver on our customer-centric philosophy. These innovations will help us create personalized experiences and forge deeper connections that our customers have come to expect, while delivering on the unmet demand for simple and fast digital insurance services.

Nick Creatura President, CEO CNA Insurance As we know, the future rarely unfolds as we expect. Uncertainty drives our value proposition. Insurance responds when the unexpected happens. In this period of uncommon uncertainty, it is incumbent upon all participants in the insurance value chain to raise their resilience quotient. Insureds, carriers, advisors, intermediaries and regulators all have vital roles to play in mitigating against the potential adverse consequences flowing from a number of macro factors and trends impacting the risk landscape. The COVID pandemic is certainly among the most impactful of these factors. How long before we are through it? How effective will the vaccines prove to be? To what degree will the most severely impacted economic sectors recover? How will the lessons learned from an extended period of working remotely impact travel, commuting patterns, and the use of real estate? These are among many as-yet-to-be answered questions of the post-COVID world. There will be a return to normal, but over what period of time and exactly what the new normal will look like remain uncertain.

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We are also contending with the uncertainty of increasingly erratic weather patterns, accelerating social inflation, and declining investment income from prolonged low interest rates. The above factors continue to drive a severe retrenchment of insurance capacity. Another macro trend I would highlight is the accelerated pace of consolidation among distributors. The market is clearly evolving towards a model characterized by fewer, larger, national and global intermediaries, countered by highly specialized niche or geographically focused players. This is driving a realignment of relationships between carriers and intermediaries to optimize points of collaboration. The familiar has been — and continues to be — disrupted during this period of uncommon uncertainty, which begs of all its participants greater focus, transparent communication, authentic collaboration, and resilience. Perhaps above all else, our greatest asset in navigating the journey forward will be the heightened sense of empathy that has emerged among all of us as we collectively fight the pandemic.

“In this period of uncommon uncertainty, it is incumbent upon all participants in the insurance value chain to raise their resilience quotient.”

INSURER EXECUTIVE OUTLOOK 2021 l COVER FEATURE

Louis Gagnon President Intact (Canada)

“We anticipate that consumers will engage digitally to a greater extent, that the savings rate will increase, and that Canadians will want more value for their money.”

Intact was founded on our values, a clear purpose, and a belief that insurance is about people, not things. That purpose is to be here to help society prosper in good times and be resilient in bad times. The pandemic has presented challenging times for people, businesses and communities. At the onset of this crisis, we mobilized quickly to help affected customers, providing them with payment flexibility and premium adjustments to recognize financial hardship and changing habits. Relief efforts have helped more than 1.2 million customers, with $510 million provided year-to-date. That includes the recently launched, $50-million Intact Small Business Relief program, which provides targeted relief to more than 100,000 of our most vulnerable small businesses customers. The pandemic has changed life for many Canadians. Although the current crisis will pass, some of its impacts might last. We anticipate that consumers will engage digitally to a greater extent, that the savings rate will increase, and that Canadians will want more

value for their money. More people are working from home and driving habits and patterns are changing. Usage-based insurance programs give customers more control over their auto insurance premium. Our people are at the heart of everything we do, and our 16,000 employees are essential to our success. We are committed to preparing our people for the evolving future of work driven by technology and automation. We will increase the speed of our efforts to re-skill and up-skill employees to adapt quickly to changing customer needs and business opportunities. We also continue to advance on our 10-year strategic roadmap, while integrating some learnings from the crisis, particularly on our customer value proposition and our digital strategy. Since the beginning of the crisis, we have taken a problem-solving approach with customers, employees and brokers. That will continue to be our philosophy as we assess the needs of customers, our people and community moving forward.

Carol Jardine President, Canadian P&C Operations Wawanesa Mutual Insurance Company 2020 has ushered in a new reality. Everyone has had to react quickly, creating new norms, and with technology now more integral to our work and personal interactions than ever before. The strategic transformation of Wawanesa’s legacy systems, completed this year, has allowed everyone who counts on us to be looked after during the pandemic. For this effort, we could not be prouder of our brokers and employees. What has also become clear is: Canadians value the advice of brokers — and we want brokers to remain top of mind for Canadians. That’s why we are reducing transactional friction, supporting the IBAC Data Exchange initiative, and working with brokers to deliver a full suite of application programming interfaces (APIs). As a Canadian Mutual, Wawanesa doesn’t have shareholders: We have policyholders who want us to do the right thing. In doing so, we insured

those who could not pay their premium, reduced and deferred premiums, and gave millions back to our communities; at the same time, we responded to catastrophic weather events, severe automobile collisions, and new litigation. Responding to volatile global market conditions and the retraction of global capital, Wawanesa also stepped in and underwrote risks with brokers for Canadians that needed us. Wawanesa’s results will reflect our commitment to Canadians. As Canadians step up to keep our country going, we will be there to protect their assets and help secure a stronger tomorrow. Now more than ever, our industry must embrace the future, learn to underwrite new risks and ensure the resiliency of our country. Our industry has faced down pandemics and tough times before. We’re absolutely going to do so together this time. Canadians are counting on us.

“Canadians value the advice of brokers — and we want brokers to remain top of mind for Canadians.”

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COVER FEATURE l INSURER EXECUTIVE OUTLOOK 2021

Valérie Lavoie President, Chief Operating Officer Desjardins General Insurance Group

“The insurance industry has demonstrated its adaptability and flexibility in the face of change — historically and throughout the COVID-19 pandemic.”

The COVID-19 pandemic will drive big changes in Canada’s P&C insurance industry. At Desjardins, it’s accelerating our digital transformation as clients increasingly embrace our expanding online and mobile services for sales, policy changes and other services, and claims reporting and tracking. In recent months, the percentage of clients opting for paperless service using our online or mobile solutions has increased by double digits. With the simplicity and convenience of online services, clients are unlikely to go back to more traditional ways of contact once the pandemic is over. This doesn’t mean there’s no role for personalized service. Many clients still value their local, trusted agent to explain and recommend the proper insurance coverage and provide help with other financial products. Building this type of relationship takes time, but it creates lasting customer loyalty. Our goal is to combine both — streamlined digital services with trusted personalized advice — by building our omnichannel capabilities, enabling

clients to connect when, where, and how they wish. The pandemic might also be a catalyst for shifting customers’ driving habits. Many will continue to work remotely from home while shopping and conducting other transactions online. Insurers need to adapt to clients’ needs in this new context and adjust products and services. Telematics systems like our Ajusto program can help by providing real-time insight into changing behaviours. As the pandemic showed, severe disruptive events can happen suddenly and unexpectedly. With global warming and other potential threats, insurers must be agile to support clients and their communities. What matters most are the people affected. As insurers, and especially for a cooperative like Desjardins, our responsibility is to develop and provide options to help protect their assets. Looking forward, there is much uncertainty including how claims will evolve and the speed of the economic recovery. What is certain is that there are both challenges and opportunities ahead.

Steve Phillips Chief Operating Officer Sovereign General Insurance When it comes to the global pandemic, widespread sentiment is that the commercial insurance industry will not fully return to the pre-COVID environment. All businesses have been changed to some extent and to dramatically different degrees. As an industry, we need to support our clients whose businesses have been affected. The fundamentals of the mid-market commercial insurance industry have not changed during the pandemic; what has evolved, due to the demands of the pandemic, is our collective ability to adapt with agility. The pandemic has compounded hard market conditions for company clients, distribution firms, and insurance companies. Post-pandemic, insurers will continue to take the disciplined underwriting actions necessary to counter the continuing upward claims trends. Analytics will be as critical as ever, enabling insurers and markets to remain specific,

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definitive, and selective with their risk appetite. In turn, there will be a continued need to leverage valuable data and insights to understand fully the ever-changing risks right down to the company client level. Such data will allow us to adjust rapidly with customized solutions that meet client needs. Leveraging enhanced data and analytics will help underwriters work better with brokers to provide the most comprehensive solutions to their clients. Data is key, but at Sovereign, people are always at the heart of everything we do. That priority will never change. Distribution partners and Sovereign need to work closer than ever to understand clients’ true exposures, champion risk prevention and management strategies, and develop complete solutions. We know Canadian businesses are depending on all of us. They’re a critical part of building back the economic strength of Canada well into the future.

“Analytics will be as critical as ever, enabling insurers and markets to remain specific, defnitive, and selective with their risk appetite.”

INSURER EXECUTIVE OUTLOOK 2021 l COVER FEATURE

Rowan Saunders President, CEO Economical Insurance

“We will continue to...implement solutions to better manage changes that COVID-19 might bring regarding cyber risk, industry consolidation, and rate adequacy.”

COVID-19 has had a profound impact on our lives and the industry, changing perceptions of our industry as well as customer and regulatory expectations. A solid and stable insurer that brings speed to market, convenience, and reliability is needed to deliver the new insurance experience. The past year has unleashed so much uncertainty. We must evolve quickly and have increasingly important discussions to create greater clarity between acceptable and uninsurable risks. P&C insurers play a critical role in providing outstanding customer service with excellent insurance fundamentals. Before the pandemic, the industry was experiencing a period of escalating insurance costs in combination with flattening investment returns, resulting in hard market conditions. For several reasons, we expect the market to remain hard for the next 12 to 24 months. First, underlying inflationary trends continue to escalate. Vehicles and properties are more expensive to repair, litigation is lengthy and costly, and medical

costs are increasing. Second, weather events continue to increase in frequency and severity. Third, worsening economic conditions positively correlates with increases in fraud. Fourth, sustained lower investment yields require a greater focus on underwriting results. Fifth, reinsurance capacity and rates are hardening due to escalating natural catastrophes and pandemic liabilities. Looking into the future, we will continue to be resilient and implement solutions to better manage changes that COVID-19 might bring regarding cyber risk, industry consolidation, and rate adequacy. For the past several years, Economical Insurance has focused its investments in innovation to fill gaps in the market with Sonnet, our digital direct channel, and Vyne, our modernized broker offering. We’ve strengthened our core insurance operations and act on meaningful trends that improve and transform broker and customer experience.

Chris Sekine President, CEO Trisura Guarantee Insurance Company COVID-19 has affected most businesses, and the insurance industry is no exception. Businesses are operating in a more uncertain environment than ever before. Insurers and reinsurers have adjusted underwriting appetites, which has influenced portfolios, available capacity, and pricing. Given current hardening conditions, we expect industry results to gradually improve. For many businesses, near-term results will be contingent on government support in response to the pandemic and the potential for further lockdowns. Insureds are navigating challenging industry dynamics. The pandemic, combined with the hard market, amplified the need for brokers and their value. This is true for both insureds and insurers, and especially those with complex commercial risks. Trisura is a broker-driven company and we are working closely with our broker partners to navigate these turbulent times. We expect the risk tolerance of businesses/ insureds to evolve. Cyber risk is a good example of an exposure that businesses may not have ap-

preciated. As cyber attacks have increased through COVID-19, businesses are looking to the insurance industry to help manage this risk. We expect many business trends established before COVID-19 to return and business operations will resume much as they were pre-pandemic. For example, we anticipate a return to working in-office and in-person interactions with our brokers and partners. Although most companies successfully transitioned to working remotely, we don’t believe that is sustainable in the long run. Businesses rely on personal relationships. Virtual meetings are a great temporary measure, but they simply can’t replace in-person meetings. That being said, the success of remote working arrangements will provide a broader tool set to employers and employees. For those with appropriate job functions, employers should offer flexible working arrangements. Embracing technology will enhance productivity and collaboration of established operating norms. What hasn’t changed is that good people are the very core of a successful business.

“Although most companies successfully transitioned to working remotely, we don’t believe that is sustainable in the long run. Businesses rely on personal relationships.”

canadianunderwriter.ca | December 2020/January 2021

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COVER FEATURE l INSURER EXECUTIVE OUTLOOK 2021

Jason Storah CEO Aviva Canada

“Scientific data can help protect us from massive climaterelated devastation and we have a role to play in helping communities prepare for the inevitable changes that are ahead.”

For Aviva Canada, 2021 will be the year to redesign the way we do business, translate challenges into new opportunities, and create better experiences for our customers. If there is just one overarching hope that I have for 2021, it’s that we move away from being reactionary and instead focus on proactively helping people and businesses move forward after the massive detrimental impact that so many have faced in 2020. COVID-19 will continue to accelerate changes in many facets of society and our industry, with digital transformation being at the forefront. We’ve known for a long time that consumers want to interact easily with their insurers and brokers digitally. We are digitizing our sales and service journey, but we are equally focused in the short-term on the more fundamental need to provide affordable coverage. Pre-COVID-19, the commercial marketplace was already grappling with inadequate pricing and capacity issues. These challenges have been exac-

erbated thanks to continued market hardening, an increase in some insurers exiting certain segments, and an increasingly restrictive and hardening reinsurance market. All of this means technical rates will continue to face upward pressure while many consumers will be expecting reductions. We are acutely aware that people and businesses are having a hard time and we are doing what we can to support all of our customers. Brokers and insurers have to work together now more than ever. Collectively, we must find ways to get better at explaining the risks, educating customers on coverage, and protecting Canadians. Scientific data can help protect us from massive climate-related devastation and we have a role to play in helping communities prepare for the inevitable changes that are ahead. We have an awful lot to do, but working together, I’m confident we’ll be able to build a better tomorrow for Canadians.

Andy Taylor President, CEO Gore Mutual We began 2020 by launching our Next Horizon business plan, the most ambitious strategy we’ve ever undertaken. With Next Horizon, we’re essentially rebuilding Gore Mutual and transforming our organization in a way that will redefine our place in the industry. The economic uncertainty caused by COVID-19 has made some organizations change paths, but straying from our Next Horizon plans has never been an option. In many ways, we’ve accelerated our investment in strategic initiatives to innovate our way out of the crisis. The pandemic has shown that digital connectivity is more important than ever. Over the next two years, we’ll invest the equivalent of what we previously would have spent over a decade to replace all of our platforms and create best-inclass broker and customer connectivity. The pandemic also influenced our thinking about attracting and accommodating talent. We’ve now adopted a hybrid work model that embraces both physical and virtual environments, enabling us to strengthen our teams with specialized talent from across the country to scale our business.

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The upcoming year will be challenging for the P&C industry because of historically low interest rates, rising reinsurance costs, and political and social influence placing downward pressure on pricing. Certain segments will be hit harder as economies reopen and governments manage localized outbreaks. The industry will have to balance profitability initiatives on underperforming lines of business with political and public perceptions. Longer term, the pandemic will have lasting effects, including greater emphasis on wording and underwriting risk management for unprecedented events. It may also accelerate public-private partnerships for catastrophes. New coverages are already emerging, while existing coverages are being challenged by increased pressure for further regulation of certain classes of business. We’ve made a deliberate decision to lead with purpose throughout the pandemic. We’ve made historic donations to our communities, proactively led the industry on consumer relief initiatives, all the while putting employee safety and wellness at the core of everything we do.

“Over the next two years, we’ll invest the equivalent of what we previously would have spent over a decade to replace all of our platforms and create best-in-class broker and customer connectivity.”

INSURER EXECUTIVE OUTLOOK 2021 l COVER FEATURE

Matthew Turack Group President, Insurance CAA Club Group

“Consumers are telling us that a onesize-fits-all insurance soluton isn’t working for them. They want flexible products like pay-as-you-go.”

Over the course of 2020, we have seen a fundamental shift in daily habits. Many of our existing office jobs have transitioned to at-home workspaces in the short term. Having P&C products and at-home services that cater to the new reality will drive change. We may not see a 100% return to what life was once like. How we work, live, and travel has changed. But even before news of COVID-19 flooded our airwaves, consumers wanted products that were flexible while still providing good coverage. Going forward, customization will be a hot topic in the P&C world. Consumers are telling us that a onesize-fits-all insurance soluton isn’t working for them. They want flexible products like pay-as-you-go. Based on a recent survey conducted by CAA South Central Ontario, six out of 10 members would consider exploring a pay-as-you-go insurance product that would allow them to buy auto

insurance only for the kilometres they drive. At CAA Insurance Company, we believe there is a good business case for pay-as-you-go auto insurance. Our model predicted that people who drive less get into fewer collisions and our data is showing that those predictions were accurate. On average, pay-as-you-go drivers save 40% to 60% on their auto insurance costs. Customers who enroll are benefiting by paying lower premiums because they are driving less and getting into fewer collisions. In order to accommodate this new stay-at-home reality, the P&C industry needs to adapt their products. Customers want flexibility and choice. We started years ago to anticipate people’s needs. We also believe that in order to create these new and flexible products and programs, a continual partnership with regulators is needed to make these things happen across Canada.

Season’s Greetings Wishing you happy holidays and a joyful, healthy New Year.

Best wishes for 2021, from your friends at

canadianunderwriter.ca | December 2020/January 2021

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FEATURE l BROKER EXECUTIVE OUTLOOK 2021

BROKER EXECUTIVE OUTLOOK Photos: iStock.com/kupicoo/Kardd

2021 FORECAST

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BROKER EXECUTIVE OUTLOOK 2021 l FEATURE

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t’s been a tough year to be a property and casualty insurance broker. Things started off with the market continuing to harden in 2020 Q1 — or “firmly settle in place,” depending on to whom you talked and business line being discussed. Some may wish they could go back to those times, because what happened in March 2020 was unlike anything they’d ever seen. When the global COVID-19 pandemic first arrvived in Canada, brokers were thrust into a world of uncertainty. They had to pack up their offices and work out of their kitchen. A social bunch by nature, they were now confined to their homes, able to see their clients only through a computer monitor. Phone lines lit up as personal lines clients were laid off and looking for ways to save money on their insurance. Commercial clients, too, were asking about relief, and whether or not this situation could be considered a business interruption claim. As the pandemic wore on, Canada’s economy groaned under the strain of massive personal and corporate debt. Interest rates essentially bottomed out, significantly reducing carrier’s investment income. As a result, underwriting rules became stricter, capacity shrunk, and some insurers exited unprofitable lines of business. That put pressure on brokers to even find coverage for their clients, let alone for a reasonable price. Brokers worked tirelessly and without compensation to help their clients adjust to the new circumstances. The broker value proposition shined: Clients got a front-row seat of the true value of a broker as a trusted advisor. Now, with the news of successful COVID-19 vaccine testing, there appears to be a light at the end of the tunnel. What will the broker channel look like in a post-COVID world? We went to 10 of Canada’s top brokerage leaders and asked them how they see brokers changing in the next 12 months. They told us about their upcoming challenges and opportunities. In alphabetical order, here’s what they said...

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FEATURE l BROKER EXECUTIVE OUTLOOK 2021

Philomena Comerford President, CEO Baird MacGregor Insurance Brokers LP & Hargraft Schofield Deemed an essential service, most tech-savvy brokerages deftly pivoted to a remote workforce model when COVID shut down the economy in March. Necessity became the mother of invention. The pandemic ignited the brokers’ rapid transition to paperless processes, enabling delivery of uninterrupted client service through a largely remote workforce. Brokerages are now re-thinking how and where their staff will work, not only through the second wave of the virus but also in the long term. Virtual meeting technologies like Microsoft Teams, Zoom and WebEx helped restore a sense of community and collaboration for staff who work from home, while reducing travel costs. Although IT expenditures may have increased for brokerages that wisely deployed corporately-owned devices to employees and invested in improved network security, brokerages can reduce their occupancy costs post-pandemic. This requires adapting our methods of training, supervision, mentoring, regulatory oversight, and network management

of employees who continue to work remotely. The challenging pre-pandemic market conditions persist due to poor industry results, weather events and catastrophes that continue to put pressure on insurers’ bottom line. Brokers struggle to fill capacity shortfalls for property and excess/umbrella liability layers at any price. They face increasingly restricted underwriting appetites while at the same time bearing the brunt of clients’ ‘sticker shock’ reactions to dramatic premium increases during an economic downturn. If Ontario’s proposed COVID immunity legislation becomes reality, insurers and reinsurers might be less skittish about covering risks arising from the virus. Experienced brokers are finding creative solutions for clients by improving clients’ risk management protocols; subscribing risks; property layering; and exploring clients’ various risk assumption models. With cyberattacks and bankruptcies on the rise, brokers now have an opportunity to offer credit and cyber insurance solutions to their clientele.

Shawn DeSantis President, CEO Navacord Corp. The pandemic has reshaped our industry — and is still reshaping it — with rapid change and innovation. Going forward, brokers will need to adopt and adapt to these changes across our expertise, people, and technology. No longer is a generalist broker with limited markets the right choice. The pandemic has stressed the importance of risk advisors with deep sector and product expertise who can function as an extension of the client’s business team. This market will not tolerate preventable losses; as brokers, it’s up to us to be the change we want to see. We need to educate clients and provide proactive risk mitigation strategies and solutions to truly add value. Further, a shrinking talent pool and increasing risk complexity mean brokers must invest continuously and aggressively in their specializations, thought-leadership, and in the training and development of their teams, to ensure they remain the top choice for today’s clients. Internally, we talk about a “flight to quality” occurring. To compete, brokers will have to provide a broad range of tools and resourc-

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es to their advisors and clients alike, including access to legal advice, loss control, superior claims advocacy, actuarial, and modelling support. Clients are rightfully demanding more. Operationally, brokers took for granted the communication and collaboration that occurred with clients in person, and the trust that was naturally built within a traditional office setting. Now the modern office is anywhere, and we must invest in leading technology and IT supports so that employees are on when they are online. With the hard market and demand for precision from insurers across most commercial lines, broker workloads are increasing significantly. Insurers and underwriters are getting far too comfortable saying, “No, can’t be done.” Thus, having the operational expertise to deal with this environment is one of the biggest challenges. The opportunity now is to move beyond the “no.” Brokers are using our experience to create risk solutions that work for everyone involved and drive businesses — ours, insurers’, and our clients’ — forward together.

BROKER EXECUTIVE OUTLOOK 2021 l FEATURE

Warren Griffiths President FCA Insurance Brokers When FCA this year celebrated 100 years of operations, and the beginning of a new chapter for our business journey, we also prepared for market hardening. Like everyone else, we have been surprised by the added complexity of the COVID-19 pandemic to a year that we had already forecast as being difficult. But while the pandemic has introduced its own challenges, it has also given us the opportunity to accelerate technology enhancements we had previously planned. Operationally, our employees have welcomed new, virtual working realities. Our team embraced drastic changes to operate remotely and demonstrated the efficiency of a work-from-home model. This is important, especially since this could become a more permanent shift for many industries. From an insurance industry lens, we’ve seen our business partners take a vast array of approaches to deal with the combined challenges of COVID-19 and the tightening market. As these market conditions play out, brokerages taking a “client- first”

approach will be rewarded. Marketplace changes have shifted client expectations, challenging us as a brokerage to present new and creative options to meet their needs. Partners with sound fundamentals and who are nimble to provide new solutions will be favoured in this new landscape. As the market continues to tighten for the foreseeable future, clients’ expectations of their insurance broker to deliver value will only increase. Having a wide breadth of markets available is invaluable to our clients during these uncertain times, since the overall market still seems to be quite asymmetric. As more Canadian brokerages get swallowed up in acquisitions, the war for new talent will become more competitive. As an independently-owned insurance brokerage, our model has always been people first, allowing us to attract the best talent in the industry. Those who invest in their people will be put in a better position no matter where the market takes us.

Stéphane Lespérance President, Commercial Risk and Health Solutions in Canada Aon In 2019, and the early part of 2020, we talked about a market under correction with increased underwriting discipline by insurers. This year, we added to the mix a global pandemic, claims uncertainty around COVID-19, and the global economy’s uncertainty. It makes it a very challenging market, not only for brokers and insurers, but for Canadian businesses. It’s too early to fully predict how the market will trend in 2021 but one fact remains: The return to profitability for insurers is top of mind. Markets are reducing significant capacity in certain classes of risk or simply exiting others. Property, D&O and professional indemnity are three challenging classes and we don’t expect that to change in 2021. So far this year, the Canadian industry operates profitably relative to its peers with a 98.3% cumulative net combined ratio. Despite this, capacity remains tight and the insurance market overall continues to harden as corrections implemented so far have not produced the expected level of impact. The underwriting process is more detailed, with an abundance of questions related to COVID-19

response. As COVID-19 restrictions eventually subside, and as businesses return to some semblance of normalcy, market conditions are expected to become more stable, with pricing and conservatism more similar to the prior two years. In many instances, underwriting authority has been pulled away from Canadian underwriters. This situation is putting more strain on Canadian insurers to be supportive of Canadian businesses. Construction, food, transportation, forestry and pulp and paper industries have been key pillars of our economy for decades. They are even more important now and we need to support them with innovative solutions. How are we solving client issues? We are talking to our clients with one voice. Our approach is broader than just offering a solution within a single solution line. We bring to the table a number of solutions. Our globalization of resources allows us to bring forward the right individuals and capacity that will create unique solutions for our clients.

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FEATURE l BROKER EXECUTIVE OUTLOOK 2021

Barry F. Lorenzetti President, CEO, Founder BFL Canada COVID-19 has been a massive disruptor in every aspect of our lives and we continue to work through and endure a very tough insurance market. Tech is king, with brokers moving towards a work-from-home protocol for certain categories of employees. Going forward, brokers who do not embrace available technology will be left behind: Clients are seeking more efficient ways to manage their risk management needs, in combination with accessing deeper and more relevant data analytics. Brokers need to be open to operational changes; they need to embrace new ideas for how to engage with their clients. Greater sophistication is needed on how they prevent risks. Post-COVID, I see a flexible mix of in-office/remote work. This will be coupled with innovative and efficient brokerage technology that is integrated with insurer technology. This will help brokers grow their books of business effectively while monitoring off-site employees and managing their performance. The core business will remain unchanged, but there will be an increased need to focus on collaborating and communicating effectively both inside and outside the firm.

We all know the market was hardening pre-COVID. The pandemic now provides underwriters with additional reasons to be selective in the risks they chose to write. Two years ago, completing placements was not problematic. However, shrinking capacity compounded by COVID has made placements even more difficult and challenging. Direct access to reinsurance markets has assisted our firm greatly. Challenges will be numerous. Losing sight of the importance of personal relationships and physical interaction is one of them. Teamwork wins and this is even more relevant today. In terms of opportunities, brokers armed with strong market accessibility will do well, particularly against smaller regional brokers. Those with the technical resources to win accounts that are currently being underserved by the global brokers will fare well. There are always opportunities if you have market access (both domestic and abroad) and strong relationships. Firms that transition well and have the ability to seamlessly integrate acquisitions and new recruits will continue to be successful.

Aneill MacCaull President AA Munro Insurance Moving forward through COVID and into a post-COVID world, the biggest operational change for brokers will be the continued automation of simple customer transactions. Policy inquiries, payments, requests for liability cards, and renewal transactions will all become faster and easier for customers. While automation has been developing for some time, it has sped up dramatically. Brokers are investing in both technology and people to achieve a new customer experience. They have to — the market has changed. Customers now trust and expect fast, omnichannel service. Brokers successful in their investments will spend more time solving complex issues for their customers, working through challenges created by rapidly changing carrier appetites and processes. One example is in commercial lines. As capacity shrinks and carriers continue to shift underwriting

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away from individuals and towards algorithms, customers and brokers in the commercial space are being forced to shop more frequently and in different ways. This means investing in new tools and new talent for a fast-moving, digitized world. While many industries seem to be challenged in their ability to service customers in a digital world, brokers have flourished. Pre-COVID, I would not have expected this. But brokers have proven to be nimble, regionalized, and fast-acting enough to shift operations in a manner that best reflects their customers’ expectations. As doors across the country begin to open, we may see customer preference turn in favour of the local approach, presenting an increased opportunity for digitally engaged brokers who also have a physical presence and deep connections within their communities. It’s an exciting time to be a broker.

BROKER EXECUTIVE OUTLOOK 2021 l FEATURE

Kenny Nichols President, CEO Western Financial Group Brokers have always had a unique position in the insurance industry. Adaptability has been a crucial part of the broker model and we have seen particular evidence of that this year. Our traditional ways of doing business are gone. The focus has shifted to providing options for customers quickly and efficiently. Western has been able to adapt to the challenges of COVID by emphasizing the needs of the customer. Brokerages need to broadly understand those needs and change their value propositions to ensure a quick response. Customer experience has always been vital but perhaps never as important as it has been this year. We will maintain our omnichannel approach to our customer experience, which responds to a range of our customers’ diverse needs. Brick-and-mortar locations will continue to provide community-based service options, while virtual call centres will support customers looking to avoid COVID exposure risk. There will be a contin-

ued need for increased technology offerings and innovation. New communication channels will be required, as will expanded hours and more contact options. Market hardening has influenced options for some segments, but Western has been able to find solutions for many of our clients in difficult classes. However, some risks may still struggle to find coverage. We have been working with our market partners to find solutions and we continue to explore innovative ways to respond to the hard market challenges. Opportunity exists in reinforcing the broker value proposition beyond just the price point. Winning brokerages will demonstrate to customers their understanding of market challenges, invest in technology, provide risk management expertise, and have access to capacity. Unfortunately, a possibility exists that these changes and challenges will lead to some brokers thinking about an exit from the marketplace.

Tina Osen President Hub International Canada Consumer behaviours are changing. We demonstrated to our customers how important it was to have good information, in real-time, and they value our knowledge. Our clients recognize that the advice we bring is important, but they want to consume it in different ways. So the next step is to continue to dial up virtual advisory services, digitally enable our sales forces, and open new channels to interact with us. These will all be necessary steps to re-imagine distribution in a way that serves our customers. Operating models will have to change, too. I’m kind of excited about the fact that this crisis has required us to be more agile, flatter in our decision making, and move quicker to get things done. All are necessary skills for a changing consumer and rapid technological advances. The pandemic has really illustrated the importance of great leadership. It required CEOs to push for broad changes in their companies and rapidly dial up the extent and speed at which they re-exam-

ined their business models. In crisis, CEOs need to be more engaged. This will require strong communication skills, listening, empathy, understanding, commitment, follow-through, flexibility, and the ability to pivot quickly. Currently, capacity continues to be challenged. No indicators suggest any short-term relief. These challenges do present opportunities. For example, scale becomes important. M&A will continue to be a significant driver in the business. You need the size to invest in your value proposition for your customers. Second, we are going to continue to see a rationalization of trading partners. Finally, we will see the introduction of new capital. Not all solutions are available in the current marketplace, so you will see new entrants that opportunistically see the right timing with pricing (in addition to more sophisticated AI) enter the marketplace. Conversely, you will see brokers scouring the globe for solutions if they can’t find them domestically.

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FEATURE l BROKER EXECUTIVE OUTLOOK 2021

Dave Partington CEO Gallagher Global Brokerage – Canada The biggest change and differentiator will be how brokers access and use data. For example, the ability to benchmark coverages, limits and rates against peer groups will help our clients make better buying decisions. Better use of data to enrich underwriting submissions will enhance the client and underwriter experience. The pandemic has given us many opportunities to improve our operations. It has demonstrated that flexibility is critical to success in this environment. We are really focused on delivering a far more flexible client and employee experience through new technologies, tools and resources. The market remains tough. However, that drives innovation and success. We have had to adapt the way we work with our clients and partner insurers. Our teams have been incredibly innovative — accessing the global marketplace to find solutions,

creating new capacity and restructuring programs. All to ensure the best results for our clients. Pandemics, social unrest and tough markets all bring us challenges — but also opportunities. Our goal and focus remain the same, and that is to deliver solutions to our clients. This means maintaining our focus on developing, retaining and hiring the best people. We are driving our talent development programs forward, embracing diversity and inclusion, and making Gallagher a fun and rewarding place to work. We see many opportunities to engage with potential merger partners. We will continue to look for partners with similar cultures who share our values and ambition for growth in Canada. This past summer, we integrated a new partner and our pipeline is robust. We’ve learned we can do that successfully and seamlessly in a virtual way, so we look forward to more opportunities in that area.

Sarah Robson President, CEO Marsh Canada Limited It has been a memorable year for all of us as 2020 has been particularly eventful for those of us in the insurance industry. We’re used to dealing with floods, fires, storms, and other unexpected natural catastrophes. Still, this year, in addition to these somewhat familiar challenges, we have faced a global pandemic and a record number of hurricanes and tropical storms, all in the midst of a transitioning insurance market. I’m very proud of how Marsh responded to the global pandemic, transforming our business virtually overnight to work remotely while continuing to support our clients’ evolving strategic and operational needs during this uncertain time. It is a testament to the strength and resilience of our people. We have also been working with industry leaders and governments in Canada and around the world to develop public-private pandemic risk solutions to accelerate economic recovery and provide much-needed protection against future pandemic risks.

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If 2020 has taught us anything, it is the importance of corporate resilience. To survive and thrive in today’s global economy, Canadian business leaders need to have a clear understanding of the risks — and related opportunities — their organizations are facing in the short and long-term. More importantly, to develop appropriate mitigation strategies, they need to move beyond addressing individual risks to focus on the interconnectivity of the risks. We expect current market conditions will continue into 2021. The low-interest-rate environment, combined with the impact of losses related to COVID-19, wildfires, and the Atlantic hurricane season, will challenge insurers’ profitability, driving up rates for some coverages and industries. No doubt, 2021 will be another challenging year for many of our clients. Our job as brokers is to ensure our clients are prepared so that they will have choices and options regardless of the market conditions.

FEATURE l ECONOMIC OUTLOOK

ECONOMIC OUTLOOK

V ew from the edge A hard market, pandemic and economic downturn are making the future hard to predict, and that has brokers nervous

Photos: iStock.com/jozefmicic

By Adam Malik, Managing Editor

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ECONOMIC OUTLOOKK l FEATURE

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anada’s property and casualty insurance brokers have every reason to be on edge. A year ago, they knew things were going to be tough. A hard market was settling in. They knew they would have to face a market that even a 15-year veteran had never seen. But while that’s a daunting task, a hard market is hardly a foreign concept to a broker. Many people are still around who have been through a few of these before and know the basics for getting through this. Then COVID-19 hit. Now, nothing is normal. Even the most senior of insurance professionals haven’t seen anything like this — unprecedented job losses, an economy in tatters, and a global pandemic that has changed the way people live, work, and go about their daily lives. Oh, and yes, there’s still a hard market. That didn’t go anywhere. “Certainly, there’s additional stress and pressure,” observes Carol Mills, B.C.-based chief sales officer at Hub International. “What everyone is going through right now is unprecedented, and there’s no playbook for it.” While most will acknowledge that brokers have done well to make it through the first 10 months of the pandemic, it remains to be seen if the worst is yet to come, says Kent Rowe, president of the Insurance Brokers Association of Canada. “We’ve gotten through it, I would say, decently,” he says. “But everybody is concerned about what the next four or five or six or seven months might hold. What’s going to come in and what will be the impact of that?” And therein lies the toughest questions of all: What’s ahead? And what will the ripple effects be? At least brokers can take comfort in the fact they are not alone in worrying about this, as Mills points out. Fellow brokers, insurer partners, and clients are all facing these unique tests. Part of the reason for the angst is that clients have been facing their own set of challenges. Personal lines customers may have been laid off from their work, for example, causing them to seek premium relief. Many commercial clients are facing the risk of losing the business altogether. The Canadian Federation of Independent Business reported in November that 37% of all businesses across Canada are losing money every day they’re open. And some, such as the restaurant and fitness industries, have had to endure multiple rounds of lockdowns in various regions of the country. As the pandemic and its toll on the economy continue, what’s going to happen when the calendar flips to the New Year? Brokers are asking themselves these hard questions and more, as Rowe observes. “Are more businesses going to close down?” he asks. “Are more people not going to be able to afford to buy cars? Or make their mortgage payments? All of those issues will certainly have an impact on how we manage our business. If people are unable to work or if they’re managing their own personal financial situations, they’re unlikely to buy initial coverage, or new coverage, or coverage they might need. That has an impact on brokers, obviously.”

canadianunderwriter.ca | December 2020/January 2021

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FEATURE l ECONOMIC OUTLOOK

“Are more businesses going to close down? Are more people not going to be able to afford to buy cars? Or make their mortgage payments? All of those issues will certainly have an impact on how we manage our business.” COVID’s economic impact COVID’s impact on the economy is weighing heavily on the minds of brokers these days. The way they do business has changed. “Some of the challenges is that the market has changed, and the way that the policies are being underwritten is changing,” Mills says. “So, from a sales standpoint, it’s incredibly important to be managing our

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December 2020/January 2021 | Canadian Underwriter

client expectations properly. It’s bringing communication to a level that wasn’t necessary, in some cases, in the past.” Even the simple stuff isn’t so simple anymore, she explains. With interest rates so low, insurers must get the technical fundamentals of pricing right, so underwriters are looking at everything under the microscope. That’s something brokers aren’t used to seeing.

“It’s the responsibility of the broker to be explaining to and educating our clients on the ‘why’ behind this analysis, and addressing and preparing them for detailed questions that they may not have been asked to address in the past,” Mills says. “That’s a huge challenge for the teams that are working on these risks for our clients. There’s a lot of stress right now, I think, in the market and for our clients.” There’s no such thing as a simple renewal anymore, adds Sarah Thompson, chief marketing officer at Hub International. A lot of remarketing is taking place. It’s hard to predict what an insurer’s appetite is going to be, and what capacity is going to be like in certain lines. “There’s lots of turmoil in the market — price increases, reductions in capacity,” Thompson says. “And so we’re having to navigate through that and keep our sales team apprised so that they can keep our clients apprised. We’ve dealt with lots of changes with the pandemic, with respect to wordings, new exclusions, and we’re having to advise clients of that as well.” In tough economic times, clients will naturally press their broker for cost savings. “I think it really highlights the importance of what it is that we do,” Rowe says. “And we have the ability as brokers to find ways to pass savings along to our clients.” Of course, brokers have to look out for their business as well, he notes. At some point, there will be pressure on revenue streams if the economic situation doesn’t get better — or worse, sinks further. “Obviously, we’re all thinking about that — that’s a concern,” Rowe says. “But, as a brokerage industry, as much as we’re concerned about that, we’re concerned about the well-being of our clients as well. I can assure you that brokers are doing everything in their power to make sure we’re finding [solutions] for our clients, be it alternative terms or better pricing in the marketplace.” Reasons for optimism Despite all the doom and gloom, there are reasons for optimism. First of all, brokers have demonstrated that they can indeed be counted on to help their clients. “I think that’s the real pot of gold at the

ECONOMIC OUTLOOK l FEATURE end of the rainbow for us here,” Rowe says. “When all this is over, I think we’ll have had ample opportunity to demonstrate to our personal lines and commercial lines clients the value of dealing with a broker and why it should be the unanimous choice for Canadian insurance consumers. We’re able to provide the advice they need, we’re able to provide the choice they need. We can advocate for them, whether that takes the form of planning options or some other creative ways to manage their insurance and the costs. And they trust us.” Insurers took time out to applaud brokers for what they have accomplished during the virtual Insurance Brokers Association of Ontario Convention held in October. “In terms of what brokers did themselves, and what you have been doing for your customers, I think this was a real time for brokers to shine. And from all reports, you’ve done a hell of a job,”

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said Paul Mlodzik, executive vice president and chief customer officer at SGI Canada. “I think this is really good news for the broker distribution channel.” The future is going to be tough, Louis Gagnon, president of Canadian operations at Intact Insurance, said at the convention. “The role of the broker will never be [as] important [as it will be] in the next 15 to 18 months — making sure we help the most vulnerable and that the people that deserve to get a break get a break.” Communication is also going to be essential to keep things positive. In fact, over-communicating will be necessary, according to Mills. “It’s the responsibility of the broker to be over-communicating where possible with clients, over-communicating with markets, and really making sure that they’re managing the clients’ expectations throughout the process,” she says. At a time when capacity is scarce, brokers will need to exhaust every avenue

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possible to find options for their clients. “In this situation when economic times are challenging,” Rowe says, “having the ability to provide choice to your client certainly provides us with the opportunity to help them manage any financial problems they’re having — either by finding a better price, or finding them better terms in the market as a result of having that choice option.” Keep in mind that, despite the broker’s best efforts, all that hard work may result in communicating information that the client doesn’t want to hear. “It could mean increased deductibles, higher costs, reduced coverage — and those are really challenging conversations to have,” Mills says. “We’re spending a lot of time ensuring that our brokers understand what’s going on, why this is happening, what the impact on our clients will be, and then they’re able to articulate that to the clients. And not just at renewal, but leading up to it.”

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FEATURE l TRUSTED ADVISOR SURVEY (PART 4)

TRUSTED ADVISOR SURVEY: PART 4

Wearing a new hat Asked what “value-added” services they are providing to clients, brokers say they are increasingly wearing a risk manager’s hat. That means giving their clients more holistic advice on claims, loss control, and risk mitigation. By David Gambrill, Editor-in-Chief

Photos: iStock.com/francescoch/feedough

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TRUSTED ADVISOR SURVEY (PART 4) l FEATURE

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hen it comes to providing value-added services to their clients, insurance brokers — particularly commercial brokers — are seeking innovative ways to help their clients with the claims and risk management side of the business. This is in contrast to the traditional, more limited view of the broker as an advisor on insurance policy coverage options and price alone — an “order-taker,” as some brokers refer to this sales approach. In today’s world, in the minds of both consumers and brokers alike, providing holistic advice not only on coverage, but also on claims handling, risk mitigation and loss control is increasingly becoming “table stakes” for brokers who wish to be seen as trusted advisors to their clients. “All of the leading brokers, I would say, are moving towards a risk advisor skill set and thought process,” David Pettigrew, president and CEO of Harvard Western Insurance in Saskatchewan, tells Canadian Underwriter. “That means helping educate clients on understanding their risks and navigating them, and then using insurance where necessary or desirable. It’s not just providing insurance-specific risk services. This is a trend, especially in the commercial insurance market. The more information the broker has available to them, the easier it is for them to transmit it to their clients, and the better position they will be.” The trend is confirmed in the results of our inaugural 2020 Trusted Advisor Survey, conducted during the summer months of the global COVID-19 pandemic. Canadian Underwriter asked an open-ended question to more than 180 brokers participating in the survey: “What value-added services do you provide your customers to increase retention and make sure you win the business?” Of the 173 responses we received from brokers, 35 answers — about one in five — emphasized the importance of providing holistic advice on claims, risk management and loss control. This compares to the next-highest answer of reviewing business contracts for insurance implications, which turned up in 23 (13%) of the responses. The third-highest answer was offering “personal” or “personalized” service to clients. The consumer demand for a more holistic approach to risk advice was also clear in the consumer portion of the survey, which was conducted in March 2020. There, Canadian Underwriter asked

more than 600 personal lines consumers and 165 business owners about whether they thought their brokers were “trusted advisors,” characterized by offering consumers choice, advocacy, and advice. Approximately 70% of both business and personal lines consumers agreed with the statement that their brokers were “trusted advisors.” But if almost everyone is a trusted advisor, how do brokers set themselves apart from each other in offering the best service to their clients? The consumer survey results provide a hint: Just 53% of commercial lines clients and 46% of personal lines clients agreed that their brokers told them about “ways to prevent loss or damage, helping [me] to reduce my premiums.” So, consumers would clearly like to see brokers taking more of a risk management/loss control type of approach. The trusted advisor survey shows that brokers already see themselves as offering more holistic risk advice. For example, when we asked brokers if they told clients about ways to prevent loss or damage, helping them to reduce their premiums, 93% of commercial brokers said yes, as did 83% of personal lines brokers. (In fairness to personal lines brokers, as one broker mentioned in a separate interview, it’s more difficult to provide non-obvious risk advice in the personal lines auto context. To take an extreme example, “Don’t crash your car,” is not particularly insightful advice for reducing a client’s auto premium, although if the client followed the advice, it would definitely help.) When we asked brokers an open-ended question about what value-added services they provided, many talked about the advice they were providing in the areas of claims, risk mitigation and loss control. In the claims area, many talked about establishing “concierge” services or 24/7 reporting centres. As for advocating on behalf of a client during the claims process, one broker reported taking a more proactive approach. “We attend significant claims, meet the service providers and adjusters, and in several cases have been able to negotiate coverage for our clients that had been previously declined.” Another broker reported having “a claims advocate in-house who helps walk through the claims process and ensures [clients] are happy with the outcome.” As for offering risk management advice, many

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FEATURE l TRUSTED ADVISOR SURVEY (PART 4) brokers appear to be assuming the mantle of a risk manager by coming up with a comprehensive risk management plan for the client. This includes not only offering insurance coverage options, but also discussing alternative means of risk transfer (e.g. other than through an insurance policy), such as self-insuring through a captive, for example. The trend towards offering risk management services speaks to a shift in how brokers may need to be trained and licensed going forward. As Brenda Rose, vice president of FCA Insurance Brokers, observes, there is providing generalized risk advice to business clients and consumers, and then there is getting into the detailed, nitty-gritty of specific advice on loss control measures, which may require a different skill set. “Providing [alternative] insurance options to address the risk — that it’s not just about a price, that it’s not just about buying more insurance — that’s one conversation,” Rose says. “The whole concept of risk control in a physical sense is an entirely different qualification, and not everyone who has just graduated and got a licence [as a broker] is equipped to do that. It depends on the nature of the risk that you are talking about.” Where brokers lack specialized expertise to make concrete loss control recommendations, the trusted advisor survey

suggests they are putting their clients in touch with experts who can. “[We offer] risk management services, including loss control strategies, partnering with [third-party] companies to support claims at claims time,” one broker in the survey reported. Another said it provides “risk mapping and risk management services to larger clients” through a partnership with a third-party industry risk management software provider. Some offer risk inspectors and risk control seminars. One broker reported leveraging 30 years of previous experience as an insurance inspector to provide “very advanced risk management services.” Taking the holistic view will mean seeing returns later down the road, as one broker in the survey suggested. It means taking a long-term view of the broker’s relationship with the client. “Earning trust is more important than winning the business,” as one broker in the survey commented. “Being a client’s trusted insurance advisor is ongoing, not tied to a single renewal or policy placement. Value-added service means breaking from the routine and constantly updating, reviewing, and questioning insurance programs. The broker must educate the client and provide solutions, with the client making informed decisions with such input.”

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DEAL TRACKER

Latest acquisition news & activity Intact

RSA

Intact Financial Corp. will take over London-based RSA plc’s insurance operations in Canada — as well as parts of Europe and the Middle East — if a deal announced in November gets approved. The proposed deal would cost Intact about £3 billion (about CDN$5.2 billion) and Danish insurer Tryg A/S about £4.2 billion (CDN$7.25 billion). Tryg would retain RSA’s Swedish and Norwegian operations, with Intact and Tryg co-owning RSA’s Danish operations. Intact would take over RSA in Britain and Ireland. At press time, the deal was subject to approval by RSA shareholders and regulators. It has been approved by all three companies’ boards.

Westland

Gillons

Westland Insurance Group Ltd., based in Surrey, B.C., has acquired Gillons Insurance Brokers Ltd., which has 11 offices in Northern Ontario. The deal came about a month after Westland closed the acquisition of two Alberta brokerages — Ironside Insurance Brokers (based in Carstairs) and G&E Insurance (based in Picture Butte). Gillons places business, auto, home insurance, as well as coverage for recreational equipment, including camper trailers, boats, ATVs, and motor homes, among others. Westland has made recent acquisitions in Winnipeg, B.C., and Alberta.

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WORKING REMOTELY

Future workplaces Many brokers turned working from home into a success. What lessons can we take with us when we return to the office? B Y N I C K N O V I N G E R , Regional Manager (Quebec), Canadian Insurance Brokers Inc.

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hen not in lockdown to avoid the spread of the novel coronavirus, many brokerage offices have reopened, with brokers settling back into the routine of working in an office building. But we can’t forget about how we adapted to a life of working from home. We pivoted quickly, adopted new technology, brought in new processes, and more. Those gains can’t be lost going forward. Not only do our businesses benefit, but so do our clients. After COVID-19 was declared to be a global pandemic back in March, many brokers in Canada were catapulted into a remote work arrangement almost overnight, whether they were ready for it or not.

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And we were successful. We proved we can change, despite our reputation. We just needed a catalyst to overcome the initial inertia around the status quo. This is an opportunity to re-imagine how — and where — a broker does their job. Let’s not go back to the old way of doing things. Brokers have invested heavily in technology infrastructure to update the way they work with each other and with clients. Brokers are seeing massive efficiency gains from simply replacing in-person meetings with video conferencing software. A broker that used to see four or five clients a day in-person can now see 10 or more online in the same amount of

time thanks to reduced travel time. Don’t forget, clients may still be leery of you visiting them, regardless of whether or not your staff has returned to the office (to say nothing of employees’ health concerns about being back in the office). While the pandemic stays with us, video meetings should be at the top of your list as a way to meet clients. However, even after the pandemic is over, you should still use video to communicate because of the efficiency it brings. How will that impact the broker-client relationship? Don’t you lose something by not seeing each other in person? Absolutely. But that’s where the broker needs to create more touchpoints for the

HANDBOOK client. A few extra virtual connections can help overcome the lack of physical connection as we maintain our distance. By automating a few processes and personalizing communications (no more generic messages), the digital connection can become stronger. We’re already communicating more digitally; the quality just needs to be better. To be successful long term, we’ll need to set ourselves up for success. The transition to working from home wasn’t easy for a variety of reasons. Bored children and lack of a proper workspace were common issues. So if brokers are going to work from home more often and achieve high productivity, they must create a degree of separation between work and home life. A dedicated workspace where you can close the door and achieve that mental focus is essential. Make sure your home setup is not hindering you. If you’ve put off fixing that loose internet connection because you figured the arrangement was temporary, maybe it’s time to get that done. You’ll be relying more heavily on technology, so make sure what you have works properly. Use working from home to your advantage. Since there are no physical events to attend for networking purposes, engage more with your neighbours. Get to know those who live around you. Who’s a small business owner? Who makes decisions for their company? You’d be surprised how far these simple conversations can get you. A simple wave in the morning while taking out the garbage can lead to an in-depth conversation about the economy and what businesses are doing to recoup losses. Brokerage leaders should support their staff in two key ways: communication and coordination. When communicating, use the right medium for the right ideas. Complex ideas are best communicated over video where facial expressions and other social cues can be picked up. Small, non-urgent requests are best made over email or some other messaging system like Slack. Also, communicating frequently with colleagues helps to prevent roadblocks and build trust. It can be hard to keep everyone synchro-

nized while working remotely. Formal processes are important, such as setting clear performance metrics, keeping documents up to date, and scheduling team lunches. One-on-one video calls at least once a week with a different person in the organization can be helpful, too. These types of meetings will help build teamwork and solidify the company’s culture.

Never let a good crisis go to waste, as the saying goes. Continuing to use tools that have made brokers stronger and more efficient can’t be forgotten.

Nick Novinger is regional manager (Quebec) at Canadian Insurance Brokers Inc. His website is www.novingerinsurance.com.

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recovery Live Event Risk p. 50 l Alberta Catastrophes p. 52

Photos: iStock.com

HIGHLIGHTS

ADDITIONAL INSURED

‘The most litigated insurance concept’ A lot of things can go wrong when a client agrees to add a counter-party to a contract as an additional insured. Here’s what your clients can do to reduce the risk of a nasty coverage dispute B Y G R E G M E C K B A C H , Associate Editor

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f your clients sign agreements that require one party to add the other as an additional insured, there is a risk that the actual insurance placed will not be suitable, insurance lawyers warn. Clauses requiring one party to add another party as an additional insured can appear in contracts for maintenance provision, equipment installation, commercial leases, and construction, said insurance defence lawyer Gemma Healy-Murphy of law firm Rogers Partners LLP in Toronto. “It could be one of the most litigated insurance concepts in Canada,” said Harmon Hayden, owner of B.C.-based Harmon Hayden Law. This is partly because the insurance placed does not always provide the coverage that one party or the other needs, he added. 48

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“The most difficult broker task is placing coverage for an already-signed contract that has language the broker knows an insurer may not be prepared to cover, or cover in the way required,” said Marcus Snowden, principal of Snowden Law Professional Corporation. “This is why getting the broker involved before signing is preferable.” Commercial lines brokers should also be sure to ask questions if they are uncertain about terminology that some contract lawyers use in agreements, or wording that may be specific to a given industry (e.g., leasing, construction, property maintenance, etc.), Snowden recommended. He added that commercial brokers often have access to legal counsel who can provide the required

input to ensure the clause in question is properly understood. “Again, this is done before rather than after signing the agreement.” What can go wrong? The insurance placed may not match the contractual documents or their contractual intent, said Hayden. For example, some contracts requiring one party to add the other as an insured have specified policy limits, said Healy-Murphy. “It may say, ‘You are required to take out a policy for the additional insured, with policy limits of $5 million,’” she said. “And maybe it turns out that the policy was put in place for $2 million.” As Hayden observes, “sometimes the parties themselves may not have enough sophistication to understand what it

ADDITIONAL INSURED l RECOVERY really means to add another party as an additional insured and the scope of coverage that provides.” In general, what can parties to a contract do to reduce the risk of a dispute if one of those parties must place insurance for the other? “Coverage placement is never guaranteed, particularly in hardening markets like the one developing now — so even the best commercial brokers will sometimes have difficulty placing a given risk,” Snowden said. Snowden represented Economical Mutual Insurance Company in a coverage dispute with renewable energy firm Sky Solar (Canada) Ltd., which was named as an additional insured on a policy written by Economical for contractor Marnoch Electrical Services Inc. Marnoch installed equipment for two of Sky Solar’s Ontario renewable energy projects, one in Brampton and one in Bolton. Fires occurred at two of those projects after those projects were transferred to Firelight Solar Limited Partnership.

Sky Solar had to compensate Firelight Solar Limited Partnership to the tune of nearly $600,000. Economical denied Sky Solar’s liability claim and a coverage dispute ensured. Economical won and Sky Solar appealed. In Sky Clean Energy Ltd. (Sky Solar (Canada) Ltd.) v. Economical Mutual Insurance Company, released in September, the Court of Appeal for Ontario ruled in favour of Economical, dismissing Sky Solar’s appeal. The coverage dispute was over what it means when an additional insured is covered for something “arising out of operations” of the client who buys the policy. Marnoch had an endorsement on its Economical policy covering Sky Solar as an additional insured. That endorsement covered Sky Solar “with respect to liability arising out of the operations” of Marnoch. The fires at the solar power sites were blamed on transformers that were supplied — but not manufactured — by Marnoch. Those transformers were selected by Sky Solar, not by Marnoch.

Ontario Superior Court Justice Peter Cavanagh concluded there was not enough “proximity” between Sky Solar’s decision to use the transformer it selected and Marnoch’s actions to order and install those transformers to determine that Sky Solar’s liability to Firelight arose out of Marnoch’s “operations.” In the end, Hayden observed, the court decided that the damages arose out of Sky Solar’s own independent alleged negligence. So that meant that Sky Solar’s alleged negligence was outside the scope of coverage provided by the additional insured endorsement on Marnoch’s policy. Sometimes when one party is required to add another party to its policy, it does not actually comply with its part of the bargain. “You want to get that insurance as soon as possible,” says Healy-Murphy. “Often times, that step might not be taken. Only later on, when there is a problem, do you find out the coverage was not put in place and that you were not added as an additional insured.”

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RECOVERY

INSURING LIVE EVENTS

The show must go on The new COVID landscape means looking for alternative ways to mitigate claims risk at live events B Y S C O T T C A R R O L L , Executive Vice President, Program Director, Take1 Insurance

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here’s no denying it: The effect of COVID-19 on the live events industry has been nothing short of catastrophic. An industry that at one time was riding higher than ever before was put on hold in an instant. But live events aren’t gone for good. Until some sense of normalcy returns, every single person looking to stage a live event, experienced or otherwise, must creatively adapt in order to recover. And their insurance brokers and risk managers must follow suit to avoid a claims nightmare. The live events industry will make a comeback because of an unprecedented pent-up demand for live entertainment. As a whole, the industry has been lucky enough to come out of previous national and global calamities relatively unscathed. For instance, after 9/11, people didn’t stop attending movies, concerts or sporting events. In fact, a recent report from Investopedia found that despite the lasting impact of the plane attacks on North America’s collective psyche, 50

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the economic and financial impact was fairly muted. Markets bounced back within months of the tragedy. In 2001, much like today, many were mentally anguished, but at least they were able to go out and entertain themselves. The impact of COVID has changed that reality drastically, such that I believe there will be more events than ever before and people will be eager to attend. That said, until the risk of COVID is managed to the point that social distancing regulations can be relaxed, the live events industry will have to adapt and so will their insurance providers. What is the concert industry doing to manage the risk? Many artists are presenting streaming concerts; fans pay money for tickets just as they would at a regular venue. And when concert-goers return to live venues in some form, don’t expect the virtual element to disappear. Given capacity limits and social distancing guidelines, concerts will continue to be streamed online, at least for the next

several months, so as to not lose out on significant chunks of revenue. That means the insurance industry must be prepared for a streaming element to concerts, as well as the associated risks, including internet crashes, malicious hackers, and more. For example, a free virtual concert staged by the Israel Philharmonic Orchestra in June was disrupted by a suspected cyberattack, preventing tens of thousands of viewers worldwide from watching and participating in the event. Just imagine the claims scenario if those virtual viewers had paid their hardearned money to attend. Brokers and risk managers should ask the insured venues more questions to get a clearer sense of potential claims that may await. Most notably, what are they doing relative to their duty of care in managing the pandemic? This way, the broker and risk manager could provide recommendations on safety that the live event producer may not have con-

LIVE EVENT RISK l RECOVERY sidered. Our industry can provide this critical service to help clients navigate through these uncertain times. Furthermore, from a business perspective, talking to a client about their specific business risks is a good positioning tool for the broker when pitching the insured to the insurance company. In other words, when an account is submitted to the underwriters, it’s never submitted blindly. Rather, the broker has spent some time discussing what the insured is doing to manage risk — especially if they’re in the public view. If a venue, for example, is taking all the necessary precautions to avoid a claim, that becomes a bargaining chip. When an insurance carrier likes what they hear, they become more comfortable insuring a particular client, raising the likelihood of that account being accepted. Of course, live events are not limited to the traditional venue. Prior to COVID-19, the industry was expanding at an unprecedented rate across the

world. Citing an August 2019 report from Allied Market Research, the global events industry was valued at $1.1 billion in 2018. It is expected to grow by 10.3% (or $2.33 billion) by 2026. The reasons for staging a live event are various: increasing business profitability, celebration, entertainment, and supporting community causes, among others. The scale can range from a massive corporate event down to a local carnival. One example of a local event is organized by a large brewery insured by our company. Before the onset of the pandemic, they routinely staged concerts for around 1,000 people per show. The brewery also happens to own a large field not far from their location. When COVID struck, they saw an opportunity to get creative. An event service firm provided a stage and the brewery began hosting a series of socially-distanced concerts. Each party separated into their own individual squares — six feet apart.

From our perspective, as live event insurance providers, this was anything but ordinary. This really isn’t a venue and we’re not dealing with a concert promoter. However, this was a forward-thinking entrepreneur who saw an opportunity to fulfill a consumer need. They were willing to provide detailed answers to the areas of concern we identified. Together, we made the concert work safely for everyone involved. Even though, from a risk management perspective, not all of the things you would look for were present, together with the client, we were still able to manage this event as effectively as possible. That’s a service we should be able to provide. We will have to adjust as clients continue to capitalize on a desire for safe and engaging entertainment options.

Based in California, Scott Carroll is a commercial broker/underwriter focused on live event safety.

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Photos: iStock.com/51Systems

RECOVERY

ALBERTA CATASTROPHES

Mother Nature’s wrath Alberta continues to endure the most expensive insured weather events in Canada. What’s happening and what can be done about it? B Y D E R E K C L O U T H I E R , Canadian Underwriter Staff

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lberta is no stranger to natural catastrophes. The province holds the notoriety of enduring six of the Top 10 insured disasters in Canadian history. Whether it be flooding, hail, or forest fires, Albertans have seen Mother Nature wreak havoc on the Wild Rose Province’s home and business owners over the years. And with the increased risk of costly claims comes potentially higher insurance premiums. “Insurance is about risk,” said Bob De Pruis, western director of consumer and industry relations for the Insurance Bureau of Canada (IBC). “Some geographical regions across the country are at higher risk for specific perils, and premiums are commensurate with risk.” De Pruis would not comment on the specific cost of insurance premiums in Alberta, given the competitive market and varying rates between providers. A recent

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home insurance study by LowestRates.ca found that personal property home insurance rates in Alberta increased by 1% in 2020 Q3 over the same period as last year, while condo insurance rates soared by 16%, which LowestRates.ca attributes in part to damaging weather events. Speaking hypothetically, De Pruis observed that some individuals and companies in the property and casualty insurance industry might look at regions differently based on the regions’ risk profiles. Judged by the numbers alone, Alberta may hold the title of the riskiest region in the country. By far, the costliest insurance claim in Canadian history was the 2016 Fort McMurray wildfire, with $3.9 billion in insured damage. (This spring, insurers paid out an additional $522 million for damage caused by flooding in Fort McMurray.) The 1998 Quebec ice storm is

second, trailing far behind at $2.3 billion. Flooding in Southern Alberta in 2013 is third at $1.7 billion. Next was a June 2020 hail and rain storm in the Calgary area that cost insurers $1.2 billion. Alberta claims three spots in the Top 4. And with three more spots in the Top 10 — the 2011 Slave Lake fire, the 2014 Central Alberta hail and wind storm, and Calgary’s 1991 hail storm, each with a price tag of nearly $600 million — “risk” seems to be Alberta’s middle name. Kyle Brittain is a meteorologist for The Weather Network in Alberta. He points out that five of the province’s most significant weather catastrophes have occurred over the past decade. “While long-term trends are assessed over longer periods of time, it certainly seems as though there has been an uptick in high-impact weather events in Alberta in recent years,” said Brittain,

ALBERTA CATASTROPHES l RECOVERY adding that Alberta can also see severe winter weather and tornadoes. “Alberta’s unique geography makes it somewhat prone to these weather events, which can impact all areas of the province.” Brittain said the urban interface areas of the boreal region in Northern Alberta and along the foothills in Central and Southern Alberta are most impacted by wildfires. Flooding can be prominent due to a number of factors, including large mountain snowpack, a saturated ground from previous precipitation, and large, slow-moving and moisture-laden low-pressure systems that bring heavy rainfall. “These terrain influences don’t exist in all areas of the country to the same extent,” said Brittain. “While devastating overland and river flooding can impact all areas of Alberta, the costliest floods have occurred in cities within 100 to 200 km from the foothills.” Hail makes up the trifecta of severe weather events Alberta sees on a yearly basis. Once again, those majestic Rocky Mountains are to blame: They force moist air upwards, generating thunderstorms. “Alberta’s high elevation results in the freezing level being closer to the ground, permitting more hail to reach the ground, which can be very large in severe thunderstorms,” said Brittain. “While severe hail can impact all areas of Alberta, it tends to be most frequent from the Calgary area up into central sections of the province, from the foothills east into the heavily-populated QE2 corridor [the highway that connects Edmonton and Calgary].” But as De Pruis points out, severe weather is only one factor impacting the insurance market. “Other factors like non-weather-related claims, low interest rates, increasing replacement value of property, repair/ rebuild costs, and global reinsurance costs,” he said, “are all factors impacting the insurance market.” The insurance industry is advocating for the strengthening of building codes and amending land-use planning to help reduce the chance of loss or damage. One such measure would include avoiding floodplains, where risk of flooding increases substantially, which result in hefty insurance claims.

More people, more catastrophes In addition to mentioning that the weather has changed over the past few decades, George Hodgson points to another reason behind the increase in catastrophic weather events in Alberta: Population growth. “We are seeing a lot more catastrophic events here, but I think damage from the catastrophic events, or at least the dollar value, has a lot to do with the fact that there are a lot more people in Alberta,” said Hodgson, the CEO of the Insurance Brokers Association of Alberta. “We’ve often been building in places where catastrophic events have always happened.” Hodgson points out that in 1990, Alberta’s population was around 2.5 million, whereas now, that number has grown to more than 4.4 million, nearly an 80% increase over 30 years. “I would be willing to bet that a very significant majority of those people are living in an area south of Red Deer,”

said Hodgson. “If you have more people living in the hail belt, there are more houses in the hail belt, with more vinyl siding in the hail belt, those catastrophic events are going to cause a significant amount of greater damage than it would have years ago.” The situation has raised eyebrows within the Canadian reinsurance community, which has voiced concerns in the past about Alberta being prone to natural disasters. But Hodgson notes that global reinsurance companies tend to take a long-term view, looking not only at Alberta or any specific region, but Canada, the U.S., and North America as a whole. They know some higher-risk areas like Alberta and the Gulf Coast regions, for example, can be challenging to insure. “It’s not that Alberta has had a [Hurricane] Katrina event or that type of thing,” Hodgson said. “What we’ve had is multiple events…We’ve had fires, hail storms, floods…We’ve had them all.”

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peer to peer

FORENSIC ENGINEERS

UNDISPUTED NEUTRALITY In a world where insurers are amalgamating claims service offerings, third-party forensic engineers can bring to the table a neutral, unbiased perspective that is void of any potential for a conflict of interest, says Chris Giffin, chief executive officer of Haag Canada. – As told to Adam Malik

Change is exciting. Since I began supporting the Canadian property and casualty insurance industry with forensic engineering services just over three decades ago, it has been a pleasure to watch the industry landscape evolve, ushering in an era of collaboration and innovation. As multi-disciplinary forensic engineers specializing in large loss, we fulfill an inherent societal need, which is helping our insurance clients definitively ascribe liability by identifying cause, quantum, and mitigation of loss. Our value proposition is rooted in our unbiased service offering and being completely void of conflict of interest.

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It has been hugely beneficial for the industry to have insurance organizations amalgamate their service offerings to better assist customers. We are observing a migration away from a hyper-specialized approach. The customer experience has never been more streamlined, allowing a one-stop shop experience and a reduction in excessive resource expenditures that typically coincide with specialization. It is inevitable that the merging of resources will increase the potential for conflict of interest, but therein lies opportunity. While companies can do their best to establish processes to mitigate the potential for bias, the only infallible process

is to retain a truly third-party unbiased partner. When appropriate, it is increasingly vital to have access to experts who are void of the appearance of conflict in order to fairly and accurately establish the unbiased root cause of a loss. As the industry ecosystem changes, one thing remains true: The potential for a conflict of interest can undermine value propositions, particularly during commercial, large loss cases involving a complex set of stakeholders. That’s when a team of unbiased, multi-disciplinary forensic engineers can be a beacon of neutrality shining through the chaos.

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