What’s on Dec? | Episode 10 | 2024 Executive Outlook – Part 1

Canadian Underwriter’s 2024 Executive Outlook asked the country’s top insurance industry leaders how 2024 will be different than 2023. Many predict next year will look similar when it comes to NatCats, high inflation and interest rates, labour shortages, geopolitical conflict, hard insurance markets and rising auto theft.

Hear Intact’s Louis Gagnon, Aviva Canada’s Urs Uhlmann and Lloyd’s Canada’s Marc Lipman offer their take on what’s in store for 2024 — including observations about recruitment and retention, industry collaboration, and ‘whole-of-society’ approaches to resolve issues facing the insurance industry.

This is our first of two podcasts featuring industry execs’ outlooks. Tune in after the New Year to hear our second podcast, featuring three more executives.

 

Audio transcript

Intro: You’re listening to What’s On Dec?, the Canadian Underwriter podcast, focusing on the hottest topics in the P&C community, featuring insights, analysis, and interviews with subject matter experts throughout the year.

Curt Wyatt:

Welcome back everyone to What’s On Dec?, the Canadian Underwriter podcast with Pete Tessier and myself, Curt Wyatt. Hey, we’re excited to be back and we’re excited to have our sponsor back on board, Taycon Risk, the MGA that specializes in niche markets, hard to place unusual, complex commercial risks. They turn hard risks into smart coverage the old-fashioned way, they underwrite it. Check out DRUM, their Digital Rating Underwriting Management system for your automated submissions. Bang the drum with Taycon. That’s taycon.ca.

So Pete, what do we have coming up this episode of What’s On Dec?

Pete Tessier:

Well, we’ve got three great executives in our first episode. So we’ve got Urs Uhlmann, who’s the managing director for corporate and specialty at Aviva Canada. We also have Marc Lipman, who’s the president of Lloyd’s of London, Canada, who is maybe Canada’s biggest insurer that’s not a domestic market. Excited to have Marc here. And of course we’ve got Louis Gagnon, the CEO of Canada for Intact Financial Group. An amazing group of executives, different insights, different viewpoints, but all of which are seeing the market from a very broad view, 30,000 foot view, but have incredible insight into what’s driving some of the changes that we’re going to see as we leave 2023 and head into 2024.

Curt Wyatt:

Pete, there’s lots of change within the industry. There’s drive into ’24 that includes things like AI, big data, we’re talking workforces returning after the pandemic. We have legacy insurers that have done a great job of maintaining an environment that’s kept insurance on the forefront so that the economy can keep running.

Pete Tessier:

Yeah, none of these executives have a crystal ball, but they’re sharing with us some insight as to how they think the world’s going to change for us when it comes to insurance, what the year of 2024 could bring based on some different variables. But they’re all getting asked the same questions and they all have a slightly different take on what they’ve got when it comes to an answer and their viewpoints.

So Curt, we should probably dive into this and get in with the first question and our guests.

Curt Wyatt: 

We’re here with Louis Gagnon from Intact. Louis, your voice will speak volumes to the insurance industry in Canada as we review what’s happening. How do you expect 2024 could be different for the industry than what we’ve been seeing in this past few years and what are your basis for saying that?

Louis Gagnon:

First of all, Curt, usually people don’t talk about my voice. They talk about my accent, and that’s how they recognize. But that’s another topic. So yeah, so we could expect, I think in 2024, continuity of what’s happening in 2023. Right? I think there is some, I would say some heavy trends that exist in the market right now. Inflation’s continue to lingering and it creates tension and I would say it could also create a bit more social tension at the same time because of pressure on many folks to pay their bills.

So again, that is definitely something that we will continue to see. I mean, the economy seems to slow down a bit also at the same time that inflation is creeping. So again, create a bit of uncertainty for sure going forward, cost of repairs continue to go higher. I think also that we’ve had a pretty tough year on the climate side in 2023.

Should we expect the same thing in 2024? Difficult to predict, right? I mean, this year was kind of really high. I mean, it was not our worst year in percentage. We’ve seen when we had flood in Calgary and in Toronto the same year, that was pretty bad. Fire in Fort Mac was also a pretty bad year. So you have those peaks and valleys that we’re expecting in 2024, but we know that there’s three times more catastrophe than there was 30 years ago, four times more, sorry. And so again, definitely we will continue to check that.

And third, I would say that the risk around cyber continues to be not just for the industry as a coverage, but also as company to protect themselves on cyber and for brokers to protect themselves against cyberattack seems to me also a big threat. And that will continue in 2024.

Pete Tessier:

Marc, we’ll let you follow up after Louis here, if you don’t mind.

Marc Lipman:

Every year is different than the prior year, right? Some may be more so than others. I think 2024 will look and feel different, and I think there’s a couple reasons for that. We’re still gripped by inflation, but it seems like we’re starting to get the handle on that and maybe that will help in terms of loss trends, maybe it will help the term of investment portfolios, but it’s a storyline onto itself.

I think the market is changing, right? I think competition is heightening within Canada. I see it from our traditional domestic colleagues. I see it from companies that have traditionally been reinsurers getting into the direct business, either directly or indirectly. And I see it from some notable new entrants into Canada that have really sort of gone up and running late in this year and I think will probably make their mark in 2024 and going forward. So I think the competitive landscape is certainly different and will have its own impact.

The last thing I would sort of point to, and maybe I’m fudging my answer a little bit, ’cause it’s not like we haven’t had enough uncertainty in past years, but I don’t expect that to change. I think what will be consistent is the fact that things are going to happen that we weren’t planning on. And whether that’s major Nat or manmade Cat events, whether that’s geopolitical tension and conflicts that continue or escalate or are new, whether it’s major cyber events, I think what we’ve learned from the past couple of years is something is always coming. You might not be able to predict what it is, but something will be there.

Pete Tessier:

And we’re going to let Urs Uhlmann come in here and bat clean up. And Urs again is the managing director for global corporate and specialty, Aviva Canada. So Urs, what’s your sort of take on what to expect for 2024 and how could it be different than 2023?

Urs Uhlmann:

Well, first I guess I want to say that we’re cautiously optimistic for 2024. So I certainly think that COVID is kind of behind us. Certainly the economic fallout of COVID has settled a bit. Inflation, if you listened to, I guess the federal government a week ago, says it’s going to come down. Hopefully not into a recession.

Certainly all those have been factors and drivers for what we experienced over the last number of years. So I think a lot of that is behind us.

I do believe we’ll see a little bit more stability in ’24 than we’ve seen before. I guess there are still pluses and minuses on both sides of the ledger that will influence the year. Depends a little bit in which area you play, but all in all, I would think more stability than we’ve seen.

Pete Tessier:

So the next question we want to ask you guys is will the industry make some headway in 2024 when it comes to the challenge of recruitment and retention of staff and people? It’s long been an issue. What do you think is going to happen in 2024?

Urs Uhlmann:

Oh, I think you’re certainly only as good as your team first and foremost. And it has been a struggle. I don’t think just in our industry and probably still to some extent it is. I think all around it has been a struggle. You just need to go to a restaurant for that matter. But I do think we have a strong team and I do think that the industry as a whole generates an awful lot of opportunities. We haven’t been as effective and haven’t been for a number of years to bring that to the talent out there.

I do think it’s getting a bit better. Even that is settling down a bit. When we look at the attrition ratio that we have as a company or that the industry has, it has come down from somewhere around 16% to 10%. So it’s settling there a little bit more as well. But clearly it is very high on any executives’ radar, I would think, to make sure we have the right talent, we have a strong team that helps us service our customers and achieve the goals that we set ourselves.

Louis Gagnon:

Yeah, you know, I think COVID created a lot of new thinking from employees and workers in general in the economy of deciding if they were at the right spot. I think people were re-questioning their positions in their career and also as a job. And it created a lot of in and out in many industries, right? So a lot of industries have seen people trying them out, people not liking it. It was not exactly what they were expecting.

So we saw a lot of that. So, you saw a lot of movement from the hospitality to the insurance business to the construction business, and while that business was suffering. And we saw that in ’21, ’22, lots of movement, lots of attrition, difficult to exactly satisfy, I would say, the needs of these employees on the professional side really there because I think that was the expectation.

We’ve seen a lot more stability in 2023 for sure. Attrition is now nearly at the same level that it was in 2019 in most of our areas. There’s a bit more work that’s been done in training, in making sure that the onboarding… so we up our onboarding to another level. We’ve really tried hard to make sure that we understand what drives people. We have now, in Intact, some people that are taking care of careers directly, that we have a career centre where people can have access to information.

So again, lots of stuff has been done to improve that. On the broker side, I think we’re also at a better place. I look at what’s going on in the market, talking to brokers. They seem to be in a better position. There’s still, I would say, a lot of work to be done to attract people in our industry, right Peter? We’ve been talking about that for many years. How do we make sure that we make our industry attractive, that’s something that people will look for? And I don’t think we’re there yet, right? We’re still lagging, but lots of work to be done by associations, brokers association, industry association, the Insurance Institute. I think there’s a lot of work to be done by all these organizations to raise the image of the profession because it’s a pretty cool business, right? It’s a pretty cool thing that we… It’s a gig that can last for a long time, right?

Pete Tessier:

Insurance is freaking awesome, let’s put it that way.

Louis Gagnon:

And the thing is, and we’re helping people and that’s something that people don’t see. We’re really helping people, right? We’re there to be there when things are tough.

Marc Lipman:

Well, it’s got to make some headway, doesn’t it? Right? I think we’ve been talking about the problem probably for far too long now and doing not enough about it.

I guess, got a couple of answers to that for you, Curt. On a very tactical level, I think we’ve been too reactionary. You lose a sixth year underwriter, you got to go out and replace the sixth year underwriter. Right? So of course there’s a challenge in finding that if you’re looking for that exactly.

I think what we’ve got to do as an industry is step back, put in the hard work and the time it takes to build a really healthy pipeline so there’s always that bench strength there for the next person to stand up, right? And that means competing with all sorts of industries at the university and college level and alternative sources, right? To bring people in, to start them early, to train them. And so when a person departs, whether it’s for an alternative opportunity or because it’s a career change or the end of a career, we’re not always so reactionary. And I think that in itself will make a big difference.

But the other thing I think that’s really important for us to keep mind of, and I think the industry in Canada is doing a decent job of it, is if you think of talent like a pyramid – the bigger the base, the stronger the structure ultimately is, right?

And we have to continue to really embrace diversity on focusing, on drawing on talent from sources that haven’t traditionally been where we look. There are too many people in our industry that continue to look like Marc Lipman being a white male, and we need to change that.

So Lloyd’s has established hard targets about diversity in our marketplace. And globally we aim to have at least 35% of our leadership being women, and we try to hire one in three in terms of from an ethnically diverse talent pool, right? So we’re challenging ourselves to try and hit some really specific numbers so that as an industry we look different, so as an industry we think more broadly and bring a diversity of thought and ideas in, and so that we have a richer and deeper talent pool.

Curt Wyatt: 

Urs, there’s no lack of industry collaboration, let’s face it. But the fact is we want more. I mean, end of the day there’s problems to solve and as an industry, we need to get to the table. Do you expect to see more collaboration in 2024?

Urs Uhlmann:

Well, there is and there is not. I think first and foremost, we are quite a competitive industry. It maybe not always appear like that as consumer, but it is a very competitive industry and there certainly is areas where we can collaborate and there is others where we don’t. I guess just a vertical collaboration, which is just along the value chain. So probably most prominent for an insurer would be insurer-broker. But there’s also a number of suppliers, particularly on the claim side that are engaged.

And I do think that there is opportunity to deliver a better outcome for the consumer if we collaborate more effectively. And we see at least attempts at it. But I think there’s lots of opportunity for us as an industry to do better there.

I think for example, if you think of sustainability, clearly we can collaborate more effectively. I think a lot of customers, more so in the commercial space, do need help to figure out how can they gear their business toward a more sustainable future and make sure that they can answer the requests they get from their customers.

And I think as an industry we can help them and that needs collaboration between the insurer and the broker and in some cases even our suppliers.

And then of course, it’s what I would probably call the vertical collaboration, which is a little bit more tricky amongst us friendly competitors out there, but there too is a need and opportunity to do that to the good of society. I mean, you only need to open a newspaper. Everybody now finally talks about the increased car theft in Ontario and Quebec and clearly industry collaboration there has been helpful and is helpful.

Louis Gagnon:

Curt, I think there’s a lot of work being done to collaborate more on many topics, but I’m going to be a bit controversial here. And I think one of the things that we have not been very good at, it’s to make sure that we explain to the regulators, the government, that we are a very highly competitive industry and we are very often seen as one. I mean, government or regulators are going to take a position on everyone’s going to be affected by the decision of the government regardless of who you are, what you do, what’s your profit, how do you perform in the industry, so everyone is painted with the same brush. And I think that’s something we have to start talking more about is how competitive our industry is.

There’s 21 markets in Ontario that are writing auto insurance that are very active. And when I say active it’s people are fighting every day for every piece of business that’s out there. And that’s just in auto. And you talk about commercial lines, it’s the same thing. You look at other industries right now and the other industries, there’s some three players in many places, four players. And so we have to collaborate, but at the same time, we also have to explain that we’re collaborating for the better good of the economy, of society, but at the same time, we are a very competitive environment.

And that’s the danger of speaking on one voice all the time. It’s to give the impression that we are all the same, we’re all doing the same thing and we all do, we don’t compete against each other. So let’s make sure that we find the right spot, the right things to talk about it as a group, but let’s make sure that we promote the fact that we are a very, very competitive business.

So again, it’s a bit of a dilemma, I have to admit there. Because there’s a lot of stuff we have to solve as a society, climate change and our approach. And at the same time, let’s make sure that we have our own voice. Again, it’s a bit of a dilemma.

Marc Lipman:

I’m actually fairly optimistic around collaboration within the industry. Because I think there’s some really good examples out there. Just sort of homegrown in the Lloyd’s shop, we have the Lloyd’s Lab, which is an award-winning space for insurtechs to come and to really develop their ideas and business propositions not only within the Lloyd’s ecosystem but the greater London system.

And so we have all of this collaboration coming from non-traditional insurance thought leadership to really create new insurance products to drive efficiencies, to think about new sources and ways to use data and analytics. So I think that’s a great example.

More broadly, I looked this past year to the success of the UN Grain Corridor, an initiative to try and help facilitate the export of grain out of Ukraine through the Russian embargoes. I think we all know what was going on with food availability and the prices globally, and that program was a global insurance initiative where carriers from all over the world were taking a piece of that risk to help ensure the shipments of grain out from Ukraine through the Black Sea.

I think basically as it stands now, over 1,000 shipments of grain were sent out, 30 million tons of grain to help feed the world, to start to bring down prices of food again. That’s a huge success. And just like insurance and our industry, we don’t celebrate and talk about that stuff enough, but it’s there.

And closer to home, the industry is working hard together to try and build a collaborative model, not just amongst ourselves but with government to backstop some of the systemic risks that are particularly pertinent in Canada. I think currently the focus is on flood, but earthquake is supposed to be included. I think most of us in the industry would suggest to you that earthquake really ought to be the focus. Don’t think the federal government’s quite ready to get there yet, but at least they’re in the room and talking finally after a decade or more of calling for them to come and help us. Canada remains the only G7 country that doesn’t have some sort of government backstop or program to help with some of these critical systemic risks. So at least we’re starting out down that road.

I think collaboration in the industry is possible. I think some of these huge systemic risks that we’ve had to endure over the past couple of years have really demonstrated the need for it and brought people together, perhaps more initially than they would have been previously.

Pete Tessier:

Louis, we’re going to let you bat clean up here. I know the industry often wants to have these whole-of-society solutions, and that can be really difficult to figure out and then get momentum. Do you think that’s going to change in 2024? Are we going to be able to move as one or closer to moving as one as we move forward for change and adjusting to the market and some of the realities we’re all facing?

Louis Gagnon:

I don’t have a crystal ball on that one, Peter. Pete, I think you know, I mean, I’m a member of IBC. I’m an active member of IBC. I discuss with IBAC on a regular basis. I try to get involved with climate groups to make sure that there’s a real sense, or to connect the dots between all those organizations and again, try to explain those things. It’s a tough one.

Interests are diverging from from one constituent to the other, from one government, even from one government part to another, to the difference between even civil servants and elected officials and regulators. You always have different opinions on those things. So should we do better? We should. It’s a tough task.

As I said, we’re lots of competitors, lots of people involved, and that’s the beauty of the business. That’s the beauty of the business. It’s the beauty, but at the same time makes it a bit more difficult to move in one direction. But the thing is we have to, as I say, select the one we have to move on as a group, and make sure that it is done with consultation, not with consensus. Tough to have consensus with that many stakeholders, but again, let’s do our best. But tough, tough one.

Marc Lipman:

Whole society challenges are big problems by definition, right? Otherwise, we wouldn’t be calling them whole society. I think there is a limit where insurance alone can’t shoulder the entire burden. And so I do go back to the idea of really trying to build some fruitful partnerships with, whether it’s government bodies, other kinds of UN bodies, depending on the kind of risk we’re looking at. I think that can be really helpful.

I also think sometimes the old saying about, “How do you eat an elephant? Well, you do it one bite at a time.” When you think about some of the new product development that’s becoming out to address some different kinds of natural Cat risk that seems to be uninsurable right now, whether it’s forest fire in certain parts of the United States and perhaps soon Western Canada as well, where they just simply can’t get insurance, or whether it’s clarity around cyber coverages and state-backed cyber activities or various kinds of parametric coverage. Sometimes these incremental changes and new product development can have a really oversized impact on addressing those society-wide challenges you talk about.

I think the introduction of parametric products and not necessarily to indemnify a person to make them absolutely whole, but to address immediate needs very quickly with certainty, go a long way. And we’re seeing new products and technologies that are starting to make wildfire risk in California insurable again. Certainly those of us in Canada from the Lloyd’s market are eyeing those developments very carefully hoping to bring that technology and those insurance solutions north of the border as well in 2024.

I think there’s a lot out there. I think there is the goodwill for the entire industry to collaborate around whole-of-society solutions. I think there’s also a lot of individual players nipping at the elephant to try and get the job done as well.

Urs Uhlmann:

Well, I would think maybe we could claim that we had some success on the whole society solution when it comes to car theft. I believe that the provincial government just announced that they’re going to spend 18 million more on law enforcement on car theft, and while insurers and other parts of society already have tried to tackle that problem, the provincial government now is coming in as a partner as well.

And I will claim that at least as a little victory in whole-society collaboration, and there certainly is much more needed. It’s the same topics again, I guess again, around sustainability, around natural catastrophes. There certainly is much more that can be done, and I do think we’ve been trying for a long time, particularly when it comes to natural catastrophes to achieve, to get to a better level. And while we may not see the big breakthrough in ’24, I do think we’re getting close.

Outro: Thanks for listening to What’s On Dec?, the Canadian Underwriter podcast.