Brokered Concerns

Industry stakeholders gathered at the 92nd gathering of the IBAO Convention in downtown Toronto from October 17 to 19. Building on the convention’s theme – Leading the Way: Our Vision, Our Brand, Our Strength – attendees were treated to an array of educational seminars addressing topics ranging from social media and online marketing to creating a winning sales culture and enhancing customer connections. The centerpiece of the gathering was a lively discussion by CEOs of some of Canada’s largest insurers.

USE OF PREDICTIVE ANALYTICS

Despite the need for insurance brokers to make greater use of predictive analytics computer software to offer lower-risk customers better rates, the industry has not done a good job of explaining the benefits to both customers and policymakers.

At least that was the view of some members of the CEO Panel, members of which represent some of Canada’s largest insurance firms, at the IBAO Convention on October 18.

Used properly, analytics are can serve as an aid to support an underwriting decision, said Alister Campbell, CEO of The Guarantee Company of North America. “The tools are getting more powerful, the databases are getting bigger and the analytic tools give you these statistical correlations that are harder to explain to a broker and a customer,” Campbell pointed out.

“It allows us to get proper pricing so that people actually get the right price for the right risk,” Maurice Tulloch, president and CEO of Aviva Canada, added.

Brokers need to look at firms with different risk selection criteria, Campbell noted, adding that if fewer variables are used, the result is narrower ranges of prices.

“If you get us down to five questions, you don’t need a broker. The machines can do it and the customers can do it themselves,” he added.

“We have done a very poor job as an industry in articulating the benefits of predictive analytics,” suggested Karen Gavan, president and CEO of Economical Insurance. “We have to do a much better job as an industry, and as brokers, in supporting and pointing out the benefits of using predictive analytics.”

Limiting the number of indicators that are available, however, is a concern. “If we cannot ask a customer where they live in order to insure them, I don’t know where we’re going,” said Jean Francois Blais, president of Intact Insurance Company.

“If we’re allowed to use lots of variables, we will be able to nuance and select within those codes,” Campbell said. He cautioned that analytical tools “are moving ahead of strategy” and the industry is at risk of being “on the wrong side” of public policy.

“The one thing you [brokers] don’t ever want to do is to put the person selling your insurance for you in a position where (they) can’t explain fully, completely and in an understandable and acceptable way to their customer, why it is they’re paying what they’re paying,” said George Cooke, president and CEO of The Dominion. “Unfortunately in the world we live in today, that isn’t always the case.”

PREVENTION QUID PRO QUO

Extreme weather events look to be on the rise, with little indication that they will abate in the short or long term. Given this climate change-induced reality, it seems inevitable water-related damage will increase in step.

Homeowners who do their part to mitigate insurable water damage by installing protective equipment should be rewarded for their efforts, suggested Maurice Tulloch, president and CEO of Aviva Canada, during the CEO panel.

There is no denying climate change is here, Tulloch said. “We’ve had hailstorms, we’ve had Slave Lake, we’ve had flooding, we’ve had massive rain events.”

Consumers can have protective devices such as backwater valves installed for as little as hundreds of dollars, he told conference attendees. “But what we better be prepared to do, when we inform and they act, is reward, and reward with a better rate because they’ve taken those preventative measures.”

Information from the Insurance Bureau of Canada (IBC) notes that measures to prevent water-related damage include installing backwater valves or plugs for drains, toilets and other sewer connections; installing a sump pump; anchoring fuel tanks to the floor to avoid fuel spills or fuel catching fire during a flood; and installing flood shields or built-up barriers for basement windows and doors.

It is incumbent on insurance companies to help inform at the industry, broker, government and consumer levels, Tulloch commented.

“Think practically about how you will advise your customers about how to protect themselves properly,” added Alister Campbell, CEO at The Guarantee Company of North America. The current situation represents an opportunity for brokers to help customers “manage something that is inevitable, clear and really matters to the thing they are spending the most on in their life – their homes.”

ATTRACTING AND RETAINING

Alister Campbell, CEO of the Guarantee Company of North America, seems to be of the mind that underwriters who have been around the block is a decided good thing.

 “Underwriters get better with mileage,” Campbell said as part of the CEO panel at the IBAO Convention. “They need to make mistakes, they need to learn, they need to really understand exposure.”

Despite the value of high-mileage types, an injection of youth is needed to keep running in fine form. With an aging labour force, insurers are trying to attract talent and continue providing the best underwriting experience to their brokers.

The Insurance Institute of Canada has estimated that by 2017, 25% of the current labour force in the property and casualty industry could retire.

Even with Canadians living longer, healthier lives, Campbell noted the challenge is to nurture experienced underwriters while still creating career paths for those in junior roles.

Extending training programs to brokers is one way to address a shortage of experienced people. Economical Insurance took its own training and education initiatives and extended them to brokers in the past year, president and CEO Karen Gavan told convention attendees. By the end of 2012, Gavan pointed out, the company will have completed 115 workshops for its broker partners.

Intact Insurance is also planning to train 1000 brokers on commercial lines underwriting next year, noted the company’s president, Jean Francois Blais.

Maurice Tulloch, president and CEO of Aviva Canada, recommends investing more time talking about the industry at colleges and universities. It is a tack employed by the company – and it appears to be paying off.

Five years ago, the industry was attracting second-tier students, Tulloch said. Now, however, the absolute best are beginning to enter the industry, especially through partnerships between the industry and schools, he added.

THE NEW CUSTOMER

Adopting a collaborative approach that focuses on common initiatives, as opposed to company-specific efforts, represents the best way for brokers to win the online client, IBAO president Rick Orr said during the IBAO’s 2012 Annual General Meeting on October 17.

It was a message that Orr has repeated often during his term as IBAO president in 2012. “I asked the industry to work together, to collaborate to develop common initiatives for the online interaction with consumers,” he said.

While some heard the message and are working with IBAO, “unfortunately others did not and went off to build their own proprietary solutions, making it more difficult for us to win as a channel,” he said. “Collectively, we can win the online consumer and beat the directs.”

Debbie Thompson, incoming president of the IBAO, reiterated the importance of collaboration as part of her remarks to convention attendees on October 19.

“If we could get everyone rowing in the same direction, we could dominate this industry in any market… against any competition… at any time,” Thompson said.

Innovation and leadership are central to creating customer value. “We have to show our present and future customers that we are willing to adapt to the way they want to buy insurance from us,” she told attendees.

“The consumer expects to interact with their preferred suppliers how and when they want. The consumer expects the right mix of interaction points. We have to be mindful of those expectations if we want to build a relevant and meaningful customer experience and, even better, increase our market share.”