Marketplace

CANADIAN MARKET

FSCO publishes bulletin on usage-based insurance

The Financial Services Commission of Ontario (FSCO) posted a bulletin in October outlining considerations for insurers planning to offer usage-based auto insurance programs, focusing on privacy issues and data collection.

The bulletin notes information gathered by telematics technology, or other devices, for usage-based insurance pricing (UBIP), should be considered “personal information” as defined by Canada’s Personal Information Protection and Electronic Documents Act.

Notes FSCO, “At this point in time, UBIP programs, including program-provided devices and applications, should collect and use UBIP data solely for discount-setting purposes, and not to decline, cancel or refuse to renew risks or to confirm rating criteria currently used.”

CSIO telematics data standard expected soon

The Centre for Study of Insurance Operations (CSIO) plans to release its industry standard for delivering telematics data in January 2014.

CSIO reported in October that it has been working for the past several months on delivering the standard for proving a secure way to transmit telematics information among multiple business partners and allowing for data quality and consistency across the industry.

“Telematics is rapidly becoming an important technology for the auto industry and in order to fully realize the potential of this technology, a data standard is necessary,” Catherine Smola, president and CEO of CSIO, says in a statement.

RISK

Need for flood maps, consumer education

Aging infrastructure and climate change are contributing to water-related residential losses in Canada, but educating consumers is one way to help mitigate losses, Glenn McGillivray, managing director of the Institute for Catastrophic Loss Reduction (ICLR), said in mid-October.

In 2013, Canada experienced two of the most costly disasters in Canadian history within two weeks of one another, McGillivray said at a luncheon hosted by the Property Casualty Underwriters Club in downtown Toronto. Estimated insured losses from the floods in Alberta were last reported at $1.7 billion while losses from the Toronto-area rainstorm are expected to be at least $850 million.

McGillivray noted that most losses are not from overland flooding. “The real problem is urban flooding,” he said, suggesting homeowners look at mitigation measures like using backwater valves, sump pumps and emergency back-up power sources for those sump pumps.

As for cities, McGillivray said that they can add flood mitigation measures. ICLR is also pushing for provinces to tighten building codes.

Reputation at risk with rising use of social media

Young consumers are becoming more likely to complain about a product on social media, notes survey results from global insurer XL Group.

XL reports that half of the surveyed 18- to 34-year-olds said they are more likely to complain via social media than they were a year ago, and almost a quarter said they had already used social media to make a complaint.

A third of respondents in all age groups polled were more likely to complain using social media than they were a year ago.

“As people integrate the use of social media into their everyday lives, they are more likely to use these channels to interact with companies and brands,” says Ed Mitchell, chief underwriting officer with XL’s product recall group. “Companies also need to develop response plans with their insurance company.”

REINSURANCE

September nat cats cost US$15B globally

Economic losses from natural disasters globally in September are estimated at about US$15 billion, notes a recent report from Aon Benfield’s model development centre, Impact Forecasting.

Among other events, the report cites hurricanes Manuel and Ingrid, which made landfall on opposite sides of Mexico within 24 hours, generating estimated insured losses of $915 million; Super Typhoon Usagi, which made landfall in China, and is expected to carry economic losses estimated at $3.8 billion; and in the United States, record rainfall that caused historic flash flooding in Colorado. Those economic losses are expected to top $2 billion, with preliminary insured losses estimated at $150 million, not including pending losses through the National Flood Insurance Program.

Lower risk seen for Lac-Mégantic operator

Montreal, Maine and Atlantic (MMA) Railway, the operator of the crude oil train involved in the deadly Lac-Mégantic, Quebec derailment, can continue operating until early next year because of measures taken to reduce risk exposure, the Canadian Transportation Agency (CTA) has ruled.

MMA no longer carries crude oil and the distance over which it transports dangerous goods has dropped 90%, the CTA noted in a ruling extending the company’s licence to operate. In its decision, CTA stated MMA has “demonstrated that there is adequate third-party liability insurance coverage, including self-insurance, for the proposed railway operations until February 1, 2014.”

REGULATION

Canada’s high court denies leave to appeal

The Supreme Court of Canada has denied an application from a commercial property policyholder that operates a fashion boutique for leave to appeal an earlier ruling by the Court of Appeal for Ontario.

The high court issued its decision to deny leave to appeal in mid-October.

In February 2012, Thomas and Marilyn Boyce filed a statement of claim against The Co-operators General Insurance Company after the insurer denied a property claim made in connection with the Boyces’ store.

On October 30, 2010, Marilyn Boyce arrived at her boutique and discovered a foul odour. The Boyces argued the boutique had been vandalized, but The Co-operators denied the claim, contending the odour had been caused by a skunk.

The business had to be closed for a time, substantial clean-up costs were incurred and a great deal of inventory could not be salvaged. A claim was not filed until about 16 months after the incident.

The case centred on if a clause in The Co-operators’ statutory conditions overrides those in Ontario’s Limitations Act. One section of the act cites a two-year limit; another provides an exception for business agreements made on or after October 19, 2006.

In a November 2012 decision, a judge ruled the Boyces could proceed with their statement of claim, finding that a one-year limit in the statutory conditions of a policy could only override the two-year limit in Ontario law if certain conditions were met. In May 2013, the Court of Appeal for Ontario overturned that decision.

The Supreme Court of Canada dismissed the Boyces’ appeal with costs.

Capital standard adds uncertainty: Fitch

Fitch Ratings cautioned in October that the International Association of Insurance Supervisors’ (IAIS) planned risk-based global insurance capital standard adds further uncertainty for the industry.

The proposed standard would apply to approximately 50 internationally active insurance groups (IAIGs) and is expected to be fully implemented for 2019.

“Any positive effects as a result of increased capital could be partly offset by negatives from the cost of higher capital and its impact on pricing and competitive position,” notes a statement from Fitch. IAIS reports that full implementation of the proposed standard will begin in 2019, with “testing and refinement with supervisors and internationally active insurance groups,” prior to that. “It is undeniable that the business of insurance is global, and global issues demand global responses,” says Peter Braumüller, chair of the IAIS executive committee.

CLAIMS

Analytics, pooled data to be used to fight fraud

The insurance industry has formed a not-for-profit organization that will focus on using analytical tools to identify suspicious claims in the industry’s pooled data in a bid to facilitate further investigation. CANATICS, or Canadian National Insurance Crime Services, will provide insurance companies with a new tool to fight auto insurance fraud. “By uncovering networks of connected claim activity across insurers, we will help ensure that investigators focus their investigations on the right claims,” says Ben Kosic, CEO of CANATICS, and a former partner at KPMG Canada.

In a report for the Ontario Auto Insurance Anti-Fraud Task Force, KPMG estimated the insurance industry pays out as much as $1.6 billion annually responding to fraudulent or inflated claims.

Workforce management seen as top challenge

Workforce management tops the list of challenges for chief claims officers at leading property and casualty insurance firms, note findings from a new Towers Watson survey.

In its survey of 41 chief claims officers, 76% of respondents cited workforce management as a top three business issue, 56% cited “achieving financial results” as a top three challenge, and 54% cited “effectively integrating and leveraging technology innovations” as a main concern.

Two-thirds of those polled said attracting and developing critical-skill workers was their top challenge, while 59% pointed to maintaining employee morale.

“Insurers are responding to this dynamic in a number of different ways, most notably by revising claim processes, modifying job functions and leveraging technology innovations, where feasible,” says Brian Stoll, director of the P&C practice at Towers Watson.

TECHNOLOGY

Insurers expected to abandon many apps

By the end of 2015, insurers will abandon 40% of their current customer-facing mobile applications because of inadequate return on investment, Gartner notes.

Gartner’s forecast report includes the research firm’s top industry predictions for IT organizations and users for next year and beyond.

While in 2012 many industry decision-makers focused on converging social, mobile and cloud technologies, today they are “significantly shifting their business models and processes,” says Kimberly Harris-Ferrante, vice president and analyst at Gartner. “Enterprises must respond immediately in order to build the right business and IT road map for future market demands.”