Readying for the Future

Insurance Brokers Association of Ontario 94th Annual ConventionOttawa

Those attending the 94th Annual Convention of the Insurance Brokers Association of Ontario in Ottawa from October 22-24 had a chance to network, take part in educational sessions and hear from industry experts. Highlighting educational events was the annual CEO Panel, where participating senior insurance executives discussed topics ranging from technology to flooding, telematics, distribution and the role of the broker in today’s ever-changing environment.

HOME INSURANCE POLICY CHANGES POSE CHALLENGE TO BROKERS

Changes to home insurance policies in the wake of record insurable losses in 2013 – much of this because of water-related damage – demanded that brokers adapt to the new reality, it was suggested during the CEO Panel at the Insurance Brokers Association of Ontario’s (IBAO) recent convention in Ottawa.

“We know last year was a tough year with weather-related losses and we had to adapt the property product with rates, deductibles and sub-limits,” Jean-Francois Blais, president of Intact Insurance, told attendees of the session.

“It’s a tough time to be a broker because, everybody has been used to auto insurance prices and dealing with that, and now we are heading into a situation where we have coverage and price issues on property as well,” said Brigid Murphy, president and chief executive officer of Travelers Canada.

“I think if the consumer understands that from a loss prevention standpoint, there are lots of things they can do, then they can do their own cost benefit analysis as to whether or not it’s worth it,” suggested Bob Tisdale, president and chief operating officer of Pembridge Insurance Company.

“Is it worth it to not have that finished basement because maybe I don’t want to pay the sewer back-up coverage for it?” Tisdale asked. “Do I want to install a (backwater) valve? Do I want to do different things to protect my house? I think those are all things that are incumbent upon the consumer,” he said.

Tisdale cited as an example the hailstorm in and around Airdrie, Alberta in August, which Verisk Analytics Inc.’s Property Claim Services (PCS) unit has estimated resulted in $450 million in insured losses.

“Those houses are being fixed with the same vinyl siding that got damaged in the storm,” he said of some of the damaged properties.

“We really need to get the consumer to understand that if they do that again, there is going to be a cost to it, so it’s better to look at it from a longer-term strategy,” he said, explaining “either they are going to pay it in premium or they are going to pay it in a self-retention, which is a higher deductible.”

Last year’s floods in southern Alberta and in and around Toronto provided some lessons, Greg Somerville, president and chief executive officer of Aviva Canada, suggested.

“One of the things they taught us is we likely could have done a better job, collectively, in explaining how the policy works and what is covered and what is not covered,” Somerville noted.

REPLACEMENT COST MUST BE PART OF EQUATION

Replacement cost must be considered as part of any discussion relating to the promise of smart home technology and what effect it could have on losses, it was suggested at the recent Insurance Brokers Association of Ontario’s 94th Annual Convention in Ottawa.

Smart home technology looks to be a positive from a frequency of loss standpoint, Bob Tisdale, president and chief operating officer of Pembridge Insurance Company, said during the CEO Panel. But as houses become smarter, Tisdale emphasized that replacement cost must be carefully considered.

Although there will be fewer losses, when a loss does occur, “it will be more expensive because that technology has also got to be replaced,” he said.

“We need to think of that as we bring technologies in, but certainly they will be tremendously beneficial in getting the number of losses down (in homes),” Tisdale added.

“If we think that installing an alarm reduces the exposure, what about installing technology that tells you before your water heater is going to burst, tells you when your heating system went down or that somebody should go home before the pipes freeze,” asked Greg Somerville, president and chief executive officer of Aviva Canada.

“Clearly, those kinds of solutions are going to reduce exposures and should have an impact on pricing, no different than some of the things that exist today,” Somerville told panel attendees.

“We talk about the smart house; we talk about telematics. Consumers are actually getting more and more into the driver’s seat about how much risk they’re actually presenting,” Brigid Murphy, president and chief executive officer of Travelers Canada, pointed out.

Karen Gavan, president and chief executive officer of Economical Insurance, noted that there is a behavioural element that must be taken into account.

“Just because the technology’s in the house doesn’t necessarily mean it’s going to be used effectively. So, technology only goes so far because it’s still human behaviour that impacts into the process,” Gavan emphasized.

VALUE BEYOND PRICE

Having a clear understanding of how consumers want to be serviced will prove important for brokers and insurers alike, Greg Somerville, president and chief executive officer of Aviva Canada, suggested during the CEO Panel at the recent Insurance Brokers Association of Ontario convention.

If one considers why consumers might be inclined to look elsewhere, “price, ease of doing business and self-service is our view of what drives them,” Somerville said.

“We can decide how we want business to be done, but the 9 million drivers in Ontario are going to decide how they want to be serviced. If we don’t understand how they want to be serviced, how they want to buy their products and tailor solutions to meet their needs, somebody will do that,” he warned.

That said, “I still believe there is a large segment of the consumer base that really values advice and really needs advice. If the broker channel is only competing on the basis of price, well that’s going to be mechanized and digitized away,” argued Karen Gavan, president and chief executive officer of Economical Insurance.

Bob Tisdale, president and chief operating officer of Pembridge Insurance Company, cited surveys out of both the United States and Canada showing that while the majority of respondents were price-conscious, they would pay more in premium if they could get customized policies and advice.

How does what customers are receiving “relate to my needs, my lifestyle, my wants and then how much are you going to charge me,” Tisdale told attendees. “The cookie-cutter approach doesn’t work for these consumers and it’s certainly a big segment that we really need to be aware of,” he argued.

BUSINESS MODEL ADJUSTMENT URGED

The traditional business model for Ontario brokers will likely need to change since their competitors today will not be the same as those five years from now, Chris Floyd, president of the Insurance Brokers Association of Ontario (IBAO), suggested during IBAO’s 94th Annual Convention in Ottawa.

“Our competitors are ramping up their game and we need to move quicker and remain extremely nimble,” Floyd said.

“Those sorts of statements aren’t meant to be doom and gloom. It really is meant to make us realize that our traditional business model will need to change as an industry,” he emphasized.

“Are we doing the simple things that the competition is doing? Are we providing online quoting, online chat, extended hours of operation?” Floyd asked.

If brokers do not simplify things and provide customers with the relevant products and services they want, “somebody will,” he cautioned.

“We have traditional means of delivering our services that need to change. If w e are going to differentiate ourselves, we’re going to need to simplify our business,” Floyd said. Big data, analytics and being customer-centric are all very “relevant to what our business is today and where our business is going.”

AVIVA CANADA COMMITS TO TELMATICS SOLUTION

Aviva Canada has committed to using the telematics solution from Quindell and Independent Broker Resources Inc. (IBRI), the for-profit arm of the Insurance Brokers Association of Ontario (IBAO), to execute its telematics offerings.

Aviva Canada – one of the country’s largest property and casualty insurance companies, with more than three million customers, 1,700 brokers and a 9% market share of the Canadian automobile insurance market – has selected Quindell as its telematics technology provider on an exclusive basis for the next five years, IBAO reported in a statement in advance of the association’s 94th Annual Convention.

IBAO president Chris Floyd explains that the IBRI/Quindell solution allows broker access to interpret clients’ risk profiles and adequately advise them on the most appropriate insurance product available to match their needs.

“We firmly believe that telematics and usage-based insurance solutions will benefit our customers as we are able to customize their insurance based on individual driver experience – and reward safe driving behaviour with lower premiums,” notes Greg Somerville, chief executive officer of Aviva Canada.

Quindell, a global provider of professional services and digital solutions, notes in a separate statement that the five-year contract offers a one-stop solution through the provision of devices, network connectivity, product platform, systems integration, logistics, mobile applications, data analytics and consumer-facing applications, including the use of the Himex Virtual World technology.

Over an initial period of five years, subject to achieving key milestones, the insurer is looking to meet the goal of 120,000 telematics customers, Quindell reports.

The technology is to be used for personal and commercial lines and includes working in conjunction with IBRI with its Quindell broker-based telematics distribution model, the statement adds.

Quindell chairman Robert Terry goes on to say that the company model “will continue to positively disrupt the Canadian insurance market, where telematics take-up of 20%-30% plus on new business is proven for the right market proposition.”