Real Puzzler

It is still Canada; it may still even be the same type of perils the country has always known. But there now appears to be something different – and decidedly concerning – about the potential impact of events and insurable losses that property and casualty companies operating in the country can expect to see in the near and more distant future.

The events of 2013 – highlighted by a horrific rail disaster book-ended by two flood events expected to produce close to $3 billion in insured losses – clearly demonstrate the need to be on the lookout for old perils that can have new, bigger impacts. Those three incidents alone have launched a federal review and fuelled renewed discussions around flood insurance.

There is also talk of the influence of Ontario auto (highlighted by the government-mandated average 15% rate reduction), increasing regulation, plentiful capacity, telematics, mergers and acquisitions (M&A), customer expectations and buying behaviours, earthquake risk, cyber attacks and technology.

All this, coupled with the continuing influences outside Canada’s borders, demands that p&c companies be prepared to rethink current approaches to solve individual and collective puzzles. Perhaps, the best preparation is to expect the unexpected.

That said, understanding risk, anticipating challenges, focusing on underwriting discipline, embracing innovation, enhancing customer service and being prepared to respond in a timely manner – all may reveal opportunities for p&c insurers.

Canadian Underwriter asked senior executives for some of the country’s primary insurance companies the following question: What are the key trends affecting the Canadian property and casualty market and what sort of response is needed to meet the challenges or opportunities in 2014?

Here is what executives had to say, presented in alphabetical order by last name.

1 Barbara BellissimoChief Agent & Senior Vice PresidentState Farm Canada

In 2014, State Farm will continue to advocate for change to improve the affordability of insurance, while ensuring that coverage remains available for the risks Canadians face.

Increased regulation continues to add cost. Consumers would benefit from modernization of auto insurance rate oversight across the country.

Encouragingly, legislation recently introduced in Alberta may lead to the elimination of the annual industry-wide adjustment and allow for a file-and-approve system. At State Farm, we see this as a small positive step forward to minimize compliance costs, enable insurers to respond more quickly to market conditions, and promote innovation. We will continue to call attention to the consumer benefits of a competitive pricing environment with provincial regulators.

The challenge to achieve a healthy Ontario auto insurance market continues. Positive cost developments from the 2010 reforms will disappear without follow-through by the government to reinforce its original objectives.

The Statutory Accident Benefits Schedule is unique to Ontario and has driven costs by encouraging fraud and coverage over-utilization. To achieve cost reductions, we urge the government to implement the proposals that are already on the table. Lasting cost reductions will require further reforms. Solutions can be found in the contract language of existing successful auto insurance systems in North America.

Severe weather events earlier this year have piqued public interest in property insurance water coverage. Lost in the conversation about whether or not insurers should begin to offer overland flood coverage is the insurance industry’s existing struggle to continue to offer sewer back-up coverage.

All levels of government must encourage the building of more resilient communities; those that are able to withstand a wide range of severe weather incidents, not just overland flooding.

2 Jean-François BlaisPresident Intact Insurance

2013 is unfolding as expected with modest economic growth and low interest rates; all indicators point towards the same environment for 2014. While equity markets are most exuberant, much uncertainty remains as North American monetary policymakers weigh their options.

At the industry level, insurers are closing 2013 with uncertainty over the outcome of the cost reduction measures that the Ontario government will adopt. While we are hopeful that the government’s initiative will reduce the cost of the protection that drivers enjoy in Ontario, the 15% objective will remain a stretch.

However, it will be imperative for the government to reach that goal if it wants to maintain the availability of auto insurance in the province. Good drivers in Ontario and across Canada deserve a break.

This is why Intact will roll out across the county in the upcoming year its telematics solution to brokers, whereby their customers could benefit from a discount on their auto insurance premium that may reach 25%.

What did not unfold as expected was the unprecedented devastation caused by the flooding in Southern Alberta and the Greater Toronto Area. These events have again demonstrated the fragility and vulnerability of our nation to natural disasters and the urgency for Canadian society to adapt to climate change.

While insurers rethink the protection we offer to consumers, its design and its pricing to ensure its availability and sustainability, it is of the outmost importance that the industry encourages governments, NGOs, planners, builders and consumers to make our cities, communities, public infrastructures and the buildings where we live and work more resilient. This will be the most enduring contribution we could make towards the prosperity of our society.

Consumers more than ever are looking for a seamless and personalized experience characterized by authenticity and simplicity throughout all interactions with insurers and brokers. As the traditional distinctions between distribution channels become less and less evident, Intact intends to offer brokers and their customers unmatched service levels, a broader suite of products and much improved online communications and buying tools.

We will also continue to invest in more modern and flexible technology platforms that will allow brokers to offer the outstanding experience their customers have come to expect from them.

3 Alister CampbellChief Executive OfficerThe Guarantee Company of North America

The Canadian insurance industry got thrown a lot of curve balls, knuckle balls and even the occasional spitball in 2013. Floods, train crashes, collisions and another episode of the Ontario auto saga all combined to make our continued struggles with record-low interest rates even more challenging.

And there are so many balls in the air. With so many rapidly evolving trends in technology, distribution and customer-buying behaviours, it is a real challenge for any insurance executive to choose which balls to swing at, and which to just let go by.

So let’s focus on what we know for sure. Ontario auto rates will fall. Residential rates will climb. Companies will continue to buy up distribution. Big machine underwriters will use big data to refine rating, but become even less transparent to brokers and customers. More telematics options will enter the auto market. Interest rates will stay low, and Canadian economic growth will underperform the United States, but outperform Europe.

While we are at it, let’s try to quantify what we do not know. Are proposed reforms to Ontario auto adequate to offset mandated reductions? Are we really sure we know where water is going to accumulate next? Will politicians get m ore engaged in property insurance as premiums start matching those of auto in flood-prone zones? Will telematics empower or weaken intermediaries? Will consumer’s love of the Web start to shift buying patterns in commercial lines?

The list of uncertainties is just as long as the list of things we think we can be sure about! What’s the strategy for times like these? Small ball.

It is likely a mistake to swing for the fences. Better to execute the perfect bunt or hit through a market gap to advance a runner. Steal a base only when the percentages are really stacked in your favour. Keep your head up and be prepared to duck fast when politicians or competitors show a lack of control.

Should be a great game!

4 Patrick LundyPresident & Chief Executive OfficerZurich Canada

Risk and uncertainty continue to permeate the global economy, as escalating effects of catastrophic events, government regulations and active M&A activity will continue to have a significant impact on the Canadian property and casualty insurance industry in 2014. The need for people to have a good grasp of the risk they are ready to insure is greater than ever.

Traditionally, Canada has had limited exposure to catastrophic weather events, but the last few years have shown that the environment is changing, as evidenced by the estimated $1.7 billion of insured losses for the Alberta floods and the estimated $0.9 billion of insured losses for the Toronto floods.

Having the right tools, maps and predictive models is key to charging an accurate price for the risk, and capacity in certain areas may become harder to come by. Updated flood zone maps for Canada are of the utmost importance in being able to respond accurately to the increased flooding activity.

While capacity may be harder to come by through established channels, this opens opportunity for newer entrants to market. Customers need to confirm that any new players that come into the industry have a firm grasp on what they are insuring and have the ability to pay for the kind of severe weather claims that are predicted to become more common. Consequences of these perils cause ill-prepared carriers to need more capital or simply walk away from the market.

Not only is the industry seeing new players, the players already on the field are combining. Primary insurers are continuing to purchase brokerages without strong regulatory oversight. This may cause channel conflicts.

Building a work environment that fully taps into the potential of all individuals is key to success. The industry is seeing skilled insurance professionals move from carriers to brokers, but less often is it the other way around. With carriers placing greater value on employees with sales mindsets, I see a more even sharing of expertise between brokers and carriers in the coming year.

The regulatory environment is continually evolving and tightening. Carriers are grappling with the significant hit related to HST on affiliated reinsurance contracts, ORSA (Own Risk Self Assessment) guidelines have been finalized and will take effect in January 2014, and changes to capital calculations are expected to be implemented in 2015.

There is a need for companies to have dedicated enterprise risk managers to help respond to the ever-changing legislation. These changes will strengthen the insurance industry from a capital and risk management perspective, but also come at a cost.

Despite these and other challenges, there are still keen opportunities for insurers. With the right people and having an understanding of the growing Canadian and global markets like technology, health care and financial services, there are plenty of areas in which to prosper.

5 Ken McCreaPresident & Chief Executive OfficerWawanesa Mutual Insurance Company

Perhaps the most significant trend is the response by the insurance industry to severe weather events through changes to product design and pricing of property insurance products. While the Calgary flood and Toronto rainstorm were the high-profile events of 2013, there were several other significant weather-related losses in Western Canada.

Increased claim costs from water, wind and hail are resulting in premium increases.

Product changes are designed to show consumers how much of their premiums are related to these perils and to offer choices in coverage amounts, deductibles, coverage inclusions/exclusions and discounts for loss control actions. Both companies and brokers are challenged to educate customers on reasons for premium increases and product design changes.

There will be continued focus on earthquake risk. Following the recent release of the Insurance Bureau of Canada’s study, the industry will engage various stakeholders with the goal of preparing Canada for a major earthquake. Many property owners in exposed regions do not carry earthquake insurance.

At Wawanesa, in order to continue offering effective protection to customers, we are proactively managing the risk through product design changes in addition to maintaining a high-quality reinsurance program.

In the automobile market, while it might not be seen as a trend, concern over the Ontario premium reduction regulation dominates. While reducing the price of auto insurance in the province is a very desirable objective, achieving the regulation’s premium-reduction targets in a fair and balanced manner is dependent upon government introducing necessary cost-reduction changes.

The emerging use of telematics will be a significant trend in 2014 and beyond. The required technology seems readily available, but there are challenges in utilizing the data for rate setting, including regulatory approval, and implementing it in company systems.

Technology development will continue to receive attention. At Wawanesa, we remain focused on our technology renewal strategy, including upgrades to company/broker integration and replacement of legacy systems.

6 Kevin McNeilPresident & Chief Executive OfficerGore Mutual Insurance Company

As I write this, the news is filled with images and statistics about Typhoon Haiyan, the strongest storm to ever hit land. When I consider key trends affecting the insurance industry, my mind turns to increasing severe weather patterns.

It is said that 2013 is the seventh hottest year on record. A host of alarming issues come with that. Our industry must be aggressive in its response. We need to find prudent ways to protect customers and their families.

Traditionally, our industry has fallen trap to reading in additional coverages and delaying rate increases that will help us keep pace with escalating claims and reinsurance costs. Being prudent means keeping families safe, but it also means protecting coverage availability. Insurers want to be there to provide the coverage clients need in the event of a loss.

Our industry has faced consumer confidence issues, which is unfortunate, considering the profoundly positive impact that we have when our policyholders need us. When a severe weather event occurs, we all have the occasion to serve clients professionally and quickly.

While analytics, research and predictive modelling are important, the insurance industry cannot overlook the influence of genuine personal service. From the broker who takes the time to understand a client’s needs, to the claims adjuster who compassionately serves clients, we collectively impact the brand, which is why we all choose our partners carefully.

We must be on a quest to attract top talent to the industry. And we must invest in training that talent.

As insurers witness an alarming increase in severe weather events, we need to recognize the importance of crisis management and response. When disaster strikes, it is the people in our industry who will most influence the clients’ experiences. We all want to be there to respond when clients need us.

As Gore Mutual prepares to celebrate its 175th anniversary, it occurs to me that this fundamental position has not changed and looks just as it did in 1839 – our industry providing genuine personal service in a client’s time of need.

7 Ellen MooreChair, President & Chief Executive OfficerChubb Insurance Company of Canada

This has been a very challenging year for the Canadian insurance industry with the advent of several major weather events. These storms put Canada on the front pages of newspapers around the world and brought home, after a near 15-year hiatus, that Canada is not immune from major catastrophic weather and the resulting damage caused.

While both events left our customers and brokers in dire circumstances, the Calgary flooding produced unprecedented dislocation of people from their homes and workplaces. Employees in the insurance industry took part in fundraisers and neighbourhood coalitions, responding to help flood victims wherever possible.

Our claims staffs have begun the loss-settlement process, working very long hours and under very difficult conditions, to respond to get the help needed by our customers. It is circumstances like these that allow us to demonstrate our value proposition.

There are also other significant issues industry will continue to deal with

into 2014. Operating margins in our business continue to be under pressure from the effects of low investment yields, rising costs and loss development trends. Canadian insurers operate in a very competitive marketplace with significant excess capital, which kept 2013 rooted in another year of a soft market. Early indications suggest recent severe and increasingly frequent climatic activity may not produce the pricing response one might have expected for both commercial and personal insurance products.

Regulation continues to increase significantly and will continue to do so, all adding cost to the system. In the auto segment, proposed pricing regulation runs counter to loss development trends. Such mandates can create market instability at the very least.

With such market challenges, it is even more important that Chubb stays focused on underwriting discipline, prices to exposure, is innovative with products and excels in customer service. Continuing to provide top-notch service and products while managing our balance sheet and underwriting profit, remains the top priority.

Chubb is optimistic about 2014, expecting some lift in the global economies that are critical to Canada, continued stability in the Canadian economy and stable pricing of industry products.

8 Sean MurphyPresidentLloyd’s Canada

Earlier this year, Lloyd’s – which marks its 325th anniversary in 2013 – released the annual Lloyd’s Risk Index. The index assesses corporate risk priorities and attitudes amongst the world’s business leaders. Many of the top 50 identified risks resonate in the context of Canada’s insurance industry.

I was drawn to two identified risks as being particularly illustrative of our experiences in 2013.

Firstly, regulation and changing legislation continues to be at the forefront of C-suite executive minds. Like all other regulatory bodies, Canadian regulators are actively diligent to ensure the insurance industry remains robust, consumer rights are protected and company failures negated.

All worthy goals, but when regulatory directives clash, how will individual companies react? How will a mandated decrease in one of the largest insurance market segments in Canada impact the strategies of insurers most affected? Will they enter into unfamiliar classes of business to offset their loss in premium income? Will their push for market share into other lines put further pressure on rates, creating a domino effect on other markets that compete in that segment? Or will the directive to reduce auto rates spur on the quest for more consolidation in the insurer ranks?

Secondly, many believe environmental risks due to climate change are on the rise. In 2013, we witnessed several significant weather-related loss events.

In Canada, two of the most severe occurred in Alberta and Toronto in the early summer months. According to the Intergovernmental Panel on Climate Change report, Canada and other countries distant from the equator will feel the impact associated with climate change most acutely.

We should anticipate that these types of severe weather events will become the norm in Canada. How quickly will lessons learned from 2013 be applied to future events? Will there be a rise in consumer expectations for the industry to better cope with the claim settlement process as weather-related losses become more frequent?

What should we expect in 2014? We should expect more change and evolution of risk. The ability to succeed is predicated on our ability to adapt and seek out the opportunities those changes will present.

9 John O’DonnellPresident & Chief Executive OfficerAllstate Insurance Company of Canada

With increasing political and regulatory uncertainty affecting the insurance industry in Canada, 2014 promises to be a year focused on the ability of the property and casualty market to adapt, innovate and evolve.

It is important that insurers are able to understand our customers and provide them with the knowledge to make choices that best suit their individual insurance needs. We need to be a reliable and credible source of information for our customers, and demonstrate that we will be there to support them through tough moments.

With increasing public attention on insurance premiums, some aspects of our industry are bound to change. Insurers all want to see insurance offered in a stable, affordable and accessible way, but rate cuts are simply a short-term, Band-Aid solution that fails to address larger systemic issues that require attention.

Ultimately, it is our customers who make us successful and they have the power to choose their insurer based on what values are important to them.

It is important to understand our customers and how they vary across different markets. We owe it them to continue providing trusted advice and a competitive product; insurers will do this by innovating and fostering a thriving marketplace.

It is critical that the industry has the ability to adapt and offer new solutions and services in a timely manner to keep up with customer interest and demand.

Insurers rely on regulators to help us achieve this. Companies require the flexibility to enter into new markets and offer innovative programs. Those that adapt and evolve will succeed; those that maintain the status quo run the risk of being left behind.

If systemic costs are properly addressed, if insurers have the regulatory ability to innovate and adapt, and if we all practise strong corporate management, a healthy, competitive market will emerge. In this scenario, it is the customer who benefits the most, and from that we all succeed.

10 Lynn OldfieldPresident & Chief Executive OfficerAIG Canada

The trends in the property and casualty marketplace as we close 2013 have been apparent for a number of years. Insurers continue to experience low economic growth prospects, a continuing low interest rate environment, plentiful domestic and global capacity, expanding regulation and governance, more new commercial entrants vying for market share and an increased frequency of catastrophic losses.

Looking back over the past year, the events that stand out are the catastrophic losses in the Alberta floods, the train derailment tragedy in Lac-Mégantic, Quebec, and the Toronto July rainstorm accompanied by power outages, flooded basements, a stranded GO Train and shuttered subway stations. Cat losses are becoming the norm, rather than the e xception.

The negative media coverage of the insurance industry claims response in Alberta was a wake-up call for many carriers. AIG needed to change the conversation. AIG’s commercial property market leadership and vast experienced claims team provided a unique platform to facilitate positive change in the claims process. Our partial claims advance payments to commercial property clients provided much-needed liquidity during challenging times of displacement, clean-up, repair and reconstruction – all well before the final proof of loss was filed or the application of flood retentions was completed.

The question we asked ourselves was, “How much of this claim do we know for sure is covered?” The client and broker reaction was one of gratitude and respect.

The challenge is to sustain that service responsiveness in every aspect of AIG’s business and exceed expectations.

The Toronto Insurance Conference has drafted a Declaration of Emergency, which requires carriers to extend coverage at existing terms, conditions and pricing for the duration of a declared emergency by civil authorities.

Canadian p&c carriers should voluntarily agree to do the right thing, whether through an agreement, commitment or endorsement of cover.

11 Gary OwcarPresident & Chief Operating OfficerCNA Canada

In a rapidly changing industry, one thing remains constant – the importance of underwriting and the need to produce an underwriting profit.

In the low-yield environment the insurance industry has experienced for the last few years, companies can no longer rely on investment income to shore up earnings. Rather, they must have the expertise to fully understand and respond to the nuances of their customers’ industries through underwriting and pricing that reflects each industry’s unique risks.

Three trends stand out as important for our market. The first is the increasing frequency of catastrophes throughout the world. No longer immune, Canada experienced two natural disasters this year; the largest was the Alberta flood that weighed in as the worst floods in Canadian history.

When a catastrophe happens, many lessons are learned, which highlight the need for effective enterprise risk management (for customers, brokers and carriers), thorough underwriting, coverage, claim service and accurate pricing.

The second trend is the evolving nature of business risk. For example, cyber attacks on individuals, corporations and governments are proliferating. The government is increasingly focusing on cyber security, which is certain to lead to more legislation and regulation.

Insurers need to ensure their customers are protected against cyber risk by offering solutions that address identification, control and coverage.

Finally, the trend of greater regulation of our industry is accelerating. The current dialogue on regulation is relevant to all global writers.

The Financial Stability Board, an international board chaired by the Governor of the Bank of England, has been established to co-ordinate at the international level the work of national financial authorities and international standard-setting bodies, as well as to develop and promote the implementation of effective regulatory, supervisory and other financial sector policies in the interest of financial stability.

Carriers and brokers need to speak out for our industry to ensure that proposed regulations are effective and reasonable, not costly, complex and burdensome.

12 Sylvie PaquettePresident & Chief Operating OfficerDesjardins General Insurance Group

The past year will be remembered for the record insured losses from the catastrophic flooding in Alberta and the torrential rains in the Toronto and Montreal areas that cut sharply into insurance industry profits.

With our changing climate, the frequency and severity of weather-related Cat events is a trend that will worsen in the future. Add in the very real earthquake risks in the Vancouver, Montreal and Ottawa areas (highlighted recently by the Insurance Bureau of Canada), and it is clear that Canada’s insurers need to focus more sharply on Cat risks in their business mix, pricing models, coverages and claims organizations.

But insurers cannot tackle these huge challenges on their own. Governments at all levels have a big role to play, by improving building codes and outdated infrastructure, restricting development in flood-prone areas, and providing financial back-up.

With the launch of our usage-based insurance (UBI) offerings, DGIG is part of another key industry trend. UBI offers drivers more personalized insurance, and a strong financial incentive to improve the way they drive. Concerns about “big brother” monitoring will fade as these telematics programs become more widespread, and as other value-added services are tacked on.

It is clear that those companies that quickly embrace new technologies like telematics will have a clear lead over their slower competitors. While many insurers are wrestling with how to update or replace legacy systems, postponing tough decisions and investments could be costly.

That’s because technology is becoming ever more important to the customer experience. Efficient systems and seamless online and mobile applications are just as important as the friendly, knowledgeable voice on the telephone.

DGIG is tackling both the people and technology sides of the equation, to position itself as the customer experience leader in Canada – along with so many of our competitors.

Addressing all these key issues requires deep pockets, which is why I also believe that the consolidation trend in the industry will continue. In 2014 and beyond, size and reach really will count.

13 Rowan SaundersPresident & Chief Executive OfficerRSA Canada

The continued pressure of severe weather was unequivocal in 2013, when the market faced two of Canada’s most expensive natural disasters within the space of three weeks. These unprecedented events tested the industry’s ability to meet customers’ needs.

Given the increased frequency and severity of weather-related events, the opportunity lies in having the ability to respond quicker, manage costs and become more sophisticated at Cat, risk and accumulation management going forward.

Additionally, having a customer-focused approach to property rate, deductible and policy changes will be critical in driving retention. Customer education as to why these changes are necessary, their options, and the value-added services and benefits your proposition brings to the table, will be key.

In Ontario auto, uncertainty looms as the insurance industry awaits further details on the “cost” element of the government’s imposed “cost and rate reduction strategy,” which needs to be timely, reasonable and realizable to ensure that the customer does not suffer the consequences of an unsustainable market. RSA anticipates that regulated products such as auto will continue to be exposed to political interference and commoditization.

To remain competitive, it will be crucial to utilize scale, technology and data analytics to develop the next level of pricing sophistication in this segment, or alternatively, shift focus towards higher margin, niche and specialty lines of business.

Lastly, the industry needs to advance customer interactivity in order to address continued changes in consumer behaviour and expectations. Insurers and brokers alike should look outside our industry, and beyond Canadian borders, to discover new, innovative and enhanced channels and touch points that improve our customer-centricity.

Overall, 2014 will evolve how we address a familiar set of challenges. Winning strategies will focus on putting the customer first.

14 Greg SomervillePresident & Chief Executive OfficerAviva Canada

Key trends Aviva sees continuing in 2014 revolve around the complexities of auto insurance in Ontario, customer behaviour, especially purchasing preferences, and weather-related events. These trends represent a number of new realities that we will face collectively in 2014.

Managing auto insurance in Ontario requires balancing government directives with consumer expectations and insurers’ claims costs. The 15% mandatory average rate reduction is only achievable if significant change is made to take costs out of the system.

In addition to working with the Insurance Bureau of Canada (IBC), Aviva has formally submitted ideas to the government on ways to reduce costs. As individuals, we can engage our local MPPs on the need for these changes to make insurance affordable and accessible for everyone.

For customers, it is about putting them at the heart of the insurance process and being available to do business at their convenience. Insurance providers should recognize and respect evolving customer preferences that are trending towards self-service buying models.

Insurers and brokers must join forces, adapt and find solutions. At Aviva, we are investing in lead-generation tools and digital solutions to help brokers respond to evolving customer preferences.

Following the catastrophes of Southern Alberta and Toronto and the unprecedented losses in their wake, there is a renewed urgency to act on climate change and weather issues. Government at all levels, industry bodies and consumers must work together to better protect citizens and communities.

A promising development on this front is IBC’s newly implemented Municipal Risk Assessment Tool that helps city governments identify sewer and storm water vulnerabilities, so that they can plan and fund infrastructure improvements.

Consumers have a role to play by managing their own risks and expectations and we, as insurers, can encourage this through greater education.

By working together, our industry will be better prepared for the future.

15 John TaylorPresident & Chief Executive OfficerOntario Mutual Insurance Association

Two of the key trends in 2013 are familiar to everyone in the property and casualty industry as they have been with us for a number of years: Ontario auto and severe weather.

Much has been said and written on issues concerning Ontario automobile insurance, primarily driven by the provincial government’s unprecedented position on mandating rate reductions across the industry.

There is not yet enough proof of sustainable improvements in Ontario automobile insurance results following the reforms of 2010 to allow for the level of reduction mandated.

In 2013, the insurance industry did see the government moving towards implementation on a number of initiatives in the spirit of the 2010 reforms. Nonetheless, there is no delivery date as yet for the key reforms relating to a Minor Injury Treatment Protocol and the definition of catastrophic injuries.

Results are also starting to suggest that any cost stability in the first-party benefit structure will be eroded by increased claims arising from tort.

These are fundamental issues for all stakeholders, including consumers. The political automobile insurance platforms that Ontario’s three parties have built are pointing towards destabilization, which of course, is the opposite of the stated intentions of the reforms of 2010.

For 2014, the industry needs to focus on communicating at an understandable level to policyholders on how auto insurance works in Ontario and why it costs what it does.

Severe weather and frequent storms highlighted by the flood events in Alberta and Toronto in 2013 have put a stronger Canadian spotlight on water loss exposure, and particularly on the broader economic effect of these events.

I believe in 2014, we will see opportunities for more productive discussions on public-private forums on better municipal control of building and flood plains, understanding of infrastructure deficits, the need to be proactive in looking at better weather-resistant construction methods and building codes, and how to come to grips with the insurability of water damage in general.

16 Silvy WrightPresident & Chief Executive OfficerNorthbridge Financial Corporation

While adapting to change has always been a challenge, the increasing pace of change is creating a sense of urgency for businesses to adapt quickly – and for those of us in the insurance industry, it is creating new and emerging exposures and opportunities at an unprecedented rate.

Technology will continue to play an integral role in how we adapt as an industry. The coming year will see a continuing focus on leveraging digital technology to control distribution costs and provide better service to customers across every touch point – sales, service and claims processing.

The insurance industry will also see continued investment in data and systems capabilities to better support improved analytics and decision-making.

With 69% of surveyed Canadian companies reporting a cyber crime attack in the past year, cyber risk has quickly emerged as a new reality in the business landscape. The risks that come with our growing reliance on technology affects almost every company operating today – regardless of size or industry.

Despite the rising importance of technology, insurance is at its core a people business. We need to continuously adapt to the needs of an evolving workforce and continue to invest in the talent we already have, while attracting those with the mindset and skill sets required to drive innovation and help the industry stay ahead of the change curve.

Attracting talent is an area where our industry has struggled historically.

The recent report released by the Insurance Institute clearly demonstrates that we have made a great deal of progress in this area – the property and casualty insurance industry is now both younger and more aligned with the age structure of Canada’s labour force than it was in 2007 – but there is still work to do.

As many of us in the industry already know, there are great opportunities for a rich and rewarding career in insurance, and it is important that we let everyone in on our secret. The more we continue to innovate and advance, the more we will be able to attract the best and brightest – the future leaders of this industry.