Priming Performance

Despite reasons for optimism in some specific business segments, the general economic outlook for the property and casualty industry in 2012 appears troubling. Investment income is down based on ongoing volatility in global financial markets; claims frequency and severity continue to be an issue in home insurance lines, particularly in light of water damage and the fire in Slave Lake, Alberta; and in the auto product, fraud continues to be an area of concern. Conditions are such that some see the dawn of a hardening insurance market.

Given all of these potential obstacles and more, Canadian Underwriter approached executives of Canada’s primary insurance companies and asked them where their focus should lie in 2012. “What is at the top of your to-do list in 2012?” we asked.

Some chose to interpret the question as what the individual company’s focus will be. Others talked more generally about the Canadian P&C industry’s focus. Either way, the answers suggest a certain narrative. That is, in spite of the various economic obstacles facing insurers (or maybe because of them), insurers are now paying close attention to priming their performance. That would include delivering quality service to consumers; helping brokers better serve their clients; and streamlining and/or developing new products, technology and/or services to retain customers in what are challenging economic times for them, too.

Here is how executives answered our question, presented in alphabetic order by last name.

1 Barbara Bellissimo Senior Vice President, Chief Agent,State Farm Canada

State Farm’s success is based on its people. Investing in their capabilities to better serve the evolving needs of our customers is a priority in 2012.

We will build on our capacity to satisfy our customers’ insurance and financial services needs by supporting our agents with technologies that provide a simple, responsive and seamless experience.

Our customers expect us to provide insurance at an affordable price. This requires us to monitor Ontario auto product reform trends and partner with stakeholders to realize the opportunities available for stable and affordable auto insurance.

Aggressively combating insurance fraud will continue to be a priority. Additional resources are needed to deter this criminal activity successfully, and we will work closely with the government and law enforcement to ensure this issue receives the necessary attention. This sends a clear message that criminal activity will not be tolerated.

Ultimately, matching price to risk is the fairest approach for consumers. We will advocate for the use of sophisticated, evidence-driven pricing models. Achieving strong underwriting results in an uncertain economy and during periods of low interest rates will be a priority.

As an industry, we must continue to champion the cause of infrastructure renewal and promote loss prevention solutions, since all of us benefit from safer communities. With severe weather events increasing, we have witnessed increasing infrastructure failure and property damage.

Our philosophy has always been our customers’ needs will determine our path, and operating on this philosophy in 2012 will be our focus.

2 Charles BrindamourCEO,Intact Financial Corporation

Providing an outstanding experience to customers and high-quality service to brokers is at the top of our ‘to do’ list in the coming year. In 2012, we will continue to build upon our customer value proposition and to demonstrate our unwavering commitment to brokers who wish to expand their activities. We will remain focused on delivering an experience that goes beyond our customers’ expectations while making it easier for brokers to do business with us.

As an industry, we should continue promoting customer confidence. Individually, as brokers or insurers, we should put customers at the centre of everything we do. We must uphold a strong customer-driven mindset to improve our relationships and earn the trust and respect of our customers. As consumer needs, demands and preferences evolve due to demographic changes and the prominent role of technology in our lives, adjusting our service delivery becomes increasingly important. These factors will continue to shape our initiatives. Technologically, we will leverage our Web strategy and roll out our buy online tool for brokers, which will not only help connect brokers with new customers but also allow them to better compete in a rapidly evolving marketplace.

As we have in the past, we will support brokers by offering best-in-class products, accelerating our technological enhancements and providing financial solutions to ensure brokers have a means to succeed and flourish in this new environment. This support is above and beyond the high-quality and experienced team to which brokers have access and with whom they work in close proximity. We are also intensifying our publicity, marketing and community involvement to promote brand awareness and drive business to brokers. This, along with investing in technology, is fundamental to the future growth and success of brokerages and its entrepreneurs.

3 David BrosnanPresident, CEO,ACE INA Insurance

Similar to my peers, much of the calendar is consumed by the administrative responsibilities of running a complex business like insurance. While I have much to accomplish in this regard, I am most passionate about the human aspect of our business and telling the ACE story. These pursuits marry up nicely, as we have spent the better part of 2011 engaged in a dialogue with our clients and our key trading partners.

Emerging from these discussions is a mandate to tailor our specialty suite of products in 2012 by industry segment, since specific sectors are often faced with a unique set of challenges. This effort encompasses scaling our specialty product suite for the small to medium market. This segment is often referred to as the driving force of the Canadian economy, and therefore it is imperative that we continue to refine and roll out this capability in 2012.

One of my greatest objectivities is to leverage ACE’s global capabilities, financial strength, technology and its network encompassing 53 countries. For Canadian multinationals operating in today’s ever-changing regulatory environment, it is critical that global placements are compliant. ACE has invested considerable capital in thought leadership in this area, particularly as it pertains to helping our clients understand and interpret the various regulations where they do business. ACE’s latest white paper on Canada clearly demonstrates this. Supporting these efforts is ACE WorldviewSM, a Web-based portal developed specifically for multinational risk managers and a recent winner of the 2011 Innovation Award from Business Insurance magazine.

4 Alister Campbell  President, CEO,Zurich Canada

It’s lucky we’re an industry that specializes in managing risk in a world of uncertainty. Because uncertainty appears to be the only sure thing we can plan for with confidence heading into 2012! Looking back on comments I have made over the past year, I’m not feeling too bad about Zurich’s “predictions.” Remembering to “do the boring things well” – focusing on customers and broker service in a challenging economic environment – remains wise. And reminding people last year about the impact of sustained low interest rates on the P&C industry balance sheet is clearly turning out to be prescient. Last year, “95 was the new 100” when it came to acceptable combined ratio levels. Even that lower target might need to shift downwards if investment yields continue to deteriorate.

What new insight can Zurich offer? Maybe the need to think more deeply about “interconnectedness.” The financial crisis of 2008 made all of us face the nature of systemic risk in our financial infrastructure. Trouble in a handful of financial institutions could threaten our entire financial system. Now we are learning that fiscal trouble in one or two mismanaged countries could jeopardize global economic prosperity. And, we have learned from the Japan quake/tsunami that globalization is making the impact of domestic natural catastrophes less localized than ever before. As I write this, floods in Thailand are once again having material supply chain impacts and forcing all of us think about contingent business interruption exposure in a new light.

Interconnectedness might be a good theme to keep in mind in 2012. Our customers, their brokers and the insurers who serve them are symbiotically linked – another way to say “we’re all in this together!”

5 George Cooke President, CEO, The Dominion

The Dominion heard a clear message from brokers in 2011. In feedback sessions and through direct conversations, brokers are talking about the way we do business together. Improving our brokers’ experience in 2012 continues to be one of The Dominion’s top priorities. We are listening and delivering.

Brokers consistently express frustration about what is currently required to meet service expectations. We agree we have work to do, as a company and as an industry, to attract and keep customers in our channel. Historically technology has not enabled these efforts, but in very recent years open technology and opportunistic integrators (vendors) have become available to our industry. Our systems can now “talk” to each other to better align with the consumer’s view of the transaction.

The Dominion in 2012 will see significant progress in our systems transformation, which aligns with CSIO standards and our full support of the IBAC vision. Our transition is being done in deliberate phases, such that brokers will see incremental efficiencies along the way. In all areas of our business, we are investing in process efficiencies and improved service from the “outside-in” perspective of the consumer.

Our commercial lines team has been strengthened significantly to make The Dominion a market to which brokers can look for their commercial clients. Our approach to the full spectrum of broker communications – from the detailed policy/claim level to broader marketing of our products and services – will also see a meaningful transformation.

Our vision is to bolster the value of the channel. We are working with our brokers to streamline interactions and increase efficiencies to allow more time for them to focus on developing and nurturing client relationships through the provision of valued advice and service, using whatever process or medium they choose.

Brokers must also be certain of their priorities in 2012. With consumer demands evolving, business models must follow suit so that clients realize the full value of the independent broker. For the broker channel, a strong brand definition is key; the business strategies of all those within the channel should reinforce that brand. An evaluation of all business relationships based on support of the broker brand should top the independent broker’s list of priorities in 2012.

6 Karen GavanPresident, CEO, Economical Mutual Insurance Company

The P&C industry will continue to operate in challenging circumstances in 2012. The sustained low interest rate environment, combined with low equity returns, underlines the necessity of focused, well-analyzed underwriting decisions.

At Economical, we’ll be focused on leveraging our data assets to support sound decision-making in underwriting and claims, while providing ongoing support to broker partners. A key differentiator for our company, even in times of structural economic constraints, is our excellence in claims service. We’ll be leveraging that reputation and skill set to continue adding value to our stakeholders, especially policyholders and brokers.

Managing fraud and mitigating its impact will be an ongoing priority as the Ontario auto reforms continue to take hold and the conditions for fraud change as a result. We’re seeing heightened awareness within and even beyond the industry in terms of the true costs – and prevalence – of fraud to Canadian policyholders. We will continue to build on that awareness and maintain the industry’s momentum in countering fraudulent claims activity. In terms of Ontario auto more generally, Economical joins many industry watchers and operators in a cautiously positive assessment of the reforms on controlling claims costs.

Enhancing ease of doing business will also be a defining feature of our business plan. This will be done across the entire spectrum of operations – including product development, process improvements and technological integration with brokers’ business management systems.

Finally, Economical will maintain our ongoing commitment to prudent capital and expense management, as we continue striding toward the goal of demutualization in 2012.

7 Kevin McNeil President, CEO,Gore Mutual Insurance Company

The same thing has been at the top of our to-do list for many years. It is something we never grow tired of tackling: finding ways for Gore Mutual to better serve our most important customer, our broker partners.

At Gore Mutual, we enjoy a unique and healthy dynamic.  On one hand, we are a stable, conservative mutual company that honours traditions built over 172 years. On the other hand, we are a progressive company embracing innovation to find new and better ways to serve our brokers.

Despite time and commitment dedicated to this issue, our industry is still without a common solution for brokers and insurers to work more efficiently together. It’s the elusive and much-desired “silver bullet.”

The challenge is not only to integrate multiple management systems, but also to map multiple workflows. Each brokerage wants a solution built for their specific workflows. However, there can be multiple requirements even within a single brokerage, since each employee customizes how he or she does business.

We have discussed specific options at numerous industry forums. At best, only half the hands go up when voting for any one solution – and it’s never the same half! This tells us that each broker is unique. This uniqueness has made brokers who they are and reflects their entrepreneurial nature.

Gore Mutual would like nothing more than to find and support an industry-wide technology solution. We will continue to invest in this challenge and we’ll be the first to the party that celebrates an industry-wide solution. In the meantime, we will do our best to offer customizable solutions to make it easier for brokers to serve their clients.  We have looked at leading-edge technology in other industries to show us the way forward and are very excited about what we’ve discovered.

8 Ellen MoorePresident, CEO,Chubb Insurance Company of Canada

Chubb anticipates the beginning of a turn in the Canadian market as we enter 2012. In our view, seven years of soft commercial pricing is not sustainable given today’s investment portfolios and climatic activity. Rate strengthening may begin in more problematic lines like long tail casualty and catastrophe exposed property, hit hard by year-over-year price reductions.

The appropriate anxiety over profit deterioration and balance sheet stability is beginning to wear on the theory that excess capital will continue forever. We believe this will likely bring firmer pricing to both commercial and personal lines. Focus is needed on making an underwriting profit in our industry, so that the industry can provide a consistent and sustainable product to the consumer.

The industry has the responsibility to execute well in the underwriting of our clients, since we have limited influence over other market dynamics. We believe continuing consolidation among insurers and brokers will affect the market, affecting the ability to grow top line.

Regulatory pressures are still on the rise. Certainly the impact of the global economy in which we operate is a challenge. Although Canada remains a stable environment, influences around the world challenge our industry’s ability to grow and stay financially strong.

Success in 2012 will require more diligence than ever. Chubb has been more fortunate than some of its industry peers with catastrophe events and severe weather this year. Our strategy remains unchanged: stay focused on underwriting discipline; price to exposure; be innovative in the client segments in which we excel; and provide outstanding service to our brokers and customers. Managing our balance sheet and our underwriting profit remains our top priority. Managing distribution relationships, as always, will be critical. We remain committed to our network of strong, independent brokers.  

9 John O’DonnellPresident, CEO,Allstate Insurance Company of Canada

As the Canadian P&C industry becomes increasingly competitive, the experience we provide our customers will continue to play a central role in how we run our business. Economic conditions in recent years have created a heightened awareness around price, leading many consumers to shop for the best rate available, but the experience they have is relevant to the choices they make.

As an industry, we thrive in a regulatory environment that fosters competition and encourages investment and innovation. This is more important than ever as we focus on delivering the right balance between profitability and accessibility, while maintaining strong retention and avoiding significant rate increases. This is a difficult challenge to meet, especially with Ontario auto, and will require us to be nimble both in terms of product and pricing and customer experience in order to succeed.

At Allstate, we survey our customers in order to identify individual preferences and help us better respond to their needs. As a result, we are developing more sophisticated products, strengthening our online presence and becoming more active in social media, since we recognize this is how more of our customers prefer to do aspects of their business with us. Addressing our customers’ product, shopping and service preferences will be critical in the years ahead.

10 Gary OwcarPresident, Chief Operating Officer,CNA Canada

There has certainly been a lot of chatter south of the border about increasing rates and establishing a bottom to the soft market. CEOs have not missed an opportunity to talk about their positive rate increases and the market outlook.

One thing is for sure: this is not the typical environment for a hardening market. Instead of too little capacity chasing too many risks, we have the opposite – too much capacity chasing too few risks. The problem is anemic rates of return on equity, investments and assets. For boards and shareholders, current income in today’s marketplace is very much at issue.

At CNA, we have taken the position that we will provide distinctive insurance solutions regardless of market cycles. In Canada, we have implemented a strategy focusing on a strong point-of-sale capability, coupled with deep expertise in chosen industry and product segments.

In 2012, our key priorities will be:

• Improving data integrity and access to maximize our predictability models and sharpen underwriting and pricing skills.
• Training and developing our people to increase sales competency, while providing new tools to mine business with our distribution partners.
• Improving productivity by centralization and automation of business processes that are not core to the underwriting and claim functions.
• Continuing to raise performance expectations, while upgrading and developing our talent wherever possible.

Overall, I believe 2012 will see the leaders in our industry moving ahead based on execution and performance. And, I fully expect CNA to be counted among them.

11 Sylvie PaquettePresident, Chief Operating Officer, Desjardins General Insurance Group (DGIG)

I have three items on the top of my to-do list. First is to renew our focus on the customer experience. As a direct insurer, we’ve always prided ourselves on the quality of service provided to customers at all points in the relationship, from the initial quote right through to service and claims. However, we’ve grown so quickly over the past couple of years that our service quality has slipped. This is a big concern for us, and it is an issue we will be addressing right across our organization in 2012.

The second item is more complex – the continuing challenge in the Ontario auto insurance market. Don’t get me wrong: the market has improved as a result of the reforms. But it is still extremely difficult, particularly for direct companies. The take-all-comers rule, the restrictions on rating variables and the expensive and time-consuming rate approval process all have a negative impact on industry profitability. The market is especially challenging for direct companies that are expanding (such as DGIG): our promotional efforts, availability and competitive pricing tend to attract more than our fair share of less-desirable risks.

The other top item on my list is industry consolidation. It’s no secret that our industry is very fragmented and is ripe for consolidation. The Intact purchase of AXA Canada will likely accelerate that restructuring. We are looking at all the options very carefully, as we plan to be participant – not a wallflower – in reshaping the industry.

12 George Petropoulos President, CEO,                Travelers Canada

We can expect 2012 will be another year of global economic uncertainty coupled with an election year in the United States. Fortunately, Canada has a relatively stable economy and the Canadian property and casualty insurance industry remains well capitalized.

On the surface, this seems positive for Canada. However, when you talk to average Canadians, they will tell you in most cases that they are struggling. People are worried about growing personal debt levels, the sluggish economy and the employment outlook.

So what does this mean for commercial lines customers? If their own clients are having difficulty, then we can only assume that our customers are having difficulty as well.

As a result, it makes sense that everyone is more conscious of how much they are spending. As insurers, we need to help our brokers by delivering a clearer value proposition to them. We need to remain focused and disciplined, and clearly communicate our business appetite.

At Travelers, we believe it is important to deliver greater value to our brokers and customers by continuing to invest in our organization, whether it is product development, risk control or claims handling, and to focus on providing exceptional service.

13 Rowan Saunders President, CEO,                RSA Canada

In order to mitigate the impact of a slow economic recovery combined with the challenges of severe weather events, RSA will continue to focus heavily on disciplined underwriting. This means a more in-depth review of potential risks and existing portfolios to ensure our appetite reflects increased pressures faced by the industry at large. Our acquisition strategy remains a priority given that an ongoing divergence in industry performance will lead to further consolidation. We continue to seek out acquisition opportunities that will complement our growth strategy.

Our focus on growing in niche markets enables us to build and enhance our product offerings. For our commercial business, this means an increased appetite in large commercial and specialty lines and a greater emphasis on leveraging our capabiliti es as a global insurer. In personal lines, this includes more customer segmentation and highly targeted, specialized offerings such as private client insurance for high net worth clients.

We strongly believe people are at the heart of everything we achieve. As such, talent acquisition, retention and development are also key priorities. Our broker partners are equally vital to our success and we will continue to invest heavily in this channel through education, technology and strategic partnerships.

Finally, the upcoming move of our Toronto head office to a greener, more collaborative space in 2012 Q1 signifies our ongoing drive to remain an innovative and dynamic industry leader.

14 Maurice Tulloch President, CEO,                Aviva Canada

As global economic turmoil continues, we at Aviva are heading into 2012 with the same priorities with which we started 2011 – being a great underwriting company committed to the broker channel. With those solid guideposts, our focus is on:

• Making our commercial lines business just as competitive as our highly successful, post-transformation personal lines. With a focus on people, process and technology, we will enable our underwriters to do what they do best. We are consulting with our broker partners every step of the way to build a no-surprises process and responsive solution for them and their clients.
• Improving ease of doing business for our broker partners at every touch point. Central to this is greater broker connectivity, and we’re already implementing system improvements such as an upgrade to our broker integration hub.
• Combating fraud to protect our customers and our business. With our industry and the government aligned, and public awareness growing, progress is being made. However, as insurers, we will need to be more proactive and collaborative than we have ever been to win the fight against fraud. Our customers deserve this from us and governments expect it.

All of us at Aviva Canada expect the New Year to be full and challenging, and we’re ready.  Encouraged by much-improved satisfaction scores across the country – a report card on our efforts so far – we are excited to build an even better experience for both our brokers and customers.