TABLE OF CONTENTS Dec 2012 - 0 comments

Full Spectrum

It's a safe bet that Canada's property and casualty insurers are in for big changes. How dramatic those changes will be, what form they will take and when they will ultimately unfold are expected to fall on many points along the spectrum. Building on hard data and emerging trends, insurance companies are blending old with new as they prepare for all shades of risk.

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After the polar opposites of the last two years - from the red-hot losses of 2011's catastrophic events to the relative green-light calm of 2012, albeit one punctured by a superstorm and a barely felt, but wholly unnerving, earthquake - 2013 looks poised to offer p&c companies in Canada its own mix of defining colours and shades of grey. The push to become better prepared for what lies ahead may help smooth the transition and avoid yet more extremes.

The coming year looks to be an opportune time to rethink risks once in the background, but now coming to the fore, and integrate a new view of necessary responses to meet ever-changing customer demands and expectations.

Insurers have plenty of issues to consider: the divide between the economic cost of catastrophic losses and levels of insured risk from increasingly severe large loss events; earthquake risk, costs, capacity and cover; catastrophe modelling requirements; tepid economic growth; the looming fiscal cliff; the importance of strong underwriting; merger and acquisition activity; infrastructure renewal; the need to tailor claims solutions by location, customer and activity; and, of course, technology... technology... technology.

Canadian Underwriter asked senior executives for Canada's primary insurance companies this question: What do you regard as the key existing and emerging p&c trends and how will your company respond to meet these issues in 2013?

Again, responses ran the length of the spectrum. Here is what the executives had to say, presented in alphabetical order by last name.

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

Record low interest rates mean insurers must concentrate on the fundamental components of underwriting results - rate adequacy, risk selection and efficiency - to achieve a satisfactory return on capital. Increased regulatory and capital requirements continue to burden the industry.

We support government efforts to meet the needs of Canadian consumers. For example, Canada's anti-spam legislation (CASL) intends to promote electronic commerce, yet some key provisions will be detrimental, restricting the industry's ability to communicate with customers and adding significant compliance costs.

Consumers have clearly voted for the convenience and security of e-commerce. We hope the final CASL regulations will strike the appropriate balance.

New technology allows insurers to capture information on driving behaviour to better match price to risk. We will work with provincial regulators to find ways to leverage this new technology to achieve the real benefits available for consumers that result from the enhanced correlation between driving behaviour and the price of auto insurance.

Ontario auto insurance reform is moving in a positive direction. Nevertheless, more work is required. The Ontario government must move to implement key recommendations of the Ontario Auto Insurance Anti-Fraud Task Force.

The accident benefits schedule introduced in September 2010 continues to provide Ontario consumers with some of the most generous benefits available in North America. To be affordable, stable and sustainable, the Minor Injury Guideline must be reinforced and work around the catastrophic impairment definition must be completed.

The mechanism for dispute resolution as it exists today is not working. Initiatives have been implemented to address the serious backlog, but do not address the systemic issues in the dispute resolution process. The government must proceed with urgency to address these key areas of Ontario's auto reform.

Increasingly severe weather events continue to put pressure on aging infrastructure. We support loss prevention solutions and champion the cause of infrastructure renewal. In many communities, infrastructure systems have reached their life expectancy, posing real risks to families and communities.

In 2013 and beyond, we will continue to work with all stakeholders to implement positive and sustainable changes that will allow us to provide customers with accessible, responsive and affordable insurance products. 

2 Charles Brindamour
Intact Financial Corporation

As we approach the New Year, we are gaining a better understanding and greater clarity of the developments that will shape the performance of our industry.

The Euro zone's unresolved debt crisis and the United States' looming fiscal cliff means that our industry will continue to operate in an economy characterized by tepid and modest growth, low interest rates and volatile financial markets.

While such an environment is conducive to greater discipline in our core insurance activities, the industry will still have to contend with numerous challenges such as inadequate pricing conditions in commercial insurance, uncertainties over the outcome of the auto insurance reforms in Ontario, a home insurance product that was not designed and priced for climate change and, finally, our ability as a nation to deal with the aftermath of a major earthquake.

However, the most significant trend of 2013 and beyond will remain the ever-evolving needs, demands and preferences of our customers as they embrace new technologies. The transformational impact of this change cannot be understated as new, non-traditional competitors may emerge and current players are adapting or evolving their business models.

This is the reason why at Intact, we intend to continue to put the customer at the centre of all our processes and ensure we provide them with an outstanding experience. This evolution in consumer wants and needs is also the reason why we will continue to provide brokers with a broad product suite, high-quality service and the tools, financial solutions and technology that will allow them to offer the best customer experience.

This has been our strategy for years with the launch of our web offerings for brokers, increased brand and marketing efforts to drive traffic within brokerages, and the adoption of technology that allows brokers to be more efficient and focus more of their time and efforts on their customers.

While challenges may be disrupting, they are a source of incredible opportunities for all of us and, at Intact, we believe we are well-positioned to pursue our organic growth. 

3 Alister Campbell
The Guarantee Company of North America

Having recently moved from a large global financial institution to a smaller, Canadian-owned insurer, I was curious if the most significant trends affecting the p&c industry were any different from my new vantage point. Declining investment yields, uncertain economic prospects, rapidly shifting dynamics in the primary distribution channel, the threat of new entrants, consolidation... turns out the list is the same no matter where you work in our industry.

There are some key trends beyond our narrowly defined industry that will clearly continue to have impact on all of us in 2013.

So much is changing around us that sometimes it is hard to keep up with it all - as consumers much less as corporate leaders. The speed of things is accelerating, which includes customer expectations. The 7/24 world is now across multiple platforms - bricks and mortar, phone, "smartphone," tablet and social networks. Are we ready to serve customers across them all?

Increased customer sophistication, coupled with demands for transparency, will require more clarity from us about coverage, pricing and compensation. Web technology has a propensity to enable dis-intermediation. Are we ready to respond?

Shifting wealth patterns in the Canadian demographic are changing how we think about customer segmentation. Are we ready for the public policy questions that will come from that? Globalization is affecting our customers in commercial lines and the exposures they incur are shifting just as fast. Do we have that covered?

Given all that is changing, it is interesting how much remains the same. The willingness to pay for value, the power of relationships, the need for human intervention in a claim, the influence of brand, the desire for a trusted advisor.

These elements will all evolve in the face of so much change. And that change will force all of us to evolve (perhaps faster than we would like).

The winners will understand and respond to what is changing... but remember those elements of the customer that are truly immutable. Doing so will make it a lot easier to handle the vagaries and trends in our specific industry and enable the winners to prosper in 2013 and beyond.

4 Andrew Hollenberg
ACE Canada

Much like social media before it, cloud computing is gaining ever-widening acceptance in Canada.

While Canadian organizations are adopting at a much slower rate than other G7 nations, Canadian companies have not ignored the considerable business benefits of its use.

Some are exclusively utilizing its hardware capabilities as a way to store data; others have embraced its software capabilities for such things as email, human resources tools, customer relationship management and day-to-day business applications, including word processing and spreadsheet programs.

Cloud providers often do as good a job or better than most organizations in providing data security, simply because of the amount of resources these providers can deploy to the security function. However, they are often seen as a target by industrious hackers.

While cloud computing offers many strategic benefits, it has been criticized by privacy advocates, particularly when data is stored offshore. To illustrate this, data stored in the U.S. is subject to search under the Patriot Act.

Given the cloud's ability to provide the computing power enjoyed by the world's largest organizations, small to medium companies can often gain entrance at a fraction of the cost. As a result, these companies may adopt cloud computing at a higher rate and may be susceptible to the same types of security breaches. Like social media, cloud computing is gaining a strong foothold across Canada. While the business risks of social media are often reputational in nature, cloud computing presents the same types of challenges, often with the added dimension of business interruption and all the implications of a privacy breach.

Many technology watchers have classified cloud computing as a "mega-trend" and have viewed it as past the tipping point. As adoption grows, Canadian companies remain responsible for the safekeeping of their data. For these companies, it is critical to have in place specialized insurance coverage.

ACE offers a fully scalable product for Canadian companies of all sizes that focuses on privacy liability arising out of lost computer equipment, network security breaches and human errors. It also covers companies from errors made by third-party service providers.

As more companies adopt cloud computing, the potential exposure for data breaches and the need for data security will continue to be of concern to Canadian companies.

5 Patrick Lundy
CEO, President & Chief Agent
Zurich Canada

The global economy has remained flat over the last few years, many countries are going into near default and, in addition, a "superstorm" just hit the most populated city on the continent.

In contrast, Canada seems to be faring slightly better and has not slipped into a serious recession. In fact, the country is poised for a continued stable outlook, growing gross domestic product (GDP) at a projected annual rate of 2% to 3% in the next three years.

This is the complicated business environment in which we now live and we may be viewing the new normal for several years to come. To survive, carriers need to find out how to turn this environment to their advantage. If they do not adapt to change, their future may mirror the crawling economy.

Looking at the old world in a new way and helping customers do the same is not an easy task, but as insurers, it is our job to identify the risks of the future and help our customers understand and prepare for them. We need strong balance sheets to pay claims and we need to tailor solutions by location, customer and activity.

New catastrophe modelling requirements that will be implemented in 2014 are expected to increase capital obligations, putting pressure on the market as a whole. Regulations like these and the low interest rate environment mean being disciplined and focused in underwriting is imperative. Not only does it provide a return to shareholders that we are not getting from investment yield, it will position carriers for a harder market.

At Zurich, we endeavour to look at problems in new ways to ensure that we understand the industries we serve and can anticipate the issues they are facing. By consistently evolving our strategy and also listening to our brokers, we will adapt, adjust and become even better in the changing environment we face.

6 Ken McCrea
President & CEO
Wawanesa Mutual Insurance Company

There are a number of industry trends or issues that warrant attention, a number of which are of greatest concern and will be a focus for Wawanesa.

First is the continued severe weather in Western Canada, mainly Alberta. This is of particular importance to Wawanesa because of our strong presence in the region.

It is well-known that severe weather has resulted in significantly elevated wind, hail and water claims in the last three to four years. This can no longer be viewed as an experience fluctuation, but rather a "new normal," which Wawanesa is addressing through changes to product design and rates.

That said, it is challenging to take the necessary actions in a manner that does not disrupt business or result in consumer dissatisfaction with the industry.

Second is the risk of a major earthquake in British Columbia. While there is similar risk in Ontario and Quebec, B.C. is our main focus due to our significant business volume in the province.

A number of developments have highlighted the risk and costs of a major quake, including increased insured property values, increased loss estimates from updated earthquake models, increased reinsurance costs because of recent global earthquakes, and anticipated increased reinsurance requirements as a result of the Office of the Superintendent of Financial Institution's new guideline.

These developments all lead to a need for significant increases in customer earthquake premiums. The company is offering product options in an effort to keep coverage affordable.

Like many companies, Wawanesa continues to engage in replacement of our core insurance legacy systems. New technology will provide the means to assist our brokers and employees in providing improved service and a better overall experience for customers.

We have made great progress in recent years and in 2013, will embark on a multi-year project to replace its policy administration system, the final stage of our enterprise system replacement strategy.

Other trends include the increasing adoption of sophisticated pricing approaches and continuing to adapt to a low interest rate environment.

7 Kevin McNeil
President & CEO
Gore Mutual Insurance Company

We believe 2013 will see insurer and broker expenditures in technology accelerate to achieve improvements in customer service and operating efficiency.

Outdated, inflexible legacy systems must be replaced with modern client-centric and adaptable core systems. Innovative technologies - that are rapidly increasing customer expectations and reducing costs in other industries - need to be adopted.

Our industry is far behind and the catch-up will be costly and high risk. Many realize there is no choice but to bite the bullet and get on with it. If we continue to linger in the past, insurers and brokers alike will face increasing criticism for being antiquated and out of touch. We will also see new entrants using technology to capture significant market share from traditional players.

Clients are becoming conditioned to receiving instant solutions, often through online tools. Recognizing that customers behave differently, brokers and insurers need business models that allow them to customize their services. Products and services must be delivered in seconds, maybe minutes, but definitely not hours.

Insurers will need to leverage technology to find new ways of doing business. Several are examining how big-data search engines and predictive analytics can provide more underwriting insight; some are moving to paperless electronic workflows; most are starting to replace their legacy systems with state-of-the-art technology that provides the foundation from which companies are then able to innovate. Better, more innovative solutions become possible when working with modern open core systems.

All participants in our industry need to embrace new technology to drive down the cost of doing business and create exceptional customer experiences.

During 2013, Gore Mutual will continue its legacy system transformation; now well under way. The company will also introduce innovative technologies in all of our operations, beginning with the launch of a new system early in the New Year.

8 Ellen Moore
Chair, President & CEO
Chubb Insurance Company of Canada

During 2012, the industry continued to see a very competitive landscape as excess capital helped sustain eight years of a soft market. This remains counter-intuitive as underlying trends on loss development, increased and severe climatic activity and limited investment return on the industry portfolio are just three reasons for a long overdue market turn.

There has been some movement on the commercial rate front and with the major events of 2012, we should anticipate greater momentum during 2013.

With limited investment opportunity and significant insuring events playing out in the market, Chubb believes focus is needed on making an underwriting profit within the industry. This is the only way to provide for consistency for the long term in pricing, product availability and ultimate consumer protection and market confidence.

The fundamentals of our business will be critical as the upcoming year will present even greater challenges. While Canada remains a relatively stable economy, the influences around the world challenge our industry's ability to grow and stay financially strong.

The volatility of global financial markets continue to influence regulators and this is evident in many new or revised regulatory requirements being imposed in Canada. There are several significant changes for 2013 that will add cost to our business and impose potential added capital requirements.

Global catastrophic loss events have made consumers even more aware of the important role insurers play in rebuilding businesses and households. Chubb takes that responsibility very seriously and our strategy to deliver on that promise remains unchanged: stay focused on underwriting discipline; price to exposure; be innovative in the clients segments in which we excel; and provide outstanding service to our brokers and customers.

We look forward to a successful 2013.

9 Sean Murphy
Lloyd's Canada Inc.

An emerging trend in the global insurance market is the increasing severity of major disaster events. Last year was the second costliest year overall for the insurance industry and the costliest for natural catastrophe claims on record.

In the aftermath of these large loss events, what sadly becomes apparent is the disturbing difference between the economic cost of catastrophic losses and the levels of insured risk.

In Canada, the most widely recognized, but highly difficult risk to quantify, is earthquake. There has been much talk in our industry about the risk of earthquakes and an effort to reduce its related solvency risk, the latter by increasing capitalization levels for insurers who write business in earthquake-prone areas.

The accepted broader economic shock of such risks emphasizes the need for a comprehensive approach that avoids action taken in isolation which could have unintended consequences, including higher prices or reduced capacity on an already low penetration level of earthquake cover.

A recent Lloyd's-commissioned independent study by the Centre for Economic & Business Research highlights the cost of underinsurance to the state. The study showcases that the state bears an excessive portion of the cost for natural catastrophes in countries with a low level of insurance.

Those costs can be reduced with a small increase in market penetration - a 1% increase in a country's insurance penetration can reduce state liability by as much as 22%. In a difficult economic climate, these levels of financial exposure have a clear impact on economic recovery.

Lloyd's will continue to manage catastrophe risks, encouraging the need for a comprehensive approach to identify and address risks associated with earthquakes.

10 Lynn Oldfield
President & CEO
AIG Insurance Company of Canada

Some of the key existing trends in our business have been with us for a number

of years and the expectation is that many will continue through 2013.

The global financial and economic climate remains uncertain. At the time of writing, the business pages are filled with musings on the U.S. fiscal cliff, the possibility of a recurring and sustained recession and the continued uncertainty of many European countries' balance sheets and their ability to service their growing debt loads.

The global financial impact on our p&c industry in Canada is most evident in equity volatility, the sustained low interest rate environment and limited growth prospects for some Canadian corporate and commercial sectors. All of that coupled with a competitive marketplace with plentiful supply of capacity requires a return to the basic fundamentals of our business.

Sustainability requires superior operating performance and a focus on continuous improvement. At AIG, we have increased the tools available to our underwriters and claims professionals. Risk assessment tools, dedicated risk training modules, fraud detection systems and improved analytics all add value for our client and broker partners by sharpening our competitive offering. Science then requires the art of experience, brought together by years of underwriting, engineering and claims experience.

Whether you deem the trend in global weather and catastrophic events to be due to global warming or climate change, there is no doubt of increased frequency and severity of operational risk on a global basis. Industry eyes have been opened by supply chain risk management volatility and swings in contingent business interruption valuations as the global nature of risk is impacted by events around the world.

AIG will continue to provide thought leadership, education, training and tools to assist our client and broker partners in preparing their businesses to survive and thrive when faced with adversity. The unexpected has become the expected.

Finally, the pace of change and technological advancements require new skill sets from our team members. AIG continues its core focus on mentoring. Employee engagement fosters a "can do" culture and that benefits our broker and client partners.

11 Gary Owcar
Chief Agent, President & Chief Operating Officer
CNA Canada

As of late November, the insurance industry is facing some big unknowns. What will superstorm Sandy cost the industry? How will newly elected leaders in the U.S. address the financial cliff? What further deterioration may occur in the Euro zone? Will the Middle East conflict escalate?

Any or all of these events would alter the economic landscape and the insurance industry's 2013 outlook.

Turning to more predictable factors, economic growth is likely to remain tepid. Yields on investments will track with weak GDP growth. On a positive note, however, we should see some improvement in the U.S. economy. Increased business investing and consumer spending along with gradual recovery in housing will benefit the Canadian business environment.

As this unfolds, strengthened international solvency regulation is under development on a number of parallel tracks in various countries. Higher capital requirements are coming, and more sophisticated risk modelling capabilities will be table stakes. These trends will drive mergers and acquisition activity on the carrier side as well as change many aspects of their operations.

Against this backdrop, carriers will be more challenged than ever to achieve their goals. With interest rates at historic lows, a 95% combined ratio is the new 100%. Strengthening pricing is the only way for the insurance industry to deliver a respectable return on equity to shareholders.

The need for rate does not mean the market will harden across the board: globally speaking, there is still too much capital for a traditional hard market. Instead, we expect to see market adjustments by geography and lines of business.

Each company will have its own set of challenges based on mix of business, underwriting appetite, balance sheet strength and capitalization.

Overall, we continue to see this as a time of opportunity for CNA companies with financial strength, deep insights in preferred customer segments, and underwriting and claims expertise in specialized lines.

12 Sylvie Paquette
President & Chief Operating Officer
Desjardins General Insurance Company

There are so many trends impacting Canada's p&c insurance industry, that it is difficult to narrow it down to the most important.

The prospect of record low interest rates continuing for at least the next few years is certainly a big concern, and will put pressure on rates and profitability. With 20 straight years generating an underwriting profit, Desjardins General Insurance Group (DGIG) is well-positioned to maintain growth and profitability through this increasingly challenging period.

Technology is also impacting the industry in a variety of important ways, and will become even more critical going forward.

Insurance distribution channels are a key area already seeing significant changes from technology. The challenge is to meet the demands of the younger, tech-savvy generation of insurance buyers along with those who prefer our more traditional channels.

This diversity of customer expectations requires that insurers stop looking at distribution from our vantage point, and instead look at it from our customers' perspectives. This means providing customers with choice, convenience and flexibility, as well as allowing them to use a variety of seamless channels to communicate with their insurance providers or representatives, when and how they choose.

At DGIG, we are transitioning our distribution channels by strengthening our online and mobile capabilities, while also introducing networks of exclusive agents and integrating it all with our customer care centres.

Another related trend is the focus on enhancing the customer experience. While there has been a lot of talk in the industry, there are no clear leaders. This is a void DGIG plans to fill, as we are implementing an intensive, multi-pronged program to improve the entire customer experience - from the initial quote and sale through the claims experience.

Last but not least, we expect industry consolidation to continue to gain momentum, as it becomes even more apparent that size and scale really do count. As was the case last year, DGIG intends to be a participant, not a wallflower.

13 George Petropoulos
President & CEO
Travelers Canada

Travelers Canada is committed to providing the best possible products and services to our customers and brokers. As we think about key considerations for next year, we are focused on a number of initiatives, two of which are cyber risk and catastrophic events.

We are helping our customers and brokers manage these risks through an evolving suite of products and services and through education.

With rapidly advancing technology, there is a growing need for businesses to protect themselves against the potential financial losses associated with cyber crime. The threat is real and no business is exempt - regardless of size. Current data suggests that small businesses are the target of 40% of cyber attacks.

At Travelers, we feel an obligation to help our customers and brokers understand cyber and other insurable risks as well as to develop solutions to manage those risks. In this digital era, cyber attacks and the ensuing media coverage are on the rise and are likely to continue.

Catastrophic events, such as superstorms or the earthquakes that have rattled parts of Canada in recent months (fortunately with few after-effects), reinforce the importance of monitoring, assessing and responding to the risks and potential exposures posed by our ever-evolving planet. We, of course, need to be there to fulfill our commitments after the event, but we also need to provide education and advice to our customers before they face a crisis.

The value of sound underwriting, combined with risk management, claims excellence and the ability to leverage powerful analytics, allows Travelers Canada to meet the needs of our customer and brokers while delivering adequate returns to our business.

With a team of dedicated service professionals, our commitment to be there when it matters most, remains our focus in 2013.

14 Rowan Saunders
President & CEO
RSA Canada

Ontario auto remains a key agenda item for p&c insurers given its size and historical underperformance. While reforms appear to be working, the long-term sustainability of these may be jeopardized given the number of unresolved issues and the emerging downward rate pressure.

This will make it increasingly difficult to grow profitably in Ontario, which for RSA, means diversifying our geographic footprint.

Case in point: our 2012 acquisition of Quebec-based L'Union Canadienne expanded our presence in one of Canada's most attractive markets, and rounded out our end-to-end, coast-to-coast customer proposition. RSA will continue to seek out acquisition opportunities that align with our strategy, focusing on geographic diversification and specialty offerings, given that further market consolidation will likely be driven by strong players seeking growth in an economy that offers few organic opportunities.

Indeed, this low inflation, low investment yield environment will require outstanding portfolio, cycle and financial management for the industry to deliver a reasonable return on equity. RSA will continue to turn up the underwriting dial in 2013, focusing on selective growth, while maintaining leading positions in our chosen markets.

With respect to weather, despite a benign H1, severe activity in Q3 will again drive above-average Cat losses for the industry. This, in addition to a number of near-misses, draws attention to the ongoing issues of inadequate catastrophe funding, tightening capacity in earthquake and wind-exposed zones, and increasing regulatory capital requirements. Prudent reinsurance, exposure management and predictive modelling will be key to mitigating this increasing global trend.

The pillars of RSA's success -Customer, People and Outperformance - will remain top of mind as we look confidently ahead to 2013. Fostering deep relationships with our broker partners, offering attractive, targeted customer propositions and investing in the technical expertise of our people, will culminate in another excellent performance for RSA.

15 John Taylor
President & CEO
Ontario Mutual Insurance Association

The Ontario Mutual Insurance Association (OMIA) represents 44 mutual p&c insurers incorporated in Ontario and has associate members from across the country.

Member companies are all more than 100 years old and have deep roots in Ontario's farm community. Over time, mutuals have grown and adapted to the emerging trends. While largely rural-based, mutuals now provide a full line of agricultural, residential, commercial and automobile insurance.

Like all insurers, OMIA has witnessed the explosion of technology and changing consumer perceptions of insurance as a product and its distribution. Up until the last few years, most technology discussions involved bridging a technology gap between distributors, such as brokers and agents, and the underwriter. Today's technology discussion is broader in context and covers both basic communication with policyholders and electronic commerce with policyholders.

The evolution of "personal" technology has changed the retail marketplace for typical consumer products considerably. That change is now also coming to the forefront in p&c insurance.

We see the primary issue as ensuring the use of technology in researching and buying insurance adequately matches the importance that insurance plays in protecting Canadians and management of both personal and business risk. Many consumers see insurance, particularly personal insurance, as a commodity. In fact, the choices consumers make related to the selection of automobile, home and business insurance represent the most significant risk management they will undertake to protect them against a potential large liability, automobile and their largest personal asset (home or business).

Ontario's mutuals are continuing to focus on policyholder needs and providing personal service and advice to protect their policyholders. At the same time, we need to make investments and adapt to being able to reach policyholders through new technology, including social media.

16 Bob Tisdale
President & Chief Operating Officer

Pembridge Insurance Company

More than ever, the insurance industry must consider how to address the challenges our brokers and their customers face when trying to integrate the convenience offered by emerging technologies with our relationship-focused business model.

Technology is one of our biggest challenges, but it is also one of our greatest opportunities to improve customer experience. How do we reconcile technology's quick convenience with the time needed to provide trustworthy advice and counsel to clients?

Today, research technology is allowing consumers to access ever-increasing amounts of information, regardless of the issue. Got a health problem? Google it and you will immediately get an answer.

Like self-diagnosis by Internet, though, there is a risk the answers given are not necessarily the right ones for the individual or for complex situations. The same is true for insurance. So how do we address this challenge?

While technology certainly does create awareness and offers access to information, it does not replace the ability of a trained professional to diagnose the problem and prescribe the right treatment. Ours is a complex product that requires specialized expertise.

The professionalism created through extensive training and education is being undermined by an "it's simple and easy" approach to our products. This commoditization can erode our business fundamentals if we do not stay ahead of the curve in ways that are meaningful and add value for our clients.

When it comes to insurance needs, one size does not fit all. Each of us has unique risk tolerances and risk profiles. Only professional investigation and advice can determine how to design a product the meets unique needs.

Pembridge will support our broker partners in efforts to bring together technical solutions that offer convenience, but not at the expense of sound advice. Many industry surveys show that consumers demand and appreciate the specialized expertise that we offer as an industry.

Fortunately, consumers continue to demonstrate they value that expertise by contacting insurance professionals before purchasing products. We, in turn, need to listen to customers, continuing to provide professional advice and not abdicating this responsibility to online search engines.

17 Maurice Tulloch
President & CEO
Aviva Canada Inc.

Superstorm Sandy certainly made people pay attention to what environmentalists have been talking about for years. And our industry has been seeing the effects first hand for quite some time - though with some reservations.

There is now no denying the existence of climate change and the affect it will have on our society for the foreseeable future. So, what are we going to do about it?

Rate is not the long-term solution to the problem, particularly in select regions, as it will not allow us to keep up with the loss trends and will, ultimately, lead to availability and/or affordability issues. Product reform and limiting perils are also not the right answers.

Insurers, brokers and all levels of government must start working more closely together on mitigation and education around new climatic patterns and their potential impact. Consumers need to understand the importance of risk mitigation such as sump pumps, back-up valves and hail-resistant materials, as well as the proper maintenance of areas around foundations, eaves troughs, roofs, etc.

We need to reward customers for taking the appropriate steps to protect themselves. Education efforts need to be clear, ongoing and come from all parties, including insurers, brokers and government. Combined with financial incentives, only then might we see a shift in behaviour.

While we increase our own educational efforts and product research, we are also deepening our support for industry efforts. The Institute for Catastrophic Loss Reduction and tools such as the Municipal Risk Assessment Tool have the potential to level-set risk and educate consumers and business owners by providing more accuracy in identifying higher risk areas and mitigation methods.

18 Silvy Wright
President & CEO
Northbridge Financial Corporation

Some of the key trends for 2013 are really continuations from this year - the ongoing challenge of the commercial lines rate environment and the rapid evolution of the distribution landscape.

We have responded to these trends/challenges by doing something that I believe is unprecedented in our industry - we brought together all four of the companies that made up Fairfax's insurance operations in Canada under the management of Northbridge Financial Corporation.

While we are expecting the commercial lines rate environment to return to more profitable levels, there is no doubt this will continue to be an issue for the industry in 2013.

Our new scale allows us to leverage efficiencies and data in ways that were never before possible when we were operating as four separate companies. It also allows us to make significant investments in technology to help us gain deeper insights from a data mining and customer intelligence perspective.

Keeping up with the changes in the distribution landscape has meant aligning ourselves with key broker partners and ensuring everything we do is focused on delivering value for our customers. For us, delivering customer value means leveraging dynamic distribution platforms that not only provide customers with a choice on how they interact with us, but also make it easier for customers and brokers to do business with us.

Providing value also means not taking a broad-brush approach to delivering on products and services, but taking the time to really understand brokers' and customers' needs and delivering tailored solutions that better support their success.

2013 will continue to bring changes on many fronts, but bringing our companies together has given us a launch pad for the future. January 2013 will mark the one-year anniversary of the integration. While Northbridge has made great progress over the past year, it is just getting started.

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