Buddies in Bad Times

Tougher insurance market conditions have taken a toll on carriers and brokers alike, putting strain on the underwriting and claims processes. And so, even though carrier tech advancements are making all the headlines, a carrier’s underwriting and claims service will more likely tip the scales when a broker is choosing between two carriers to place a client’s business.

These are the findings of a small sample of commercial and personal lines insurance brokers across Canada, supported by the preliminary results found in Canadian Underwriter’s 2019 Carrier Performance survey. Our survey asked commercial and personal lines brokers to rate five different factors that influence their own carrier preferences: underwriting responsiveness and accuracy; underwriting flexibility; claims service; claims settlement; and technology. To supplement the survey results, we posed three key questions to brokers, each designed to paint a high-level picture of the current state of broker-carrier relationships. Here are the responses to each of those questions.

cu | When dealing with carriers, what factors are most important to you in considering whether to send a client to any specific individual carrier – underwriting, claims, or technology?

“I would say underwriting is Number 1, claims advocacy is Number 2, and the strength of the carrier’s technology supports both of those functions,” says John Chippindale, vice-chairman and national chief marketing officer of Canada for Hub International Ltd. in Toronto. Hub handles both commercial and personal lines of insurance, as well as employee benefit programs. Chippindale’s personal ranking echoes the results for 250 brokers who answered a simlar question in our carrier performance survey [for preliminary survey results, see our ‘Survey Says’ section on Page 12]. Underwriting factors were of primary interest to brokers generally, followed by claims considerations, and then technology.

Chippindale says the insurance industry is currently in a “hard market,” characterized by rising prices, coupled with reduced coverage in certain areas. In this context, the underwriting process is most important when selecting a carrier, because that will determine whether the best offer has been obtained for the client, says Chippindale. Also, customers want to work with insurers that have a reputation for settling claims fairly.

For Jeff Gatcke, a manager with Earl Shaw Insurance Brokers Ltd. in Kingston, Ont., the degree to which an insurance carrier handles the claims process in a client-friendly fashion is a top priority when selecting a carrier for his clients. Gatcke is president of the Insurance Brokers Association of Ontario. “We provide one opportunity to make a lasting impression for consumers, and that is at the time of claim,” he says. Earl Shaw Insurance Brokers does business primarily in personal lines.

Commenting on the underwriting process, Gatcke says one key priority is to determine which carriers are open to new business from brokers. “In this market, in my opinion, it’s just as important to keep and maintain business as it is to write new business,” he adds. “Measured growth is really where we’re at. It’s difficult for brokers right now.”

When selecting a carrier for a client, “we look first at financial stability, like the financial rating of the insurer, and then we look at their underwriting flexibility,” says Kevin Neiles, president of the prairie region and national director of market management for Arthur J. Gallagher Canada Ltd. in Winnipeg.

As for claims process, Neiles says, “we typically look to make sure that carriers have very strong in-house claims capabilities. And if they have independent adjusters working with them, we make sure that those adjusters are very strong and have capabilities across the country.” Neiles’s brokerage handles both commercial and personal lines of insurance.

David Mew, national placement leader with Marsh Canada in Toronto, says that from a commercial lines standpoint, if the client is a small- or medium-sized business, technology is a key criterion. Brokers seek a carrier that is automated, offering one-touch underwriting and processing of small commercial accounts; in addition, markets should offer electronic delivery of information and documentation.

“Once we get to our larger mid-market accounts, I would say right now the most important thing is that the underwriter is responsive, and willing to negotiate terms and conditions — things like rate, deductibles, earthquake, wind and flood supplements, etc.” says Mew.

Lisa Giannone is the managing partner of BFL Canada Risk and Insurance Inc.’s Montreal office, which specializes mainly in risk management and commercial insurance lines. She says the underwriting and claims functions are both important elements of how insurers treat a broker’s clients.

On the underwriting side, Giannone seeks carriers that demonstrate both the flexibility and capacity for clients seeking unique solutions. For example, some clients may need to be serviced for more complex risk transfer programs; these may require specific coverages for which it may be worth paying additional premium. Examples might include packages for events affecting their supply chain, a product recall, rip and tear, or contingent business interruption coverage.

“On the claims side, it’s very basic,” says Giannone. “I require a carrier who can get back to the clients quickly and make the client feel like they’re being heard. There

cu | In which of the areas of underwriting, claims, and technology do you believe carriers generally are currently performing at a high level? What do you believe are carriers’ strengths right now?

“I don’t think carriers are performing at a really high level in any one of those areas,” says Vicki Livingstone, owner and general manager of Freeman Insurance Agencies Ltd. in Innisfail, Alta. Freeman Insurance deals primarily with personal lines of insurance. “I think they’re kind of all consumed with the auto product right now, with auto being the mess that it is. But I do think that technology is one of the areas they really are focusing on.”

Improvements in technology represent one of the strengths that carriers offer today — or at least, they are working towards it, say some brokers. “On the technology side, there are some great things happening,” says Chippindale. “Insurers are transitioning to artificial intelligence (AI) and digital applications, which is helping velocity in the way business moves. It’s helping us to reduce costs. And it’s also helping us get more speedy claims settlements.”

Leveraging mobile capabilities, certain insurers are now introducing digital reporting and self-reporting from clients to insurers. From an underwriting standpoint, this is helping issuers do a better job of establishing risk profiles — insurers are better able to understand risks based on industry types and geography, for example. It also serves as a foundation to tailor coverage appropriately. This translates into underwriting decisions that drive fair pricing, and that reward high-quality customers, Chippindale says.

Technology — specifically the use of digital or mobile devices — also makes it easier for customers to provide information to the insurers. Obtaining such information quickly promotes the early investigation of and settlement of a claim.

“Whereas previously you might report to the broker via the telephone, and it would take multiple days, now it’s on demand, right there,” Chippindale elaborates. “If it’s an automobile accident, for example, you can attach pictures of what’s happening, and therefore it’s quicker and ultimately less expensive [to resolve the claim], which reduces the cost of insurance.”

Mew says some carriers who write big commercial books of business spend money on advanced technology and have electronic platforms, policy and documentation deliverance that do quite well in the categories of underwriting, claims, and technology. “But if you look across the spectrum of 30 or 40 insurers, [the number of carriers “doing quite well” at tech] probably covers five, seven or maybe 10 of them, at best. The others really fit into the average bucket.”

cu | In which of the areas of underwriting, claims, and technology do carriers generally most need to improve right now? What can they do to improve in these areas?

A tough market has resulted in a negative impact on both the carriers’ claims and underwriting processes, brokers report. In auto, the direct loss ratio for the industry is 102%, MSA Research reported in its Q4-2018 Quarterly Outlook Report. In other words, for every $1 in auto premium that insurers take in, they are paying out $1.02 in claims.

From an underwriting standpoint, customers and brokers in today’s business environment are experiencing too many about-face decisions, which is causing a lack of confidence and resultant brand damage, says Chippindale. “If an insurer’s getting in and out of the business, and the advisors and brokers are not clear on long-term commitment, then it causes a breakdown in the system and a lack of confidence,” he says. To improve the situation, Chippindale recommends that issuers provide better clarity about their strategic direction, which would prove consistency and demonstrate an overall long-term commitment.

Mew thinks carriers should allow their underwriters more latitude for underwriting business. “For brokers placing business on behalf of our clients, the most important thing in this marketplace is that underwriters are empowered to make decisions, and don’t have to go up the reporting line for approval before a risk can be quoted, accepted, and written,” he says.

Mew concedes that the industry is entering a more disciplined, transitional phase at the moment; that means some carriers have legacy loss ratios from last year and the year before, and therefore they have less flexibility to write business. “But we as brokers are looking to those carriers that have the ability to work through those issues, and still provide a deal and a product and a good price for our clients,” he says.

From a claims standpoint, higher loss counts have caused carriers to become more cautious about paying claims, Gatcke observes. “They are taking longer and conducting much more thorough investigations before paying, even when compared to the immediate past,” he says. “Two years ago, they really just wanted to settle the claim, get the car repaired in a timely manner, and get the claim closed. But it is a challenge in the current marketplace environment to get information back from auto insurance companies about ongoing claims, because they’re delaying payment or making it more difficult, by asking clients to provide more documentation during the claims process. [And so] we really have to be more diligent to follow up with the claims service with clients.”

Gatcke would like to see claims information flow seamlessly between clients, brokers and insurance companies, so that all parties have access to the same information in real-time. For example, as vehicles are being repaired, brokers would be made aware of all the steps taken without having to go through the process of calling claims adjusters, leaving messages, sending e-mails, and waiting to hear back.

Commercial auto insurance is also in a tight spot. “Commercial auto is not a profitable space for most insurers, so they’re shying away from it,” says Giannone. “As far as claims are concerned, obviously the frequency is higher, so insurers are not capable of efficiently handling all the claims that are occurring. I think that’s why the process is slower for getting claims resolved.” Technology such as AI is a must to handle automobile claims more effectively, she adds.

Jeff Buckstein is a freelance writer based in Ottawa.