Canadian Underwriter

In Touch

December 1, 2016   by Canadian Underwriter

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Clearly, property and casualty insurance is about a whole lot more than technology. But the preoccupation with all things technology – relating to everything from customer demands to distribution, product offerings and more – has become a focus. The trick is to ensure that emphasis does not blur the final picture.

In fact, many primary insurers would surely suggest long-term competitiveness (perhaps even survival) may very well depend on the agility, adaptability and responsiveness of carriers.

That technology is driving change is hardly news; the accelerating pace at which change is unfolding and expectations developing may be. Failure to quickly adapt is sure to be a recipe for disappointment.

With ever-increasing demands by customers – clients who measure service by all companies that provide goods and services, not just insurers – insurance companies in Canada must view change as an opportunity. They must also recognize the importance of being nimble, understanding when changes can be pursued on their own or when forming partnerships is the more sensible and efficient tack.


Systems need to be in place, openness to change must be fully activated and ability to adjust underwriting, pricing and claims functions in step with client and customer demands must be available.

But amidst all this change, insurers who allow “efficiencies” to trump customer experience do so at their own peril. Client experience on par with services outside the insurance industry, no doubt, will become table stakes to ensure retention and foster lasting relationships.

Leveraging technology, transitioning from legacy systems, attracting high-performing talent, recognizing the importance of underwriting discipline, educating policyholders on natural catastrophe threats, communicating value proposition, incorporating data-based models for selection and pricing, learning from disasters and finding the right partners – these are all issues that need to be on Canada’s p&c radar in the coming year.

Canadian Underwriter asked senior executives at primary insurance companies what they see as the key trends affecting the Canadian p&c market in 2017? Here is what they had to say, presented in alphabetical order by last name.


1 Jean-François Blais
Intact Insurance

By 2020, 6 billion people will have a smartphone. More than two-thirds of the world’s population will be active mobile users and have a smartphone or supercomputer in their pockets. Millennials will make up half of the workforce and much of discretionary demand in the global economy.

This presents insurers with unique opportunities to do things differently for customers – by leveraging technology, telematics and big data to revolutionize underwriting, pricing and claims.

Today’s digital reality allows companies to move quickly in response to changing consumer needs. While technology will continue to accelerate and enable the wave of change, as well as alter and drive the Canadian property and casualty landscape, the human element must not be overlooked – it is equally critical in transforming how insurers and brokers connect with customers and deliver an outstanding customer experience.

Insurance is, after all, about people, and it is a business built on trust and expertise. There are many opportunities for insurers and brokers to collaborate, especially on the digital front, to achieve synergy and cost-efficiency.

Broker support will continue to be fundamental in connecting customers with product offerings, building relationships, helping customers break down the complexity of insurance, and providing customers with trusted and professional advice on products that best suit their evolving needs.

The digital transformation, while crucial to delivering great and on-demand service, will be inadequate to create a superior customer experience without the human touch – the reassurance that someone is there for the customer when he needs it most, in good times and bad.

Ultimately, the winners in the digital age will be those who are able to leverage technology to enhance the customer touch points, listen to customers, understand their needs, make it easy for them and go beyond their expectations to deliver an outstanding customer experience that is second to none.


2 Alister Campbell
President & Chief Executive Officer

The Guarantee

Disruption. Change.

Alarm bells are ringing everywhere insurers meet as an industry. Experts warn of impending this and that, and, apparently, Canada’s insurance industry is at dire risk.

Of course, the experts may prove to be right. But to some at least, the

environment that insurers face as an industry presents more opportunity than threat.

In a world of rapid change, more consumers and businesses will seek risk transfer solutions. More… not fewer.

In a world of rapidly evolving risk, more consumers and businesses will seek providers ready to support their increasing risk transfer needs. That means more prospects with increasing demand, not the opposite.

And in a world of heightened complexity, more consumers and businesses will seek advice from trusted intermediaries. Again, that means more prospects with more needs.

It is also important to remember that the Web does not do complex well, and some argue is becoming less trustworthy all the time. Humans remain the best processors of complexity and the best solution-finders, having the ability as they do to think outside the black box. Trust is best engendered through human interaction.

This is not to say that in order to win, the industry will not need to have a winning digital strategy. It is a given.

But at least in specialized risk transfer categories, the winning strategy will need to enable expert human underwriters to collaborate closely and effectively with expert brokers.

And while prospects and customers will welcome the efficiencies of digital transactions, those transactions will be predicated upon a relationship that will often have people at the initiation of that relationship and at many key touch points along the way.

Opportunity knocks.


3 Denis Dubois
President & Chief Operating Officer
Desjardins General Insurance Group

Canada’s property and casualty insurance market has seen more change in the past two years than in the previous 20.

From telematics to quick-quoters, Airbnb and Uber, technology is transforming every aspect of the business. With the exploding growth of the sharing economy, and with automated cars and the Internet of Things (IoT) on the horizon, the pace of change will only increase.

Perhaps the biggest impact of technology is how it has enabled a revolution in customer experience, as virtually every consumer industry now provides services that are quick, simple and hassle-free, but just as rich in terms of features and advice.

The challenge for insurers is to meet these changing customer expectations while managing the difficult transition from legacy systems to a seamless omni-channel model that includes digital and mobile options, as well as phone and in-person service and advice.

That being said, Canada’s insurers have come a long way in a short time. Many companies are now using innovative digital technologies, analytics and available data to simplify and improve every aspect of the business, from marketing and sales to pricing, underwriting and claims management.

This trend will accelerate in 2017 as insurers continue to partner with “InsurTech” companies, targeting specific opportunities in various areas of the business. The cumulative effect of all these innovations will reshape how insurers meet the insurance needs of their customers.

Longer term, it is clear business models will evolve to focus more on building deep and lasting customer relationships. These will be based on value-added advice and a sophisticated and proactive approach to loss prevention using sensor technologies and more interactive and personalized communications.

It is also clear insurers need to buckle up for the onslaught of even more radical and rapid change heading their way.


4 John Hennessy
President & Chief Operating Officer
CNA Canada

Over the last few years, the property and casualty industry has clearly elevated the standard of the commercial insurance offering.

With 2017 on the horizon, the competitive Canadian landscape continues to sharpen as carriers and brokers focus on innovation of both product and processes, while concurrently lowering the cost of doing business.

This dynamic environment has created, and will continue to create, more value for customers. However, the advances in the industry in the last few years have come at a cost – like never before, carriers and brokers are witnessing greater pressure on colleagues, particularly those doing the heavy lifting at the various points of sale and service.

In addition, a significant challenge has emerged and it needs to be addressed by all participants. In order to fuel innovation and growth, carriers and brokers require more and deeper talent at every position.

This need is exacerbated by a gap that exists between a mature and skilled workforce, and the emerging talent of the Millennial generation.

The p&c marketplace demands more effective training for those new to the industry and for existing staff. Those in the industry must also create and advance a culture with the fabric and elasticity to retain and develop a high-performing, ambitious workforce.

As the baby boomer generation retires at an increasing rate, successfully recruiting new talent has become, and will continue to be, a critical element of success. This serious challenge requires focus and investment throughout the industry. No position is exempt from this threat.

Product and processes will continue to develop and distribution relationships are always table stakes to success. However, it will be the ability to attract and retain high-performing talent that will separate the successful companies from the vanquished.

Simply put, commercial insurance is a skill-based game and the best talent usually wins.


5 Ulrich Kadow
Chief Agent of Canada
Allianz Global Corporate & Specialty Americas

There continues to be pressure on insurance rates in the Canadian property and casualty market and this is expected to continue into 2017, although possibly in a moderated fashion.

The emergence of IT technology, in particular in the small commercial space, is also putting pressure on prices. Both of these factors will result in revenue and cost pressures for insurance companies and brokers.

On the claims side, there has been increased activity on natural catastrophes and this risk will continue to be on the rise in the coming year.

There has also been increased claims activity on the cyber front, driven by data breaches and hacking becoming more prevalent.

Opportunities exist where companies are facing new potential exposures or are growing due to market changes. Some examples of this trend include the cyber and drone insurance markets; globalization effects, which increase the demand for international insurance solutions; mergers and acquisitions activity, which requires representation and warranty coverage; and increased exports as a result of the low Canadian dollar, which may lead to growth in some industries.

The Canadian p&c insurance industry is responding with investment and innovation in growth areas and market opportunities, including cyber and drone insurance coverage.

As a whole, companies are improving in terms of providing a lean, cost-efficient and customer-centric approach towards product delivery. Those insurance carriers who exhibit underwriting excellence, proper risk selection and portfolio management will benefit the most in this market environment.


6 Patrick Lundy
President & Chief Executive Officer
Zurich Canada

Every year in early January, the Economic Club of Canada hosts its outlook breakfast in Toronto featuring the chief economists of the big banks discussing their projections on what they see for the year ahead. It seems certain that this group of analysts will once again point out that the Canadian economy is growing very slowly and no one should be looking for a dramatic uptick in 2017.

For the commercial insurance industry, this means the overall opportunity pool of insurable risk in the country remains challenged in some of the economy’s slower-growing sectors and will be defined by fierce competition.

Carriers may look to “double down” and re-deploy their capital in other areas of the economy where growth is more promising.

One potential consequence of this is that some carriers may choose to insure risk in industries where they believe there is growth opportunity, but where they may not have a track record of expertise. In this climate, brokers and customers need to be mindful of working with companies that can demonstrate they understand the risks and issues faced by a given industry and how to help manage those risks effectively.

At the same time, the value of a steady, long-term approach to industry segments does not mean that insurance companies can afford to stand still.

Carriers need to be evolving faster than ever before to keep up with changing customer demands and compete with new players and business models that have entered the commercial insurance space.

They need to leverage the latest technological innovations to re-invent how they transact business with their customers and be continuously updating their suite of products and services.

Successful insurers will need to use data to connect with their customers in a much deeper way. That means using data to not only make better underwriting decisions, but also to educate brokers and customers about risk and how to better manage it.

Insurance companies will need to continue capitalizing on innovations such as robotics and artificial intelligence to bring new products and solutions to market much faster than in the past, before those innovations are replicated by competitors.


7 Ellen Moore
President & Chief Executive Officer
Chubb Insurance Company of Canada

Canada remains a highly competitive and challenging insurance environment.

The property and casualty industry faces a number of hurdles as it enters 2017. The protracted soft commercial market has placed margins under pressure after multiple years of low investment yields, rising operating costs and loss development trends.

With significant excess global capital, the Canadian market continues to be very attractive for new entrants and insurer consolidation.

The impact of climate change and the threat of natural disasters must remain one of the industry’s greatest concerns and areas of focus.

Insurers demonstrated their true purpose and sense of community by responding with urgency and compassion to the devastating Fort McMurray Wildfire.

Regulation at the federal and provincial levels continues to increase. Companies with significant exposure to the Ontario auto insurance market have seen results deteriorate as the government walks a political tightrope to get consumers the best balance between coverage and premium charged. Reform of the Ontario auto insurance market continues to be a work in progress.

To meet these challenges, insurers need to remain focused on underwriting discipline and profitable growth. Product development, introducing new offerings and reinvigorating others is also expected to be a key part of future success.


8 Sean Murphy
Lloyd’s Canada

While many are still feeling the impacts of the Fort McMurray wildfires in Alberta, it seems fitting to think about how natural catastrophes will influence a disproportionate amount of Canadian property and casualty insurance losses going forward.

Some, including President-elect Donald Trump, debate the effects of climate change, but there is no denying the changes in weather patterns seen both in the Canadian market and around the world.

Whether rain, flood or tornado, the increased frequency and severity of natural disasters is going to present ever-more challenges to local economies.

Governments can control environmental policy and infrastructure spend to help mitigate the potential damages, but it will be up to insurance companies to take a more active role in educating policyholders regarding the increased frequency and severity of these disasters.

Governments would do well to reach out to the insurance industry and its various associations for their input on how to improve the robustness of city resilience in light of work and capital it has expended for years to help communities get back on their feet.

But natural disasters are not the only concern for the Canadian p&c market. Man-made risks are a growing threat that cannot be ignored.

Cyber attacks have become so prevalent that most companies no longer wonder if they will get attacked, but rather when. Terrorism was once viewed as a threat for major cities, but lone wolves have proved impartial, thus giving the risk no geographic limits.

There is more to be done to mitigate the losses from cyber attacks and terror threats. The public and private sectors will need to work closely to develop measures to help mitigate such risks.

Natural catastrophes and man-made risks are rather visible; however, there are numerous risks that have not yet entered insurers’ line of sight.

Autonomous vehicles, for example, are around the corner, but there is a litany of issues that insurers have not thought of yet, and the Canadian market will, no doubt, stand ready to address those challenges head on.


9 Tom Reikman
Senior Vice President & Chief Operating Officer
Economical Insurance

Auto results are problematic in many parts of the country as the industry grapples with high claims ratios. Industry data for Q2 2016 shows that, on average, third-party liability claims ratio is running at 70%. The accident benefits (ABs) picture is even worse, with a total claims ratio for ABs of 107%.

In Alberta, third-party auto bodily injury claims costs – the average cost has risen 49% between 2011 and 2015 – are not sustainable. Poor performance will likely continue until the government takes measures to mitigate, if not contain, those costs.

Pair that with a poor comprehensive catastrophe loss cost experience fuelled by an increase in Cat frequency and severity.

Cat events impacting comprehensive auto coverage caused claims costs to rise 35% between 2005 and 2014, not to mention the losses in 2015 and 2016.

Currently, the Alberta government is undertaking a review of auto insurance to identify the issues and measures needed to resolve them.

In Ontario, ABs have not been performing well. After the first six months of 2016, the loss ratio is 109%, indicating the ongoing challenge with Ontario auto following the reforms on the tort side in 2015 and on the ABs side in 2016.

The good news is the provincial government recently announced an expert review to ascertain what costs can be driven out of the auto insurance system to make it more affordable for consumers and to identify additional opportunities for reform.

The expectation is the review will show that despite the resources spent on medical rehabilitation and treatment, there is little evidence health outcomes have improved.

The review will also likely show the system is still prone to abuse and fraud by those who participate in the AB economy, the underlying causes that give rise to the high rate of disputes have not been addressed and the tort process for third-party liability issues is too slow and overly expensive.

The hope is that review recommendations in 2017 are acted upon with minimum delay.

The government must realize that notwithstanding the needed reforms that have been implemented over time, none have dealt with the root problems of Ontario auto. The system and the product are too complicated and the benefits too rich.


10 Heidi Sevcik
President & Chief Executive Officer
Gore Mutual Insurance Company

The property and casualty market is experiencing more change than ever before, covering a broad spectrum of challenge and opportunity.

New and emerging technology solutions, impacts of climate change, regulatory requirements and changing customer expectations are key drivers of these changes. The competitive environment has never been more dynamic.

Mergers and acquisitions are dramatically changing the competitive landscape of the broker channel, causing many brokerages to develop new and responsive business models.

Technology is being developed at a rapid pace as the industry tries to create attractive tools for busy, constantly connected consumers. They have little patience for long processes, are casually adept at cutting through marketing rhetoric, and want readily available, easy-to-use solutions that get them what they need quickly, no matter where they are.

Because of this, distribution is becoming one of the most important focal points for both insurance companies and brokers.

The race for the ideal tech delivery formula is certainly on, yet one of the biggest challenges is that it is hard to be all things to all people.

In a world where everyone – from one’s children to one’s grandparents – is online, generational purchasing behaviour is likely the biggest barrier to overcome.

The youngest insurance-buying consumers want speed and mobility, the eldest like convenience, but still seek a personal touch, and the ones in the middle demand efficiency, but are not yet completely trusting of transactional apps.

How does one cater to all these needs in a single solution?

There is one lens that seems to successfully unify the various generations: a company’s value proposition. The current era of instant information has allowed people’s awareness of broader, even global, issues to become more robust than ever before.

Consumers care about causes that impact their future and that of their children, and are increasingly concerned about what companies stand for. Aligning to their values may be the most direct route to gaining their attention and trust.

A company that delivers on customer service expectations and also remains true to its own values and overtly demonstrates them by taking actions that make a difference, may hold the most appeal for a caring, sophisticated insurance-buying public.


11 Greg Somerville
Chief Executive Officer
Aviva Canada Inc.

When thinking about what to say in a look ahead to 2017 and reflecting on what the view was a year ago, it always comes back to one thing – the customer. The property and casualty insurance industry needs to continually focus on customers’ needs, preferences and ease of doing business.

This means looking at insurance offerings through a different lens. It is no longer about providing insurance solutions based on how the industry has been

traditionally structured and what legacy systems will allow.

Putting customers first is about building propositions that are relevant to them, will add value to their lives, and will be delivered the way the customer wants. This will, undoubtedly, involve insurers and brokers upscaling their digital capabilities in order to respond to the ever-evolving customer needs.

It also means continued work as customer advocates with all levels of government is essential. The industry must address issues such as auto regulation, building codes and zones, damage mitigation, flood mapping and insurance fraud, to name a few.

Advocacy involves not accepting increased loss costs and passing these on to customers in the form of increased premiums, but acting on customers’ behalf to take costs out of the system and offer the right protection at the right price.

The end result will be customers who take comfort in knowing they are covered and that their insurer and broker are acting in their best interests. A comfort gained from a simple, painless and easy-to-understand buying experience that instills confidence that, in the event of a claim, a great claims experience lies ahead.


12 John Taylor
President & Chief Executive Officer
Ontario Mutual Insurance Association

At this time last year, the more broadly based introduction of overland water coverage was anticipated, and in 2016 in Ontario, this came to pass.

The approach taken by most in the industry has been to use data-based models for both selection and pricing, although the level of sophistication varies from insurer to insurer. The type of product available, and even the terminology in describing the perils covered, also varies from insurer to insurer.

In 2017, the industry will likely see the continued refinement of the product and increased sophistication in the use of analytics in identifying risk categories.

Losses experienced to date in 2016 have not really provided any significant insight into how affordable overland water coverage will be in the long term.

Later in 2017, the industry may see some movement on availability and pricing, but only if a significant flood loss event occurs.

By late 2015, insurers were also starting to see upward pressure on Ontario automobile premiums due to adverse loss experience, and this has continued.

A report is due to the Minister of Finance in late 2016. If that report suggests a drastic reset of the system, insurers will be fully immersed in that proposal throughout 2017.

In addition, it is anticipated that the dawn of a new regulator in Ontario, the Financial Services Regulatory Authority, and the adjustment to that will require many changes in the current regulatory relationships.

In 2017, insurers can expect to see a continued appreciation of the risk associated with cyber activity. This touches virtually every element of personal, business and institutional lives.

The affluent society here in North America would appear to be a prime target for escalating cyber crime and this will result in an increase in demand for cyber risk mitigation strategies, such as insurance.

From a risk management standpoint, insurers are probably considering cyber risk as their single most prevalent enterprise risk, aside, possibly, from earthquake exposure.


13 Martin Thompson
President & Chief Executive Officer
RSA Canada

Though 2016 brought with it a new set of challenges, the property and casualty insurance industry also had to contend with some forces that have been in play for longer – including severe weather and the economic climate, to name a few.

In May 2016, Canada experienced the costliest disaster in its history with the Fort McMurray wildfires.

Like with any catastrophe, what is learned from it is an important step for insurers to better prepare for the next event. Fort McMurray emphasized the need for a well-co-ordinated effort among insurers, brokers and the government to best serve those affected.

Customers’ preferences are constantly evolving, creating a demand for brokers to adapt quickly to better serve their needs. This, in turn, is an opportunity for insurers to become more efficient and effective at servicing brokers, so that brokers are well-positioned to evolve with their customers.

Though customers seek convenience, they also want advice to help them make better decisions.

Brokers have an opportunity to maintain customer trust and to differentiate themselves from the direct channel through the value-added service they offer. In order to affirm the role of the broker as a trusted advisor, a continued investment in education and training is needed.

Equally important for insurers is to embrace digital innovation to engage with existing clients and attract new customers, in order to meet the growing consumer demand for 24/7 service.

Despite the challenges this year has brought, as insurers look ahead to 2017, the industry as a whole must continue to work closely with brokers as strategic partners.

Investments in areas such as technology, disaster planning and pricing strategy will also continue to help insurers brace for the changes that lie ahead in the new year.


14 Silvy Wright
President & Chief Executive Officer
Northbridge Financial Corporation

With the Canadian economy expected to grow at a moderate pace in 2017, achieving growth will remain a pressure point for insurers.

Winning the hearts of customers has become paramount in achieving that growth.

The first choice that people often make when buying insurance is to look for the counsel of a trusted advisor.

This particularly rings true in commercial lines, where consumer understanding of how to protect their businesses is limited. The more complex their needs, the more important finding the right broker becomes.

Brokers must do more to capitalize on this by delivering an exceptional experience for customers who need and value their service.

What does an exceptional customer experience look like? If there is one truth insurers and brokers must all take to heart, it is this: customers will continue to set the bar higher and higher for the industry as a whole.

When customers do business with insurers and brokers, they expect an experience that matches what they get elsewhere – from paying for their coffee with their smartphones in the morning to choosing exactly what they want to watch on TV at night.

They want fast and frictionless experiences and they want easy access to clear and engaging information that is tailored to the needs of their businesses.

In the race to innovate, many organizations lose sight of what matters most – the customer.

To be truly effective, the way in which insurers and brokers innovate must be deeply rooted in understanding their customers.

There is an abundance of innovative new ways to do business for organizations that are open to it.

Brokers are uniquely positioned in this environment, given their close relationships with customers, to make the most of this opportunity.

It is becoming increasingly important for brokers to work together with the right partners to deliver on an experience that defies industry.

No small feat, but if insurers and brokers leverage innovative solutions and deliver leading-edge service that customers value, customers will be their best advocates.

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