Options Abound

The events that typified 2013 and 2014 are near polar opposites in some respects, particularly with respect to the number of catastrophes and severity. That said, certain things remain consistent for the property and casualty industry despite the specifics of a particular year, including the demand to respond to customers’ ever-changing wants and needs, the necessity to innovate, and the requirement to predict what lies ahead.

While some existing issues remain, other new ones have entered the space. Consider Ontario auto (moving forward with reforms is welcomed, but there is a call to bring the provincial system in line with those in other jurisdictions); climate change (having insurers collaborate will help set and advance common positions); community resilience (combating both overland and urban flooding, as well as communicating with policyholders about how rating for water perils is developed, is essential); usage-based insurance (making the technology affordable can help support widespread use and the hope is that safer driving behaviour will result); technology transformation (key to meeting the ever-changing expectations and behaviours of customers); innovation (relating to product, service and distribution channels); data (shifting how it is assessed, priced and underwritten); and attracting skilled professionals and young talent with high potential.

So what lies ahead? Have p&c companies operating in Canada selected the right options moving forward?

Canadian Underwriter asked senior executives for some of the country’s primary insurance companies the following question: What are the key trends affecting the Canadian property and casualty market and what sort of responses are needed to meet those challenges and opportunities in 2015?

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

1 Kathy Bardswick

President & Chief Executive Officer

The Co-operators Group Limited

Considering current trends in the property and casualty industry and looking into the future, two topics are currently top of mind: climate change and Ontario auto.

The Co-operators has been advocating for more resilient communities and better protections for homeowners against overland flooding.

Working with researchers from the University of Waterloo, the company recently brought together industry leaders to discuss what it would take to make overland flood insurance viable.

In the second phase of the project, a broader group of stakeholders identified the priority areas where action could be most effective in reducing the risk of flood damage for homeowners, while the third phase, currently under way, will assess the preparedness of major Canadian cities for extreme weather and flooding.

Other organizations are doing important work in this area as well, and the federal government has committed itself to looking into the issue of overland flood insurance, and has undertaken important work on flood mapping across the country. There appears to be some momentum building.

If there was one positive outcome of the recent catastrophic floods, it is that they helped to raise awareness of the industry’s lack of preparedness for such events, and helped both the industry and key stakeholders focus more intently on finding a solution to that particular challenge.

Looking at the bigger picture, however, it is time for the insurance industry to step up and take on more of a leadership role in the very important climate change discussions currently under way. Important decisions on long-term issues such as carbon pricing are being made, and insurers must collectively be prepared to take positions on these issues and be assertive in advancing them.

Auto insurance remains an ongoing topic of discussion and concern in Ontario. More reforms are being introduced as the government hopes to achieve its stated rate reduction target of 15%.

Other jurisdictions have auto insurance systems that are relatively simple, efficient and affordable. Everyone concerned – drivers, insurers, regulators and government – would be well-served if Ontario could achieve a similar result, and put an end to the constant tinkering and uncertainty.

2 Barbara Bellissimo

Senior Vice President

State Farm Canada

The Ontario government’s decision to swiftly pass Bill 15, which in itself represents an important and necessary step towards meaningful reform of the Ontario auto insurance product, is welcomed. However, due to the mandatory industry-wide nature of the product and system costs, Ontario drivers continue to pay too much for auto insurance.

Continued vigilance will be important as the insurance industry as a whole collaboratively explores opportunities with the government to find the right balance between stable price and coverage in order to make auto insurance more affordable for consumers.

Over time, it is anticipated there will be continued development in usage-based insurance (UBI) initiatives and related technology to assist with affordability.

To support this, insurers look to a more responsive regulatory environment aimed at promoting greater innovation with usage-based analytics. These initiatives provide real opportunities for consumers to proactively adjust their driving behaviours to be safer, have fewer accidents and injuries, and as a result, lower auto insurance rates.

The technological development of autonomous vehicle systems such as UBI, accident avoidance features, and increasingly complex vehicle construction presents new opportunities and risks. Industry and regulators must consider and address the impacts now so that insurers can respond to these developments in a cost-effective and timely way for the benefit of the consumer.

Beyond a focus on innovation and technology in the auto sector, the industry also needs to better understand the risks of severe weather incidents and aging infrastructure in order to be prepared for the future.

Insurers have all seen the impacts of weather events on homeowners and business owners, and the challenge these events have on the price of the property insurance product.

Insurers must continue encouraging all levels of government to look into the building of more resilient communities as a long-term investment.

Consolidation is another issue having a significant influence on the insurance industry in Canada.

Insurers involved in consolidations – including State Farm Canada, which anticipates its sale to the Desjardins Group will be completed in 2015 – would do well to determine how best to serve Canadian customers by assessing their needs and helping them realize their insurance and financial goals.

3 Jean-François Blais

President

Intact Insurance

The past few years have created numerous underwriting, pricing, claims service and profitability challenges for the insurance industry that will still require insurers’ attention in the upcoming 12 months.

Not only shall insurers deal with the traditional risks associated with the physical environment – climate change, changing precipitation patterns, floods or earthquakes – they will also address emerging ones like cyber risks that may cause significant threats to businesses, governments and society.

These challenges pale in comparison, however, to the efforts that will be required to successfully manage the tsunami of technological transformations that will take place in the years to come.

This is not about the industry’s ability to manage its legacy systems; it is about its ability to use technologies to meet the ever-changing expectations and behaviours of customers. Technology is now at the heart of the customer experience, which insurers need to deliver to be successful.

Consumers today expect from insurers the same seamless experience in real time, 24/7 a
nd across all touch points that is being offered by other financial institutions. They want ease of interaction, they want simplicity, they want transparency and, above all, they want a personalized experience. They also want products and services tailored to their real needs, better choices and more control over their protection.

In response, Intact Insurance has undertaken a major transformation of its systems to improve customer experience, make it easier for its people and help brokers deliver the outstanding experience that consumers have come to expect from them.

It has also made available a buy online solution and launched a usage-based insurance solution.

Technology and customer experience will be the cornerstone of the insurance industry’s future. Insurer successes and those of brokers will depend in our collective ability to innovate and to deliver a simple and seamless experience based on the needs and expectations of consumers.

4 Alister Campbell

Chief Executive Officer

The Guarantee Company of North America

Over the past few years, the insurance industry has witnessed the sustained fall-out from the freakish and ahistorical policy of “low for long” interest rates, as implemented by central banks throughout the Western developed world.

As investors pursue yield, they are bidding up the value of other asset classes and seeking to allocate capital to alternative forms of investment vehicle. Hedge funds, private equity firms and pensions funds are all now engaged in the primary insurance and reinsurance markets, and the knock-on effect in reinsurance markets is contributing to continued soft-market conditions.

Forced to adjust their strategies in response, reinsurers are engaging in primary markets. Partly in response to this, but also fuelled by the desire to use their own capital more effectively, primary carriers are seeking to expand their range of products – particularly by expanding into severity lines that appear to the uninitiated to offer “lower loss ratios.”

Looking through the toolbox for strategies to respond to these pressures, old tools are still good ones, but everyone is using the same strategies (including product diversification, geographic expansion, distribution strategy and price changes).

Future winners will seek to change the rules of the game through product innovation.

Historically, the insurance industry has excelled at supporting the innovation of others. Risks associated with climate change, cyber crime or terrorism all have seen rapid innovative response from the industry, but are insurers innovating fast enough?

The Insurance Bureau of Canada is now starting to push on the flood insurance issue and drive the prospect of joint industry/government solutions, but did the industry really have to wait for the 2013 floods to move forward on this?

Telematics offers a rare example of the insurance industry innovating on its own rather than waiting to develop solutions in response to risk transfer needs driven by the innovation of others. But more is needed.

In 2015, the industry must increase the creative focus on product and service innovation, the only real source of new value. In markets like these, it is the best bet for long-term sustainable profitable growth – and way more fun!

5 Karen Gavan

President & Chief Executive Officer

Economical Insurance

Commercial property results continue to cause concern. Losses are steadily increasing and profitability is decreasing. Loss ratios are not sustainable, particularly in residential realty, retail and hospitality.

Companies that step forward first with pricing sophistication and address the need for appropriate rating at a risk level in specific segments will be in a far better position in the future.

With Ontario auto, it will take several years before insurers see any material benefit from the cost-reduction reforms in Bill 15. As long as accident benefits in Ontario are among the richest in North America, the combination of mandatory rate reductions and ongoing claims inflation in the province will continue to put upward pressure on loss ratios.

As catastrophes become more frequent, insurers and governments will have to work more closely in the future to mitigate the risks associated with overland flooding and the more problematic urban flooding.

As an industry, insurers have to help policyholders mitigate the risk of urban flooding, but also work with government policymakers to change building code regulations so that mechanisms, like back-up valves, are mandatory features in homes during construction.

Regulations could also require homes to be built with more weather-resilient materials, such as long-life shingles and longer nails to secure them to the roof, to withstand extreme weather conditions. In Alberta, for example, hail-resistant siding should be mandatory for new homes in hail zones.

Public policy must be in lockstep with innovation and real-time regulation must reflect the current risk environment.

6 John Hennessy

President & Chief Operating Officer

CNA Canada

Recently, there has been a great deal of discussion around the headwinds of the global economy continuing to present a challenge to growth in 2015. And in the insurance industry, it is clear that there is already a transformation under way within distribution channels and product offerings.

Successful carriers will be those that have the flexibility and talent to cultivate their product offerings and continually seek to improve delivery to market, while finding ways to make their distribution more efficient and profitable.

But with an already saturated insurance market, how can insurance carriers differentiate themselves?

Focusing on specialized markets and placing more resources behind developing industries such as healthcare, technology and professional services is one way to differentiate one’s business offering.

In addition, financial strength and expertise will certainly play a part in ensuring carriers are charging appropriate rates for the exposures involved, particularly on catastrophe-prone business.

Business leaders know that maintaining a competitive edge has much to do with investing in customer intelligence. A well-developed broker relationship is vital to a strong understanding of customers’ needs.

The true opportunity lies in these relationships and an ability to leverage insights gained. Ideally, leaders want to know customers’ needs before they do, and energy spent on this endeavour can result in greater profitability.

As much as insurers are in a global economy, brokers are looking for underwriting expertise in the local market. Carriers that continuously evolve their product offerings to meet emerging customers’ needs and provide cost efficiencies in the distribution channel will continue to accelerate profitable growth.

By providing underwriting expertise in the local market while expanding technology, professional services and healthcare business in 2015, carriers will better serve the needs of their brokers and customers.

7 Patrick Lundy

President & Chief Executive Officer

Zurich Canada

Looking back to the 2014 outlook underscores that many of the industry’s biggest challenges are persistent and will not be solved from one year to the next. For example, the fact that there were fewer headline-grabbing floods in Canada this year than last has not diminished the need for updated flood zone maps.

Likewise, it will take a demographic shift spanning many years to impact the fierce competition in the industry for skilled professionals and young talent with high potential.

Successful employers must focus on cultivating a high-performance culture where people feel empowered and recognized for their contr
ibutions, and have meaningful opportunities for development and advancement.

Indeed, human capital will be the critical ingredient for insurers that want to be defined by their value propositions rather than by price. Companies will need to be very good at articulating those value propositions to customers to build lasting relationships in a market that continues to be defined by an influx of capital from various sources.

Another key success factor for leading companies will be the investments they make in predictive analytics to generate distinctive risk insights that can improve risk selection and pricing. The winners will be those that not only make better use of the data they already have, but find useful new sources of data, all without adding complexity to processes or negatively impacting a customer’s ease of doing business.

Insurers will have to start innovating faster simply to keep up with a world that is continually creating new risks. Evolving cyber risks, self-driving cars and drone technology are all areas the insurance industry is only beginning to come to grips with.

At the same time, insurers must innovate in a climate of increasing regulatory enforcement, especially in the area of market conduct.

Despite these pressures, companies that rely on the basic guiding principle of putting customer needs first will always find opportunities to achieve growth and profitability, even in a brave new world of flying cars and unmanned machines.

8 Ellen Moore

President & Chief Executive Officer,

Chubb Insurance Company of Canada

After a difficult year characterized by CAT events, the industry has rebounded in 2014 and underwriting results have normalized. The 2013 catastrophes did not spare the industry’s customers, yielding unprecedented dislocation personally and at work.

Although less significant, the industry has experienced a number of extreme weather events in 2014. The threat of natural disasters must remain one of industry’s greatest concerns and focus.

With 2013 gone but not forgotten, the industry approached 2014 cautiously and there are many challenges.

The industry continues to operate in a protracted soft market. Margins have been under pressure after several years of low investment yields, rising operating costs and loss development trends.

The litigation climate has shifted in Canada and legal costs are spiraling, as are healthcare costs. The insurance industry is seeing a proliferation of class actions happening or on the horizon, which is a relatively new phenomenon for Canada.

To this, add a highly competitive market with significant excess capital. New entrants and insurer consolidation are creating one of the more difficult global insurance landscapes.

Additionally, broker consolidation and insurers with multi-distribution strategies that are buying brokers or funding brokers are a troubling trend in product distribution.

Regulation at both the federal and provincial levels will continue to increase. Companies exposed to Ontario auto in any meaningful way are likely to see results deteriorate as government struggles to get the best balance between coverage and premium charged.

To combat these challenges, Chubb remains focused on underwriting discipline and profitable growth.

The company is experiencing strong organic growth this year both in its commercial and personal segments. Growth has been underpinned by product development, introducing new offerings and reinvigorating others.

Chubb is optimistic about 2015 and looks forward to working closely with its brokers and clients.

9 Sean Murphy

President

Lloyd’s Canada

Few would argue the insurance industry is today facing many unprecedented challenges.

The pressures on the industry are many: severe weather events, increased competition, a low interest rate environment, the effects of alternative capital, the need to attract and retain talent, and the pressure to innovate are just a few examples of the challenges that the industry faces.

Many of these challenges are squarely outside of the control of insurers that are tasked to manage and react to them. But of those that insurers do have the ability to directly influence, there is still much work to do as an industry.

A global survey on innovation and growth conducted by PwC highlighted that a significant difference exists among financial institutions in Canada, the United States, the United Kingdom and other countries.

In the PwC report, Canadian financial services institutions (which included insurers) struggle the most in the areas of attracting and retaining talent, innovation progress and establishing an innovative culture.

There is a tangible link between a lack of innovation and a company’s inability to attract young talent. Innovation and new product development in the insurance industry will be driven by an emergence of young new talent who can get the most out of future technologies.

The work being done by the Insurance Institute of Canada to educate students at the college and university levels with regard to the opportunities in the insurance industry is commendable.

If the industry is serious about innovation and growth, it needs to be serious about its talent, too.

10 John O’Donnell

President & Chief Executive Officer

Allstate Canada Group

The past year brought many changes to the industry, and those who use innovative approaches to adapt will gain an advantage. This is easier said than done in Canada’s insurance marketplace.

True innovation, while hard to find in the insurance industry, is not impossible. Insurers have many new opportunities resulting from the need for reform, climate change, advanced technology and new or non-traditional entrants.

We need to address the impact these will have on issues as diverse as capital management, product design, regulation and customer experience.

In Ontario, insurers need to challenge themselves, working together with government, to bring more flexibility to the auto product. Customers expect a personalized protection solution and are not willing to pay for redundant coverages across their product suite.

It is important to address this consumer need for efficient coverage and price.

In property lines, there are advances in homes that enable insurers to provide enhanced protection and prevention for customers. New pricing models for the risk addressed by smart home technologies is an opportunity, though these can also cost more to replace in catastrophic situations.

From a distributor perspective, understanding one’s value proposition to consumers remains critical. It is a matter of time before the industry sees non-traditional distributors enter Canada. Understanding these potential entrants must be part of our collective strategic thinking and planning now.

In summary, flexibility and innovation in thinking and approach for all stakeholders in the market – regulators, insurers and distributors – will be the most important trend for 2015 and beyond.

Tinkering with existing frameworks, whether they are regulatory or part of the insurance industry’s infrastructure, is no longer enough. To keep pace with customer expectations, true leaders in the industry will push the boundaries of strategy and execution.

11 Lynn Oldfield

President & Chief Executive Officer

AIG Canada

In the near term, certain factors appear to remain a constant in the insurance industry and they continue to challenge us to innovate. Consistent for a number of years, modest investment returns, increasing regulatory oversight, catastrophic losses, industry consolidations and new market entrants will be on the industry’s radar in 2015.

Insurer clients will continue to elevate the function of risk manag
ement within the C-suite and board level, as this critical function gains much-deserved weight.

The rise of big data is one of the most exciting and transformative trends facing the industry – 90% of the world’s data was created in the last two years and the amount of data has doubled every three years.

Companies with the know-how to mine the 2.5 quintillion bytes created daily will likely prosper, as they better understand the needs of their clients and their buying behaviour. The question for many insurers is how to harness this information for the benefit of broker partners and clients.

Beyond improved risk assessment, the widening spectrum of innovation includes catastrophe modelling, fraud detection and most exciting, helping clients identify risks within their business, such as the root causes of industrial accidents or how to mitigate the risk of climate change on their operations.

This is some of the work that AIG’s Science Team has been charged with since the group was established two years ago.

Today’s sophisticated insurance buyer is looking beyond insuring against any specific risk; they are looking for a partner to help mitigate the risk from occurring in the first place. Or to put it more plainly, clients are looking for end-to-end risk management solutions and the insurer or insurers that can deliver, will likely prevail.

By strategically harnessing big data, brokers and clients obtain a partner to help navigate events such as cyber security, climate change, pandemics or disruptive innovation.

Partnering with the right insurance company will permit Canadian brokers and clients to convert the current risks of the day into the rewards of tomorrow.

12 Sylvie Paquette

President & Chief Operating Officer

Desjardins General Insurance Group

There was good news for Canada’s insurers this past year, as the Ontario government brought much-needed changes to the Ontario auto insurance market.

By clamping down on fraud and abuse, and addressing the costly delays and uncertainties in the system, the government made good progress reining in insurance costs.

More needs to be done, of course. But the trend is positive, as the government is continuing to build on the reforms of 2010, working with insurers and other stakeholders to fix problems as they emerge. This reflects more of a shared understanding between the industry and government and an alignment of interests to the benefit of customers.

The Insurance Bureau of Canada (IBC) has played a major role in achieving this understanding, with the support and active involvement of its members. This has allowed the industry to speak with a united voice on the big issues that affect everyone in the market.

In addition, Desjardins and a number of other insurance companies have actively participated in this effort. With insurers collectively serving millions of consumers and having thousands of employees, along with agents, brokers and suppliers, their voices hold weight with governments.

Another key trend is the evolution of distribution models to what’s being called the “omni-channel” – providing a seamless approach to the consumer experience through all channels.

While insurance is lagging behind other industries, it is clear that customers will increasingly expect more flexibility and a more integrated experience when dealing with their respective insurance companies.

The question each insurer must answer is how quickly should it adapt to stay relevant to its customers. Clearly, doing nothing is not the answer.

This raises a key challenge facing all insurers, regardless of distribution model or size: where to invest for the future.

There are so many changes impacting the industry – big data, analytics, digital, omni-channel distribution, telematics, the Internet of things, climate change, industry consolidation and many more. All of these require big investments in terms of money, staff and corporate energy.

Understanding the trends, focusing on the right opportunities and choosing where to invest to move forward are the key issues that will cause insurance executives more than a few sleepless nights in the year ahead.

13 Rowan Saunders

President & Chief Executive Officer

RSA Canada

This past year has been a challenging year for the insurance industry.

Insurers have seen changes in regulations, with Bill 15 passing. The industry must continue to work with the Financial Services Commission of Ontario to identify further reforms that can help achieve fraud reduction targets.

In addition, the increasingly competitive nature of the commercial market and the severe weather insurers have experienced is becoming the new normal.

With the increase in frequency of extreme weather came the need for a shift in how data is assessed, priced and underwritten. RSA is investing in data collection technology, like flood mapping and geocoding, to ensure that risks are effectively priced and claims can be managed quickly.

As an industry, insurers must also use technology to make transactions with brokers easier, faster and more efficient. Insurer investment in pricing sophistication and technology solutions will make it easier for brokers to do business with insurers and to improve the experience for the customer.

Broker feedback plays a key role in shaping RSA’s strategy and from what the company has heard, brokers have become increasingly frustrated with insurance companies owning equity, seeing it as a conflict of interest.

Narrowing the company’s strategic focus – having its core business be an underwriting company as opposed to a brokering company – means brokers are no longer seeing it as a competitor, enabling the company to create better partnerships with brokers in the future.

Looking ahead to 2015 and beyond, it is anticipated the challenging property and casualty environment will continue. To succeed in this ever-changing industry, insurers will need to adapt to change, maintain close relationships with their broker partners and consumers, and continue to focus on customer service as the ultimate priority.

14 Heidi Sevcik

President & Chief Executive Officer

Gore Mutual Insurance Company

Many key trends impacting the insurance marketplace are influenced by evolving technology. Managing Ontario’s heavily regulated auto product is challenging. To balance this, insurers turn to technology solutions to help improve efficiency.

Technology is also being deployed in telematics solutions to improve driving behaviour, with the ultimate aim of reducing claims costs.

Consider property. Again, investments are made in technology to streamline the way the product is processed and to reduce operating expense.

Predictive tools and models are leveraged in the hope of making better-informed underwriting decisions and improving loss experience.

Consumers are expecting efficient, informed service avenues and new technology solutions will help facilitate these expectations while integrating the personal advice and advocacy that brokers provide in an efficient way.

While technology is an enabler, it is how that technology is deployed that will drive differentiation and consumer satisfaction.

Delivering technology solutions in a cost-efficient manner becomes a challenge for the entire industry. What is needed is collaboration in implementing unified solutions.

When insurers pursue individualized solutions, it adds to the complexity of the insurance industry and makes it difficult for brokers.

Recognizing that there are times when individualized solutions are necessary and/or beneficial, there are other times when common platforms are more effective. When there is a sharing of resources and expertise, it multiplies the results and increases the solutions’ value.

Every insurer is looking for a co
mpetitive edge and wants to protect its intellectual property, but there is merit in collaborating to propel the entire industry forward with common solutions.

The Centre for Study of Insurance Operations’ eDocs initiative is an example of good collaboration that has benefited everyone by reducing costs, providing a common integrated platform and improving service levels.

The technology landscape should be considered carefully and incorporated into all planning, including product development. Working together, it is possible to find meaningful solutions to respond to evolving customer needs and new cost pressures.

The industry will benefit by collaborating to find collective wins and harness thought leadership.

15 Greg Somerville

Chief Executive Officer

Aviva Canada Inc.

Continued extreme weather, distracted driving and evolving technology are among the big-ticket items for 2015.

Climate change is here to stay and with it more frequent, severe weather events. The insurance industry as a whole must continue to seek solutions and offer affordable flood coverage to the majority of consumers.

With the Insurance Bureau of Canada at the helm, the industry is making progress on this issue, including assessments of flood mapping, better exposure analysis and more dialogue with all levels of government.

Distracted driving is a huge problem for society. In the United States, distracted drivers cause 10 fatalities per day and 300,000 accidents annually. This needs to become as socially unacceptable as drinking and driving.

In 2015, the hope is that the entire property and casualty industry will support the IBC’s campaign: Drive Now, Text Later, Live Longer.

The use of telematics will continue to proliferate, allowing insurers the opportunity to create new value for customers. Apart from lowering prices, there is the social benefit of reducing injuries and saving lives.

Consumers are more in control of their insurance choices than ever before. This will continue to evolve with the widespread adoption of usage-based insurance (UBI).

Broadly speaking, consumer attitudes are warming to UBI and insurers can expect to see more companies offering customers this type of insurance in 2015.

And finally, insurers continue to seek a balance between benefits and costs for auto insurance in Ontario. As primary stakeholders, auto insurers are pleased that the Ontario government passed Bill 15 – it is a good first step.

But to truly affect long-term change for Ontario drivers, claims costs must be reduced in line with other provinces and the government needs to commit to taking costs out of the system.

16 John Taylor

President & Chief Executive Officer

Ontario Mutual Insurance Association

Automobile insurance in Ontario continues to be a work in progress. However, it appears that in 2015, there may be some light at the end of the tunnel on implementation of some of the reforms that were first proposed in 2010.

In 2013 and 2014, there were mandated premium reductions, despite the fact that the reform package remained only partially implemented. The insurance industry responded to these on a good faith basis and now it is important for the government to continue doing its part to build stability into the Ontario automobile claims process.

Action on a minor injury treatment protocol and a catastrophic injury definition are two of the more important reforms that remain outstanding. With a stable majority government, perhaps the legislative agenda will be able to take a stable long-term view.

At the same time, insurers are seeing significant changes in automobile technology that have the property and casualty sector considering what the car and insurance policy of the future will look like. The advent of autonomous or driverless vehicles would essentially change the insuring agreement to one based on rating a technology, as opposed to a driver.

Severe weather events and frequent storms continue to dampen industry results. In 2015, it will be important to keep the dialogue moving forward on issues, including assessing and improving storm water infrastructure, as well as strengthening building codes so that new housing stock is storm-resistant.

2015 may also hold some surprises in regards to consumer activism concerning residential property policies. It will be important for the industry to ensure it is clearly communicating with policyholders on how rating for water perils is developed.

Highly sophisticated rating mechanisms that cannot easily be understood by consumers will lead to significant public relations pushback, and probably increase the activity by market conduct regulators.

17 Silvy Wright

President & Chief Executive Officer

Northbridge Financial Corporation

Often when insurers think about how technology is impacting the insurance industry, thoughts turn to its influence on the continuously evolving expectations of customers.

However, the accelerated pace of change driven by technology is not only changing how insurers serve customers; it is having a profound effect on how insurers respond to losses, as well as how they help customers mitigate risk and better prepare them for emerging risks.

That said, investing in modernizing operations to deliver better service to customers at every touch point – sales, service and claims processing – will continue to be a trend in the year ahead.

As customers increasingly expect tools and information to be available digitally, insurers can anticipate more innovative uses of technology to interact with customers.

Customers also expect value beyond what they are able to Google. Many of them are well-informed about potential insurance solutions long before they contact their brokers or agents.

Insurers need to offer more than just insurance and to work closely with their distribution channels to thoroughly understand customers’ businesses, assess current and future exposures, and deliver business-specific risk mitigation solutions.

One emerging threat that was not on anyone’s radar 10 years ago is cyber risk.

Despite all of the publicity, cyber risk is still largely misunderstood, and many Canadians are still vulnerable to its potentially devastating effects, particularly small business owners.

Technology is also playing a huge role in how insurers support customers with loss prevention.

For example, a European insurance company recently launched a telematics system that uses a series of sensors to detect fire, smoke, flooding or a lack of electricity, and then sends an alarm to both the customer and an operation centre.

The insurance industry has a role to play in educating customers about these emerging risks, and developing solutions that protect their businesses for today and tomorrow.