The 2015 P&C Preview
We asked some top insurers what they have in store. Here's what they've got.
“The days of homegrown solutions are probably behind us,” says Chris Van Kooten, newly minted chief underwriting officer and senior vice-president at Economical Insurance. The company will spend much of 2015 building its new policy administration system, for which they chose GuideWire earlier this year. “The ability of these large players to develop a system that is far more robust, and has far greater investment than individual companies, has really gone to a whole new level.”
The new system isn’t quite a turnkey product. Economical has “really just begun” the planning and design phase, looking at its architecture before building its own iteration.
Van Kooten says GuideWire will help brokers make sure their consumers are getting competitive rates. Where a rate change could have taken months to get to market in the past, the new system could cut that wait time down to weeks, or even days. “That’s a big advantage… particularly if we experience more and more extreme weather events and our competitors are out there making changes to products to try to… [make] the coverage affordable.” Now, “we can keep pace with the market in those things and, in some cases, be a market leader.”
He says it’ll also make a broker’s life easier. It’s tricky to get new business onto the current system, so an underwriter needs to step in at some point. But brokers can work directly in the new system, he says, speeding up their workflow.
GCNA: SURETY RARITY
Guarantee CEO Alister Campbell sat at the back of the room as one of his charges launched their new product to a group of brokers, and thought he’d have a go at him. After his colleague finished describing miscellaneous errors & omissions insurance, Campbell “challenged my guy, ‘Can’t you be more specific?’ And he said, ‘Well, I can tell you what it’s not.’ And I said to the brokers, ‘Is that clear to all of you?’ And they all, as one, looked at me and said, ‘Yep, totally clear. You’re miscellaneous!’”
The new product, launched in October, is kind of a negative space. It’s E&O for the unusual suspects—not lawyers, doctors, engineers and architects. He says it’s a good complement to what they’re already doing for D&O customers that don’t fall under those traditional categories. When it comes to the year ahead, Campbell plays his cards close to the vest, but he says “there will be continued aspiration to expand the portfolio of specialty [lines] that we write.” One of the specialties that GCNA got into this year was surety, having launched a new bond this year. (He likes to say, “The words ‘new’ and ‘bond’ are rarely seen in each other’s company.”) Speaking to Top Broker in November, he said they had already sold one bond and were hoping to close a few others by the time the calendar flips over to January.
Campbell was optimistic that the surety bond would do good things for GCNA in the new year, because it creates “a more rapid response by a more liquid commitment… as to the speed of response to a customer if there is a sub-contractor default.” And while he jokes that it “can be photocopied… it’s much harder to actually deliver.”
TRISURA: THE BIG PUSH
Most people would consider a nine-year-old to be a child—but CEO Mike George says Trisura, turning nine in 2015, is “middle- aged, almost.” But it doesn’t sound like the specialty lines insurer is about to have a crisis and buy a motorcycle.
“We’re really trying to up our game… to have Trisura a more recognized name, and recognized as being creative, innovative, nimble and a solid, solid company.” George says they’ve gotten good feedback from broker partners, but the brokers “wish… that we had more product for them to distribute. We’re a specialty lines company, so we’re fairly narrow in our focus, and so they’ve said, ‘We’d love to distribute more product for you.’” One of the ways Trisura has been doing that— and will keep doing it—is by broadening the scope of its existing offerings.
All professional liability clients now get a form of cyber coverage attached to their policies, and the company is trying to get those clients’ commercial general liability business, too. Adding CGL, says George, is “going to be a big push for us next year.” The company is now licensed to write sickness and accident coverage, and “trying to combine that together with a number of our existing programs and existing business areas, including a lot of the warranty-type products that we do.”
Another big push is to help brokers streamline. George says the company’s online portal helps with that, especially in its program and association business. His go-to example is a massage therapist in Timmins, Ont., who “can go online and answer some questions and get not only a quote, but an ability to bind and then pay online. And the whole process takes like eight minutes, and it frees the broker up from doing the mundane parts of the transactional side to actually working closely with the association in developing a product that the association needs and dealing with problems or claims or all those things.”
SGI: GO WEST, YOUNG INSURER
The sun is rising in the west for Saskatchewan Government Insurance as the company looks to focus on Alberta and British Columbia in 2015. Eight years after entering the Alberta market, SGI announced earlier this fall that it’s pushing further westward into B.C. CEO Andrew Cartmell says it only makes sense, given the West’s economic make-up.
“We’ve got potash [in Saskatchewan], lots of mining, lots of processing of agricultural products. So when you look at the Western economy, there are a lot of similarities between Manitoba, Saskatchewan and Alberta, and when we started looking at B.C., we noticed in fact, [that] eastern B.C. has quite a significant oil and gas industry that’s going on. We sell a lot of products through our brokers to contractors that support the oil and gas industry, so it’s kind of a natural fit for us.” He said the eastern part of the province is where SGI will focus in the beginning, but that he “wouldn’t preclude doing commercial lines throughout B.C.” eventually. Personal lines might follow later on, once SGI has talked to its reinsurers about earthquake risk.
The expansion is just one part of SGI’s repositioning of its geographic centre. The company sold its stake in the Insurance Company of Prince Edward Island earlier this year, after it “agreed to disagree on the direction… ICPEI should go in, in terms of its next strategic direction,” Cartmell says. The Maritimes were also a challenge because they’re a small and competitive market. “It had taken us 13 years to grow $20 million, and in Alberta, in half that time, we’re going to grow to $100 million.” Another major initiative on Cartmell’s plate for next year will be the Better
Together program, going into its third year. The program provides incentives—like the equivalent of funds for education, technology or marketing—for brokers who get points for doing a certain amount of their business with SGI electronically, or who sell a lot of some particular products. According to Cartmell, the sell to brokers is, “‘We want to help you invest in your business and keep it independent and keep it growing and thriving, and in return for that, if you do that, we want you to support us as a company, and we’re willing to offset some of the costs of you investing in your business to make it stronger.’”
INTACT: HIGH TECH AND A HEARTY APPETITE
With three major acquisitions since 2011—Metro General, Jevco and AXA— Intact Insurance president Jean-Francois Blais says the question isn’t whether the company is still hungry. “We have the appetite, that’s for sure. [But] the timing of acquisitions, obviously, is something we cannot predict.”
So while we don’t know whether Intact Financial will buy up anyone in the new year, its product rollouts in 2014 give some indication of where it’s headed. The company introduced a telematics product in Quebec at the beginning of the year, and has since rolled it out to Quebec’s neighbours in Ontario and New Brunswick. Pending regulatory approval, it’ll be in Nova Scotia and Alberta next. “As of today, we’re very happy with the pickup,” says Blais. “I think more and more people… realize how it works and the benefit they can have… It’s a no-lose situation from a customer perspective.” The brokers have played a big part in educating customers on the benefits of usage-based insurance, and Blais says they’ll do the same when Intact launches cyber risk coverage. Cyber is still in its early days, “so there is a lot of broker involvement on educating customers about the risk and the product and what it covers.” The product won’t cover everything— it’s a first-party product, meaning it’s effectively cyber business interruption insurance—“so it’s very important for the brokers to explain to customers how it’s being applied.”
Blais says the customer experience is another priority for 2015, including the web and Intact’s reams of documents. But making policy documents more accessible is not a quick fix. “This one will not be solved in one year, but to improve the simplicity and transparency of our… documents and make it as easy to understand for customers is certainly a priority for us as we go forward.”
AVIVA: FINDING A WAY
With the industry still reeling from last year’s exceptionally wet summer in Ontario and Alberta, Aviva Canada says it expects to go to market next year with a flood solution. “Providing we can underwrite it and there’s a risk transfer element to writing the cover, we’re going to look to find a way to do it,” says president and CEO Greg Somerville. The IBC has produced an advisory wording to clarify that sewer backup isn’t covered in case of a flood, and Aviva will clarify its own wording. “Our position, which I believe is the right position from a consumer point of view, is [that] at the same time we adopt that clarification, we provide an option to provide coverage for flood.”
There are some properties that will be too difficult to underwrite, “because they’re built, effectively, in a riverbed,” but Somerville estimates them to be less than five percent of properties in the country. “There needs to be a solution” to the issue of homes in risky areas, “[but] it’s more of a… social problem that needs to be addressed by many stakeholders, not just the industry.”
Like many other insurers, Aviva is also keeping a close eye on the Ontario government’s targeted auto rate cut of 15 percent. Somerville, who chairs the Insurance Bureau of Canada’s Ontario committee, says he’s “very pleased with the level of conversation and engagement we have with the government. We endorse the fact that premiums are disproportionately high in Ontario, particularly when you look at them relative to other provinces in Canada.”
He adds, though, that there needs to be balance between the cost to insurers and the benefits to consumers. He calls the recently passed Bill 15 (the Fighting Fraud and Reducing Automobile Insurance Rates Act) “a good start… but we need to do more.”
RSA: DATA AND DISCIPLINE
If Rowan Saunders ever changes careers, don’t expect him to show up on the Weather Channel.
“The reality is, it’s very hard to be a weatherman… but if we look at the trends over the last five years, in our portfolio, we have absolutely seen an increase in weather-related losses.”
More weather events are just one of the pressures the CEO of RSA Canada says the industry is facing, along with new entrants in commercial lines. For 2015, the company will be leaning on data to make up for the tricky headwinds.
On the personal auto side, Saunders says that “by improving our pricing sophistication and the use of more data, we think we can be more competitive to a broader segment of customers than we currently are.” One way to get that data is through telematics, and Saunders says they’ll be rolling out a UBI product in the new year.
Commercially, he says, the middle market has “proven to be quite challenging through 2014, particularly in pricing.” RSA will do more “disciplined underwriting” in that market, and tweak its value proposition for certain sectors, like smalland medium-sized enterprises. He says SMEs want their experience to be more like it is with personal lines. (And the numbers back him up: in our October issue, CITB reported on a J.D. Power study that found SMEs preferred doing their commercial business through their personal lines broker.)
For RSA, it’s “really about making the process easier, faster and more efficient. So we’re working on our models and our technology to make it easier for brokers to deal with us and for us to be able to… process more volume than we currently do. Because the issue there is less about loss ratio and more about the combined cost between RSA and the brokers to deliver the product.” That means asking fewer questions and relying more on predictive analytics to move things along quickly. Saunders doesn’t expect things to change much following the company’s sale of Noraxis to Arthur J. Gallagher earlier this year, but says he’s gotten positive vibes from other brokers about it. He says that independent brokers, who bristle at the notion of brokerages owned or backed by insurers, have reacted well to the sale. “We’re finding a number of brokers talking to us about opportunities for building their volume with us as they no longer see us as a competitor to them in acquiring brokers.”
Copyright 2014 Rogers Publishing Ltd. This article first appeared in the November 2014 edition of Canadian Insurance Top Broker magazine