The 2016 P&C preview
When we did this roundup last year, the talk was about change, and how not to be another Kodak or Blockbuster. For 2016, there doesn’t seem to be so much an overarching theme as the insurers are making certain issues top priorities. Overland flood coverage seems to be finally coming into its own, with quite different approaches—and attitudes. Worthy of particular note are Alister Campbell and Chris Van Kooten’s comments (see GCNA and Economical). Meanwhile, you remember your mother always told you to share—today, Mom might tell you to keep your eye on the sharing economy. Insurers certainly will. And there seems to be a growing effort to relieve brokers of the more tedious paperwork, freeing them up to be advisors and experts. Of course, while that’s going on, we still have the contentious matter of going direct, an issue that will definitely spark more discussion in 2016—and which will be explored in the pages of the magazine in the months to come.
Allianz is all about the maple leaf these days.
For “many companies, the U.S. tends to just dominate in North America,” says Paul Schiavone, head of financial lines for Allianz Global Corporate & Specialty in North America. “…For us, our Canadian operations have been so strong, they lead the charge.” And in 2016, that means developing a few new products.
First up is expanding its cyber offering, which launched last year. “This product is in its infancy. And we’ve seen competitors jump in to certain interest groups, have a couple claims, and jump out… AThe point of what we want to do and the image that we will project in North America is stability and sustainability. So we want to make sure we’re here for the long, long haul with our customers, because it’s not fair otherwise.”
In cyber products, Schiavone points out, “the insurance part… is actually secondary to all of the services that go with the product,” such as forensic accounting, preventative measures and legal advice. “It also puts a lot of pressure on insurers to have the right service.”
Allianz will also launch representations and warranties insurance next year, first in North America and then worldwide. It’s “more of an M&A type [of] product,” which covers unexpected liabilities only discovered after a transaction closes and can be purchased by either the buyer or the seller. “We believe, as a large multinational company, we need to be able to offer all products to our insureds and potential insureds.”
THE GUARANTEE COMPANY OF NORTH AMERICA
The Guarantee will be throwing its hat into the overland flood coverage ring in 2016, and that hat won’t look like any of the others.
Other companies, CEO Alister Campbell says, are introducing overland flood only “to tighten coverage for sewer backup or even remove it. They’re narrowing the main product and offering the overland flood solution to give the customer an option to broaden back.” GUARANTEE GOLD won’t be trying “to narrow and then charge more for additional. We’re going to try to offer a broadened coverage for increased value.”
Campbell acknowledges, however, Canadians living in areas at high risk of flooding often can’t get coverage “so I think it’s critical that the Insurance Bureau of Canada continue to work with the various provincial governments to develop solutions in this area.”
Turning to another hot topic—telematics— Campbell acknowledges its disruption potential, but since auto isn’t a big part of The Guarantee’s book, he is more interested in the sharing economy. Insurers must figure out “how to provide insurance solutions for customers who want to work for Uber or want to rent out their homes on Airbnb and make sure they’re properly protected,” as well as remaining protected themselves.
“I think that’s probably a more urgent theme than telematics, and a really interesting one for 2016 for sure. And we may well do something in that area.” As for details on what that something will be, we may have to wait until the 2017 P&C preview.
RSA introduced overland flood in November and is working on bringing to Canada a telematics program, which is already “quite a mature product” in its UK division. But on the whole, the insurer is focusing on more than new offerings.
“It’s mostly about enhancing our tools that interact with the brokers,” says CEO Rowan Saunders, “so it’s easier to do business with us.” Over the next few years, RSA aims to expand its broker distribution channel by 20 percent, especially in Ontario, Quebec and Atlantic Canada.
“We like brokers that are customer-centric,” says Saunders. Sales skills and a willingness to invest in technology are also essential. A broker who focuses on “‘How can I provide advice and a superior service to the customer? How do I have employees that are very focused and motivated to do that?’, and then have the tools to deliver, fits very well with our capabilities.”
Through 2016, RSA plans on investing in its own technology to make life easier for its brokers and policyholders. It will update its claims tech to allow more self-service, especially for small and straightforward claims.
“…By changing our underwriting rules and filters,” says Saunders, it’s becoming faster for a broker to speak with a customer, get a quote and generate a policy “as the systems flow smoother, and the filters work more efficiently. That’s fantastic for brokers, because that allows them to spend their times where they’re given the most value, which is providing advice to the customers.”
International proposition. Those are the two words that come to mind for CEO Patrick Lundy when you ask him what Zurich Canada has in store for 2016. He’ll quickly point out the gross domestic product isn’t looking that attractive of late. “Our exchange rate is hurting us locally,” and companies that have $25 to $300 million annual revenues are seeing the wrong side of the tax fence. “So you’re seeing incentive for these guys to do business outside of Canadian borders.”
Zurich’s value, argues Lundy, is in “saying, ‘Look, if you’re to go out and do business in other jurisdictions, we will walk you through what those tax implications, those cultural implications are of doing business outside of borders. By the way, the other part of international, too, is even if someone doesn’t physically do business outside of Canadian borders… they’re selling product, [it’s] understanding the jurisdictional differences as well from a litigation perspective… So this is going to become a bigger impact.”
We asked point blank about the fact that Zurich is an all-rounder, while some competitors have arguably made names for themselves in specific sectors. “We’ve got large-sized customers,” replies Lundy, “multinational, we have mid-sized customers, we offer specialty products to those customers as well… from a sector perspective though, to your point, we are quite diverse in what we offer, but have been long-established here, 93 years operating in Canada in areas like construction, real estate, manufacturing.”
Aviva launched a direct-to-consumer channel earlier this year and CEO Greg Somerville is “not expecting it to impact [brokers] at all…. It’s really about customers, not choosing direct over broker.”
2016 will also see Aviva introduce its flood coverage in Quebec, and mid-year, says Somerville, the insurer will bring to market basic protection products such as critical illness and second opinion insurance.
And then there’s the question of car insurance in Ontario. “The ultimate solution for Ontario auto from our perspective is a new product” that better balances administrative and treatment costs. “That’ll manifest itself in obviously lower premiums.”
Mike George isn’t afraid of tackling big, hairy, audacious goals—he calls them B-HAGs. He was grappling with them when he expanded Trisura five years ago, and he expects he’ll see more of the same over the next five years. “We do know that in 2016, we need to continue to broaden our product mix,” he says, adding the goal won’t stop next year but will continue to 2020. “In today’s environment, how do you remain relevant for your broker force?”
One way is to help maximize efficiencies. George recognizes “if we’re a high, high cost provider, especially in a commoditized business, we’re very vulnerable to low-cost disruptors coming in.” To compete with direct insurers, both brokers and their insurer partners must reduce processing times, so customers get policies in hand as soon as possible.
George says Trisura’s portal tool will help make that happen, especially in the soft med mal area where E&O premiums tend to be low. “What the broker does less of is all of the paper pushing, and actually, by having the customer be able to pay for the $200 policy online… you take massive costs out of the system.”
In terms of new products, “we just got our accident and sickness license, which is going to augment some of the products that we do, especially in our warranty space,” says George. Trisura is also looking to expand its general liability coverage to existing E&O, D&O and programs customers. “Multiple sales to the same customer are important to us.”
First comes demutualization, second comes an IPO, then comes M&A. But Economical is still a few years away from going public, says Chris Van Kooten, chief underwriting officer and senior vice-president. And at this point, demutualization isn’t going to have “an immediate impact in terms of broker relations.” That’ll have to wait until the company becomes “a major player in Canada in terms of completing acquisitions. That really allows us to unlock the potential of Economical and I think a bigger, stronger Economical is good for our brokers.”
Closer on the horizon, however, is flood coverage, which Economical will introduce at some point in 2016.
“Our concern really is that our competitors are really taking a profit-driven exercise to increase their competitive advantage and we believe the flood issue is larger than that”—those living in high-risk flood zones who aren’t offered or can’t afford coverage.
“I think the industry needs to solve the problem as a group, not as a bunch of competing entities,” he says. Independent partnerships between insurers may be tricky—“we have to be careful about colluding with our competitors”—but it’s essential the IBC and its members figure out a flood solution for all homeowners.
“At the end of the day, government subsidized premiums is one avenue. I’m not sure it’s the best,” as subsidies might not incentivize homeowners to build in safer areas.
“I think that if the industry and the government work together, there might be some form of risk-sharing pool we can use to spread that risk across a broader population.”
Behold the behemoth, stomping to a market near you. Canada’s largest insurer, which currently claims around 12 percent of market share, wants to get even bigger.
“Our view is that there will be more consolidation in the coming years,” says Intact president Jean-FranÃ§ois Blais, “and that we want to participate and increase our market share to somewhere around 25 percent… We’re looking at opportunities all the time. That’s our job.”
To double its size, Intact will introduce a slew of new products in 2016, starting with overland flood coverage in February. Blais expects 90 percent of Canadians to be eligible for the endorsement, which, like with other insurers, includes sewer backup “to simplify the buying experience.”
And then, of course, there’s the sharing economy. In September, Intact announced it was developing auto insurance for Uber drivers, and the company “will look at other projects in the sharing economy too” throughout the year. Blais can’t confirm any details until he hears back from regulators but says the main point is to eliminate any gaps in coverage for Uber drivers.
Next year will also see telematics— possibly in app form—enter the Alberta market (it’s currently available in New Brunswick, Nova Scotia, Quebec and Ontario). On the commercial side, Intact will introduce drone insurance.
“The technology is a big topic; it’s important,” says Blais. “But insurance, it’s about people. It’s about the trust… The complexity of new products is, for me, better served right now with the help of a good advisor, which is the purpose of the broker.”
Copyright 2015 Rogers Publishing Ltd. This article first appeared in the December 2015 edition of Canadian Insurance Top Broker magazine