Canadian Underwriter

Category: Insights

On the move – the future of Mobility in an ever-changing world

Emerging technologies and the COVID-19 pandemic have propelled the need for carriers to develop new ways of insuring the future of transportation.

COVID-19, in particular, has highlighted how transportation and mobility patterns can change in an instant.

For example, as a result of social distancing policies and regulations arising from the pandemic, Canadians have been less inclined to brave subways, buses and other forms of public transportation.

“I think you are going to see people getting more comfortable using different mobility solutions,” predicts Ryan Spinner, Head of Mobility at Liberty Mutual Canada. “For example, during the summer, when we were in the midst of COVID, we saw a massive uptick in bike and scooter usage in cities that allowed these services. And that made sense. People still have to get around, but with many people less likely to use public transportation due to COVID concerns, bikes and scooters were a great option, and we saw their adoption skyrocket.”

Even before the pandemic, an explosion of new technologies changed how Canadians move around. People are now stepping into the cars of strangers through ride-sharing services. They are driving semi-autonomous vehicles that can apply brakes on behalf of human drivers. They are using telematics to more accurately assess their auto insurance risk. They are sharing cars or using subscription services to access cars.

These emerging modes of transportation are putting pressure on traditional underwriting models, which have historically made clear distinctions between personal lines versus commercial lines auto products.

Those clinging to this traditional view will soon become hard-pressed to underwrite and provide innovative solutions for emerging mobility risks, predicts Rob Marsh, Executive Vice President of Commercial Insurance at Liberty Mutual Canada.

“We recognize that underwriting future mobility requires a new approach to meet this variety of needs,” Marsh says. “It’s not as clear-cut as it may have been in the past, where it came down to personal vs. commercial insurance. It really requires a fundamentally new approach.”

The new approach at Liberty Mutual includes the creation of a cross-functional “Mobility Pod.” It’s a dedicated, multi-disciplinary team of insurance professionals whose expertise spans across personal lines, commercial lines, automobile, general liability, regulation, legislation, risk services, and claims.

“We believe the future of mobility is at that really cool intersection of technology and consumer adoption,” says Ryan Spinner. “So, the question then becomes: Where does the liability lie? This is the challenge a lot of companies are trying to figure out. And this is where we can help by bringing our expertise to clients and brokers.”

The concept of mobility covers just about every aspect of transportation, from scooters to space travel, as well as the delivery of packages and products from retailers to consumers. It also considers how urban infrastructure is changing to accommodate new forms of transportation, such as car subscription for changing behaviors of car buyers, or constructing condominium buildings without parking garages. Each risk in this amorphous field of mobility requires a unique approach to insure it, and Liberty’s underwriting is designed with flexibility in mind.

“Brokers love this approach,” Spinner says. “They like that we understand the unique challenges of this mobility ecosystem. They like that we’re flexible and that we create products and solutions that are not cookie-cutter. They also value our regulatory intelligence and experience: We have a long history and experience working with different regulators across North America, and this is important, as speed to market is key for our clients.”

Innovative claims handling is also an important consideration. Like auto underwriting, claims handling tends to follow the traditional divide between a personal insurance claim and a commercial insurance claim.

“These distinctions are getting blurred as technological changes spawn new ways for people to get around,” says Spinner. “Given the structure, sophistication and growth of the companies we work with, risk solutions require innovative insurance products and services. It’s no small feat to offer sophisticated pricing with limited data, manage claims with a clear understanding of both the perspectives of the layers of insureds and a range of manuscript coverage language, while also delivering a satisfying customer experience.“

Primarily U.S.-focused, the Mobility Pod collaborates with the Liberty Mutual Canada mobility team to create a broader North American experience that has been proven valuable for Canadian clients. Many Canadian mobility clients either started in the United States or plan to expand to the United States, and not all insurers can offer a holistic North American solution.

“Our differentiator in Canada is around our North American solutions,” as Marsh explains. “When you talk with OEMs [original equipment manufacturers], the technology providers, the customers that are really driving a lot of this commercial activity right now, most are North American, if not global.”

By working with an insurer that knows the lay of the land — down to every twist, turn, and potential pothole — shared mobility providers can not only create superior products and services, but better position themselves for growth further along the road.

December 23, 2020
Drastic Times and Drastic Measures: Keeping Businesses Running during the Age of the Coronavirus
The COVID-19 virus has had a tremendous global impact. Throughout the world we’ve witnessed international borders shutting down to visitors, businesses ceasing operations and a significant hit to the economy.

Some businesses have managed to maintain operations through remote working arrangements and implementing safety precautions at the workplace for any individuals required to be present. Health of employees and visitors is of the utmost importance and the question of how to successfully resume regular operations is at the top of everyone’s mind.

It’s important to keep in mind that many individuals may still be hesitant to return to the workplace, even with many precautions in place. Whether it is a matter of using public transportation, a position that requires excessive contact with others, shared elevators and common areas, it isn’t difficult to see where discomfort may arise. During this time, communication between employers and employees is key. The Government of Canada recommends that staff express any concerns they may have about the pandemic discuss the possibility of working remotely.

If employees are to be physically present, here are some protective measures businesses can take in an effort to reduce the risk of COVID-19 in the workplace, as recommended by the World Health Organization:

Install disinfectant wipes throughout the workplace;

Restrict access to shared areas and equipment, such as break rooms and refrigerators;

Ensure everyone wears a mask and frequently washes/sanitizes their hands;

Separate bodies as much as possible; this can be done through having employees come to work on a rotating basis so the business is not at full capacity;

Create a clear people-flow through the workplace to ensure no two-way traffic.

In addition to the above suggestions, employers can also try restricting access to shared areas and equipment, such as break rooms and refrigerators, as well as having a clear people-flow through the workplace to ensure no two-way traffic for even more protection.

If remote work and precautionary measures aren’t possible, some business may be forced to limit operations, which may include moving to a temporary “online-only” presence for the consumer industry or shutting down certain aspects of the business for the time being, for example. In this case, a top priority for employers may be determining the actions they can take to reduce the potential of a permanent shut down. Businesses should determine the resources and options available to them, which could include measures such as seeking emergency government benefits for the business itself or its staff.

In the unfortunate event a business need to reduce staffing levels, they need to be aware of their legal obligations before implementing any layoffs or staff changes. Businesses are encouraged to contact their legal counsel to ensure they are acting in accordance with fast changing rules and regulations on staff layoffs/firings during Covid-19. Having solid legal advice before making any decisions can help avoid potential future wrongful dismissal claims or other potential legal matters as a result of these employment changes during these uncertain times.

To learn more about employment practices liability insurance, contact your Trisura underwriter. Contact us here.

The views expressed in this article are exclusively those of the author; they do not necessarily reflect the views of Trisura Guarantee Insurance Company, its affiliates or partners.
December 14, 2020
More Information, Better Decisions for Insurers

Did you know that in the U.S., 130 of the top 150 insurance carriers use CARFAX vehicle history data to improve underwriting and boost claims efficiency? In fact, CARFAX vehicle history data has proven to be highly correlated with loss ratios. Here are some of the most valuable data points for insurers:

Odometer readings

Based on CARFAX Canada analysis, it’s estimated that there are more than 192,000 vehicles on the road in Canada that have odometers that have been tampered with.

Odometer readings from service records are the best source of accurate odometer information because the readings are not self-reported (unlike provincial registration records). CARFAX Canada has added over 30 million new service records so far this year¹, helping our customers to extrapolate mileage information and identify potential odometer problems.

History of severe problems

Based on research conducted by CARFAX U.S., vehicles that have a history of severe problems are more likely to have more future accidents and cost more to repair.

CARFAX Canada’s vehicle history data can flag many severe problems including a stolen vehicle check (for vehicles that are actively reported as stolen), negative or title branding (Salvage, Rebuilt, Junk, Frame Damage, Fire, Flood, etc.), and accumulated accident damage over specific thresholds – all with associated dates.

History of minor damage

CARFAX U.S. research has also shown that vehicles with minor damage end up having higher losses than vehicles that don’t have a similar history. As well, the more minor damage events in a vehicle’s history, the worse its loss performance. In fact, vehicles with more than five minor damage events have losses similar to those with major damage in their history.

In addition to flagging severe problems, vehicle history information from CARFAX Canada can also provide visibility into minor accident and damage events such as hail damage and vandalism.

Ownership history

Knowing the history of ownership is a very powerful predictor of future losses. CARFAX U.S. studies have shown that the longer a vehicle is owned by a single owner, the less it costs to provide coverage for that vehicle. On the flip side, vehicles that have had multiple owners have a higher chance of not being properly maintained at some point in their lifecycle, and as a result, they have more losses and attract lower valuations (which is particularly important in total loss compensation).

Ownership types, multiple current registrations and service record location

Garage flipping and misrepresentation of ownership type/vehicle are just two types of insurance fraud that are increasingly common. CARFAX Canada vehicle history data such as vehicle decode, service records and locations, ownership type, and potential VIN cloning can be used to help identify these types of fraud.

With so much information available, it’s imperative to understand which data points are most relevant for your business, and to have that data at your fingertips. CARFAX Canada vehicle history information can be customized to suit various business functions, and the delivery format can be tailored to suit your needs, including APIs and user portals.

For more information, or to request a no-cost data evaluation, visit go.carfax.ca/big.

The information in this article is based on the experience of the CARFAX Banking & Insurance Group in the U.S. CARFAX Canada is pleased to be able to offer similar vehicle history services to insurance companies here in Canada.

¹CARFAX Canada Data, Oct. 2021

October 20, 2020
What brokers want from their carriers during the pandemic

As COVID-19 changes the world, brokers need carriers that will change along with it.

For brokers, successful carriers during and beyond the global pandemic will be the ones excelling at the three ‘As’ — accessibility, agility and authority (underwriting).

And while this has always been the case, the crisis situation brought about by the global pandemic has shone a bright light on which carriers are excelling at these underwriting fundamentals, says Garth Pepper, President of Liberty Mutual Canada.

“This is a huge time to differentiate,” Pepper told Canadian Underwriter recently, when talking about what brokers want to see from their carriers during the pandemic. “Brokers moving forward will certainly continue to expect high levels of service from their insurers, as they should. But it will certainly be correlated to how each insurer operated within this current [pandemic] environment.”

In times of crisis, brokers are looking for markets that are mastering the fundamentals, Pepper says. “Were their carriers accessible and available? Were the underwriters empowered? Were they giving a high level of service, or did they struggle with that in this current environment? Also, did the carrier show appropriate compassion, in terms of understanding some of the pressures that brokers and their clients are dealing with? I think that’s a big element as well.”

Accessibility

On Mar. 16, 2020, Shawn DeSantis, President and CEO of Navacord Corp., and T. Marshall Sadd, Executive Chairman of Navacord Corp., were leading the response of their national Canadian brokerage to the global COVID-19 pandemic. In doing so, they sent out an email to CEOs of the country’s major insurer carriers.

At that time, the Canadian P&C industry and its commercial clients were under a state of emergency. The World Health Organization had just declared COVID-19 to be a global pandemic. The federal and provincial governments were halting travel and starting to order non-essential businesses to shut down to prevent the spread of the virus, which has, at the time of writing, killed more than 8,700 Canadians and infected more than 106,000.

DeSantis says the intention of his brokerage’s email was to deliver several key messages to the heads of Canadian P&C carriers. Among them, he sought confirmation that his markets would be accessible while the country’s economic meltdown buffeted Canada’s commercial clients.

In the email, DeSantis tells Canadian Underwriter, the priority message to CEOs was: “We need you to be open for business.”

“In that first week,” DeSantis elaborates, “it was clear that some companies were better positioned than others. I get it that it was the first week [of the pandemic] and there was a lot of transition, but the message [from us to the CEOs] was: “Clients are still calling us regardless of what’s happening around us. We need to be able to pick up our phone and get in touch with an underwriter. That was Message Number 1.”

Better communication between brokers and underwriters has become part of a broad spirit of cooperation that has ‘Zoomed’ throughout the industry lately, DeSantis observes.

“I think the carriers that are leading — and that will continue to lead — through this [pandemic] are going to be the ones who communicate the best with their broker channel,” he says. “I feel fortunate through this process to have had communications with senior executives of insurance companies on a frequent basis, and our account executives would say the exact same about the underwriters who are available. The idea that we can get [an underwriter] on Zoom and have a discussion about a risk face-to-face, instead of swapping five or six emails back and forth, it makes things in our industry move faster. There is more transparency, and I think that’s a big takeaway for our industry.”

Agility

Message Number 2 to the CEOs emphasized the need for agility.

Government emergency orders placed Canadian businesses under enormous financial strain. Statistics from the Canadian Federation of Independent Business (CFIB) suggest that 80% of Canadian small and medium-sized businesses suffered either a partial or full shutdown as a result of social distancing rules.

A separate study of Canadian small and medium-sized businesses conducted in April by the CFIB showed that 40% of the businesses reported revenue losses of higher than 70% as a result of government-ordered business shutdowns. In late May, 12% of more than 4,400 Canadian businesses surveyed by CFIB agreed with the statement: “I am considering bankruptcy/winding down my business as a result of COVID-19.”

These businesses were calling brokerages throughout the country for relief. And DeSantis wanted to know what his markets’ game plan was to help his commercial clients.

“Clients were going through a significant economic shock,’” DeSantis recounts. “And we are their support — their broker. Our clients were calling us and saying, ‘I’m parking vehicles. My construction project has slowed down. My restaurant is closed down. I need to reflect my reduced exposures.’

“So, the second message we sent to the companies was, ‘You are going to have to figure out how you reflect these reduced exposures, because clients are asking us for it and need it.’”

Taylor Shields is Head of Distribution at Liberty Mutual Canada, an insurer that distributes commercial and specialty lines insurance with offices in Montreal, Toronto, Calgary, Edmonton and Vancouver. She says Liberty pivoted quickly to account for entire changes in some clients’ manufacturing process. In some instances, clients were re-tooling their entire business to manufacture things such as personal protective equipment or hand sanitizers, in an effort to help front-line hospital workers treat spikes in COVID infections. Liberty was called upon to support these clients with innovative insurance solutions.

“With the amount of pressure exerted on mutual clients [to change products and adjust coverages to reflect risk], brokers are trying to find solutions for them quickly,” says Shields. “They need to be working with a market that has local authority; that has an empowered team; and that has a lot of expertise within a particular industry segment, so that they can provide a customized and tailored solution to those clients.”

Underwriting Authority

When servicing a client that has unique insurance needs, nothing is more frustrating to a commercial broker than getting an automated message saying the risk can’t be written, citing strict adherence to unyielding underwriting rules or obscure internal guidelines, policies and procedures. Or perhaps a locally-based underwriter can offer a flexible solution, only to have a corporate head office in another country scuttle the deal. For a broker who wants a chance to work through the issue with someone, it’s the worst-case scenario: Underwriters with no authority to be creative problem-solvers.

“In an environment like this, our clients and mutual brokers need underwriters who are accessible, underwriters who are empowered to make decisions, and underwriters that are solution-oriented,” says Pepper. “They need to be agile, and they need to execute in a way that is consistent with our corporate messaging, goals and aspirations. This all assumes a higher priority, even though all of this is required during more normal times.”

Shields notes that brokers are looking for experienced underwriters to think outside of the box and identify a need for products in response to emerging trends. “It will really be important for brokers to have insurer partners that look into the future; they want insurer partners that can see the emerging trends and new product needs of clients, and that have the capacity and ability to offer new solutions and products for those customers.”

The pandemic is highlighting new mobility needs around the shared economy, ride-sharing and home-delivery services, as Pepper observes. “The movement of goods is going to increase,” he says. “There will be different product needs and solutions for that. Brokers and clients are going to have an increased need for companies to provide solutions on a multiple product line basis, and in multiple jurisdictions. That will be more important as well.”

As businesses across Canada begin to re-open in the middle of a pandemic, “re-thinking liability is an interesting topic,” says Shields. “With large gatherings of individuals, where there might be a chance of contracting something like this virus, what are the liability exposures and what are some of the controls? Are brokers prepared to counsel their clients? And how can companies step up to be able to help educate around some of the differences in liability that might come up?”

Ultimately, says Shields, echoing Pepper, the pandemic is an opportunity to differentiate between commercial carriers. “I’m hoping that clients and brokers will be able to step back and see who was able to come to the table and respond,” she says.

September 23, 2020
“Dark Clouds on the Horizon” The Impact of Nuclear Verdicts on Canadian liability insurance

It is widely acknowledged that the United States has a more litigious environment than Canada. However, the rise of recent jury awards in the United States, dubbed “nuclear verdicts”, will have a greater impact on Canadian companies that operate in the United States. In the 5-year period from 2014 to 2018, the median value of the top 50 US verdicts has doubled, increasing from USD 27 million to USD 54 million. This claims trend is prompting many Canadian insurance carriers to re-evaluate their strategy around liability business, particularly in excess casualty where loss was traditionally viewed as more remote.

Some of the main drivers of the increase in liability are the frequency of large awards, the cost of litigation, the impact of results on historical data, and the increased societal pressure to hold firms accountable.

Moving the Goal Posts

The industry is experiencing what is known as “frequency of severity”: an increase in frequency of severe losses. Moreover, there is an impetus to bring more claims to court which is incentivized by the potential for a larger amount awarded at trial as well as readily available financing through third parties who are in the business of litigation funding. This heightened litigation environment significantly increases the defense costs for corporations. Since a large verdict today becomes the starting demand for tomorrow’s claim, insurers and clients are having to react to significant change in the liability exposure they face.

Past Not Reflective of the Present

In Canada, there are reference materials with industry standards that provide guidance for awards related to specific incidents, for example the Accident Benefit tables in Ontario that outline the award amount paid depending on type of bodily injury. There are also case precedent records available to provide benchmarks when predicting potential jury awards for a case. However, the established precedents related to past judgements are arguably no longer a reliable indicator of potential jury awards; Insurers must now look beyond the traditional reference points when determining the true cost of the present and future litigation environment.

Corporate Scrutiny

In the US, many verdicts against large corporations are also intended to punish with the mindset of bridging the economic disparity between the “poor” victim and the “billionaire” corporation who is perceived to have “deep pockets”. The underlying motive amongst jurors is to hold large firms accountable for their actions. In 2019, these outcomes included a USD 8 billion verdict against Johnson & Johnson for their Risperdal drug, a USD 2 billion verdict against Bayer’s herbicide Round Up, and a USD 11 billion verdict against PG&E related to wildfires. With the number of cause of actions continuing to grow (concussion litigation, auto liability and climate change are some examples) firms are facing a significant increase in the number of claims they face. More disturbingly, multiple parties are being pulled into the litigation. For instance, in the opioid industry, litigation is no longer limited to the manufacturer- distributors and packagers are now also targets. Additionally, a lengthy trial can often lead to politicized outcomes.

Impact on Underwriting

Underwriting pricing is based on actuarial science, using loss history to project the future. These new litigation trends are proving that past indicators are unreliable when forecasting the future. This is most true in the excess casualty space where the risk of loss from litigation was traditionally seen as more remote. Insurers must now react to the new normal which will invariably affect the customer through higher pricing, increased deductibles and reduced capacity. Undoubtedly, certain industries will be affected more than others – the transportation is one such industry.

Although these trends have not yet made their way into Canadian courtrooms to a large extent, insurers are monitoring these developments closely. Canadian firms operating in the US or considering entering the region should be aware of these trends and what can be done to mitigate the risk they present. The ability to transfer risk may well be impacted by a reduction in the capacity being offered by insurers and/or higher deductibles and pricing. It would be prudent to begin negotiations with insurers well ahead of renewal with a focus on differentiating your risk both in terms of exposure and the risk management steps you have taken to mitigate the risk.

James Lee is Senior Vice President and Head of Casualty for AXA XL’s Global Risk Management and Multinational Casualty business in Canada. He leads a team of underwriters that provides domestic and international casualty insurance solutions for AXA XL’s Canadian clients. He is based in Toronto and can be reached at james.lee@axaxl.com.

Jonathan Ashall is Vice President Client, Distribution and Delegated Authority for AXA XL in Canada. He is based in Toronto and can be reached at jonathan.ashall@axaxl.com.

June 8, 2020