Lloyd Insurance Blog

Independent brokers will be tapping further into technology this year to keep up with changing consumer demands — and cope with challenges posed by direct writers, said new Insurance Brokers Association of Ontario president Rick Orr.

Brokers and the broker insurers both need to better understand the demands of todays consumer.

Brokers must understand that there is a multi-faceted approach to this.

For example, consumers want their broker to be involved in their community — at which brokers are great — but consumers also want improved access which will require brokers to make changes to their business models.

Carriers will also need to work with the association to build better consumer facing technology that still delivers the choice, advocacy and advice that only a broker can deliver.

(Copyright Thompsons World Insurance News)

The Ontario Superior Court has found that a direct writer breached its duty of care in offering optional benefits to a consumer. Nevertheless, the court dismissed the claim against Meloche Monnex because it found the claimant would not have purchased the optional benefits anyway.

The case concerns an auto accident that occurred in May 2007. It does not address optional benefits offered under the reformed Statutory Accident Benefits Schedule (SABS). Under the new SABS, implemented in 2010, a wider array of optional benefits is available to consumers.
In Zefferino v. Meloche Monnex Insurance, the plaintiff in the case, Nicola Zefferino, was a named insured under a policy offered by Meloche Monnex. His wife, Sabina Zefferino, was an employee of the TD bank, which qualified her to purchase insurance from the defendant.

Court evidence indicated that on three separate occasions between 2003 and 2004, call centre representatives of Meloche Monnex offered optional benefits that might have increased Zefferino’s statutory minimum income replacement payment of $400 per week to $600, $800 or $1,000 per week. Each time the offer was refused, twice with the notation “not needed.”
But Zefferino initiated a legal action against Meloche Monnex, arguing that he would have purchased the benefits had they been better explained to him.

The court found Meloche Monnex did not meet the standard required by the SABS in “offering” the optional benefits.
“If an offer in the form of a simple solicitation of interest is all that is required, there would be no breach of the defendant’s obligation in this case,” the court found. “If however, a more purposive approach to the legislation is applied, the defendant may need to take a more detailed history and then ensure that the customer understands the optional coverage, its cost, whether it might apply in the customer’s particular circumstances and what the consequences could be for failure to secure the additional coverage.
“In effect, the question boils down to whether or not the defendant must offer the optional coverage in such a way that the customer can make a fully informed decision about what to purchase.”
However, even though Meloche Monnex did not meet this standard of care, the court dismissed the action. The court observed that the plaintiff’s history with four other insurers in the 10 years leading up to the purchase of the Meloche Monnex insurance in 2003 undermined his claim that he would have purchased optional benefits had he known more about them.
“The plaintiff and his spouse purchased insurance from four other insurance companies during the 10 years before relationship with [Meloche Monnex] began,” the court found. “There is no evidence that anything other than basic coverage was secured on any of those prior occasions.
“The choice of securing insurance through the defendant was based on price.”

The full decision can be found at:

http://www.canlii.org/eliisa/highlight.do?text=Zefferino&language=en&searchTitle=Ontario+-+Superior+Court+of+Justice&path=/en/on/onsc/doc/2012/2012onsc154/2012onsc154.html

Thanks to our friends at CIP Society Advantage Daily …………

Research into how the human brain makes risk-taking decisions and how quickly it can learn the correlations between risk and reward has won the 2011 Lloyd’s Science of Risk Prize.
A team led by Klaus Wunderlich of University College London used the latest brain-scanning technology to triumph over more than 60 other entrants to take the top prize.
The research suggests that the human brain has developed a better mechanism for learning from continuous observation than from studying statistics or charts.
The findings, which could be used to promote better decision-making strategies, are of particular relevance for the insurance industry where they could lead to a better understanding of how underwriters interpret risks and make financial decisions.
“This research suggests that human brains learn correlations between events through continuous outcome observations,” a Lloyd’s spokesperson told Thompson’s.
“The findings from this research may help to promote more effective decision-making strategies in financial situations where decision makers are encouraged to observe information sequentially rather than in the form of tables and charts.
“This could certainly have implications for the insurance industry.”
In the insurance operations category, Andreas Tsanakas of Cass Business School, part of City University London analyzed the various capital allocation exercises used to invest risk capital and offers a unifying framework and business-driven interpretation to link risk appetite and decision-making.
“Yet again, the entrants into the Science of Risk prize have provided fascinating and thought provoking insights to a range of issues of importance to the insurance industry,”
Lloyd’s ceo Richard Ward said. “The record catastrophe losses facing the industry this year are a reminder of the importance of understanding risk, be it an earthquake, climate change or cyber crime.”
He said that by working in partnership with the academic world, insurers can encourage and shape valuable scientific research to help businesses better identify and manage risk.

Courtesy of the staff at Thompson’s World Insurance News

Today we have guest blogger Miles Walker from www.carinsurancecomparison.org with a great summary on  Auto Reform.  Thanks for all your hard work Miles ! He can be reached for comment at miles.na.walker@gmail.com.

The Insurance Act which became effective on September 1st 2010 defines the benefits and coverage minimums in any standard auto insurance policy issued in Ontario, Canada. It also allows you to customize your policy with regards to your insurance needs which in turn affects your premium and total insurance price and benefits. This gives you greater options of protection towards you and third parties involved in accidents.

One of the benefits affected is the Statutory Accident Benefits; these are the benefits you get when involved in a car accident. These continue to be an integral part of your policy and benefits, but the new law has made changes increasing those benefits in favor of the policy holder it has also increased the area of coverage in every sense. Different things apply to different situations, for example if you already have a policy, how are you affected?

If your policy does not have to be renewed for some time then there is nothing you have to do, it will remain as is until it expires. Your actual policy will continue to cover you effectively until the times comes to renew it. When you renew your policy it will be in accordance with the new Automobile Insurance Reform Legislation. IF you want to change to the new accident benefit amounts and other applicable advantages, even though it has not expired, you can do so by talking to a licensed insurance advisor and he or she will help you make the change.

If you have recently bought a policy, on or after September 1st 2010, all the new benefits and regulations will apply. Now should be a good moment to go over your policies and decide if you are satisfied with the coverage you have or if you want to make amends according to the new regulations and benefits. Careful study of the clauses in your policy and the possibilities given to you by the new Regulations should help you find the amount and policy you are happy with for you and your loved ones.

Be aware that the claims procedures have not changed. Only the benefits and certain regulations have. Claims will be processed in the same way they have been by your insurance company. The only noticeable difference will be in the amount of benefits you will receive in case of an accident. The general purpose of changing the legislation was not to make insurance difficult to get or even more expensive. These options are yours; standard coverage has remained at the same price level as before. The difference is in the improvement of coverage and benefits.

When he’s not reading about the latest auto news, Miles Walker looks at auto insurance comparisons over at CarinsuranceComparison.Org. His latest article reviewed Texas car insurance.

Insurance associations say Canada is unlikely follow the European Union in banning gender-based pricing, which is forecast to push up life and car insurance costs for millions of women across the Atlantic.

 The European Court of Justice in March said insurers will no longer be able to take account of gender when pricing insurance policies from December 2012. The ruling ends a decade-long battle between the insurance industry and regulators and follows a decision by California to ban gender-based pricing in health insurance from January this year.

It will mean that insurers can’t take account of known risk factors, which tend to mean young female drivers obtain lower life insurance because they are known to have fewer accidents. When it comes to life insurance women also pay less as they have longer life expectancies, while they receive less in pension annuity income for the same reason.

“I am confident that while some may look at Europe, we would have to reflect long and hard before changing something that was so fundamental in identifying risk,” said Frank Zinatelli, vice president of legal services at the Canadian Life and Health Insurance Association. “The system that is used in the life insurance industry tries to reflect risk, so the use of gender is important.”

Canada allows insurers to take gender into account when pricing life insurance products, though the rules for auto insurance vary across the country. According to the Insurance Bureau of Canada it is prohibited to use gender in considering rates for auto insurance in five provinces, with Alberta only allowing its use for private policies and not through the government mandated scheme.

Insurance Bureau spokesman Mark Klein said he was unaware of any movement to change the status quo here.

Insurers in Europe have slammed the ECJ decision saying it will result in significant uncertainty and higher costs.

The Association of British Insurers said women under the age of 25 could see insurance premiums rise by an average of 25%, while women’s life insurance may rise by 20%. Men would be more likely to benefit, seeing a drop of 10% in life insurance premiums, but they would also see a drop in income from annuities of about 8%, it said, citing research carried out by Oxera in autumn.

“It would have an impact as its such an important factor in identifying risk,” Zinatelli said, referring to the impact on costs here if Canada were to follow suit.

California joined 11 other U.S. states that prohibit gender rating in the individual insurance market, according to an article by the California Healthcare Foundation’s Centre for Health Reporting.

The U.S. state found that women generally paid more than men for the same coverage in states that allow gender rating. A 40-year old woman paid between 10% and 39% more than a man of the same age, it said.

Insurance analysts say being able to clearly identify risks and calculate prices accordingly can bring down overall industry costs.

Preparing for the water in Medicine Hat

Courtesy of CBC –
Manitoba officials were working quickly Monday to build higher dikes along the Assiniboine River, while their counterparts in Saskatchewan warned that flooding will remain a threat for the rest of the month.

For the past week, much of the Prairie provinces has been flooded or in danger of being so, with parts of the region seeing the highest water levels in 150 years.

About 700 people in Manitoba have already been forced from their homes, dozens of roads have been closed, and officials are urging more vigilance.

“Many of the crests are some time off,” Emergency Measures Minister Steve Ashton said on Sunday. “We’re not even necessarily at the end of the beginning of the spring flood stage.”

Dikes along the Assiniboine upstream of Winnipeg were built to withstand water levels seen in 1976, the worst year on record. But the river was ice-free that year, and officials worry that ice jams this year will make water levels worse than they would otherwise be.

“We have not had a dike breach at this time — just over-topping,” Steve Topping with Manitoba Water Stewardship said. “Equipment is following the ice jam as it progresses down the stream and they’re raising the dikes to contain the waters.

Temperatures are forecast to rise this week, so more snow melt is expected.

The forecast peaks for the Assiniboine River have increased because of the snow and rain that fell across Saskatchewan over the weekend, CBC News meteorologist Johanna Wagstaffe said.

Souris overflowing
The Souris River is already overflowing its banks in some areas and will get additional snow on Monday.

In neighbouring Saskatchewan, the worst case scenario for flooding does not appear to be materializing. But there, too, officials called for vigilance. The Saskatchewan Watershed Authority said many water flows in the southern half of the province have hit a plateau because cold weather is slowing the melt.

A dozen communities have declared states of emergency and more than 400 people in two First Nations communities have been forced from their homes because of flooding.

Water continues to flow down Wascana Creek and into the engorged Qu’Appelle River, and the peak in Regina is still a week away.

Helping each other out
“It’s like a war zone here with everybody moving and stuff floating around,” said Len Antal, who lives on Crooked Lake the Qu’Appelle River valley. “Everybody down here has just been unbelievable helping each other out.”

“If the wind ever picks up and the ice breaks up and starts to move, like really move, it’ll just shear houses down like toothpicks.”

In Alberta, the city of Medicine Hat remained under a state of emergency Monday, but elsewhere in the province, flooding appeared to be subsiding. Officials are still concerned, however, about the snowpack in the Cypress Hills border region with Saskatchewan. The snow has barely begun to melt and could carry torrents of water into area waterways.

An interesting perspective from Canadian Underwriter yesterday :

Brokers relying solely on the mandatory mailings explaining the new optional benefits scheme in Ontario’s auto insurance regime may find themselves liable, cautioned Stephen R. Moore of Blaney McMurtry LLP.
Moore spoke during the Canadian Defence Lawyers Accident Benefits Conference in Toronto on Apr. 8. His seminar was entitled, ‘Broker Liability: Another Pocket to Pick.’

Moore pointed to the Supreme Court of Canada decision, Fletcher v. Manitoba Public Insurance Co. In that decision, the panel of judges wrote:
“… private insurance agents owe a duty to their customers to provide not only the information about available coverage, but also advice about which forms of coverage they require in order to meet their needs.”

In other words, brokers need to go beyond informing their clients of the available coverages. They also need to determine which coverage each client needs.
“There are all sorts of [Financial Services Commission of Ontario and Insurance Bureau of Canada] mailings that have gone out to consumers explaining the available benefits,” Moore said. “But they don’t do a thing to help [the broker] understand what the clients’ needs actually are. That problem must be addressed by talking to them.”

Moore said the mailings are dense and too detailed for the average consumer to absorb the information within them effectively.

“There are two details to understand: the mailings don’t have any real meaning for individuals, and more importantly, the mailings don’t describe the pitfalls for the client if they don’t buy any of the optional coverages,” he said. “Yes, if a consumer sues the broker, the broker will be able to prove that the consumer didn’t read the mailings.

“But a smart plaintiff’s lawyer will have a survey done to prove that nobody read it, and that the brokers know that nobody read it, because every time they talk to a client they find out that nobody read it.”

Moore’s advice to brokers included:

• mail out the information drafted by FSCO and IBC;
• get new clients to elect in writing what benefits they want;
• give concrete examples of why the optional coverage might be important; and
• talk to every insured once a year or at least try to leave a message that you want to talk to them about their adequacy of their insurance. “If the client doesn’t call back, and that call was logged, it will go a long way to helping you out.”

Have you seen my injury adjuster? No? Good, then I can take this thing off.....

Auto insurers welcome Ontario’s latest moves to fight fraud, abuse and over-utilization that drive up costs for their law-abiding policyholders.

“The government has clearly signaled it will support insurers that stand up to those who would exploit the system,” says Ralph Palumbo, Ontario vice-president of the Insurance Bureau of Canada.

“The vast majority of Ontarians are honest, truthful and determined to return to normal activities after a vehicle collision,” says Palumbo. “They should not have to pay more for those who are not.”

The IBC and executives at member companies are applauding the announcements in both the provincial budget, and an earlier bulletin from the superintendent of financial services:

• The formation of an anti-fraud task force to examine all aspects of detecting, combating and vigorously prosecuting those who profit from fraud.
• The recognition that a new electronic billing system that became mandatory Feb. 1 will permit insurers and regulators to monitor the performance – both the best and the worst – among injury treatment providers, and to screen for signs of excess or inappropriate treatment and for outright fraud.
• The superintendent’s check-list for ways insurers can, and must, respond to attempts to circumvent the province’s regulations and price-cap for treatment of minor injuries.
• The recognition by Finance Minister Dwight Duncan in his budget that insurers need more tools to combat fraud and excess billing, and his intention to ensure those tools are put in place.

“The government is clearly engaged in rooting out fraud, abuse and overutilization of benefits that are intended to treat those who have been injured in motor vehicle collisions,” said Palumbo.

“Every dollar inappropriately diverted from treating injured claimants is a dollar that is unavailable for honest victims and policyholders.”

Insurers welcome the clear directions Philip Howell, superintendent of financial services, gave in a bulletin about the policing of abusive billing practices by certain treatment and assessment clinics.

“We haven’t seen that kind of clarity and direction…ever,” says Rocco Neglia, vice-president of claims at The Economical Insurance Group in Waterloo.

Howell warned insurers to treat injured persons fairly, and in a timely manner, but to ensure treatment clinics respect the government’s rules.

Regulation changes Ontario implemented Sept. 1, 2010 were intended to improve affordability for drivers, Howell points out. So he urged insurers to confront abuse in the form of excess treatment, improper billing and multiple assessment requests.

“The majority of people injured in car accidents in Ontario sustain minor injuries (as defined in regulations) for which the goods and services provided under the minor injury guideline are appropriate,” said Howell.

Howell said the $3,500 spending cap for minor injuries was intended to cover the cost of any treatment for psychological or emotional issues that may arise after the injury.

It’s reasonable, Howell pointed out, for an insurer to require proof that a treatment has been provided, to set conditions before paying a treatment provider directly, to enlist the help of injured persons to confirm their clinics’ billings and to interview claimants once under oath.

The cost of assessing and treating what are mainly minor injuries has been the prime source of inflation in insurance premiums, which are higher in Ontario than anywhere in the world.

“What (the bulletin) says to us is you have got to push back,” said Nora Hohman, vice-president of claims at The Dominion of Canada General Insurance Co. “It gave us some comfort that …the regulator is supportive.”

She added: “They are saying you have the rights, but you also have the responsibility to push back when warranted, so go for it: We’re behind you.”

“I think (regulator) is attempting to remind insurance carriers that the changes…gave us a better ability to fight claim fraud,” said Gregory Jones, claims manager at State Farm Mutual Automobile Insurance Co.

“We want to commend him for putting out such a bold bulletin,” said Neglia.

State Farm is the largest insurer of Ontario automobiles. Like Economical before it, and Dominion after it, State Farm has sued certain clinics for millions of dollars, accusing them of using identity theft to submit bills for services.

Jones said his company has dramatically increased its staff of special investigators to confront fraudulent practices within clinics, particularly in the Toronto area. State Farm lost a record $1.06 billion on $1.4 billion of auto premiums last year.

The one reservation insurers said they have about Howell’s bulletin was that the arbitrators employed by the Financial Services Commission of Ontario to hear appeals from injured persons could later chastise them for being too reluctant to pay for treatments.

“A lot of companies, very understandably, have not been as assertive as we might otherwise have been because of concerns about things like arbitrator decisions,” says Hohman of The Dominion.  “Now we have to use the legislation the way it is written or it doesn’t have a chance to work.”

Jones said he is looking forward to seeing an industry-wide analysis of those clinics and professionals that submit extraordinarily high claims for assessing and treating injured persons.

Such an analysis of data will soon be possible, while protecting the privacy of injured persons, now that all treatment providers must transmit bills to insurers using a new Health Claims for Auto Insurance billing system, said Barbara Sulzenko-Laurie, the IBC’s vice-president of policy.

“We still lack some teeth to fight organized claim fraud that is led by treatment providers,” said Jones. “But the bulletin says there is an expectation the industry is fighting claim fraud.”

Palumbo said the announcements in the budgets, coming days after Howell’s bulletin, “have clearly signaled the government’s strong intention to arm insurers with the tools to better defend against fraudulent and abusive claims.”

Here is an example of a staged accident.  This is the type of behaviour that increases our automobile premiums in Ontario.  Watch out ! Don’t let it happen to you !

Click here to watch a 50 sec. video  http://www.nicb.org/theft_and_fraud_awareness/multimedia?media=0cd202ad-91e7-4eae-beb6-5d4db9387a54

Have a good long weekend !