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As accountability in corporate leadership continues to broaden across a wider range of issues, legal challenges remain a significant concern for businesses. In Sovereign Insurance&rsquo;s annual Q&amp;A series, <a href="https://www.sovereigninsurance.ca/our-team/toronto/eduard-lecker" title="" target="">Eduard Lecker</a>, Senior Underwriter, &nbsp;Management Liability, shares his insights on key loss trends and exposures in this area in 2024 and what organizations should be aware of in 2025 as new risks take shape.&nbsp;
What were the key loss trends and exposures you saw in 2024?
The key loss trend in 2024 remained consistent with the previous year: an increasing number of claims focused on environmental, social and governance (ESG).1 These legal actions&mdash;which can be initiated by consumers, shareholders and investors, and environmental advocacy groups&mdash;are typically centred on allegations related to greenwashing and climate change. For example, a company might make misleading claims about its environmental strategies or fail to disclose climate-related risks, which can expose them to significant legal and financial risks.&nbsp;
What are some emerging risks to keep an eye out for in 2025?&nbsp;
One emerging risk is claims related to artificial intelligence (AI). As more companies use AI, there&rsquo;s a growing risk of misrepresentation about what these systems can do. Some tech companies may overstate AI&rsquo;s capabilities. Companies using AI for hiring, financial reporting, or ESG decision-making are especially vulnerable, as they could face legal action if the technology doesn&rsquo;t live up to expectations. For example, AI systems that filter job applicants can have unintentional biases, and companies may claim that AI can replace human decision-making&mdash;when, in reality, there&rsquo;s still a lot of human oversight involved. If AI tools generate inaccurate reports&mdash;like pulling up the wrong numbers&mdash;and those figures influence critical decision-making, legal claims can arise. Similarly, when companies use AI to track their environmental impact, inaccurate data could also expose them to risk.
There are a couple of emerging issues in the U.S. to keep an eye on, as developments there often follow suit in Canada. Under the new U.S. &nbsp;leadership, there are rollbacks in climate policies and diversity, equity and inclusion initiatives. For example, the U.S. has pulled out of the Paris climate agreement, which could prompt companies to scale back their own sustainability effects. This could expose them to legal challenges from groups that feel misled by these changes.&nbsp;
With the current trade war between the U.S. and Canada, there&rsquo;s growing sentiment around &lsquo;Buy Canadian,&rdquo; but labelling what qualifies as Canadian-made is complicated. For instance, a product might contain American apples processed in Canada but is labelled as being made in Canada. If a product doesn&rsquo;t meet legal definitions of terms like &lsquo;Product of Canada&rsquo; or &lsquo;Made in Canada,&rsquo; this could lead to claims. &nbsp; For example, if incorrect labels lead to misrepresentation of a product or its origin, it could lead to claims of misrepresentation or breach of contract.&nbsp;
We&rsquo;re also keeping an eye on U.S. cases in which directors and officers are facing personal liability in lawsuits. Holding directors personally liable for their decisions could lead to more legal challenges and impact decision-making at the top level. &nbsp;
How can organizations mitigate these risks?&nbsp;
For AI, it really comes down to transparency. Don&rsquo;t overstate, misrepresent, or overpromise what AI can do, and understand the legal consequences of any claims you make. It&rsquo;s similar to how companies should approach environmental strategies&mdash;be transparent about your actions and results. Like the saying goes, &lsquo;understate, overperform.&rsquo;
For the developments that we&rsquo;re watching in the U.S., it&rsquo;s difficult to say how to mitigate against them because there are still a lot of unknowns. When it comes to labelling Canadian products, it&rsquo;s important to be aware of the legal requirements. Transparency is key here, too&mdash;if there&rsquo;s any uncertainty, you can direct customers to your website where you outline your process, which some companies are starting to do. If you&rsquo;re not misrepresenting your actions, you&rsquo;re far less likely to face legal issues.&nbsp;
Sources 1 Jan. 31, 2025: Moodys, &ldquo;D&amp;O series &ndash; Evolving risks in the boardroom: A new era of D&amp;O liability &ndash; Part 3&rdquo; 1 Aug. 22, 2024: McCarthy Tetrault &ldquo;Greenwashing and AI Washing: Emerging Trends in D&amp;O Claims Across North America&rdquo; 1 Oct. 22, 2024: &ldquo;The Insurer: Greenhushing &ndash; An emerging D&amp;O liability?&rdquo;

Loss trends and emerging risks in 2025: Management liability 

Managing Risk

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As businesses continue to rely on essential machinery and equipment, the risk of damage and breakdowns remains a significant concern. These incidents can disrupt operations, lead to costly repairs and result in extended downtime. &nbsp; As part of our annual Q&amp;A series, <a href="https://www.sovereigninsurance.ca/our-team/calgary/razvan-ionescu">Razvan Ionescu</a>, Manager, Equipment Breakdown Underwriting, Large Accounts &amp; Operations at Sovereign Insurance, shares insights into key loss trends from 2024 and emerging risks that organizations should be aware of in 2025.&nbsp; What were the key loss trends and exposures you saw in 2024? If we were to look for trends in the equipment breakdown insurance industry, the most notable phases would be the heating season and the cooling season. In colder months when heating systems are activated, for example, boilers that are used for heating buildings might experience breakdowns. This happens because they haven&rsquo;t been used for an extended period and when they&rsquo;re restarted, can fail due to improper shutdowns or lack of maintenance during the off-season. Similarly, with cooling systems, a lack of ongoing use and maintenance can lead to mechanical failures. In addition to seasonal concerns, we continue to see typical breakdowns of production machinery, transformers, and other equipment that businesses rely on day in and day out. This can be caused by issues like aging equipment, wear and tear, and lack of preventative maintenance.&nbsp; What are some emerging risks to keep an eye out for in 2025? One emerging risk I&rsquo;ve seen is a shift from traditional generators to electric or lithium-ion batteries as backup power sources or to reduce the on-peak service use. While generators have been in use for a long time, some businesses are turning to electric batteries. This shift brings new risks, especially when it comes to maintenance and exposure. With traditional generators, you typically need a mechanical specialist on-site to keep things running smoothly. But with electric batteries, the high-capacity maintenance is usually handled by the OEM (original equipment manufacturer), who monitors the battery&rsquo;s performance in various ways, for instance, through remote monitoring. So, the whole approach to upkeep is different. A big concern here is fire risks. Batteries are prone to something called thermal runaway, which is a chemical reaction inside the battery that causes it to overheat and potentially catch fire. This can happen without the presence of oxygen, which makes it more dangerous than other types of fires. If a thermal runaway event happens, it could damage the entire battery system, which might cost a company hundreds of thousands to replace. And of course, there are significant human safety risks with any type of fire. In contrast, if something in a backup generator breaks down, it&rsquo;s typically a mechanical issue that can be fixed &ndash; similar to how you would repair a car. How can organizations mitigate these risks? To keep machinery and equipment running smoothly and safely, the best approach is to follow the OEM recommendations. For example, if the OEM advises performing thermal scanning on batteries on a regular basis, it&rsquo;s important to stick to that schedule. There&rsquo;s a well-known saying: &ldquo;If you don&rsquo;t schedule maintenance, your equipment will schedule it for you.&rdquo; By regularly scheduling maintenance, you can ensure it&rsquo;s completed on time and reduce the chances of delays in sourcing spare parts. When it comes to batteries, there are also specific best practices to follow around proper use, storage, transportation, and disposal. Organizations should familiarize themselves with these guidelines to minimize risks. For any type of equipment, preventative maintenance is essential. Although insurance policies are designed to cover profit losses during downtime, the key is to maintain uninterrupted service to customers.

Loss trends and emerging risks in 2025: Equipment breakdown

From distracted driving on busy highways to the explosive rise of quick e-commerce deliveries on city streets, the landscape of risk is rapidly shifting for the transportation sector. As part of Sovereign&rsquo;s 2025 Q&amp;A series, Kevin Dutchak, Senior Risk Specialist, Commercial Auto, provides insights into the key loss trends of 2024 and offers practical advice on how businesses can mitigate risks to protect their operations this year and beyond.
<h4>What were the loss trends and key exposures you saw in 2024?</h4>
Distracted driving is still a big issue and it&rsquo;s becoming even more significant with the growing use of technology in the industry. Technology can be great, but it can also be distracting. For example, some drivers try to map out routes on the fly, and in the e-commerce delivery space, drivers are constantly looking at addresses along residential streets. These kinds of distractions may lead to a lot of loss incidents.
Additionally, traffic seems to get busier all the time. During rush hour and with ongoing construction, it&rsquo;s like that old video game, Frogger, with drivers switching lanes back and forth, speeding, suddenly cutting in front of other drivers, and trying to get ahead of everyone. Statistics show that road travel continues to be the riskiest form of transportation, from property loss and minor fender benders to serious injuries and fatalities. When you add distracted driving and traffic congestion into the mix, it can increase the risk significantly.
Driver controls are another ongoing issue. For example, there are cases where drivers took short cuts to try to save time. But that winding two-lane highway with limited passing lanes, for instance, can put you more at risk, especially in winter conditions.
<h4>What emerging risks should businesses be aware of in 2025?</h4>
Climate change and severe weather events are becoming more of an issue for the transportation sector. We&rsquo;re seeing more frequent storms and extreme temperatures, which can cause delays and put drivers in unsafe situations.
While cybercrime is becoming more of a risk in many industries, I don&rsquo;t see much of that in trucking yet. But as more companies integrate artificial intelligence into their operations, they should ask what they&rsquo;re doing to protect themselves so people can&rsquo;t hack into that and use it to their advantage.
<h4>How can organizations effectively mitigate these risks?</h4>
When it comes to distracted driving, the key to mitigation is the constant reminder that driving is your job 100% of the time. You can&rsquo;t afford to compartmentalize your thinking&mdash;you have to concentrate on the road because it&rsquo;s such a fluid situation.
Sound defensive driving practices are also critical. I&rsquo;m surprised at the number of fleets that don&rsquo;t provide that training, assuming that because their drivers have a licence, they don&rsquo;t need it. But despite our best efforts, we can all become complacent, distracted and forgetful. So, companies need to get the focus back on training. It&rsquo;s an investment in your drivers that can pay dividends.
In terms of driver controls, trip management programs can mitigate risks. Managers should have discussions with drivers to outline expectations: Here is when we expect you to be on the road, this is the route we expect you to take, here&rsquo;s when we expect you to stop. When there is an interruption to the plan due to situations such as poor road and weather conditions, traffic delays on route and driver fatigue, protocols should be in place for drivers to communicate with dispatch and operations staff to keep them advised, which in turn can be communicated to their clients. The safety of drivers and other road users is always the top priority. Telematics can also be used to monitor drivers&rsquo; routes and ensure drivers are following the proper procedures, such as speed limits and safety protocols.
If a driver does have a significant loss event, it&rsquo;s critical for companies to take effective corrective action, such as retraining or a driver interview. Often, a lack of corrective action can lead to further and more significant losses.
For weather events, fleet operations should focus on forecasting models, if they aren&rsquo;t doing so already. When severe weather conditions are imminent, companies should consider shutting down operations in the affected areas; all drivers should find the first safe place to park, advise dispatch of their status and stay in place until the shutdown order is lifted.

Loss trends and emerging risks in 2025: Transportation 

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Sovereign - Broker Resources

Sovereign is rolling out Nat Cat Radar &ndash; a tool that integrates satellite imagery, government data, and Sovereign policy information to help proactively identify insureds at risk of active wildfires.
Watch the video to see the tool in action.

This webpage and its contents, the Sovereign Nat Cat Radar app, the wildfire email alerts and any other emails you will receive regarding this program are intended for partners of Sovereign General Insurance Co. only and may not be forwarded or disclosed to any other persons without the express written permission of Sovereign. Any unauthorized use or disclosure is prohibited. The contents of this webpage, the video, the app and the wildfire alert emails do not constitute advice, and Sovereign makes no representations, warranties or guarantees of any kind with respect to the information contained in this webpage, the video, the app or the wildfire alert emails, including their accuracy. Sovereign is not responsible for any losses or damages arising out of, related to, or in connection with, the information contained in this webpage, the video, the app or the wildfire alert emails. 
The list of policyholders may include policies for which Sovereign does not provide any property coverage and this notification does not provide coverage where none currently exists.

Sovereign Nat Cat Radar

Just as you&rsquo;d hire a real estate agent or financial advisor for their expertise and guidance, a broker acts as your insurance advisor to help you navigate the business insurance space. As licensed insurance experts, brokers act as an independent intermediary between you and your insurer. They work in your best interest to guide you through the insurance purchasing process &mdash; from assessing your insurance needs and finding the right risk protection solutions for your business to helping you make a claim if you experience a loss.
<h4>The value of a broker&nbsp; </h4>
A broker can help you assess your business risks by performing a valuation or setting up an <a href="https://www.sovereigninsurance.ca/industries-and-solutions/services/risk-engineering">on-site risk assessment</a>, so you understand your risk exposures and insurance needs. Independent brokers can help you compare coverages from different insurers, packaging them in a direct, cost-effective manner so you can get comprehensive protection, at a competitive rate &mdash; and they&rsquo;ll take care of all the paperwork related to your policy, too. Once you confirm your insurance needs, your broker will work with the insurer to ensure your business is protected and there are no gaps in coverage. They&rsquo;ll explain coverages, terms and conditions, and the fine print in your policy. And, when it&rsquo;s time to renew, they&rsquo;ll help you review your policy and determine if any changes to your coverage are needed. If you have a claim, they&rsquo;ll also act as your point person, helping you submit the claim and ensure that it&rsquo;s settled promptly and fairly.
<h4>What are the benefits of working with a broker? </h4>
Brokers add a lot of value to your business throughout the insurance process. Here are just a few of the benefits of working with a broker. Expert advice:&nbsp;Brokers are insurance experts. They have a wealth of knowledge and expertise on risk exposures, risk mitigation and risk solutions. They know what to look for, what questions to ask and how to guide you through every step of the process &mdash; from assessing your business risks and selecting the right protection to making a claim. Support:&nbsp;Getting insurance can be a daunting task for any business. Identifying the risks to your business, choosing a carrier, and finding comprehensive protection at a competitive price can be overwhelming. Through their expert advice and guidance &mdash; and their knowledge of processes and procedures &mdash; brokers can help alleviate stress, confusion or worry that comes along with this important decision. Trusted advocate:&nbsp;Brokers are licensed insurance professionals working in your best interest, who serve as your personal advocate and provide impartial advice and unbiased recommendations focused on your needs. They will also advocate on your behalf with your insurer, which can be especially valuable if you ever need to make a claim. Greater selection:&nbsp;Many insurers don&rsquo;t sell directly to clients. Rather, brokers connect you with insurance carriers, giving you access to a greater selection of products and services. Not only do brokers provide you with more choices, but they can also help you evaluate the different coverage options.
<h4>Finding the right fit </h4>
Your relationship with your broker requires trust, open communication, and collaboration. Deciding which broker to work with is an important decision; it&rsquo;s as much about expertise as it is about fit. You want to build a long-term relationship with a broker who you trust and who will always work with your best interest in mind. In turn, your broker will connect you with an insurance carrier with competitive products, services, and expertise to serve your business needs. At Sovereign Insurance, we pride ourselves on being your partner in resilience. The relationships we develop and maintain with our valued broker partners are invaluable to achieving our purpose of enhancing the resilience of Canadian businesses and the families and communities they impact. Our belief is that resilience is born from the combination of diverse viewpoints and pointed solutions. We collaborate with brokers, industry partners, and clients to make sure every seat at the table is working together in your best interest.&nbsp; You&rsquo;re only as strong as the team you surround yourself with, which is why connecting with the right broker partner is such an important first step.

The value of partnering with a commercial insurance broker


The transportation sector has been faced with significant challenges, like driver shortages, supply chain issues, and rising fuel costs. Tune in as Sovereign&rsquo;s <a href="https://www.linkedin.com/in/abigail-bibby-0886b3b8/" target="_blank" rel="noopener">Abigail Bibby</a>, National Claims Specialist; <a href="https://www.linkedin.com/in/kevin-dutchak-7336b317/" target="_blank" rel="noopener">Kevin Dutchak</a>, Commercial Auto Team Lead, National Risk Engineering; <a href="https://www.linkedin.com/in/kevin-stedman-5a83b963/" target="_blank" rel="noopener">Kevin Stedman</a>, AVP, Commercial Solutions; and <a href="https://www.linkedin.com/in/marcus-ouellette-b2319892/" target="_blank" rel="noopener">Marcus Ouellette</a>, Manager of National Auto Underwriting discuss the ever-changing transportation landscape and the many advantages of adopting a holistic view of commercial auto risk management.

How can you control the losses of your commercial auto clients?

Is it better to be a specialist or a generalist?&nbsp; This has been an ongoing debate in many sectors for many years. In one corner, there&rsquo;s great value in holding in-depth expertise about a particular industry or sector and providing highly specialized advice and services to clients. In the other corner, generalists possess a broader scope of knowledge and may be better positioned to advise clients on the big picture.&nbsp; Certainly, there are advantages to each, and both specialists and generalists can serve important roles in organizations. For commercial brokers, however, the tide seems to be turning towards specialization.&nbsp; In the 2022 Canadian Underwriter National Broker survey, sponsored by Sovereign Insurance, brokers expressed a high level of agreement on a statement about specialization: &ldquo;Brokers need to become more specialized to withstand changing technology and sales models,&rdquo; with 83% of respondents in agreement, albeit down slightly from 85% in 2021.&nbsp; Those most in agreement are the industry&rsquo;s next generation of leaders: 91% have been in the industry less than 16 years, compared to 77% in agreement who have 31+ plus years&rsquo; experience.&nbsp; Why is it important not to wear too many hats? As the market becomes more sophisticated and risks become more complex, clients&rsquo; expectations are rising. They require their brokers to have a deeper understanding of their business and industry, to know their unique risks, and to deliver insurance solutions tailored to their needs.&nbsp;&nbsp; To better serve clients, many brokers are responding to the demand for specialization. In the National Broker survey, respondents were asked: Over the past 24 months, how beneficial have these additional practices been for serving your clients well? Nearly two-thirds (64%) said developing specialty markets expertise has been beneficial, followed by developing deep knowledge of a small selection of products (60%).&nbsp; 
<h4>The main advantages of specialization include:&nbsp;</h4>
Stronger client relationships: Since specialist brokers have deeper knowledge and insights about a particular industry, clients feel they are true partners. As such, brokers can build trust and foster stronger relationships with their clients. The National Broker survey points to brokers&rsquo; growing roles as trusted, knowledgeable advisors: They&rsquo;re informing clients of emerging risks and exposures (72%) and relevant new products (70%).&nbsp; Tailored solutions: Being immersed in a specialized field helps brokers better understand the unique needs to their clients&rsquo; businesses, and can therefore ensure their clients have comprehensive coverage tailored to their needs. Brokers can help fill any gaps that might otherwise be missed by someone who&rsquo;s not immersed in a specific field.&nbsp; Stronger carrier relationships: Many specialist brokers prefer working with carriers who are also specialized, as this allows them to collaborate on solutions. Sovereign Insurance, for example, focuses on four core industry segments: Construction, Manufacturing, Wholesale/Transportation/Logistics, and National Resources. When specialized partners come together, they build stronger relationships and can help deliver better outcomes for clients.&nbsp; See: <a href="https://www.sovereigninsurance.ca/advice-and-tools/broker-resources/how-carriers-and-brokers-can-enhance-their-partnership" title="" target="_blank" rel="noopener">How carriers and brokers can enhance their partnership</a> New business: While traditionally brokers may not have adopted a niche approach to avoid leaving new business on the table, specialization can give brokers an edge today. Many find it&rsquo;s a less competitive field, since they&rsquo;re not competing for business with a large number of generalists. Specialized brokers are also finding new opportunities through referrals, cross-selling, and upselling.1&nbsp; &nbsp; Certainly, by being specialists, brokers can tap into a sizable business opportunity. According to a report by Research Dive2,&nbsp;the global specialty insurance market is expected to grow rapidly over the next few years, reaching nearly US$244 billion by 2028, up from US$133 billion in 2020. The report notes the market is on the rise because of an increase in demand for specialized expertise and technology advancements. Specialty insurance is in great demand in the construction, environmental, healthcare, and energy industries. Errors and omissions (E&amp;O) is another common type of specialty insurance.&nbsp; &nbsp; Whatever the niche, brokers can unlock enormous value through specialization. While much of the market will still need a &ldquo;one-stop shop,&rdquo; commercial brokers who do &ldquo;one thing well&rdquo; will be well-positioned for the future and ready to meet the evolving needs of clients.&nbsp; Sources 1 Insurance Thought Leadership, &ldquo;<a href="https://www.insurancethoughtleadership.com/agent-broker/specialization-agents-vast-growth-opportunity" target="_blank" rel="noopener">Specialization: Agents&rsquo; Vast Growth Opportunity,</a>&rdquo; April 18, 2022 2 Research Dive, &ldquo;<a href="https://www.researchdive.com/8508/specialty-insurance-market" target="_blank" rel="noopener">Specialty Insurance Market Report,</a>&rdquo; Nov. 2021

The value of being a specialized broker

Successful companies put customers at the heart of everything they do&mdash;and the insurance sector is no exception. Despite ongoing digitization and disruption, the industry is still a hands-on, personal business.&nbsp; In the 2022 Canadian Underwriter National Broker survey, sponsored by Sovereign Insurance, 75% of brokers said they spend a meaningful amount of time working directly with customers in a producer capacity (i.e. advising on and selling policies).&nbsp; When asked which factors present a strong challenge to their business, client-related issues were among the top. Nearly half of respondents (48%) indicated &ldquo;navigating clients through market disruption&rdquo; is a challenge,&rdquo; followed by &ldquo;maintaining client loyalty&rdquo; (42%), and &ldquo;service demands of customers (40%).&rdquo; At the same time, competition in the industry is intensifying: 59% of brokers are worried about the growth of direct-to-consumer sales models, for example.&nbsp; Given these challenges, brokers must continually find ways to better serve their clients. Here&rsquo;s a look at the customer service practices brokers are finding beneficial and how they can better serve the ever-evolving needs of clients.&nbsp; 
<h5>Timely, Ongoing Communication&nbsp;</h5>
Strong communication is crucial to getting new clients and keeping them. In the National Broker survey, respondents were asked how beneficial certain practices have been for converting prospects into customers over the past 24 months. The vast majority indicated &ldquo;rapidly responding to enquiries&rdquo; was beneficial (89%), followed by &ldquo;responding to enquiries outside of business hours&rdquo; (56%).&nbsp; Of course, it makes sense that being responsive is key in those initial stages. However, once clients are onboarded, brokers shouldn&rsquo;t wait for policy-renewal time to get back in touch. It&rsquo;s important to communicate regularly with clients, stay on top of emerging risks to their businesses, and inform clients of new solutions. In the survey, 72% of brokers indicated they find it beneficial to inform clients of emerging risks and exposures, and 70% find it beneficial to inform clients of relevant new products.&nbsp; 
<h5>Personal Touch </h5>
In today&rsquo;s digital world, personalization makes a difference. Based on the survey findings, brokers appear to be investing in better understanding their clients so they can offer more tailored, personalized services. When asked how beneficial the following practices have been for serving their clients, 87% of brokers said they are educating themselves more about the customer&rsquo;s situation. This was followed by: &ldquo;personally assisting in the claims process (69%); &ldquo;referring your customers to information and other resources&rdquo; (59%); and &ldquo;personally offering after-hours service,&rdquo; i.e. they can contact you directly, (49%).&nbsp; However, there may be a disconnect between brokers&rsquo; and clients&rsquo; perceptions. For example, while the majority of brokers find it beneficial to personally assist in the claims process, a previous survey indicates there is room for improvement. In Canadian Underwriter&rsquo;s Trusted Advisor 2021 survey, only 36% of respondents&mdash;commercial clients of brokers&mdash;said they were satisfied or very satisfied that their broker &ldquo;helped me through the claim process to clear up confusion and move things along quickly.&rdquo; 1 While brokers don&rsquo;t manage claims themselves, there is an opportunity to help clients navigate complexities throughout the process and help manage expectations. Brokers can walk clients through how to report a claim to their insurance company, guide them through the process, and get in touch after the claims process is finished.&nbsp;
<h5>Specialist vs. Generalist&nbsp; </h5>
In recent years, many brokers have taken on roles as specialists, focusing on niche markets rather than taking an &ldquo;all-things-to-all-people&rdquo; approach. In the survey, 83% of respondents agreed &ldquo;brokers need to become more specialized to withstand changing technology and sales models.&rdquo; In addition, nearly two thirds (64%) of brokers said &ldquo;developing specialty markets expertise&rdquo; is beneficial for serving clients well, up from 60% in 2020. And 60% said &ldquo;developing deep knowledge of a small selection of products&rdquo; is beneficial.&nbsp; Overall, the findings indicate that many clients want their broker to have a deeper understanding of their business and industry, as well as their unique risks. Brokers with a dedicated focus on a specialist market, such as construction or auto, will be well positioned to provide deeper insight and knowledge into the sector, as well as niche solutions and services.&nbsp; 
&nbsp;
&nbsp;
Sources 1 Canadian Underwriter, <a href="https://www.canadianunderwriter.ca/insurance/survey-shows-brokers-need-to-improve-claims-management-services-1004213722/" target="_blank" style="background-color: #ffffff;" rel="noopener">Survey shows brokers need to improve claims management services,</a> Oct. 26, 2021.&nbsp;

What brokers can do to better serve their clients

In just a few short years, cyber attacks have gone from being the stuff of myth and legend to real-world threats that impact organizations globally every day. Yet, while awareness of cyber threats has grown, along with the frequency and severity of attacks, there hasn&rsquo;t been a concurrent rise in demand for standalone cyber insurance.&nbsp; A recent Deloitte report notes that cyber insurance growth remains well below expectations. In a survey of middle-market companies, defined as having between US$250 million to US$1 billion in annual revenue, non-buyers were asked why they passed on a cyber policy. The reasons ranged from insurance product issues to distribution issues to buyer issues. For example, respondents indicated the cost was too high (41%), the broker/agent has not suggested it (22%), and they didn&rsquo;t know coverage was available as a standalone policy (17%).1 Anecdotally, Canadian brokers have indicated that many clients don&rsquo;t believe a cyber crime is likely to happen to them and they don&rsquo;t fully understand their exposures, which adds to the challenge of selling cyber insurance to businesses.&nbsp; While these barriers mean cyber isn&rsquo;t necessarily an easy sell, it&rsquo;s still critically important for clients to make cyber insurance a part of their cyber security strategy. Even the best defenses will sometimes fail, so businesses need to consider risk transfer options. Here are five ways brokers can overcome challenges in the marketplace and make the case for cyber insurance:&nbsp; 1. Make cyber risks relevant to their business&nbsp;
To start, brokers can initiate a discussion with clients on the cyber threat landscape and highlight risks that are relevant to their business or industry. For example, manufacturers might be less concerned about data breaches since they don&rsquo;t collect customer data. However, they could fall prey to phishing or social engineering scams and lose sensitive company data. Or, as has been a rising trend, the manufacturer could fall victim to a ransomware attack, whereby criminals encrypt an organization&rsquo;s data and demand payment to restore access.&nbsp; 2. Build the case with case studies&nbsp;
In addition to outlining where clients&rsquo; exposures might be, brokers can inform them of the potential significant business impact that could follow a breach, including financial costs and reputational harm. For example, the average cost of a data breach in 2020 was US$3.86 million.2 Deloitte&rsquo;s survey found that respondents who bought stand-alone policies often did so as a reaction to cyber attacks against others, including competitors, supply chain partners, and even companies outside their own industries.&nbsp; This presents an opportunity for insurance companies to support brokers by providing case studies they can use to inform their clients. After all, storytelling is a powerful tool. As Deloitte experts note, case studies that show how standalone policies kicked in after a cyber event, as well as the challenges facing those without dedicated coverage, might make the difference between a sale and a pass, especially if it involves an event within the prospect&rsquo;s own industry. 3 3. Create a sense of urgency&nbsp;
Like with your health, a pre-existing condition could make it more difficult to secure insurance. Discuss how difficult securing cyber insurance could be if a client has had a recent loss, given the quickly changing cyber landscape. Insurers are dramatically revising their approach&mdash;in some cases premiums are going up and coverages are tightening up across the board.&nbsp; It&rsquo;s also important to ensure clients protect their business as soon as possible because the longer they wait to protect their business, the longer they&rsquo;re vulnerable to a possible cyber-attack &ndash; and no business is immune from the threat. 4. Educate clients on the need for a standalone policy&nbsp;
Insurers can help brokers, who in turn can help their clients, understand how standalone cyber policies can close possible gaps in a client&rsquo;s current coverage and offer greater clarity. Some common coverages that fall under a cyber policy include security breach expenses, business interruption, crisis management expenses, and forensic investigations expenses, among others.4 Although cyber is relatively new in the insurance world, standalone products need to keep pace with the speed of change as threats continually evolve. For example, Sovereign Insurance&rsquo;s new product suite, <a href="~/industries-and-solutions/technology-and-cyber" target="">Sovereign Secure TechPro</a>, features more precise language designed to address the unique, new and emerging risks to Canadian businesses. The product also features enhanced policy forms to offer more comprehensive coverage and modular products to provide greater flexibility.&nbsp; 5. Highlight value-added breach preparation and breach response services
Value-added services are another meaningful benefit of standalone cyber policies. For example, with <a href="https://cdn-ca.aglty.io/sovereign-1/brochure-pdf/2023/Technology Risk and Cyber Liability Insurance_Sell Sheet.pdf" target="_blank" rel="noopener">Sovereign Secure TechPro</a>, clients also get access to breach preparation and crisis management services, as well as personalized access to a breach preparedness website provided by our partner, CyberScout&reg;.&nbsp; While cyber insurance can&rsquo;t prevent cyber attacks from happening, it can help businesses navigate a loss and get businesses back up and running again. Brokers can <a href="~/contact-us" target="">contact Sovereign&reg;</a> to find out how we can work together to bring clarity to businesses on cyber coverage.&nbsp;
&nbsp;


CyberScout&reg; is a trademark of CyberScout, LLC and used with permission.
 &copy;2021 The Sovereign General Insurance Company, a member of The Co-operators group of companies. Sovereign&reg; is a registered trademark of The Sovereign General Insurance Company. Not all advertised products may be available in all jurisdictions. For full terms and conditions, including coverage limitations and exclusions, please refer to the policy wording. The Sovereign General Insurance Company is committed to protecting the privacy, confidentiality, accuracy and security of the personal information that we collect, use, retain and disclose in the course of conducting our business. Visit sovereigninsurance.ca or call toll free at 1-800-661-1652 to learn more. 
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1 Deloitte, &ldquo;<a href="https://www2.deloitte.com/us/en/insights/industry/financial-services/cyber-insurance-market-growth.html" target="_blank" rel="noopener">Overcoming challenges to cyber insurance growth,</a>&rdquo; March 16, 2020 2 IBM, &ldquo;<a href="https://www.ibm.com/downloads/cas/QMXVZX6R" target="_blank" rel="noopener">Cost of a Data Breach Report 2020,</a>&rdquo;&nbsp; 3 Property Casualty 360, &ldquo;<a href="https://www.propertycasualty360.com/2020/05/12/stand-alone-cyber-insurers-need-more-agents-and-brokers/" target="_blank" rel="noopener">Standalone cyber insurers need more agents and brokers,</a>&rdquo; May 12, 2020 4 Insurance Bureau of Canada, &ldquo;<a href="http://www.ibc.ca/ab/business/risk-management/cyber-liability" target="_blank" rel="noopener">Protect your organization from cyber crime</a>,&rdquo;&nbsp;

How brokers can overcome the challenge of selling cyber insurance

Every business leader knows they have to expect the unexpected, especially in today&rsquo;s unpredictable world. However, when it comes to risks that can cause real harm &mdash; from workplace injuries and physical damage to the fallout from legal and regulatory compliance issues &mdash; no one should be caught by surprise.&nbsp; To be truly prepared, organizations should evaluate and reevaluate potential threats to their business by having their insurer conduct risk assessments. By being proactive, businesses can stay on top of risks as they emerge and evolve, and implement solutions to mitigate those risks.&nbsp; There&rsquo;s no one-size-fits-all approach to risk assessments: the scope will depend on the nature of the business, and there are numerous tools, techniques and technologies that can be used. During a property and casualty risk assessment, for example, the inspector will tour the facilities (and utilize secondary sources such as questionnaires, accident reports, and more) to identify risk factors, hazards, and loss exposures that could impact the business, cause harm, or don&rsquo;t comply with regulations; evaluate the potential impact of that risk; and offer recommendations to eliminate or control the risk. Most importantly, risk inspectors take the time to educate and share proactive solutions so that clients can continue to strengthen their risk management practices. In any case, conducting a risk assessment has tangible and wide-ranging benefits. It can help a business: protect its financial security as risks are reduced or eliminated; find efficiencies to save money in the long term, for example, by enhancing equipment longevity; comply with regulations and avoid fines; and avoid potential increases in insurance premiums if recommendations aren&rsquo;t implemented. Of vital importance, a risk assessment helps protect employees&rsquo; health and safety in the workplace.&nbsp; While these advantages may sound compelling, getting commercial clients on board can sometimes require convincing. For example, some clients might resist a risk inspection, questioning why they&rsquo;re being asked things they&rsquo;ve already covered through the insurance application. Others may not see the value or understand the recommendations from a risk assessment, or they may not have the funds to implement them.&nbsp; Additional factors that contribute to clients not proactively protecting themselves against existing and emerging risks include: the lack of a risk management framework and/or business continuity plan; not having a dedicated risk manager; and not keeping up with changing regulations, best practices, and technologies.&nbsp; These hurdles, however, don&rsquo;t mean clients should close the book on risk assessments. To address their time and cost constraints, for example, companies should consider a phased approach to implementing recommendations: not all upgrades and updates need to be done at once.&nbsp; For their part, brokers can help clients understand the value that risk assessments bring to the business by sharing educational resources and discussing potential scenarios. An impactful approach is to outline in real, practical terms what could happen if the client is underinsured, and/or if they lack proper risk mitigation strategies and tactics.&nbsp; &nbsp; Research shows there is interest among brokers in receiving a wide range of services, educational resources, and tools from their loss control and risk inspection partners. In the Canadian Underwriter National Brokers Survey, sponsored by Sovereign Insurance, when asked &ldquo;What services, education, resources, or tools do you expect and/ or want to receive from Loss Control, Risk Inspector partners?&rdquo; 69% of brokers said they expect and/or want their clients to receive on-site or remote risk inspection services. This was followed by: reviewing the recommendations resulting from the risk inspection with a risk specialist (64%); broker accreditation courses (56%); tools such as accident/incident trackers, checklists and permits (52%); webinars and panel discussions (52%); articles, blogs and bulletins (42%); and whitepapers on emerging risks.&nbsp; The survey also found that 31% of brokers are likely or very likely to use a third-party inspection service to help their clients evaluate and mitigate risks to their business, compared to 23% who are unlikely or very unlikely. While these results seem to indicate that brokers see the value of risk inspections for their clients, surprisingly, nearly half (47%) said they are neither likely nor unlikely. This indifference indicates there may still be some work to do within the industry to promote the value of risk inspections and raise the awareness of their immense benefits.&nbsp; Brokers, too, have a lot to gain when a client undergoes a risk assessment. An assessment can: reduce claims for the insured; keep the insured marketable, both for their existing carrier for future renewals and/or for future carriers; help keep the insured&rsquo;s premiums and deductibles down; and help keep the Insured and their employees healthy and safe.&nbsp; Ultimately, risk assessments speak to the heart of the insurance business. They embody the value of risk recommendations and documentation and reinforce the value of the client-broker-insurer relationship &mdash; and it&rsquo;s everyone&rsquo;s job to proactively mitigate risk.&nbsp;

The value of risk assessments

In challenging times, many business relationships are put to the test. That&rsquo;s true in the insurance sector today, as carriers and brokers navigate a hard market and the related stresses it puts on their partnerships.&nbsp; In the Canadian Underwriter National Brokers Survey, sponsored by Sovereign Insurance, one of the questions posed to brokers was: to what level do you agree with the following statement: &ldquo;Insurance carriers are striking a fair balance between the interests of carriers and brokers.&rdquo; The result was 45% agree and 55% disagree.&nbsp; That&rsquo;s not surprising, as the hard market means brokers&rsquo; jobs aren&rsquo;t easy. In a hard market, carriers typically apply stricter underwriting criteria, charge higher premiums, and don&rsquo;t renew accounts in areas that are prone to losses. Capacity, or the supply of insurance, is reduced and there&rsquo;s a subsequent increase in demand. Compare that to the previous soft-market cycle when capacity was readily available at the best price, and it&rsquo;s easy to see the challenges and frustrations brokers are dealing with today.&nbsp; While these aren&rsquo;t the best of times, it&rsquo;s vital for carriers and brokers to work together for their mutual benefit&mdash;and, most importantly, that of clients. Having strong partnerships will not only help carriers and brokers weather the storm, but also help them emerge stronger and more resilient on the other side.&nbsp; Here are key ways insurance carriers and brokers can enhance their partnership: Focus on communication: Open and honest communication is an excellent way to enhance partnerships and ultimately assist clients. &ldquo;Carriers need to help brokers understand what&rsquo;s happening in the marketplace&mdash;and why,&rdquo; says Don Maxwell, AVP Commercial Solutions, National Operations, at Sovereign Insurance. This will arm brokers with the awareness and information they need to have potentially difficult discussions with their clients, for example, explaining why their costs are increasing, or why terms are changing. &ldquo;Even something as simple as promptly answering phone calls and emails shows that insurance partners are in this together with brokers,&rdquo; says Don.&nbsp; For their part, brokers need to provide carriers with high-quality, detailed and accurate quote submissions with all the basic risk information. This will allow the underwriter to quickly qualify an account and minimize questions.&nbsp; See: <a href="https://www.sovereigninsurance.ca/advice-and-tools/broker-resources/how-brokers-can-be-successful-with-quote-submissions" target="">&ldquo;How brokers can be successful with quote submissions&rdquo;</a> Be empathetic: Empathy is fundamental when it comes to carrier/broker relationships, but it can sometimes fall by the wayside. It&rsquo;s important that underwriters have an appreciation for brokers&rsquo; roles and responsibilities, as well as the pressure they&rsquo;re under. They need to think about the end client as well, and what impact their own actions in underwriting will have on the client. Brokers will value carriers that demonstrate empathy, compassion, and care, which will go a long way toward the longevity of the partnership.&nbsp;&nbsp; Similarly, it&rsquo;s important that brokers understand the tough hard market adjustments carriers are required to make to ensure the longevity of their business and ability to continue to pay claims. &ldquo;The reality is that claims trends have outpaced industry expectations, and as a result have also outpaced the accompanying premium increases over the years,&rdquo; says Terry McGrath, AVP Commercial Solutions, Western Region, at Sovereign Insurance. &ldquo;Making difficult adjustments to our capacity and risk appetite is a necessity to ensure that our business is financially strong, and that we&rsquo;re able to deliver on our promise and live our purpose of protecting Canadian businesses.&rdquo; See: <a href="https://www.sovereigninsurance.ca/advice-and-tools/hot-topics/how-the-hard-market-is-a-time-for-opportunity" target="">How the hard market is a time for opportunity</a> Provide added value: As the saying goes, you can&rsquo;t win on price alone. &ldquo;Providing added value demonstrates to brokers that the carrier isn&rsquo;t just another company providing a price, but also offers deeper benefits&mdash;both to brokers and clients,&rdquo; says Kevin Stedman, AVP Commercial Solutions, Eastern Region, at Sovereign Insurance. &ldquo;As a partner, we should communicate why we&rsquo;re going to insure this risk, what the premium is, and what value-added services we&rsquo;re offering.&rdquo;&nbsp; Whether it&rsquo;s offering clients loss control / risk engineering services, providing brokers advice when an issue arises, or even helping brokers present information to clients, value-added services position carriers as a trusted advisor and support for brokers. Value-add resources, tools and services can then be utilized by brokers to support them in further educating and advising their clients.&nbsp; Be out front and proactive: Rather than the pass&eacute; way of waiting for business to come their way, carriers need to be proactive in their interactions with brokers. For example, as part of Sovereign&rsquo;s new sales enablement initiative, which will help us build deeper connections with brokers, one discussion topic is how to be a proactive participant in every piece of business.&nbsp; &ldquo;Rather than simply being &ldquo;quote number 10&rdquo; on the broker&rsquo;s desk, we want to be tenacious about the new business quotes we provide and show brokers that we&rsquo;re interested in writing the business,&rdquo; says Don. &ldquo;Similarly, brokers who invest in their relationships with carriers will have a deeper understanding of their unique risk appetites and the types of target submissions they&rsquo;re looking for &ndash; streamlining the process and saving everyone time and effort.&rdquo; Whether it&rsquo;s a hard market or a soft market, getting back to the fundamentals of good partnerships&mdash;communication, empathy, added value and participation&mdash;will help earn and keep brokers&rsquo; trust and respect. When the partnerships between carriers and brokers are strong, everybody wins.&nbsp;

How carriers and brokers can enhance their partnership

With today&rsquo;s rapid acceleration of digital-first experiences, customers have increasingly come to expect &ldquo;anytime, anywhere&rdquo; access to information, products and services. Even in relationship-based industries like insurance, putting technology solutions into play is becoming more important. To stay competitive, brokers have to figure out what tools and technologies can enable them to better meet their clients&rsquo; needs, as well as benefit their own businesses. Research shows that brokerages are making positive progress toward technology adoption. A Q1 2020 survey of independent brokers in Canada, the U.S. and U.K. found that 33% of agencies and brokerages use self-service portals, representing a 50% increase, and 52% have extended mobile technology to their employees. The survey also found that 71% of agencies and brokerages host their software in the cloud, up 9% year over year. In addition, 29% of agencies and brokerages reported using data analytics applications, which is a 26% increase year over year.1&nbsp; However, while technology adoption continues to trend forward, it&rsquo;s still a key challenge for brokers. In the Canadian Underwriter National Brokers Survey, sponsored by Sovereign Insurance, rapid technology changes landed at number four of the top five challenges Canadian P&amp;C brokers are facing. In addition, adopting new technology came in as the fifth &ldquo;strong challenge&rdquo; to their business. There is a myriad of reasons why technology keeps brokers up at night, but here are some common challenges and how brokerages can overcome them:&nbsp; Pace of Change Technology continues to evolve at a rapid pace and there&rsquo;s no shortage of innovative digital solutions hitting the market. The challenge for brokers is how to keep up with all the trends and tools, and determine which solutions best suit their needs.&nbsp; The key is doing the research. While &ldquo;shiny new objects&rdquo; seem exciting, they might not save brokers time or money, or enable them to better service clients in the end. The imperative for brokers is to first figure out what they need and what their clients need, and then find technologies that fit. If they start with technology first, and not the problem they need solved, their new tech investments might end up collecting dust on the shelf.2 In addition to embracing technology to help advance their business, brokers are tasked with learning and adopting technologies and tools introduced by the different carriers they partner with. While many of these advancements may support broker business, others could miss the mark if brokers aren&rsquo;t partnering with carriers during the ideation and requirements gathering process to ensure it meets their needs, and in some cases aligns with their systems. Limited Resources Technology options may be expanding, but that doesn&rsquo;t mean resources are, too. On the heels of the pandemic, many companies are still dealing with budgetary pressures and conflicting priorities, so they&rsquo;ll have to get creative.&nbsp; One insurance expert suggests assessing other expenses critically to free up resources, including time, money and personnel. For example, because of the pandemic, companies no longer need big travel budgets and there may need less commercial office space. When it comes to time, one suggestion is to increase the time available to personnel by adding more people or by cutting other projects or responsibilities.3 While a complete digital transformation can take years and a huge investment, some brokerages have built on their existing technologies, which isn&rsquo;t as costly. Some easy-to-implement solutions include chat bots and text messaging services.4 The Talent Gap&nbsp; New technologies in the workplace require new skills in areas such as data and analytics, mobile, cloud, artificial intelligence, and more. Brokers will need digitally savvy employees to power any new solutions they implement, which might require both training current employees and hiring talent from outside the organization.&nbsp;&nbsp; When it comes to introducing new technologies, the problem for business leaders is that some employees may be resistant to change. Some reasons include fear of the unknown, no clear benefits or value, and lack of communication. To overcome this challenge, employers are encouraged to use tactics such as: prioritize ease of use, connect to people&rsquo;s needs, customize training, use group endorsement, and keep an open dialogue.5 When hiring from the outside, brokers may encounter difficulty filling roles as the digital talent gap continues &mdash; a common challenge for many companies. In a May 2020 survey by McKinsey, 87 percent of executives said they were experiencing skill gaps in the workforce or expected them within a few years. Yet less than half of respondents had a clear sense of how to address the problem.6&nbsp; To close the talent gap, one solution is to focus on reskilling and upskilling initiatives, which is beneficial to both companies and employees. For example, employees will have pride knowing their company wants to invest in them and their future, and loyalty will likely follow. 7&nbsp; See: <a href="https://www.sovereigninsurance.ca/advice-and-tools/hot-topics/finding-qualified-workers-how-to-support-the-insurance-talent-pipeline" target="">Finding qualified workers: how to support the insurance talent pipeline</a> Cyber Security&nbsp; Brokers considering new tools and technologies should be mindful of new cyber security risks. For example, if brokers have &ldquo;anytime&rdquo; access to clients&rsquo; information on their mobile devices, or if data freely flows to all employees in the organization, how does the company ensure the information is protected from cyber threats? While there&rsquo;s no question the threat is real, brokerages can take steps to mitigate cyber risks. Some key measures include backing up and encrypting data; securing mobile devices; providing employee awareness training; enabling security software; using strong user authentication; and many more.8 See: <a href="https://www.sovereigninsurance.ca/advice-and-tools/managing-risk/cyber-loss-prevention-how-to-mitigate-cyber-risks-to-your-business" target="">Cyber loss prevention: How to mitigate cyber risks to your business</a>&nbsp; &nbsp; &nbsp; As brokers continue to explore technology solutions and evolve their offerings, insurers too are driving their digital transformations forward. According to PwC, elements of digital transformation in the insurance industry include digitally enabled sales, direct-to-consumer engagement, automated advice, digital underwriting and automated claims adjudication.9&nbsp; &nbsp; Some are also developing technologies to enhance the broker experience and make it easier to do business with their partners. 10 This presents a great opportunity to involve brokers in that process to ensure it really meets their needs.&nbsp;&nbsp; While it can be daunting to keep up with new trends and technologies, it&rsquo;s well worth it to make the effort. Keeping pace with change and finding the right solutions for their business will ultimately help brokers compete and better serve clients in today&rsquo;s digital-first world.&nbsp; Sources&nbsp; 1 Applied, &ldquo;<a href="https://www1.appliedsystems.com/en-uk/news/press-releases/2020/applied-systems-reveals-2020-digital-technology-adoption-survey-results-among-global-independent-agencies-and-brokerages/ " target="_blank" rel="noopener">Applied Systems Reveals 2020 Digital Technology Adoption Survey Results among Global Independent Agencies and Brokerages.</a>&rdquo; July 21, 2020 2 Canadian Underwriter, &ldquo;<a href="https://www.canadianunderwriter.ca/insurance/digital-brokers-should-you-build-your-own-tech-or-buy-someone-elses-1004198908/" target="_blank" rel="noopener">Digital brokers: Should you buy your own tech or build someone else&rsquo;s?</a>&rdquo; Oct. 22, 2020&nbsp; 3 Property Casualty 360, &ldquo;<a href="https://www.propertycasualty360.com/2020/08/26/five-major-challenges-of-insurance-digital-transformation/" target="_blank" rel="noopener">Five major challenges of insurance digital transformation,</a>&rdquo; Aug. 26 2020&nbsp; 4 Canadian Underwriter, &ldquo;<a href="https://www.canadianunderwriter.ca/insurance/insurtechto-speakers-share-experiences-chatbots-refund-portals-text-messaging-1004123370/ " target="_blank" rel="noopener">Brokers succeeding with chatbots, refund portals, text messaging: InsurTechTO panel,</a>&rdquo; Nov. 8, 2017&nbsp; 5 Memory, &ldquo;<a href="https://memory.ai/timely-blog/motivating-employees-to-adopt-new-technology" target="_blank" rel="noopener">Resistance to change: Motivating employees to adopt new technology,</a>&rdquo; Oct. 16, 2020 6 McKinsey, &ldquo;<a href=" https://www.mckinsey.com/business-functions/organization/our-insights/to-emerge-stronger-from-the-covid-19-crisis-companies-should-start-reskilling-their-workforces-now" target="_blank" rel="noopener">To emerge stronger from the Covid-19 crisis, companies should start reskilling their workforces now,</a>&rdquo; May 7, 2020 7 Chief Executive, &ldquo;<a href="https://chiefexecutive.net/closing-the-tech-skills-gap-3-key-factors-for-ceos-to-consider/" target="_blank" rel="noopener">Closing the tech skills gap: 3 factors for CEOs to consider,</a>&rdquo; Sept. 3, 2020 8 Canadian Centre for Cybersecurity, &ldquo;<a href="https://cyber.gc.ca/en/guidance/baseline-cyber-security-controls-small-and-medium-organizations" target="_blank" rel="noopener">Baseline cybersecurity controls for small and medium organizations</a>&rdquo; 9 CIO, &ldquo;<a href="https://www.cio.com/article/3613173/insurance-rising-to-the-challenge-of-digital-transformation.html" target="_blank" rel="noopener">Insurance rising to the challenge of digital transformation,</a>&rdquo; March 28, 2021&nbsp; 10 Canadian Underwriter, &ldquo;<a href="https://www.canadianunderwriter.ca/insurance/how-carriers-could-save-brokers-from-drowning-in-friction-1004204188/" target="_blank" rel="noopener">How carriers could save brokers from drowning in friction,</a>&rdquo; Feb. 23, 2021

How brokers can adapt to rapid changes in technology

Equipment Breakdown (EB) insurance is a critical, yet often misunderstood coverage.&nbsp; There remains a common misconception that EB only provides coverage for conventional equipment such as pressure vessels and mechanical equipment. But that&rsquo;s simply not the case! This isn&rsquo;t niche or specialized insurance; EB is an important coverage for almost every business, protecting against mechanical, electrical, and pressure vessel breakdown. If your clients own equipment, they likely have EB exposures. &ldquo;Breaking Down Equipment Breakdown&rdquo; helps you better understand all that Equipment Breakdown insurance encompasses, illustrated through helpful claims examples.&nbsp; You&rsquo;ll learn: 
<ul>
<li>The history of EB insurance</li>
<li>What EB coverage entails</li>
<li>The types of equipment it can protect&nbsp;</li>
<li>What additional coverages compliment EB</li>
<li>The importance of risk inspections </li>
</ul>

Breaking Down Equipment Breakdown

When asked what you wanted to be when you grew up, chances are &lsquo;insurance professional&rsquo; wasn&rsquo;t your answer. And for many young adults considering which career path to follow, the insurance sector still isn&rsquo;t on their radar. While the industry offers many opportunities to grow and develop careers, it remains challenging for insurance companies to attract the next generation of top talent. In fact, the degree of interest the Gen Z cohort (16 to 22 years of age) has for the sector has remained at 14% from 2015 to 2019, while those not interested at all has increased from 35% to 39%.1 As the workforce ages, the need to attract talent is becoming more acute. Today, nearly 30 percent of the P&amp;C insurance industry&rsquo;s workforce is over the age of 50, compared to only 23 percent in 2007, according to a study by The Insurance Institute of Canada. More than one in four workers, and one in three managers, are forecast to retire by 2027. The report states that given the high rate of retirement, the inflow of young workers is barely sufficient to match the outflow of older workers.2 While the sector isn&rsquo;t on many job seekers&rsquo; radars, there are many rewarding reasons to choose a career in insurance. It offers opportunities for advancement, lifelong learning, stability, personal satisfaction and growth, and variety, to name just a few.3 As the workforce gap widens, developing a healthy pipeline of diverse talent will be crucial for the success and longevity of the industry. Here are a few ways companies can recruit and retain the right talent:&nbsp; Create a company that employees are proud to work for: A positive workplace culture, great employee experience, and meaningful employee value proposition (EVP) all contribute to an enjoyable and fulfilling workplace. An EVP describes the unique benefits that employees get in return for their contributions at a company. At Sovereign Insurance&reg;, for example, our EVP is &lsquo;Purpose with Profit&rsquo;; it puts people at the heart of everything we do and encourages everyone to make an impact. Bringing the EVP to life helps our employees feel proud to work for the company and allows us to remain competitive as an employer of choice. Not only does company pride help retain employees, but it also builds brand ambassadors who promote the company as a great place to work within their networks. Think ahead when it comes to recruitment: Finding talent doesn&rsquo;t just involve recruiting employees when they&rsquo;re needed &mdash; it also involves building and evolving the workforce to ensure it doesn&rsquo;t become obsolete. Companies should continually assess their workforce in terms of the talent they have today and the talent they&rsquo;ll need in the future, whether it&rsquo;s next year or 10 years from now. This includes identifying what skills and capabilities will be in demand and then proactively planning, hiring, and developing talent to ensure they&rsquo;re ready to take on future challenges. This approach allows businesses to find ways to grow their internal talent, as well as identify gaps where they may need to hire outside talent.&nbsp; Support employees&rsquo; growth and development: Demonstrating a commitment to career and personal growth is a powerful way to both attract and retain employees. Help employees build their skills and knowledge by providing educational and professional development, cross training, mentoring and coaching. In addition to career advancement, consider supporting internal job transfers between departments or between parent/subsidiary companies, to encourage growth, development, and innovation.&nbsp; Implement an internship/Co-op program: Partnering with post-secondary institutions for internship / co-op work terms is a great way to scope new talent and transition them into full-time employment opportunities. Internships are an especially important opportunity to attract innovative talent as insurance companies embark on digital transformations and insure-techs revolutionize the digital space.&nbsp; In addition, it&rsquo;s crucial to promote the insurance sector as an interesting career path for a wide range of professions, including legal, actuary, data sciences, project management, sales and marketing, and even trades, as for example, tradespeople often make great loss-control specialists.&nbsp; See: <a href="https://www.sovereigninsurance.ca/advice-and-tools/hot-topics/the-impact-of-the-skilled-labour-shortage" target="">The impact of the skilled labour shortage</a> Other ways companies can connect with students and enhance visibility of the insurance sector are:&nbsp;
<ul>
<li>Collaborate with universities and colleges to help inform curriculums&nbsp;</li>
<li>Engage guest lecturers from the insurance sector in speaking to schools about job opportunities in insurance&nbsp;</li>
<li>Develop mentorship/career coaching programs to connect industry talent with interested students </li>
</ul>
 While the talent challenge won&rsquo;t be solved overnight, companies can take steps now to build the talent pipeline in an industry that has a long history and plays an important role in society. With the right people in place, the industry will be in good hands long into the future.&nbsp; &nbsp; 1 Applied and InVEST, &ldquo;<a href="https://www1.appliedsystems.com/globalassets/all-documents/Resources/White-Papers-Research/the-future-of-insurance-bye-bye-boomers_hello-digital-natives_en-us.pdf" target="_blank" rel="noopener">The Future of Insurance: Bye-Bye Boomers, Hello Digital Natives</a>," 2019 2 The Insurance Institute of Canada, &ldquo;Demographics of the P&amp;C Insurance Industry in Canada,&rdquo; 2018 3 The Insurance Institute of Canada, &ldquo;<a href="https://www.career-connections.info/en/Why-Insurance" target="_blank" rel="noopener">Why Insurance</a>&rdquo;&nbsp;

Finding qualified workers: how to support the insurance talent pipeline

If there&rsquo;s one mantra that underwriters live by when reviewing quote submissions from brokers it&rsquo;s: the more information, the better. This is especially true during hardening markets when brokers are remarketing their business and underwriters&rsquo; inboxes are brimming.&nbsp; Today, many underwriters are focused on high-quality submissions in their key industry sectors. For brokers, the best way to get to the top of the pile is to provide complete, thorough and accurate submissions on quality risks, targeting the most appropriate carriers. Those who do often have a better chance of being offered a quote, along with getting better pricing and terms and appropriately tailored solutions.&nbsp; So, how can you ensure your submission will be prioritized? It is best to put forward a fully completed submission with all the basic risk information to allow the underwriter to quickly qualify an account and minimize questions. A fully completed submission includes, but is not limited to, the following: For All Lines:
<ul>
<li>Current insurer including time on risk.</li>
<li>Number of years in business.</li>
<li>Effective and expiry dates with a preferred target quote by date.</li>
<li>Detailed minimum five-year+ loss history and recent experience letter from incumbent.</li>
<li>Full coverage specifications. </li>
</ul>
 For Automobile:&nbsp;
<ul>
<li>Full description of operations, including how the vehicles are used.&nbsp;</li>
<li>Radius of operations, including a breakdown of regular and maximum radius. For transportation operations, include International Fuel Tax Agreement (IFTA) quarterly reports for the past 12 months.&nbsp;</li>
<li>Commodities carried. This applies not just to transport risks, as underwriters also look for the typical items that are carried in the vehicle, e.g. tools and equipment.&nbsp;</li>
<li>Safety manual including hiring practices and vehicle maintenance policy.</li>
<li>Current vehicle schedule, including a description of attached equipment and use of the vehicles; details of coverage required; list price new for all heavy units and trailers; and any lienholders/lessors.&nbsp;</li>
<li>Current driver&rsquo;s list.&nbsp;</li>
<li>Current carrier profiles including details of how any convictions, collisions, contraventions and violations were addressed. </li>
</ul>
 For Property &amp; Casualty: 
<ul>
<li>Full detailed description of operations.</li>
<li>Gross annual sales/revenues with a breakdown between Products, Operations and Services.</li>
<li>Detailed and up-to-date construction, occupancy, protection, and exposure information including building and equipment maintenance/updates and details on special hazards. </li>
</ul>
In addition to these must-haves, there are ways to take your submission to the next level:&nbsp; 
<ul>
<li>Include an executive summary that provides a brief outline of the business, background of the company, the overall company philosophy emphasizing commitments to safety and risk management activities.&nbsp;</li>
<li>If a history of claims exists, along with the recent loss experience letter from the incumbent, provide full details on the claims, explain the claims situation and what actions have been taken to avoid future similar claims.</li>
<li>Take a deep dive into the risk&rsquo;s quality control programs and safety practices. This can include detailed written quality assurance and quality control programs; a Driver Safety Manual including drug and alcohol policies; and a comprehensive Fleet Management Program including (where applicable); details of the insured&rsquo;s hiring practices, preferably a full formal policy; and vehicle maintenance policy, including how maintenance is documented and followed.&nbsp; </li>
</ul>
 Ensuring a Smooth Process&nbsp;
Underwriters work with tight timelines on already-busy schedules, so time is the biggest impediment to getting all the information they need. Be available and ready to find answers to the underwriter&rsquo;s questions. If underwriters have trouble getting answers, they may have to move on to the next submission. Keep in mind, too, that a good insurance partner will ask pertinent questions and respect your time as well.&nbsp; Be strategic in how you submit risks, demonstrating that you understand the carrier&rsquo;s target appetite. For example, Sovereign Insurance&rsquo;s core industry segments are Manufacturing, Wholesale Transportation and Logistics, Construction, and Energy and Resources, with a focus on mid to large risks.&nbsp; Although underwriting is highly technical, there&rsquo;s also a human element: underwriters want to establish strong, lasting relationships with brokers and insureds. At Sovereign Insurance, our underwriters take great pride in writing new businesses and then watching them grow, overcome hurdles and thrive over time. That starts with the broker, and our valued relationships with them can go a long way towards quality submissions and long-term success.&nbsp;

How brokers can be successful with quote submissions

There are countless benefits to taking breaks throughout your workday. Breaks help reduce or prevent stress, improve focus, enhance creativity, recharge your mind and body, and ultimately help you be more productive and maintain your performance throughout your day.
Here are 5 effective break ideas to inspire you!

5 effective breaks: The best ways to recover from stress

Every industry experiences cycles and the insurance sector, which operates in hard and soft market cycles, is no exception. In Canada, brokers and insurance companies are currently experiencing the first hard market in over 15 years. In a hard market, insurance companies apply more stringent underwriting and charge higher premiums. There&rsquo;s a reduced supply of insurance coverage (capacity) and a subsequent increase in demand.
<h4 class="serif">How we got here</h4>
Rising claims costs and the increased frequency of weather-related losses, combined with a low-interest financial environment, have contributed to eroding insurers&rsquo; profits and have led to this hard market. Rob Wesseling, President and CEO of the Co-operators Group of Companies explains: &ldquo;We have a situation where the claims trends have outpaced the expectations of the industry and as a result they&rsquo;ve outpaced the premium increases that have gone into the system, and all of the loss prevention and underwriting activities that would typically go along with that.&rdquo;
<h4 class="serif">Industry impact</h4>
While in a soft market pricing is a primary competitive factor, Francisco Saldias, Property and Casualty Specialist at Sovereign Insurance, says that &ldquo;when the hard market hits, pricing becomes less relevant and there&rsquo;s increased focus on risk selection. It can also lead to rate increases for clients and, in some cases, contracts aren&rsquo;t being renewed, which is stressful.&rdquo; The reality is that insurers are more likely not to renew an account if it performs poorly compared to previous years. Insurers are also less likely to make exceptions to writing a new business account that doesn&rsquo;t meet its underwriting criteria and risk appetite. The hard market requires insurers to re-align their risk appetite and in some cases remove themselves completely from a class of business. Brokers who may have an unprofitable book of business with an insurer may even see their contract cancelled, which restricts their market options making some accounts difficult to place.
<h4 class="serif">A time of opportunity</h4>
With the challenges that a hard market poses, it isn&rsquo;t feasible to simply wait it out. At Sovereign, we choose to see a hard market as an opportunity to focus on elements beyond price and get back to the fundamentals, but also a chance for brokers and insurance companies to demonstrate their value to clients. You can face the challenges of a hard market with an opportunity mindset and come out stronger as a result.
<h4 class="serif">The hard market is an opportunity to:</h4>
<ul>
<li>Focus on value, not just pricing: Like we mentioned, hard markets can bring with them rate increases and higher premiums. That&rsquo;s why brokers and insurers who succeed in a hard market are those who don&rsquo;t just sell pricing to the client&mdash;they provide value. Whether the market is hard or soft, clients should be serviced by an insurance company that can design a policy with coverages that fit their complex business needs and that can provide pro-active risk management and efficient claims services. Insurers have an opportunity to communicate, or in some cases re-educate, brokers and clients on the details of their risk appetite, coverage capabilities and services. This in turn can lead to higher quality submissions, more comprehensive coverage and better placed risks. Another way that brokers can add value to clients is by sharing educational materials, market updates and claims information to keep clients informed.</li>
<li>Build and maintain strong relationships: In a hard market, brokers and insurers must work harder to maintain strong relationships and support open communication; strong business relationships cannot be taken for granted. Where possible, an insurance company can work with their brokers to research alternative market options. Insurers should provide brokers with an open-door approach when they have questions, so they in turn can better provide their clients with information and find the best placement for their business.</li>
</ul>
At Sovereign, we choose to see a hard market as an opportunity to focus on elements beyond price and get back to the fundamentals, but also a chance for brokers and insurance companies to demonstrate their value to clients. 
<ul>
<li>Deliver an exceptional experience: Clear communication and timely service are key. Insurance companies need to be proactive in explaining any change in their risk appetite or underwriting criteria, ask the right questions, be able to provide answers to broker questions and be clear as to their intentions on renewal pricing and terms. And if the insurer is unable to write the account, brokers need quick turnarounds so that they have lots of time to re-place business.</li>
<li>Focus on underwriting excellence: A hard market typically follows a few years of insurance companies experiencing increased claims and shrinking profits. Apart from increasing premiums, during a hard market, insurance companies also take the opportunity to assess their tolerance for risk and will place an increased focus on underwriting fundamentals. While Sovereign Insurance has always had an &ldquo;underwriting first&rdquo; strategy, the key is to commit to your tools and be vigilant. It&rsquo;s important that a risk fit a company&rsquo;s appetite and that it meets their risk criteria. At times, the client&rsquo;s current carrier might be the right company for them and their premium and terms may be reasonable. Francisco&rsquo;s advice is to ask the questions: &lsquo;why am I looking at this piece of business? Is it a real opportunity? Is the risk suitable?&rsquo; &ldquo;Go through your checklist and be sure that all the I&rsquo;s are dotted and T&rsquo;s are crossed,&rdquo; he says. &ldquo;When you approach the account that way, you have a better chance at success.</li>
<li>Look at all business with fresh eyes: In a hard market, there&rsquo;s a renewed focus to adequately apply rate to make the book profitable, which benefits everyone in terms of the opportunity for the market to stabilize. Rather than just looking at what&rsquo;s been done in the past, insurers will look at all business (renewals and new business submissions) as if its new business coming in the door and underwrite to that standard.</li>
</ul>

&ldquo;Insurers don&rsquo;t want to keep the legacy of remaining on accounts that don&rsquo;t fit within their current appetite or performance standards, or ones that are underpriced,&rdquo; says Brenda Powell, Property and Casualty Specialist at Sovereign Insurance. &ldquo;Sometimes you need to deliver a hard message, but it&rsquo;s important to be clear with your message to the brokers and provide explanations for the actions taken. This will assist them with recommending products and providing information to the insureds.&rdquo; Rising premiums, reduced capacity and stricter underwriting can make the hard market cycle a difficult time for brokers, their clients and insurance companies. But in meeting the challenges and demonstrating value, the marketplace can come out of it stronger and provide clients greater stability.

How the hard market is a time for opportunity

Technological innovation is everywhere, and consumers are embracing digitally focused experiences. Digital disruptors are not only transforming their own industries but are raising the stakes for businesses across sectors. For the Canadian insurance sector, this raises a key challenge.&nbsp; Generally speaking, all regulators are challenged by the speed of technological change and the risks that insurance companies are trying to insure to in response. One reason regulators often lag behind is, quite simply, they have a limited number of sittings to focus on various issues. Another reason is regulators tend to wait and see how an industry responds to new innovations before then assessing whether or not they should step in.&nbsp; While regulations can&rsquo;t be updated overnight every time an innovation springs up, it&rsquo;s vital for all involved to stay ahead of disruptive technologies and make sure consumers and businesses alike are protected.&nbsp;
"While regulators don&rsquo;t always keep pace, fortunately the insurance industry is principles based and when looking at innovation, the general principles can be looked to for guidance."&nbsp;
The automotive industry is a prime example. In the not-too-distant future, driverless cars are expected to be on Canada&rsquo;s roads and highways. A report on auto insurance for automated vehicles by The Insurance Bureau of Canada1 notes that currently, auto insurance policies prescribed in provincial laws are built on the notion that human error is the primary cause of motor vehicle collisions. However, with automated driving technology, collisions will be caused increasingly by product malfunction. &ldquo;Product liability litigation is more complex and takes years longer to resolve than traditional motor vehicle liability claims,&rdquo; the report states. &ldquo;Changes are needed to Canada&rsquo;s auto insurance policies and supporting legislation to ensure that people injured in collisions involving automated vehicles get compensated fairly and quickly.&rdquo; While regulators don&rsquo;t always keep pace, fortunately the insurance industry is principles based and when looking at innovation, the general principles can be looked to for guidance. It&rsquo;s important to look at what the intention is and how it aligns with the regulations. Further, it&rsquo;s critical to bring legal and compliance resources into the conversation early on. From a product standpoint, insurance companies themselves are innovating and adapting&mdash;from something as simple as providing pink auto insurance slips electronically, to creating new products tailored to the sharing economy. For example, Sovereign&rsquo;s parent company, The Co-operators, recently launched a digital insurance brand called <a href="https://duuo.ca/" target="_blank" rel="noopener">Duuo.</a> It offers a number of unique products, such peer-to-peer equipment rental insurance and short-term rental insurance for homeowners and property. Technology innovations present many benefits in terms of access, speed and ease of transacting business; however, organizations offering products through new channels have to be mindful of the privacy regulations and considerations that come into play. In the balancing act between innovation and regulation it&rsquo;s critical to have collaboration between key stakeholders. That includes within an insurance company and among the product development and compliance teams, as well as with various regulators. Industry associations are doing a great job maintaining an open dialogue within the insurance industry and with regulators.&nbsp;&nbsp; While the pace of innovation can be challenging for the insurance sector, it also presents new possibilities that should be embraced.&nbsp;&nbsp; 1Insurance Bureau of Canada, &ldquo;Auto Insurance for Automated Vehicles: Preparing for the Future of Mobility.&rdquo;&nbsp; &copy; 2020 The Sovereign General Insurance Compliance.&nbsp; Sovereign&reg; is a registered trademark of The Sovereign General Insurance Company.&nbsp; The Sovereign General Insurance Company is a member of The Co-operators group of Companies.&nbsp; Duuo&trade; and Duuo by Co‑operators&trade; are trademarks of The Co‑operators Group Limited.

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