Directors & Officers Insurance

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In this episode of Risky Business, Colin Rooke explains the importance of learning about DNO – directors and officers insurance for board of directors of corporations and non-profits, how the current rise in wrongful dismissal and discrimination claims is making it essential for directors to educate themselves on DNO. 

Listen to the full episode here, or read the full transcript below.

Paul Martin:

Welcome to Risky Business Commercial Insurance with Butler Byers. This is Paul Martin, the CKLM business commentator and joining me, Colin Rooke commercial risk reduction specialist with Butler Byers Insurance. Colin, we have talked almost endlessly about three topics, isn’t it? And probably maybe one, cyber. We’ve talked cyber, cyber, cyber. We talked quite a bit about COVID, but today we’re going to change subjects completely. So if you’re a regular listener of the show, get ready, you’re going to hear something different. We’re going to talk about what’s called DNO or directors and officers insurance. This is one of those sort of mundane obscure little topics and they are the realm of insurance. But you say it’s all of a sudden something we got to be talking about, why is that?

Colin Rooke:

It’s really always been around, it’s just sort of seldom discussed. And if you are on a board or are someone inside of an organization that is responsible for looking after the insurance, you will know that in the last 18 months directors and officers has become quite a challenge. Depending on the type of organization, you might see some or all three of these things, but you’re seeing carriers just declined to renew altogether, we’re seeing reduced reduced capacity, stripped down coverages, and wildly increasing deductibles. And then lastly, despite all that, sharp increases in pricing as well.

And it’s really started a lot of conversation around the subject because traditionally, it was sort of a set and forget type of policy. I mean, you wouldn’t have a lot of challenges with it. It wouldn’t be uncommon to, for example, place the coverage on a three-year term at a fixed premium and maybe on the fourth year at renewal, it wouldn’t change at all. And so suddenly you have this sort of not really thought about coverage that’s causing a lot of problems. And the insurance companies are citing worldwide claims and so, a lot of clients are asking, “What happened, why are we seeing this, and why is it so hard to get?”

And until recently, the literature, the sort of proactive risk management, even the description of what it is it wasn’t a lot out there. I mean, at a high level, it serves to protect the board and its officers against some of the decisions that are made that could be later accused of wrongdoing, or making wrong decision. But it just really wasn’t in the limelight and then suddenly, in our line of work, overnight it’s become this problem child. And so we thought we better do something about it. And what we’ve done is, we’ve really designed a program, a loss control questionnaire plus a guide to an actual coverage, which not only we’re talking about a risk, but in this case we’re actually talking about a coverage, and that’s kind of unique to us. 

Paul Martin:

So what caused this change? Can you point to anything, or are we back to the same old culprits, cyber and all of those COVID, those kinds of things, or was there an outbreak, a rash of claims that the insurance company said, “Hang on, this is completely different ball game than it was even a year ago?”

Colin Rooke:

I don’t really know what started it all but suddenly, we’re seeing these, not quite unusual claims, but very high profile payouts or claims going through accusations. And some of the usual culprits so for example, you’ve got a board of directors that somehow, or is overseeing the organization, and maybe they’re involved in the insurance, or maybe they’re involved with the IT overall. And there’s a major data breach with policy limit payouts, or in excess of that, or maybe cyber wasn’t purchased at all. And suddenly, we’ve got lawsuits around that. And I guess one of the newer, not new topics but sort of rising, or in frequency and severity is all around the employment practices. And I would say COVID probably has a lot to do with that.

We’re seeing a lot more wrongful dismissal type claims. It’s weird so discrimination is a huge topic right now. And you can go, how could COVID cause this? And it’s not that COVID is causing it, or at least if you look at everyone working from home, a lot of people are working from home, or just a break in the norm, and you get employees with sort of time to think, or time away from the routine, time away from the office, and suddenly there’s these accusations coming forward, because you realize the toxic environment you worked in, suddenly you shut that down, everyone goes home, and you have time to clear your head and realize how bad it was. And so, we’re seeing a lot of that. And then, more so tied to COVID failure to address health and safety concerns, breach of employment contracts due to layoffs or closures around COVID. I mean, those are some of the hot buttons. It’s certainly not all tied to employment practices, but we’re certainly seeing a significant spike in that area.

 

Paul Martin:

Let’s just think about the headlines these days over the last year or two. Clearly, the responsibility and roles of those in positions of authority is coming under question. Start with major national and international institutions facing all kinds of allegations around sexual abuse, the Me Too Movement, inclusion, diversity, all of these really major items that are coming forward, and they’re not swept under the carpet anymore. I mean, think about even the residential school story, and that story coming out of British Columbia that, all of a sudden those in positions of authority are really coming under scrutiny and that probably amplifies the conversation we’re having here today, because one, it says, if you’re in a position of authority, you’d better be on the game. And secondly, if you’re in a position of authority you better make sure you’ve got some insurance in case you do miss a step, is that part of it?

Colin Rooke:

Yeah, absolutely. And as an example, it’s… Sorry, can we back up? My team’s ticker is going off in my ear and someone keeps messaging me over and over again. I’ve now closed it, but as you’re talking it’s just ding, ding, ding. So with recent events in the media, like you mentioned the whole Me Too Movement, certainly, I think that one accusation, or one new story is certainly going to bring out other accusations, other news stories. Again, according to the literature, certainly when those have more time to think, more time to really evaluate their experiences, I think that a lot of boards are now getting blamed for decisions that sort of have always been. And I think, why the spike? For example, the Me Too Movement was prior to COVID, right? But again, you have that break, you have that time to reset, you have that time to think, you have the time to think about where you work, and do you want to continue. And I think that is causing certainly a spike in claims, absolutely.

Paul Martin:

Well, I think there was a period of time, Colin, when people were afraid to come forward and to lodge complaints. And I think that as a few of them get lodged, more of them start to surface, and that story is very well known. But we’ve got to take a little break. And when we come back, I want to pick this up and I want to maybe talk a little bit about these guides, and the programs that you’ve got to assist boards. You’re listening to Risky Business Commercial Insurance with Butler Byers. This is Paul Martin with Colin Rooke, we’ll be back after this.

Welcome back to Risky Business Commercial Insurance with Butler Byers. Paul Martin, your host here, and joining me is Colin Rooke, the commercial risk reduction specialist with Butler Byers.

And Colin, we’re talking about some pretty serious stuff here today, societally serious in the sense of, those in positions of authority, particularly corporate authority, directors and officers of companies and that kind of stuff. I mean, there might’ve been kind of this movie style impression of, it’s a bunch of old guys sitting in a posh room with padded chairs, smoking cigars, and drinking cognac, it’s way different than that now. And the responsibility that’s falling on directors of organizations has always been there, but I think that, that fiduciary responsibility has really been amplified now and the insurance companies are responding to that. And you’re saying, it’s getting more difficult for companies to get adequate coverage or any coverage at all. And so, how are you helping those organizations?

Colin Rooke:

So a number of ways, one, we need organizations to really understand what the coverage means, the cause of claims, and the duties of a board, and have proper policies and procedures. And to look at real risk management techniques that’s going to protect the board, it’s going to protect the organization, it’s going to protect the people in it. And it all starts with, sort of guide one is, what is directors and officers, what does it entail, what types of coverages are there? And in this guide, it explains what those coverages are in a really easy to understand format. It talks about risk management, top 10 things that you must have as a board. Must have a plan around, which is really helpful.

Yes, step one is absolutely the education around it. And believe it or not, all the time you’ll run into organizations that will have a board of directors that don’t carry the coverage. And by the time that you get around to explaining what it does, there’s panic, they can’t believe they didn’t have it, they can’t believe how exposed they were. So you got to start with education; what it is, what can I do about it, how do I properly set up, what is the coverage, and typical types of claims. From there though, let’s say that either the board of directors or the coverages, it’s not new, it’s not a new thing, but you’re certainly feeling the pinch of the market. Again, high deductibles, reduced coverage, no coverage, three to four time rate increases, and all of the above.

What can you do? Well, the flip side to that is our loss control questionnaire. And again, we’ve talked about this for other specific industries, but not really relevant to a coverage. But what this does, it allows you to self evaluate your board, and there’s probably close to 100 questions here. And it’s yes, no, not applicable, and then we want you to write some notes, but it really makes you think like, do I do this, or do we do this, do we have a policy for that, how is information taken in? How is it distributed? How are officers selected, do they have prior experience, what kind of conflicts exist, if any? Do you go out of your way to hire external help, is your board primarily weighted based on those already inside the organization. It really makes you think, and it is interactive.

And going through this exercise, it’s really eye opening to all the concerns that the underwriters are going to have, and it allows you to take a step back and say, “Just because we haven’t had any claims and it’s sort of been a non-issue, we’re not as good as we thought we were. And now that we understand how these claims are arising, and then we did our own internal assessment, and really we’re not proactively looking at this,” it’s just very eye-opening to the organization where you might fall, and how the insurance companies are now looking at you.

Paul Martin:

Colin I recall taking a director training myself sometime back. And one of the notes of instruction that came from the person leading the program was, and I might just throw this out as anybody who is the director of an organization you might want to keep this in mind is, answer this, how would you answer that question on the stand? The theory being that you could end up in court over this kind of stuff. And you hold a fiduciary responsibility as a member of a board and ultimately, the buck stops with you, I guess. So you’d better make sure you do your homework on it. And I think that’s the point you’re trying to make here.

Colin Rooke:

Absolutely. And really to expand a little bit further, this guide is great for anyone that’s considering joining a board. You can use this as questions to ask, if you’re considering joining a board. And you might have some, certainly, if you’ve got experience, any board experience, however, this is particularly thorough. And for anyone listening knowing that claims are on the rise, and there’s a lot more scrutiny, there’s more accusations than ever has been. It’s a good idea to get your hands on this thing to say, “I’m not going to wait for an assessment, I want to know the answers myself before I actually commit to this thing,” because you’re right the buck does stop at the board, and fiduciary liability claims are at the top of the list when we’re talking directors and officers insurance. So it’s really an important thing to understand that, what am I getting myself into? What type of board this is, so you could use this as sort of a pre-evaluation tool.

Paul Martin:

Just one quick question out of curiosity, I think most people that are listening to this, probably assuming we’re talking corporate boards. So the boards of directors of corporations, what about not for profit boards, should this conversation be happening there too? 

Colin Rooke:

Yeah, and I would say same would apply. And depending on the not for profit, you will see boards made up of super fans, they’ve really put a lot of work in, and they were chosen to sort of help grow the organization. So depending on the organization, individuals that may be less well versed in the ins and outs of directors and officers insurance or really the duties of a board member. And so I would say, for anyone that just isn’t sure and just wants to make sure that they have something, the guide to explain what directors and officers insurance is, is over 40 pages long. 

I mean, it’s thorough but there’s no redundancies here. And so you think, “Geez, 40 pages just to understand what it is, and then what we’re getting into.” And then we’ve got a 14 page document that’s going to assess that board. And you think, “That’s a lot of literature,” and you’d be right, but it’s needed now. It’s really becoming difficult to get, it’s really becoming difficult to afford. And if you really don’t have answers to underwriters questions, they’re going to start stripping coverages out. They’re going to start dramatically increasing deductibles. But again more importantly, it’s about protecting the organization and those serving it.

Paul Martin:

I’m guessing you’re talking about a 40 page this, and a 20 page that, but five years ago those things would have been considerably shorter.

Colin Rooke:

Yeah, a little handbook that sort of said, at a high level, here’s what it is. And it’s easy to buy, and you just leave it with the same carrier, and that was about it.

Paul Martin:

And that probably underscores just how much things have changed in the last year or two. So even if you think you’re relatively current, you better just give it another look because things are changing rapidly in this particular front. 

Colin Rooke:

Yeah. Absolutely.

Paul Martin:

Colin, thanks very much, as always very insightful. And the scenario that you pointed out at the very beginning of this program that doesn’t get a lot of attention but probably needs to, and that it just falls under this whole conversation we’re having as a society is that, those in positions of authority are coming under scrutiny. So if you’re in a position of authority, you better make sure you have all your Ts crossed and your Is dotted. You’ve been listening to Colin Rooke the commercial risk reduction specialist with Butler Byers. I’m Paul Martin. Thanks for joining us. Join us again next time for a Risky Business.

Market update

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In this episode, Paul Martin and Colin Rooke cover a wide range of topics and discuss some major developments in the commercial insurance industry.

Listen to the full episode here, or read the full transcript below.

Paul Martin:

Welcome to Risky Business Commercial Insurance with Butler Byers. Paul Martin, the business commentator and CKOM here. Joining me today, Colin Rooke the commercial risk reduction specialist with Butler Byers. Colin, today we’re going to cover the waterfront, I think, hey. We’ve been talking about how COVID has impacted things, how cyber has impacted things. I mean of the big issues of the day that are impacting the commercial insurance industry, and maybe we can run through some of those major developments.

And that now we’re two thirds of the way through the year here. You start to get a bit of a handle on how insurance companies are responding. What are the latest hot buttons that a business owner or a business manager needs to be looking at? So we’ve talked about something called a hard market, which is where insurance companies are actually trying to refill their treasuries. And so anyone who is a policy holder in the commercial side, has probably seen either a reduction in coverage or an increase in premium or being told to move along, and all of these kinds of things. Is that changing? What’s the industry doing right now, and how are they looking at their capacity to be able to deal with things?

Colin Rooke:

Yeah, really good question. We have covered a lot of the new and emerging topics in the last year around COVID. I think it’s just a really good time where kids are back in school, summer holidays are ending, and just … It’s a good time to take a step back and say, okay, we’re back to work, and we got to do some planning here. And so in the insurance space, yes, we’ve talked a lot about reduced capacity, elimination of coverages, increased deductibles, increased pricing, and then just the overall insurance company, leaving certain classes of business. And really no business owner wants to fall into any of those categories.

Now, there’s a lot that can be done, but I do want to reference more of a statement from Lloyd’s, right? So Lloyd’s, birthplace of insurance, and they have their hand in most policies that you would find. Their approach to navigating or dealing with the underwriting losses over the last few years is to reach out to all of their syndicates, every insurance company they’re involved with and to say, “Look, we need the bottom 10% to go somewhere else.” That’s not a great position.

Paul Martin:

That’s kind of rude, isn’t it? I mean, it’s a very blunt instrument.

Colin Rooke:

Well, the challenge there too is they don’t define what that is. It’s really easy to say, okay, well the bottom 10%, if those are high frequency, high severity claims, it would make sense, right? I mean, it’s really easy to say, okay, well, if you’ve got 15 claims the last five years. Go lose money for another insurance company. But that’s not really the case. There’s a lot of subjectivity there. Whole classes of … Whole lines of business are being dropped as a result. If you find yourself in hospitality, which we’ve talked about before, you might be the best in the business. I mean, you might be the example that I’m referring to on this show when we’re talking about best in class. But if you fall into that undesirable line, you could still find yourself searching for a new insurance company.

And that’s the stance they’re taking. It’s just these sweeping cuts to all these lines. When you’re dealing with the customers, I mean, it gets emotional, right? You’re suddenly told you’re not good enough. We don’t want you. And now we have to find a home, and often we don’t have a lot of time to find that home. And so the part of the point of today’s show is just to talk about putting the work in now, the prep work.

Assume that you’re going to be that bottom 10%, right? Assume the worst. Expect the best. But really we got to get back to, okay, what are we doing? Are we working a risk management plan? What story’s being told? Am I class or a business, or am I a business worth working with? And if your insurance company doesn’t know that, and if your broker can’t explain that to the insurance market, you might find yourself in that 10% that we’re being told, “Go find another home.”

Paul Martin:

I guess that really just reinforces the message you’ve been delivering for years now on this show is that it is about having a risk management plan. That’s not something you can do after the barn, closing the barn door after the horse has gone. You’ve got to do it. It’s a plan. It’s an advance by definition.

Colin Rooke:

Yeah, absolutely. If you think of navigating the job market. I mean, it’s one thing to search for a new employer while you’re currently employed. It’s another to search for an employer when you’re currently unemployed. And so if we’re putting in the work and we say this client has improved significantly. We are going to go look for broader coverage, a better market, reduced pricing, more capacity because this client deserves it. Well, then we’re coming from a position of power. When we’re reaching out to the market begging for terms, because the current insurer said, “I don’t want you,” that’s not a great spot to be in. But again, if we put in the work now and we have our ducks in a row, maybe if we get news that your line of business is being canceled, there still is flexibility.

We can still go back to those markets. We could still be the one that they stick with because they know what’s being done, and at the end of the day, they all, every underwriter, every insurance company wants great business. I mean, they want best in class. We hear this all the time. I use it all the time, but if they just assume that you’re not, if they assume the whole class is bad, you could find yourself on the chopping block. So yes, work the risk management plan now. Start telling your story. Start formulating that approach, and get ahead of this thing is the message today.

Paul Martin:

It’s a really interesting point that you make. I mean, if you’re the one being told you’re being chopped, you just make the assumption, what the heck? Insurance industry can’t make any money without charging premiums. I mean, why are they getting rid of me as a customer? But your point here is that they’re not getting rid of all customers. They’re just going to where they think the best customers are.

 

Colin Rooke:

Yeah, absolutely. And again, if you’re not putting in the effort to say, I am that best customer. Yeah. I am in a class of business that statistically has not fared as well as another class, doesn’t mean I’m a poor risk. But at the end of the day, if we’re just looking at numbers, statistics, they’re going to say, well, look at the hospitality book. Was it profitable? No. Okay. Drop the bottom 10% or drop the whole line.

And again, if they’re dropping the line or if they’re just saying any account under a certain size or any property value over a certain size, we just don’t want you. Again, it makes life difficult. And something that’s pretty challenging for … The business owners to understand about the insurance market is they don’t have to offer terms. Meaning just because you’re available, doesn’t mean there’s going to be 60 insurance companies providing quotes. They don’t have to do it. There’s no requirement to take on business.

And so again, if we’re forced to go find another home and there really isn’t a great story to tell, or at least one of continuous improvement, you are at the mercy of the market. A remarketing exercise could go something like this. This is what last year’s terms looked like. We’re hoping you could provide something comparable. Oh, and by the way, yes, they were dropped by the other insurance company. So we go to the markets with all that, and we get a whole bunch of nos.

Now, you go to the secondary markets. You say the specialty lines, we’re prepared to pay a little more money. We didn’t have great luck with the normal go-tos, and then you get some nos there. Now, suddenly you’re begging. And that’s not where you want to be when we’re looking for competitive terms, but you only get to that point when there’s really no story to tell. There’s no differentiator. Right? We can’t really explain why you would take one over the other. And now we’re at the mercy of the market and really any quote they’ll throw at us.

Paul Martin:

Colin, we got to take a little break, but I’m just going to get you to think about this question. About whether or not there are people who actually are just basically shut out. The insurance companies said, “No, we don’t want you.” We’ll come back. We’ll answer that question. You’re listening to Risky Business Commercial Insurance with Butler Byers. Paul Martin here. We’ll be back after this.

Welcome back to Risky Business Commercial Insurance with Butler Byers, and Colin Rooke is joining us today. Colin, just before the break, I asked you, do you foresee or is it actually an experience that you’ve seen where companies are just told insurance, you just can’t find insurance for them. Nobody will pick up the policy or offer you a policy.

Colin Rooke:

Yeah. We’ve talked before about the condo insurance markets or Stratacorps depending on which province you’re in. And there are condo corps that are sitting either 100% self-insured or 30% self-insured. And in some cases, 70% uninsured. And that again, lends itself to the point of there’s no requirement to offer terms, so we really are fighting to get someone to take on the risk, to deploy precious capital to help with risk transfer. And if they’re not feeling comfortable that that’s going to be a profitable exercise, they’re not going to deploy that capital.

We’ve talked about, again, the reduced capacity at the beginning of the show. Now there’s less money to be deployed globally. And in order to reserve money for new business, we have insurance companies dropping the bottom 10% or more. And so when there’s less money to go around, you’re going to be a lot more cautious as to who you bet on. And again underwriting is, it’s a heavily predicted gamble, but at the end of the day, it’s a gamble. And you’re looking at the numbers. You’re saying this line of business traditionally performs poorly. Without any other plan, without any other new information, you’re going to find yourself in hot water.

I mean, we talked about directors and officers liability recently, and how difficult it is to obtain proper limits, affordable limits and reasonable deductibles due to COVID-19. And another strong factor right now is cyber crime. If you have a risk managed by a board and we have a data, if there’s a data breach, the board is going to be scrutinized for that, and chances are we’re going to see a directors and officers liability claim, or at least that’s the concern from the insurance market. And there’s been an increased amount of wrongful dismissal or employment practices liability claims at the DNO level, board of directors level, again as a result of companies handling COVID-19.

So again, there’s a lot of uncertainty out there, which is why we developed our directors and officers liability loss control guide, basically that self evaluation tool. Again, putting in the work. Now, you might be one of the fortunate that the renewal went fine, but if you didn’t do anything to deserve that, you’re just lucky right now. Your line of business just hasn’t been noticed yet, but people come, they’re getting there.

Paul Martin:

Count on it coming at some point. We’ve talked about directors. We’ve talked about some other areas. What about business interruption? I mean, at the beginning of COVID, there were people looking in their policies to see if COVID would be covered and lots of claims and court cases and noise about that. I mean, here we are, 18 months later, are those waters a little clearer now? We can start to understand how this thing is shaking out?

Colin Rooke:

They’re a little clearer in the sense that the phone calls have subsided around the, “Do I have this? Why don’t I have this? I bought this for a reason, and now it didn’t come through for me.” Lloyd’s of London is very aware of the fact that most business interruption claims were not paid. The challenge though is in the wording, and most business interruption claims are triggered by a property, an insured property loss of some kind.

Now, it’s really easy since we’ve gone through this global pandemic to say, well, that wording isn’t working for us, but you have to realize this was written prior to the pandemic. And there is nothing in the wordings right now. The other challenge is the global business interruption losses are in excess of $14 trillion, which is $12 trillion more than global premiums collected across all lines of business. The math doesn’t work.

Paul Martin:

That ratio is seven to one? But you’re saying that for every dollar of premium, there were being $7 worth of claims?

Colin Rooke:

Yeah, that’s right. And again, not just business interruption premium. That’s only about 250 billion globally. This is global premiums, all lines, all coverages, all classes. And so again, the number doesn’t work, but there are efforts being made now to revise wordings and to offer some lines of coverage around pandemic insurance or a business interruption claim triggered by pandemic. Now, it’s not going to be full policy limits. I don’t think they’re going to collect enough premium to say we can insure the world for up to two years including profits. But there is work being done on the wording itself, so I think we’re going to see more coverage options available.

It’s going to be pricey. You can bet on that. There’s also a lot of work being done with government to formulate a strategic partnership where the load can be shared. I guess really the update there is that it is being worked on. Our industry is very aware of the gaps. They’re very aware of the frustration of the policy holders, but just note that no one listening to this call or very few would have been able to predict COVID-19 and a global pandemic. Well, the wordings were written in a predictive manner as well, so things need to change on that front and are changing.

Paul Martin:

Well, I guess that probably answers the question, right? If for every dollar of premium, there’s $7 going out in claims, that’s why there’s a hard market, and that’s why certain classes are being cut. It’s just that simple. Nobody can sustain those kinds of losses. Listen, we’ve got little under a minute, and I know that you had seen the survey that caught my interest and maybe people in their thoughts on cyber. Quickly can you give us the thumbnail on that?

Colin Rooke:

Yeah. Back to the proactive planning. I mean, a survey of the top 3,600 organizations in North America, just around at a high level, do you anticipate a data breach in the upcoming year? And 84% said, “Yes, we do.” If that’s not agile enough to one, make sure you have the coverage, and two absolutely have an incident response plan, get on it.

Paul Martin:

Well, and these are the big guys who actually protect themselves, that have the budgets and the IT departments for the little guys. We’re pretty much probably just standing around being a target.

Colin Rooke:

Absolutely. And there’s no rhyme or reason. It’s not as targeted as you think. It’s basically a blanket approach, and it’s really effecting our industry.

Paul Martin:

Colin, thank you very much. As always, very insightful. You have been listening to Colin Rooke, the commercial risk reduction specialist at Butler Byers. Feel free to call him anytime. He’ll embellish on this. He’ll walk you through it. You’re listening to Risky Business. I’m Paul Martin. Thanks for joining us. Talk to you next time.

Impact of Reopening Post-Covid

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Paul Martin and Colin Rooke join Ryan Warner, Benefits Specialist, to discuss the trends in insurance and the impact on employers and employees on a local, provincial and national level as the world reopens post Covid.

Listen to the full episode here, or read the full transcript below.

Paul Martin:

Welcome to Risky Business, Commercial Insurance with Butler Byers. This is Paul Martin, the host of the show and the business commentator here on CKLM. And joining us today, we have Colin Rooke, the Commercial Risk Reduction Specialist with Butler Byers, and Ryan Warner, who is the Benefits Specialist. And we’re going to really bring Ryan in to talk about where we are as he sees things. And he has a good national pulse, not just a local one. But he tracks things across the country.

And as we start to open up in various parts of the country, what are we seeing as trends? And what are you hearing from employers and employees? And really just what’s new in the post COVID world? And let me just start it, Ryan, with first, by saying welcome. But secondly … I kind of alluded to it. You got 10 provinces and three territories, each with their own reopening plan. So you’ve got this patchwork we call Canada with no national standard. Every jurisdiction is different. If you’re an employer and you’re in five different jurisdictions, you’ve got five sets of things to work with.

I mean, I sit in your chair and I wonder, how do I manage all of this stuff? What are you seeing? What are you hearing?

Ryan Warner:

Well, first off, thanks for having me again, guys. Always appreciate the time on this show. I am seeing all kinds of different things, depending on the industry. It’s, frankly, a little bit all over the place right now, which has made my world very entertaining. Employers are trying to juggle, I think, still wrapping their head around what the opening up strategy is, depending on the province. There’s so many variances there that it’s just too different to give you a blanketed answer.

But I think the big thing in my mind is employees are the ones that are sitting here, mostly wondering what’s coming. And I think it might be a little bit too soon to give you specifics, but we can talk in a general sense, for sure.

Paul Martin:

Well, and I guess you maybe gave us the secret here, is that it’s probably incumbent on employers to be as transparent and forthcoming as they can, understanding that the rules change almost, it seems hourly. But just to keep the employees in the loop so that there’s less uncertainty, and provide as much of an idea of what’s going on as possible, because that just turns down the temperature.

Ryan Warner:

Yeah. I think the fact people … they don’t like surprises anymore. I think we’re all sick of the magic whatever’s coming up the next day. But in the benefits space in particular, and the group retirement space, employers should definitely be talking with their employees as much as possible to give them a sense of what they’re facing. Because I think employees don’t grasp fully what the costs are, certainly, with benefit plans.

And that is evolving quickly, as insurers are stumbling along and having to deal with the COVID crisis on their end. So employers are seeing increased renewals, and that doesn’t always translate down to the employees. So they don’t necessarily understand what the employer is facing.

Paul Martin:

Yeah. Maybe just talk about that a little bit. We had the world moving along at a pace and everything was sort of normal. And then boom, along comes COVID, upsets the apple cart. People are just basically trying to hold on by their fingertips. Now we’ve got a little stability. Now we’re changing again. We’re going back into the post COVID world.

What did the insurance companies learn through this? How are they responding? Was there more burden on them, less burden on them? Are rates going up? What’s the upshot of COVID on the benefits industry? And then, ultimately, that translates down to premiums for employers and ultimately, employees too, I guess.

Ryan Warner:

Well, I’m sure all your listeners are thinking poor insurance companies, they’re … been through the ringer here. But I mean, I feel like they did a really good job in the first six months of this pandemic to try to react as quickly as possible in trying to give the quote/unquote, COVID credits, back to business owners. So that the various services that weren’t being used, like dental and your massage therapy and physio and so on, the services that were shut down for a variety of reasons, insurers stepped in to try to give them some money back. So they weren’t paying for premiums that weren’t being used.

From there, things did evolve quickly and kind of bounced around depending on the province. Because I mean, there was various shutdowns across the country, and you had this bit of a hiccuping going on where insurers weren’t doing a whole lot at that time, because it was so hard to determine what claiming was going to happen or not. So now that things are, more or less, opened back up or services have figured out ways to continue to stay afloat, employees are definitely claiming.

So I’ll give you an example, like drugs. Drugs are going to keep going. If we need medications, we need them. So those plans are going to continue to see those expenses flow through. The paramedical providers, your massage, physio, chiro, et cetera, those have really ramped right back up. Dental’s ramped right back up, and so on. I think the scary part is the pooled side, so our life insurance and disability insurance, is those are the ones that we’ve seen major switches in activity.

And I think stress is at an all time high. COVID death claims have been flowing through. And for a variety of unfortunate reasons, other types of deaths have been coming through these plans. So the insurers are being burdened with increased claiming activity, which ultimately requires premiums to go up.

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Paul Martin:

Colin, jump in if you see an opportunity here. But I’m just wondering about whether you provide support to employers to do that communicating to the employees. I mean, do you have information that they can glean themselves, that you’ve prepared and then they can pass it along?

I don’t know which of you want to take a run at that. But Colin, do you have that, or is that something more for Ryan?

Colin Rooke:

Yeah, sorry. I was in the same thought process. Is Ryan going to answer, is Colin? And I did want to say, yeah, I am on this recording also. Just a little more quiet than the normal. But, yeah. So on the risk reduction side, we have all sorts of stats and literature and aides and documentation that we can help with that sort of internal communication. I think where Ryan would come in is, he helps us determine what needs to go out. Or the education side, what conversations to have, and when.

So it’s kind of a twofold approach. Ryan gives the background, sort of the meat on the bone. We help with the why and the delivery and how to approach it. And honestly too, how often and how to approach it.

Paul Martin:

Good, good. So an employer can reach out to you and they can count on you to provide them with at least some information that they can then get a conversation started with their employees. So that it’s not as Ryan alluded to earlier, just a bag of surprises coming day, after day, after day. Which as you rightly point out, isn’t necessarily fun for everybody. You provide some help.

Colin Rooke:

We are armed … and just like Ryan. Frankly, Ryan would provide a lot of that. But the trends too, so we can, of course, proactively educate and say, plan usage is up in this area. Here’s why. Here’s what you can do about it. Here’s a conversation maybe to have. And I think you can’t say this enough, but there certainly is a lack of understanding of how employee benefits works. The costs, the true cost, how … the pricing model.

I mean, I say this all the time, and Ryan’s probably tired of it, but you hear people say, my massages are expiring. I need to use those up. And there’s still is that idea that it’s prepaid, like they’re yours, you’re entitled. And if you don’t use it, it’s gone. Whereas, there’s a true cost. So we do a lot of explanation and education around just the plan itself, but certainly, again, new and emerging trends as well.

Paul Martin:

Ryan, you would share that view?

Ryan Warner:

Definitely. I think there’s lots of material we can bring to the table to help employers better understand what they’re facing and help them understand what they can do about it. And also then be there for them to educate and assist with that line of thought with their employees too, and make sure they understand what they have.

Paul Martin:

All right. Listen, we’ve got to take a little break. And then when we come back, I want to start to pursue a couple of other angles on this. One about, Colin alluded to, some areas, less claim, some areas, higher. I wonder if we could talk a little about that. But also, there are some really interesting trends that seem to be popping up here, and I want to ask you about those. So stick with us if you’re listening to this, we’ve got to take a little break. We’ll be back after these few messages. But you’re listening to Risky Business, Commercial Insurance with Butler Byers. Back after this.

Welcome back to Risky Business, Commercial Insurance with Butler Byers. Paul Martin, here, your host. And joining me is Colin Rooke, the Commercial Risk Reduction Specialist with Butler Byers. And Ryan Warner, who is an expert in the area of benefits plans.

And Ryan, just before the break, I sort of alluded to a question about, did we see through COVID some areas of the benefits plans getting more attention, like people were making more claims than others? And I think Colin said, you really probably saw dental claims go down because it was hard to get in to see a dentist. So that probably is quite logical. But were there others on the other side where there was more demand as a consequence of COVID?

Ryan Warner:

Yeah, there definitely was. I mean, the dental aspect of things has been interesting, because although there was this three to four month lull in activity with dental offices being closed, everyone still had their need to get to the dentist. So what we found was that it was almost compounding and you were getting a balloon of activity in the fall and then into the new year. So it wasn’t as though folks skipped their dental appointment for the year altogether. They really did just wait. So that claiming just came in in flux all at once. In other areas of the plan, I mean, health stayed relatively consistent. Because as I said earlier, I mean, drug costs are drug costs and people need their medication. So that kind of kept going.

The disability side of things has been a concerning area, from my perspective, over the last number of years. Pre-pandemic, even. We saw, or consistently seen trends of mental health related claims flow in. And this is right across the country, right across the board with all insurers. The pandemic heightened that concern. But the pandemic is causing, I mean, copious amounts of stress and personal wellness issues, mental health issues. And as a result, it is triggering these disability claims and leaves of absence for a variety of reasons.

So I’d like to say it’s a little too early to tell if things will start curving in the right direction again, now as we get back into a quote/unquote, normal. But the mental health impact on disability pools has been at an all time high.

Paul Martin:

Colin, I know you’ve got a question about retirement, so maybe just jump in here and you can put this to Ryan.

Colin Rooke:

Yeah. Just, in the same vein of things moving in different directions, and really, overall plan usage, are you seeing much of a trend of … are groups getting younger? And I’m just thinking, maybe you’re a few years away from retirement going into the pandemic, or even a few years maybe` past the ideal retirement age. Have you noticed plans getting younger where people are just saying, I’ve been at home for the last 18 months. I was thinking about retirement anyway. I’m just going to call it a career.

I think about … I think certainly, the older demographic is going to push the average age up, of course. So are plans getting younger? Are employees seeing any kind of decrease or discount? Am I totally wrong, is there no trend there?

Ryan Warner:

No, actually, I think … interesting conversation piece. It’s quite the opposite though. I mean, we’re seeing the retirement age increase and more and more folks feeling either they have to because they haven’t planned appropriately or maybe don’t have enough money. Or maybe they’re just in a position where their health is in great shape and they are quite willing to stick around. And we’re seeing plans tweaking and adjusting their termination ages to try to accommodate some of their older staff.

Naturally, that’s having a different impact because it’s pulling the demographics and the average ages up across the board as well. So you’re seeing adjustments that are required in the premium levels to accommodate some of these older folks that generally do claim more. So I’d say the trend is in that direction. I think I saw a stat the other day where, I think it’s about 60% of the workforce is made up of millennials now. So as the baby boomers are exiting and will exit, the dynamics of what employers are trying to do with their plans is changing. But in terms of the average age, it’s actually going up.

Paul Martin:

That raises some really interesting questions about … there’s some pretty interesting stories popping up now about people who said, after this 16 or 18 months of working from home or being somewhat disconnected from the office, I’m rethinking my career completely. And there are a lot of people checking out. There are people that are saying, I need something new.

I’m just wondering what you guys are seeing from … because as a benefits provider, you’re seeing what’s happening to payrolls. Whether this is just talk or if it’s real. And if you’re seeing anything about people rethinking careers, checking out. Maybe saying, you know what, this whole notion of the gig economy has some appeal. So I don’t want to go back as a full-timer. I want to go back as a contractor. I mean, are you seeing anything, Ryan?

Ryan Warner:

Yeah. I’m fascinated to see, mostly a migration of employees saying, I want to get out of Dodge. I’m moving to a smaller town. I’m moving to the east coast, I’m moving to the west coast. I’m moving. And the reality is, I think a lot of people think conceptually that now that they’re working from home, this won’t be an issue. I can continue to work from home. But what they maybe don’t realize is the pay grades are different depending on where you’re headed.

And employers are wising up a little bit and realizing that, if I’m paying somebody $60,000 a year here, that might equate to $40,000 a year in equal pay somewhere else. So if you’re moving from a higher pay location to a lower paid area, it doesn’t necessarily come with a maintained salary level. So I think that’s been a bit of a concern for people. And benefits are following suit.

Paul Martin:

Yeah. Well, the flip side, of course, is we’re seeing communities like Weyburn, for example, that’s advertising itself as, move from Toronto or Vancouver to here. Pocket the difference and sell your house there, and you can buy the same house here for a third of the price. So, I mean, I get that the salary changes, but so does the cost of living, I guess, is a point there.

These are fascinating kinds of changes. I mean, how is the benefits industry going to respond to this notion of the rise of the gig economy? I mean, the number of people that pull some time with SkipTheDishes or Uber or whatever, how do you put a benefits plan together for them, for example? I mean, they’re not on somebody’s payroll. I don’t know, is this going to cause some interesting challenges for the industry going forward?

Ryan Warner:

It may. I could see a scenario … and I’d be shocked if the insurers are not already looking at this and how to underwrite it. I mean, traditionally, an independent contractor or somebody that’s not considered an eligible employee on the benefit plan would have a really challenging time getting benefits on their own. Naturally, just because the ones that are generally seeking that coverage are likely the ones that have a lot of claims to pump through, which means the premiums are going to be higher.

So I don’t know that there’s any existing solution that is a one size fits all. But I definitely am seeing more trend to employers trying to offer digital type benefits, value add benefits, trying to get outside the mainstream, just your health and dental. Looking at things like employee assistance programs to try to focus on the mental health elements that are used there, and a variety of other services that that can be helpful. Like there’s digital pharmacies now where you don’t have to leave your home to be able to get your medications delivered to your front door. So a lot of different things that employers are now looking at to enhance their offering and make it more geographically flexible.

Paul Martin:

Ryan, as always, you provide some really cool insights and you’re on top of these trends. So thank you for this. And Colin, I want to thank you for bringing Ryan in today. I think it’s very timely. And for most employers that will be listening to this, they’ll be thankful to hear it, because they’re likely looking for information just like everybody else is. So again, you two, thanks very much for joining us.

You’ve been listening to Risky Business, Commercial Insurance with Butler Byers. Paul Martin here. Thanks for joining us. And we’ll talk to you next time.