2007 General Meeting ● Assemblée générale 2007

Montréal

2007 General Meeting ● Assemblée générale 2007

Montréal

Canadian Institute

of Actuaries

Canadian Institute

of Actuaries

L’Institut canadien desactuaires

L’Institut canadien desactuaires

Who is Morris & Mackenzie• Offering a full array of Insurance and Risk

Management services• Property• Casualty• Director’s and Officer’s Liability• Professional Liability• Engineering• Risk Modeling• Alternative Risk Financing• Group Home & Auto• Group Benefits

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Who is Morris & Mackenzie• Holistic approach to Risk Management

• Needs and goals analysis• Traditional Insurance only one of the available options to

transfer risk• Alternative Risk Management solutions

• Risk Management with emphasis on Control, Transfer and Financing of Risk

• Claims settlement for Insurers and Clients (S.I.R)• Implementation and analysis of databases for

clients• Proven track record with impressive client loyalty

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CIA and Professional Liability Insurance: A Brief History

• CIA’s 1st guiding principle

“In carrying on its activities and programs, the Institute holds the duty of the profession to the public above the needs of the profession and its members”

• Dual role of Insurance• Protect public interest• Protect actuaries

• Insurance market position relative to Actuarial Professional Liability

• Difficult to obtain insurance• High premiums• Limited scope of coverage• Questionable exclusions• Inadequate limits of insurance• Few insurers with in-depth knowledge of Actuarial activities

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ProAct: A Brief History• RFP sent to six (6) brokers – Morris & Mackenzie

appointed• M&M and PLIAC create presentation to insurers• Proposals received from four (4) leading and

reputable insurance markets• AIG• Aviva• Axa• Lloyd’s

• Lloyd’s proposal selected unanimously• January 2007 official ProAct launch• Step 1: Creation of Voluntary Professional Liability

Insurance Program COMPLETED

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ProAct: A Brief History• Obstacles in developing the program

• Generally unfavorable insurance market position in regards to Actuarial Professional Liability

• Actuarial activities under heavy scrutiny• Increasingly litigious environment• Increasing damages sought/awarded

• New program – no predecessor• Accurate claims information and loss data for Canadian

Actuaries is unavailable• M&M mandates law firm to prepare litigation and jurisprudence

report• Difficult to forecast level of CIA member participation

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ProAct: A Brief History• Mandate

• Protect Public Interest• Protect Actuaries• Develop sustainable Professional Liability Insurance Program• Professional Liability Insurance accessible to all• Broad terms and conditions of coverage tailored to Actuarial

Activities• Uniform policy wording• Cost efficient and competitive program• Flexible limit and deductible options20

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Professional Liability Insurance

• Coverage• Damages arising out of negligent acts, errors or omissions of the

Insured

• Key components• Claims made• Retroactive date• Deductible• Defense costs and legal expenses• Occurrence limit• Aggregate limit• Extended reporting period• Policy terms and scope of coverage

• Insuring agreements• Territory

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ProAct: The PL Solution• ProAct advantages

• Purchasing and negotiating power• Product accessibility• Competitive terms & conditions• Credible statistics to enhance Risk Management

• Common causes of claims• Preventative measures

• Sustainability• Uninterrupted coverage• Stability in terms of coverage• Ongoing client contract requirements• Enhanced credibility

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ProAct: The PL Solution• ProAct advantages

• Enhanced coverage• Primary limits up to $5M• Excess liability limits available• Aggregate limit = two (2) occurrence limit (up to $5M)• Accessible to all Areas of Practice• Broad coverage for Actuarial Professional Activities• Extended Reporting Period Options• Defense cost reimbursement for CIA CPC inquiry• Worldwide coverage: claims brought in Canada / U.S.• Coverage for TPA activities• Retroactive date to match prior insurance• Various deductible options• Ability to customize and adapt to specific activities / needs

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ProAct: The PL Solution• ProAct advantages

• Safety blanket• Policy standard• Absence of questionable exclusions• Claims management• Continuous program review, evolution and enhancement• CIA involvement

• Simple process• Standard application• Standard policy form• Proposals typically available within 10 days of submission• Insurance Binder issued upon receipt of coverage

confirmation• Policy issued shortly thereafter• One point of contact: submission and service

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ProAct: The PL Solution• ProAct advantages

• Sound Risk Management and Insurance Program are essential to long-term success and protection

• Enables CIA members and firms to voluntarily contract insurance

• Increase credibility• Increase client confidence• Expand client base• Create a level playing field among competitors• Secure financial and operational stability• Protect personal assets

• 1st step in enhancing Public Protection and advancing the Actuarial Profession

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Risk Management Issues• Personal Liability of Actuaries

• Actuaries are personally exposed to professional liability lawsuits• Financial burden of defense costs and damages (if awarded)• Personal assets exposed

• Employers often have no legal obligation to defend employees• Many situations where employers will not defend employees:

• Company no longer exists• Bankruptcy• Lack of adequate insurance coverage

• Loss Control• Best Practices & Standards of Practice• Professional Development• Peer review• Due diligence in choice of clients

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Risk Management Issues• Contracts

• Clearly defined scope of work performed• Clearly defined scope of work not performed• Limitation of Liability• Hold Harmless & Indemnity clauses• Dispute Resolution• IMPORTANT: Insured must not contractually assume any

liability other than liability imposed by statutory law, nor promise to exceed the generally accepted standard of care

• Reliance on work of others• Responsible to review work to determine possibility of errors• Identify information and data provided by client that may impact

your ability to provide an opinion

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Risk Management Issues• Documentation and reports

• Put recommendations in writing, including the risk from not following the recommendations

• Get written response/acknowledgment regarding your recommendations

• Records might be appropriately purged from your files and destroyed as part of your standard business practices

• E-Mail• Be careful what your write and review before sending• Organize e-mail into electronic folders – keep paper copies as

needed for physical files• Do not delete e-mails that may be subject to discovery requests in

claim situations

• Don’t try to be everything to everyone• Focus on core competencies• Client needs / expectations in line with you area of expertise

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Claims & Litigation• What constitutes a claim?

• Receipt of written or verbal demand for damages• Becoming aware of an intention to make such a demand• Becoming aware of fact, circumstances, or events which could

reasonably be anticipated to give rise to such a demand

• What to do in case of a claim?• Report the claim as soon as possible!• Report to broker/insurer should contain:

• Copy of initial legal process (Declaration, Motion, etc.)• Copy of demand letter and details surrounding receipt of the letter• Circumstances, alleged damages, claimant names, etc.

• Do not discuss the claim with anyone• Gather as much information / documentation as possible

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Claims Process• Claim notification received• Adjustor / legal counsel appointed

• Review claim• Advise coverage provided by policy• Evaluate claim / request for damages• Work with Insured to:

• gather information and circumstances surrounding claim• determine optimal claim resolution strategy

• Stages of legal proceeding• Examination for Discovery• Interlocutory Motions• Pre-Trial Settlement Conference• Mediation / Arbitration• Trial

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Claims Process• Special attention devoted to:

• Mitigating impact of a claim on the client’s operations and business continuity

• Reputation• Maintaining open lines of communication between all

parties involved• Coordinate claims process in a timely manner

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Next Steps: Key Components of Program Success

• Long term commitment by all parties involved• Membership response

• Higher participation = better insurance terms & conditions• Feedback extremely valuable to program advancement

• Data monitoring and analysis• Open communication• Coverage modifications and enhancements as

Profession and member needs evolve• Added value for members• Step 2: Basic personal liability coverage for all

members

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Questions?20

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