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In a traditional industry like insurance, change can sometimes happen at a gradual pace. But there&rsquo;s one emerging technology many businesses might be wise to move quickly on: Generative AI.
Hailed as a transformative force in business, Generative AI (GenAI) refers to deep-learning models that can generate high-quality text, images and other content based on the data they were trained on.1 While GenAI&rsquo;s roots trace back to the early days of artificial intelligence in the 1950s, the technology burst on the public scene in 2022, when OpenAI launched a consumer-facing GenAI tool called ChatGPT.2
In the insurance sector, experts say GenAI is &ldquo;fundamentally reshaping everything from underwriting and risk assessment to claims processing and customer service.&rdquo; More specifically, GenAI tools &ldquo;have the potential to automate processes, enhance customer experiences and streamline claims management, ultimately driving efficiency and effectiveness across the industry.&rdquo;3
In the Canadian Underwriter 2024 National Broker Survey, sponsored by Sovereign Insurance, brokers were asked how beneficial certain changes or investments have been in their organizations. Just over a fifth (21%) of respondents said using artificial intelligence and machine learning tools such as ChatGPT have been highly beneficial to them. Brokers were also asked how beneficial certain investments and actions have been for strengthening their business. Twenty-two percent of brokers indicated AI and machine learning tools have been highly beneficial on that front.&nbsp;
While it&rsquo;s still early days for generative AI, there&rsquo;s no doubt brokers and carriers alike are thinking about how they can harness the power of GenAI across their operations. Here&rsquo;s a look at a few key areas where the sector can leverage AI.&nbsp;
Claims management: For carriers, one promising application is in claims management, says Ricky Chan, Senior Solution Architect at Sovereign Insurance. &ldquo;Generative AI can help automate claims processing and assessment, which in turn increases adjusters&rsquo; productivity, allowing them to focus their expertise on more complex claims,&rdquo; he says.&nbsp;
Underwriting: GenAI can also help inform underwriting decisions. As Accenture notes, the technology highlights risk control analysis insights to show loss prevention measures in place and the effectiveness of those controls. Generative AI can generate a comprehensive narrative of the overall risk and its alignment to the carrier&rsquo;s appetite and book, as well as identify and source missing data.4
Submissions: For brokers, GenAI has a variety of promising use cases, such as submission preparation and client Q&amp;As. According to Accenture, the effort required to identify adequate coverage and prepare submissions can be dramatically reduced through GenAI. Specifically, the technology can prompt the broker on the types of questions they should ask based on what is known about the insured, the industry the insured operates in, and the risk profile of the insured&rsquo;s company compared to others. In addition, GenAI could identify potentially overlooked up-sell or cross-sell opportunities.5
Information and knowledge: For any company, GenAI can make day-to-day work life easier by performing administrative tasks and knowledge gathering, an area that Sovereign is currently exploring. &ldquo;There are substantial positive impacts to day-to-day operations, such as summarizing information and meeting minutes, intelligent information search and ease of access of information,&rdquo; says Ricky.&nbsp;
Chad Hunter, Vice-President, Information Technology at Sovereign Insurance, adds that Sovereign &ndash; like many companies &ndash; uses a handful of different platforms and domains, including e-mail, OneDrive, SharePoint and Microsoft Teams. By using a natural language chatbot or co-pilot tool, the company&rsquo;s knowledge and data could be streamlined. For example, &ldquo;instead of underwriters having to go to several different spots looking for knowledge, they could use the chatbot&hellip; and behind the scenes, that generative AI model will go to all the different areas and provide real-time responses,&rdquo; explains Chad.&nbsp;
What&rsquo;s next for GenAI? Beyond just talking about the possibilities of the technology, many companies in the insurance space &ndash; Sovereign included &ndash; are now testing and learning. Looking ahead, Deloitte notes that as generative AI moves from possibilities to practicalities, choosing the right use cases, selecting appropriate tools, getting to scale, and accurately measuring progress will all be important steps.6

Sources&nbsp;
1 IBM, &ldquo;<a href="https://research.ibm.com/blog/what-is-generative-AI">What is generative AI?</a>&rdquo; April 20,2023 2 Medium, &ldquo;<a href="https://matthewdwhite.medium.com/a-brief-history-of-generative-ai-cb1837e67106">A Brief History of Generative AI</a>,&rdquo; Jan. 7, 2023 3 EY, &ldquo;<a href="https://www.ey.com/en_us/insights/insurance/how-insurers-can-leverage-the-power-of-generative-ai">How insurers can leverage the power of generative AI</a>,&rdquo; Aug. 28, 2023 4 Accenture, &ldquo;<a href="https://insuranceblog.accenture.com/3-ways-insurance-underwriters-gain-insights-generative-ai">3 ways insurance underwriters can gain insights from generative AI</a>,&rdquo; March 21, 2024 5 Accenture, &ldquo;<a href="https://insuranceblog.accenture.com/5-key-generative-ai-use-cases-in-insurance-distribution">5 key generative ai use cases in insurance distribution</a>,&rdquo; Feb. 13, 2024 6 Deloitte, &ldquo;<a href="https://www2.deloitte.com/content/dam/Deloitte/us/Documents/consulting/us-state-of-gen-ai-report-q2.pdf">Now decides next: Getting real about Generative AI</a>,&rdquo; April 2024

Why the insurance sector should keep step with GenAI 

Hot Topics

Managing Risk

Even the most advanced technologies and significant investments in cybersecurity can&rsquo;t fully protect businesses from a major cyber risk: their own employees.
In the 2024 Voice of the CISO report by cybersecurity firm Proofpoint, 74% of survey respondents said human error is their most significant risk when it comes to cyberattacks. This finding is echoed in a 2023 study by Verizon, which found that human error is indeed a factor in 74% of total breaches, despite ongoing efforts by enterprises to strengthen their defences and increase training in cybersecurity.1,2
Employee training can fall short for several reasons: distractions in the workplace, a lack of awareness about the critical role employees play as the first line of defence, and the challenge of staying on top of the evolving threat landscape, to name a few.3
Small- and medium-sized businesses (SMBs) face an even bigger challenge: They might not have the resources to conduct employee training in the first place, relying instead on third parties to support their security measures. This can be a costly mistake.
Despite the perception that cybercriminals only target large corporations, certain types of attacks, such as social engineering, are more frequently aimed at small businesses. These companies are typically not financially prepared for an attack, and it could even put them out of business. According to IBM&rsquo;s 2023 Cost of a Data Breach Report, the average cost of a data breach on organizations with fewer than 500 employees is US$3.31 million.4,5
<h4>Simple steps for employee training in SMBs</h4>
While it may not be feasible for SMBs to regularly conduct extensive employee training sessions, mitigation strategies don&rsquo;t have to be complex. There are simple and cost-effective measures that can be easily understood and adopted, making it possible for SMBs to strengthen their cybersecurity efforts.
Make employees aware of the critical role they play: First and foremost, employees must understand the &ldquo;why.&rdquo; According to a 2023 survey by the Insurance Bureau of Canada, many employees underestimate the role they play in being cyber safe at work and the impact of potential cyberattacks on their employer. Nearly half (47%) believe technology plays more of a role in protecting their workplace from cyber threats than they do; 30% believe their employer is solely responsible for protecting the organization from cyber threats; and 31% do not believe cyber criminals would target them.6
Whether it&rsquo;s in the form of interactive workshops or channels like emails and posters, employers should regularly communicate security awareness to staff. When they are aware of the importance of cybersecurity and their role in safeguarding their company, employees are more likely to take this issue seriously and report suspicious activities.7,8
Educate employees about common and evolving threats: Educating staff about different types of cyberattack, how to spot them, and how to respond to them is crucial for protecting against breaches. Recognizing phishing tactics, for example, includes identifying suspicious emails, unusual requests, and fake websites. Staff should also be clear on who to contact if they encounter a suspicious message. In a social engineering attack, cybercriminals may mimic the writing style of a CEO to trick an employee into sending money. In this case, businesses should have dual controls in place, meaning a second person should verify the request.9,10
As part of awareness training, SMBs can take advantage of free online resources, such as webinars, toolkits, articles and e-learning courses from cybersecurity organizations like the <a href="https://www.cyber.gc.ca/en/small-medium-businesses" target="_blank" rel="noopener">Canadian Centre for Cyber Security</a> and the <a href="https://www.unb.ca/cic/webinars.html" target="_blank" rel="noopener">Canadian Institute for Cybersecurity</a>, the Government of Canada&rsquo;s <a href="https://www.getcybersafe.gc.ca/en/resources/get-cyber-safe-guide-small-businesses#C7" target="_blank" rel="noopener">Get Cyber Safe</a> platform, as well as cybersecurity firms.
Other ways to keep employees informed are through newsletters with tips, news about recent threats and best practices; informal lunch-and-learn lessons where employees can share news and insights; and a database or guidebook where employees can stay up to date on the latest threats and find answers to their cybersecurity questions.11,12,13
Nurture a cybersecurity culture: A strong culture of cybersecurity &ndash; meaning it&rsquo;s entrenched in the company&rsquo;s values &ndash; is essential. SMBs should lead by example, showing the company is committed to cybersecurity at all levels. This makes employees more likely to follow suit. Since employee engagement is a key element of building a cybersecurity culture, business leaders should also recognize and reward employees who demonstrate good practices.14
Another way to build a strong cybersecurity culture is to speak employees&rsquo; language. Experts advise communicating in plain language, avoiding technical jargon and focusing on practical advice employees can use daily. For example, rather than using the term &ldquo;multi-factor authentication,&rdquo; they can explain there is an extra layer of security when logging in.15
Additionally, fostering open communication and a &ldquo;no-blame culture&rdquo; is essential. Employees should feel comfortable asking questions, reporting suspicious emails and voicing concerns without fear of reprisal.16
While SMBs may face resource constraints, the cost of not investing in cybersecurity &ndash; even in the simplest of ways &ndash; is far greater. By prioritizing employee awareness and creating a strong cybersecurity culture, businesses can turn their weakest link into their strongest line of defence.
&nbsp;
&nbsp;
Sources
1 Proofpoint, &ldquo;<a href="https://www.proofpoint.com/us/newsroom/press-releases/proofpoints-2024-voice-ciso-report-reveals-three-quarters-cisos-identify" target="_blank" rel="noopener">Proofpoint&rsquo;s 2024 Voice of the CISO Report Reveals that Three-Quarters of CISOs Identify Human Error as Leading Cybersecurity Risk</a>,&rdquo; May 21, 2024
2 Verizon, &ldquo;<a href="https://www.verizon.com/about/news/2023-data-breach-investigations-report" target="_blank" rel="noopener">2023 Data Breach Investigations Report: frequency and cost of social engineering attacks skyrocket</a>,&rdquo; June 6, 2023
3 Skillsoft, &ldquo;<a href="https://www.skillsoft.com/blog/why-security-training-fails-and-how-to-fix-it" target="_blank" rel="noopener">Why Security Training Fails And How To Fix It</a>,&rdquo; June 3, 2022
4 &nbsp;StrongDM, &ldquo;<a href="https://www.strongdm.com/blog/small-business-cyber-security-statistics" target="_blank" rel="noopener">35 Alarming Small Business Cybersecurity Statistics for 2024</a>,&rdquo; Feb. 1, 2024
5 Business.com, &ldquo;<a href="https://www.business.com/articles/smb-budget-for-cybersecurity/" target="_blank" rel="noopener">The Cost of Cybersecurity and How to Budget for It</a>,&rdquo; Aug. 13, 2024
6&nbsp; Insurance Bureau of Canada, &ldquo;<a href="https://www.ibc.ca/news-insights/in-focus/ibcs-research-suggests-business-owners-and-employees-could-be-putting-their-organizations-at-risk" target="_blank" rel="noopener">Are you cyber savvy? IBC&rsquo;s research suggests business owners and employees could be putting their organizations at risk</a>,&rdquo; Nov. 6, 2023
7 LinkedIn, &ldquo;<a href="https://www.linkedin.com/advice/1/you-need-communicate-security-awareness-your-ob68f" target="_blank" rel="noopener">You need to communicate security awareness to your employees. What are some effective ways?</a>&rdquo;
8 FasterCapital, &ldquo;<a href="https://fastercapital.com/content/Train-your-employees-on-cybersecurity.html#The-Importance-of-Cybersecurity-Training-for-Employees" target="_blank" rel="noopener">Train your employees on cybersecurity</a>,&rdquo; June. 4, 2024
9 Pure IT, &ldquo;<a href="https://www.pureit.ca/five-ways-small-businesses-can-stop-a-cyber-breach-from-ever-happening/" target="_blank" rel="noopener">Five Ways Small Businesses Can Stop A Cyber Breach From Ever Happening</a>&rdquo;
10 Teal, &ldquo;<a href="https://tealtech.com/blog/cybersecurity-awareness-training-for-employees/" target="_blank" rel="noopener">5 Ways to Promote Employee Cybersecurity Awareness Training</a>,&rdquo; July 25, 2024
11 Mitnick Security, &ldquo;<a href="https://www.mitnicksecurity.com/blog/remote-security-tips" target="_blank" rel="noopener">Remote Security: 5 Cyber Security Tips for Employees and Businesses</a>,&rdquo; Feb. 22, 2024
12 The AME Group, &ldquo;<a href="https://www.theamegroup.com/headlines/engage-employees-to-increase-cyber-safety/" target="_blank" rel="noopener">Engage Employees To Increase Cyber Safety</a>&rdquo;
13 &nbsp;Compyl, &ldquo;<a href="https://compyl.com/blog/cybersecurity-awareness-training-for-small-business/" target="_blank" rel="noopener">Getting Started With Cyber Security Awareness Training for Small Business</a>,&rdquo; Sept. 5, 2024
14 Babylon Solutions, &ldquo;<a href="https://www.babylonsolutions.com/cybersecurity-guide-for-small-businesses-how-to-protect-your-company/" target="_blank" rel="noopener">Cybersecurity Guide for Small Businesses: How to Protect Your Company</a>,&rdquo; Oct. 7, 2024
15 SMB Solutions: &ldquo;<a href="https://www.smbsolutions.com.au/10-easy-steps-to-building-a-culture-of-cybersecurity-awareness/" target="_blank" rel="noopener">10 Easy Steps to Building a Culture of Cybersecurity Awareness</a>,&rdquo; Aug. 23, 2024
16 Tripwire, &ldquo;<a href="https://www.tripwire.com/state-of-security/cultivating-cybersecurity-culture" target="_blank" rel="noopener">Cultivating a Cybersecurity Culture</a>,&rdquo; Jan. 23, 2024

Empowering employees to help prevent cyberattacks

Considering the growing shift towards online business operations, it's becoming increasingly vital for small and medium-sized businesses to prioritize cyber security. Here are ten tips to enhance your business&rsquo; cyber security:

10 tips to enhance your business’s cyber security

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Sovereign - Hot Topics

Warehouses are the heart of the supply chain, ensuring that goods and materials are stored and handled correctly before being shipped to their next destination. As technology advances and customer demands change, warehouse operators must look for ways to stay ahead. Here&rsquo;s a look at five warehousing trends to watch this year and beyond.
<h4>Leaning into AI-driven data</h4>
Artificial intelligence (AI) is set to transform many aspects of warehousing. AI-powered systems can analyze large volumes of data collected from warehouses to enable better decision-making across their operations, from inventory management and demand forecasting to supply chain optimization. For example, insights can help to reduce stockouts, predict bottlenecks and optimize warehouse layouts, which can bring operational efficiencies and cost savings.1,2
AI can also help operators use labour and equipment as efficiently as possible. On the labour front, AI provides insights that lead to more efficient allocation of workers. The technology can also prevent equipment problems or failures by predicting when maintenance is needed.3
<h4>More robots, more efficiencies</h4>
While using robotics to automate warehouse tasks is nothing new, it&rsquo;s set for significant growth. Globally, the warehouse robotics market is to reach US$10.5 billion by 2028, growing at an annual rate of 11.4%.4 Among the factors driving growth are the e-commerce boom, rising labour costs, labour shortages and technological advances.5
While robots are traditionally used for tasks like sorting, picking, and packaging items, the latest models can plan their own optimal routes and picking sequences.6 More types of robotics are being introduced too, such as automated guided vehicles (AGVs), which help transport materials and supplies within a warehouse, and collaborative robots (or &ldquo;cobots&rdquo;) that work alongside employees.7
Although bringing robots on board has its challenges &ndash; high upfront costs and integration with legacy systems, for instance &ndash; the benefits are many.8 By automating tasks with greater precision, robotics help improve accuracy in order fulfillment. The technology also reduces time and resources spent on retrieving and transporting items around the warehouse.9
<h4>Worker health and safety levels up</h4>
By implementing more automation &ndash; thus relying less on humans to do strenuous or risky tasks &ndash; warehouse operators can reduce the risk of workplace accidents and injuries.10 At the same time, operators are turning to advanced technologies to keep workers on the floor safe.
One example is wearable technology such as smartwatches, safety vests, and helmets that monitor for health and safety issues. Some devices monitor workers&rsquo; heart rate and body temperature, triggering emergency alerts if fatigue or another health concern is detected. Additionally, some wearables have sensors that alert workers if they&rsquo;re in the danger zone of a moving vehicle. 10
Drones are another example. These aerial devices can be used to perform safety inspections rather than requiring workers to climb ladders and scaffolding, reducing the risk of falls and injury. Drones can also be equipped with sensors to detect gas leaks, fires, and structural damage. They can also use thermal cameras to locate workers in danger and quickly notify emergency services.11
<h4>The future is green and clean</h4>
The warehousing sector is primed for a green revolution. With large physical footprints, warehouses use vast amounts of energy for lighting, heating, cooling, and powering machinery, resulting in substantial carbon emissions. In addition, most warehouses use gas-powered forklifts, contributing to air pollution, while the large amounts of packaging used in warehouses often end up in landfills.12
To reduce their environmental impact, warehouse operators will increasingly look for green solutions. On the energy front, warehouses can switch to renewable energy sources such as solar, wind or geothermal power. They can also invest in energy-efficiency measures like LED lighting, which consumes less electricity and lasts longer than conventional lights. Automated control systems for lighting and temperature can be used to cut back on wasted energy, as they adjust based on real-time needs. When it comes to machinery, more eco-friendly options include electric or hybrid forklifts. To cut back on packaging waste, warehouses can move to recyclable, reusable or decomposable material.13
<h4>Supply chains go local</h4>
Manufacturers are increasingly realizing the importance of localized supply chains, especially given some of the challenges of globalization.
See: <a href="https://www.sovereigninsurance.ca/advice-and-tools/hot-topics/is-deglobalization-the-answer-to-supply-chain-woes">Is deglobalization the answer to supply chain woes?</a>
As part of supply chain localization, companies place inventory in warehouses in the same country as their customers, allowing for faster delivery times, greater efficiencies, and cost savings. For example, a U.S. e-commerce company might place inventory in Canadian warehouses for customers in this market.14 There is also a growing trend toward nearshoring, a strategy in which a company moves all or part of its production closer to its main consumer market. Nearshoring can help companies save money and avoid some of the logistical challenges that can come with overseas supply chains.15
While it may not be realistic to embrace every trend today, staying on top of the shifts will help warehouse operators identify future opportunities and see where the competition might be headed. Expect to see more changes and opportunities in this exciting and fast-changing sector this year and beyond. Ensure your risk protection keeps pace with the advancements and changes being made.
&nbsp;
<h4>Sources</h4>
1 Warehousing Express Logistics Pvt. Ltd., <a href="https://www.warehousingexpress.com/blogs/warehouse-trends-in-2023-a-brief-guide">Warehousing Trends In 2023: A Brief Guide</a>
2 Warehousing Express Logistics Pvt. Ltd., <a href="https://www.warehousingexpress.com/blogs/warehouse-automation-trends-and-technologies-in-2024">Top Warehouse Automation Trends and Technologies in 2024</a>
3 ITS Logistics, &ldquo;<a href="https://www.its4logistics.com/blog/innovative-applications-of-ai-in-warehouse-management">Innovative Applications of AI in Warehouse Management</a>,&rdquo; Dec. 19, 2023
4 Markets and Markets, &ldquo;<a href="https://www.marketsandmarkets.com/Market-Reports/warehouse-robotic-market-128876258.html">Warehouse Robotics Market</a>&rdquo;
5 Bricz, &ldquo;<a href="https://bricz.com/robots-revolutionizing-warehouses-exploring-the-explosive-growth-of-warehouse-robotics/">Robots Revolutionizing Warehouses: Exploring the Explosive Growth of Warehouse Robotics</a>,&rdquo; Oct. 11, 2023
6 McKinsey &amp; Company, &ldquo;<a href="https://www.mckinsey.com/capabilities/operations/our-insights/getting-warehouse-automation-right">Getting warehouse automation right</a>,&rdquo; Dec. 1, 2023
7,9 6 River Systems, &ldquo;<a href="https://6river.com/what-is-warehouse-robotics/">What is warehouse robotics?</a>&rdquo; Jan. 18. 2023
8 Prime Robotics, &ldquo;<a href="https://www.primerobotics.com/the-top-4-challenges-every-warehouse-automation-project-must-overcome/">The Top 4 Challenges Every Warehouse Automation Project Must Overcome</a>,&rdquo; Sept. 11, 2023
10,11&nbsp; Optima Warehouse Solutions, &ldquo;<a href="https://www.optima-ws.co.uk/using-technology-to-improve-warehouse-safety">Using technology to improve warehouse safety</a>&rdquo;
12,13 GEP, &ldquo;<a href="https://www.gep.com/blog/strategy/green-warehousing-warehouse-sustainability-strategies">Rethinking warehousing: How green is your warehouse?</a>&rdquo;
14 SCI, &ldquo;<a href="https://www.sci.ca/insights/e-commerce/how-localized-and-cross-border-e-commerce-fulfillment-can-help-businesses-expand-into-new-markets/">How Localized and Cross-Border E-Commerce Fulfillment Can Help Businesses Expand in New Markets</a>,&rdquo; Aug. 16, 2023
15 Deloitte, &ldquo;<a href="https://www2.deloitte.com/us/en/insights/economy/issues-by-the-numbers/advantages-of-nearshoring-mexico.html">Nearshoring in Mexico</a>,&rdquo; July 13, 2023

Five warehouse trends to watch in 2024 

Customer experience is paramount to success in the insurance sector. It&rsquo;s a key differentiator, a source of competitive advantage, and a driver of operational efficiencies.1 The trick for carriers is delivering superior customer experiences not just when times are good, but in times of need: during the claims process.
There&rsquo;s a lot at stake, as the effectiveness of a carrier&rsquo;s claims process has bottom-line impacts. In the Canadian Underwriter 2024 National Broker Survey, sponsored by Sovereign Insurance, brokers were asked how important certain factors are when considering which products to recommend to a customer. The quality of the carrier&rsquo;s claims handling landed at number two on the list (88%), behind policy terms and conditions (91%). Claims handling was rated even more important than the carrier&rsquo;s underwriting ability (82%), the client&rsquo;s price point (77%) and the carrier&rsquo;s capacity (68%).
&ldquo;At Sovereign, we know that claims service is a key differentiator, and we ensure our focus is on providing exceptional customer service,&rdquo; says Larissa MacLean, AVP, Claims, at Sovereign Insurance.
Claims professionals know the importance of the claims process to both financial and reputational health. A carrier with a reputation for a prompt and fair claims process will attract more clients, maintain customer loyalty, and boost the bottom line. Conversely, those with an inefficient claims resolution can struggle to attract and retain business, ultimately impacting profitability.2
&ldquo;Claims teams are aware that it can come down to claims service when our partners are placing business and when an account is up for renewal,&rdquo; says Larissa.
So, how are insurer carriers measuring up? In a new question on this year&rsquo;s National Broker Survey, which covers a range of challenges facing the broker distribution channel, respondents were asked to rate insurance carriers&rsquo; handling of claims from start to finish.
Where carriers excel is the claim submission process, with 84% of brokers saying carriers meet or exceed their expectations. That&rsquo;s followed by claim settlement (66%), collaboration with their insurance partner (61%), speed of claim payment (60%), and communication/transparency throughout the process (56%). Last on the list was speed/efficiency of the claims process at 44%.
The results indicate that, while brokers are generally satisfied with the claims process, there is room for improvement, especially when it comes to speed and efficiency, and communication.
&ldquo;The results we are seeing from our broker partners are not surprising,&rdquo; says Larissa. &ldquo;Claims service is so important to our customers in their time of need.&nbsp; As an industry it is imperative that we continue to look for ways to improve our service and constantly look at our process and procedures.&rdquo;
Why might some carriers be falling short? Like many other sectors, insurance is faced with changing customer expectations, driven by technological advancements.3 Clients have come to expect speed and seamlessness in the claims process. However, many insurance carriers still rely on legacy systems, which can make the claims process time-consuming and complex. When it comes to communication, clients expect to receive immediate support when and where they need it, and traditional channels like phone calls may be time-consuming and no longer meet their expectations.4
&ldquo;To remain competitive, claims processes and procedures need to be constantly reviewed to ensure efficiency as customer expectations continue to increase,&rdquo; says Larissa.
<h4>Building a better claims experience</h4>
Given brokers&rsquo; pain points, there are opportunities for carriers to enhance the claims experience.
To meet the need for speed, it&rsquo;s no surprise that technology plays a pivotal role, with automation at the forefront. McKinsey &amp; Company estimates that, by 2030, more than half of current claims activities could be replaced by automation. One example is robotics process automation (RPA), which can help with repetitive or manual tasks such as data entry and claim status updates. This then frees up employees to focus on more complex aspects of claims that still require human judgment.
Digital tools can also help fill communication gaps. In fact, a recent J.D. Power study found that digital communication has become the key to maintaining customer satisfaction throughout the claims process. In auto insurance claims, the research and analytics firm found that personalized text messages, status updates via mobile apps and providing guides to help claimants understand estimates can dramatically improve the customer experience without significantly raising customer service costs for insurers.5
Findings from the National Broker Survey support the idea of digital status updates. When asked what technologies the insurance industry can offer (or improve upon) to better support brokers&rsquo; business objectives, online claims tracking was number one on the list (72%). Rounding out the top five are quoting tools (64%), broker portal (64%), online claims submissions (52%) and online policy renewals (45%).
While digital tools can unlock new opportunities, carriers must balance technology with the human touch. This is especially important during the claims process when an insured has experienced a loss and requires empathy and reassurance.
&ldquo;We know that automation is the way of the future, and it will support our claims processes,&rdquo; says Larissa. &ldquo;The key here is that we still will require human touch and critical thinking throughout the claims process. Automation will not be able to replace these important aspects of the claims process.&rdquo;
&nbsp;
Sources 
1 McKinsey &amp; Co., &ldquo;<a href="https://www.mckinsey.com/industries/financial-services/our-insights/insurance/elevating-customer-experience-a-win-win-for-insurers-and-customers">Elevating customer experience: A win-win for insurers and customers</a>,&rdquo; Sept. 21, 2023
2 Mike Vestil, &ldquo;<a href="https://www.mikevestil.com/starting-a-business/navigating-the-insurance-claims-resolution-process/">Navigating The Insurance Claims Resolution Process</a>&rdquo;
3 Decerto, &ldquo;<a href="https://www.decerto.com/post/5-principles-of-effective-claims-handling-in-the-insurance-industry">5 Principles of Effective Claims Handling in the Insurance Industry</a>,&rdquo; Jan. 24, 2024
4 Insurance Thought Leadership, &ldquo;<a href="https://www.insurancethoughtleadership.com/claims/why-do-insurance-claims-take-so-long">Why Do Insurance Claims Take So Long?</a>&rdquo; March 3, 2024
5 J.D. Power, &ldquo;<a href="https://www.jdpower.com/business/press-releases/2023-us-claims-digital-experience-study">Many Insurers Struggle To Deliver Seamless Digital Experiences as Repair Cycle Times Rise, J.D. Power Finds</a>,&rdquo; Dec. 5, 2023

How do carriers measure up when it comes to their claims service

How do carriers measure up when it comes to their claims service?

On any given day, construction workers face dangerous situations, whether they&rsquo;re working at heights, being exposed to environmental hazards, or operating heavy machinery. In a sector with inherent risks, keeping employees safe is job No. 1 for construction companies.
Today, new technologies are reshaping &ndash; and even revolutionizing &ndash; safety on construction sites. With the right digital investments, construction companies can elevate their safety measures, helping to keep workers out of harm&rsquo;s way and prevent costly downtime.
Here&rsquo;s a look at three game-changing tech solutions that can make construction sites safer:
1. Wearables that monitor workers&rsquo; health and watch for outside hazards.
Essential safety gear like hard hats and work boots have gotten an upgrade with wearable technology. Wearables can track workers&rsquo; health, detect environmental hazards, locate workers in the event of an accident, and more.1
For example, smart hard hats are equipped with sensors that can detect dangerous levels of noise, gases, or other safety issues, and alert the wearer through sound or visual signals. Some models have built-in navigation systems to help workers safely find their way around a job site.2
Smart boots are equipped with pressure-detection sensors that can detect falls or shocks sustained by workers and call for help automatically.3 With GPS technology, smart boots can also track the wearer&rsquo;s location in case of an accident, so emergency personnel can reach them quickly. Some models of smart boots illuminate with LEDs to help make it safer to work in the dark.4
Another valuable safety tool for construction workers is smartwatches, which can track and monitor various health indicators. For example, heart-rate monitoring can detect signs of fatigue and let users know if it&rsquo;s time to take a break.5
2. For big heights and tight spots, send in the drones.
With an ability to spot safety hazards and perform risky human tasks, drones are becoming an indispensable safety tool. These crewless, aerial vehicles can go extremely high and navigate tight spots, while taking high-quality images and videos. When drones are deployed, construction workers who might normally do inspections at great heights, or climb scaffolding to take measurements, can stay safely on the ground.6,7
Drones can also be used to survey large construction sites for hazards to ensure worker safety. For example, thermal-imaging sensors attached to drones can detect and notify workers of gas leaks and other harmful chemicals on the site.8 
In addition to protecting workers, drones can be used to provide surveillance to help keep sites secure. For example, thermal imaging can prevent unauthorized people from entering a job site. The drone can send an alert if it detects someone going where they shouldn&rsquo;t. The location of tools and materials can also be verified remotely, allowing construction companies to identify unauthorized activity on a project.9,10
3. AI (Artificial Intelligence) and analytics make equipment maintenance predictive.
Artificial intelligence (AI) is making inroads across many industries &ndash; and construction is no exception. One revolutionary use of this technology is predictive equipment maintenance, which offers significant advantages over the traditional approach of preventative maintenance. Rather than repair machines on a predetermined schedule, predictive maintenance uses a data-driven approach. This helps companies address potential failures before they occur &ndash; a game-changer since equipment failures can pose significant safety risks to workers on construction sites.11
AI-enabled equipment can analyze large amounts of data, and predict and detect equipment failures, with the help of Internet of Things (IoT) sensors integrated into the machinery. Pressure or temperature sensors collect real-time information about equipment, tracking features that could indicate performance issues. AI analyzes the data and looks for indications that something could go wrong. It also alerts users if it detects an issue.12,13
AI can also facilitate proactive maintenance. Equipment data can be analyzed to determine the best time for maintenance tasks, considering factors such as usage patterns, operating conditions, and historical performance.14 For example, by applying machine learning to historical patterns, AI might deduce that a specific bearing on a crane&rsquo;s motor is likely to malfunction within a certain time frame. An alert lets the maintenance team rectify the issue because it leads to a significant breakdown or safety incident.15
While technology alone can&rsquo;t solve every safety issue on a construction site, it has an increasingly significant role to play. Companies that embrace new solutions will make strides towards building a safer environment for their hard-working crew members.
&nbsp;
Sources 
1,6,8Nearby Engineers, &ldquo;<a href="https://www.ny-engineers.com/blog/how-technology-is-making-construction-safer">How Technology is Making Construction Safer</a>&rdquo; 2,3,5 DOZR, &ldquo;<a href="https://dozr.com/blog/wearable-technologies-in-construction">The Best Wearable Technologies For Construction Workers</a>,&rdquo; Dec. 29, 2022 4 Openwage, &ldquo;<a href="https://openwage.com/wearable-technology-promoting-health-in-construction/">Wearable technology: Promoting health in construction</a>,&rdquo; Sept. 30, 2022 7,9 Go Codes, &ldquo;<a href="https://gocodes.com/iot-improving-construction-safety/">6 Ways IoT Improves Construction Safety</a>&rdquo; 10 Fluix, &ldquo;<a href="https://fluix.io/blog/benefits-using-drones-construction">7 Benefits of Using Drones in Construction</a>,&rdquo; Dec. 22, 2022 11,12 Utilities One, &ldquo;<a href="https://utilitiesone.com/the-impact-of-predictive-analytics-on-construction-equipment-maintenance">The Impact of Predictive Analytics on Construction Equipment Maintenance</a>,&rdquo; Oct. 8, 2023 13 Innovation &amp; Tech Today, &ldquo;<a href="https://innotechtoday.com/how-can-ai-enabled-construction-equipment-improve-sites/">How Can AI-Enabled Construction Equipment Improve Sites</a>?&rdquo; 14 Utilities One, &ldquo;<a href="https://utilitiesone.com/the-role-of-artificial-intelligence-in-construction-equipment-maintenance">The Role of Artificial Intelligence in Construction Equipment Maintenance</a>,&rdquo; Oct. 11, 2023&nbsp; 15&nbsp; The National Law Review, &ldquo;<a href="https://www.natlawreview.com/article/future-construction-ai-and-predictive-maintenance-part-1">The Future of Construction: AI and Predictive Maintenance Part 1</a>,&rdquo; July 25, 2023

3 tech solutions to improve construction site safety 

Lithium batteries power many parts of everyday life. They&rsquo;re increasingly used in everything from smartphones and scooters to power tools and machinery. On a larger scale, they&rsquo;re used in energy-storage systems that provide backup electricity for utilities companies and commercial facilities.
While lithium-ion batteries provide many benefits &ndash; they have long lifespans, provide constant power, and are lightweight, to name just a few &ndash; they also pose a risk of fire and explosion.1
As the use of lithium-ion batteries becomes more widespread, and facilities increasingly rely on them for their own power supplies, companies need to take a close look at how to protect themselves.
To get started, here is an overview of lithium batteries, the risks they present, and how to mitigate them:
<h4>What are lithium batteries?</h4>
The term &ldquo;lithium battery&rdquo; refers to one or more lithium cells that are electrically connected. Lithium cells store and release power by converting chemical energy into electrical energy using lithium ions or lithium metal.2 
Lithium metal batteries are generally non-rechargeable and are often used in consumer products like calculators, pacemakers, remote car locks, and watches.3 Lithium-ion batteries are rechargeable and are used in devices such as mobile phones, electric vehicles, laptops, and power tools, as well as materials-handling equipment like forklifts.4,5
<h4>What are the risks?</h4>
Lithium-ion batteries are generally safe but, like any energy storage device, they pose health and safety risks. Thermal runaway &ndash; a process that can cause overheating &ndash; is often considered the greatest hazard related to lithium-ion batteries.6
With thermal runaway, the temperature and pressure inside the battery cells increase faster than the heat can be dissipated. This can happen for many reasons, such as external heat sources (for example, open flames and heaters), short circuits, or damage to the battery. 7 Damage can occur by physical impact (for example, being dropped or punctured), improper charging, or exposure to certain temperatures (hot temperatures and below freezing).8
Thermal runaway may result in the release of corrosive, flammable, and toxic liquids, and gases, which can be harmful to people. Fire or explosion can be caused by the intense heat and flammable liquids and gases from the battery.9
<h4>How can facilities with limited amounts of lithium-ion use and storage mitigate risks?</h4>
Reducing risks related to lithium-ion batteries requires a comprehensive look at proper use, storage, transportation, disposal, and more. Here are just a few recommendations:
<ul>
<li>Lithium-ion batteries should be stored at charge levels below 50%. Fully charged batteries have a higher energy density and greater risk of generating significant heat from short-circuiting due to internal defects. Batteries should also be stored at temperatures between four and 27 degrees Celsius.10 </li>
<li>Establish minimum distances between battery charging stations and any combustible materials. Stations for charging large-format batteries should be separated from other combustibles by at least three feet. Small-format batteries, like the ones used in power tools, should be set on a firm surface, and separated from combustibles by at least one foot.11</li>
<li>Regularly inspect batteries for signs of damage, such as bulging/cracking, hissing, leaking, or rising temperature. If there are signs of damage, safely remove the battery from service and discard in a fire-resistant bin, separate from other waste batteries.12,13</li>
<li>Make sure your workplace&rsquo;s ventilation and fire protection systems comply with applicable legislation, including building codes and fire codes, as well as occupational health and safety regulations.14</li>
</ul>
<h4>What are battery energy storage systems?</h4>
Battery energy storage systems (BESS) enable energy from renewables, like solar and wind power, to be stored and then released when the power is needed most, for example, during a weather-related outage. Lithium-ion batteries are the technology of choice for large-scale plants to help electricity grids ensure a reliable supply of renewable energy.15
In Canada, this emerging technology is part of governments&rsquo; plan for more clean energy. For example, a new battery storage project in Ontario &ndash; Oneida Energy &ndash; aims to help the province have a &ldquo;reliable, affordable and clean electricity supply.&rdquo; The storage facility will draw and store electricity off-peak and return the power to the electric grid when electricity demand is higher.16
There are promising uses for BESS in the commercial sector as well. Commercial buildings and factories can set up their own energy-storage systems to provide power during outages and to lower electricity costs. Cost savings are achieved when a business draws energy from the grid for battery storage when hourly costs are low, and then uses that stored energy when grid costs are high (a concept called &ldquo;peak shaving&rdquo;).17 McKinsey &amp; Company believes BESS has the potential to reduce energy costs by up to 80%.18
<h4>What are the risks of battery energy storage systems?</h4>
Fires caused by thermal runaway is the chief concern with battery energy storage systems. This can be caused by physical damage, manufacturing defects, improper use, and excessively hot storage temperatures. Storing large amounts of batteries together makes this situation more dangerous. The fire caused by a single battery can create a chain reaction of battery failure, which can lead to an explosion if enough batteries fail and produce heat and gas.19
<h4>How can organizations mitigate risks?</h4>
The National Fire Protection Agency (NFPA) and other expert organizations provide numerous standards, guidelines, and recommendations for battery energy storage systems. Companies are encouraged to consult comprehensive resources such as <a href="https://www.nfpa.org/product/nfpa-855-standard/p0855code">NFPA 855</a> (Standard for the Installation of Stationary Energy Storage System and <a href="https://ulse.org/news/ulse-publish">UL 9540</a> (Standard for Safety of Energy Storage Systems and Equipment), as well as information from their insurance partners and other experts.
Here are just a few recommendations to prevent fires:
<ul>
<li>One early intervention is a battery management system (BMS), which can prevent damage to the battery cells due to overcharging. A BMS also calculates the charge remaining on the battery, monitors the temperature, and monitors for short-circuits and faulty connections. If the system detects any abnormalities, it shuts the battery down, which protects the cells from damage. A gas detection system can also be employed to shut down faulty cells, activate a ventilation system, and sound alarms.20</li>
<li>Thermal imaging can be used to monitor the battery cells and prevent thermal runaway. Thermal cameras allow operators to detect temperatures in real time and quickly identify any issues. Thermal imaging is also a useful tool for detecting manufacturing defects in lithium-ion batteries. For example, a hot spot in the battery cell may indicate a defect that&rsquo;s causing the battery to generate excess heat. Early detection allows corrective action to be taken.21</li>
</ul>
See: <a href="https://www.sovereigninsurance.ca/advice-and-tools/managing-risk/risk-resilient-thermal-imaging">Risk Resilient: Thermal Imaging: Electrical &amp; Mechanical Applications</a>
<ul>
<li>To prevent large and lengthy fires, NFPA 855 requires energy storage systems to be grouped into small segments and spaced apart. Since battery energy storage systems typically consist of multiple vertical racks, the aim is to contain the fire to a single rack through proper spacing, as well as the installation of a sprinkler system.22</li>
</ul>
See: <a href="https://www.sovereigninsurance.ca/advice-and-tools/managing-risk/fire-safety-plan">What should be included in your fire safety plan?</a>
<ul>
<li>Develop an emergency response plan specifically for lithium-ion fires. These fires have unique attributes and are difficult to extinguish and sometimes need to just burn out. Water or foam may appear to put out fires quickly, but they can reignite as breached cells are met with oxygen. It&rsquo;s advisable to keep sprinklers running and move batteries to safe burnout areas.23</li>
</ul>
While the chance of a fire related to lithium-ion batteries is low when guidelines and best practices are followed, there are no guarantees. Reach out to your broker or insurance partner for guidance on how to best protect your facility.
&nbsp;
Sources 
1 Schumacher Electric, &ldquo;<a href="https://www.schumacherelectric.com/blog/the-benefits-of-lithium-ion-batteries/">The Benefits of Lithium-ion Batteries</a>,&rdquo; May 5, 2023
2,12 Occupational Safety and Health Administration (OSHA), &ldquo;<a href="https://www.osha.gov/sites/default/files/publications/shib011819.pdf">Preventing Fire and/or Explosion Injury from Small and Wearable Lithium Battery Powered Devices</a>,&rdquo; June 20, 2019
3,4 Transport Canada, &ldquo;<a href="https://publications.gc.ca/collections/collection_2017/tc/T86-30-2016-eng.pdf">Transportation of Dangerous Goods: Did You Know That Lithium Batteries Are Dangerous Goods?</a>&rdquo; March 2016
5 Modern Materials Handling, &ldquo;<a href="https://www.mmh.com/article/where_lithium_batteries_will_make_gains">Where lithium batteries will make gains</a>,&rdquo; Oct. 4, 2022 
6,8,9,14 Canadian Centre for Occupational Health and Safety (CCOHS), &ldquo;<a href="https://www.ccohs.ca/oshanswers/safety_haz/battery-charging-lithium-ion-batteries.html">Battery Charging &ndash; Lithium-ion Batteries</a>&rdquo;
7 Safety Skills: An HSI Company, &ldquo;<a href="https://safetyskills.com/lithium-batteries/">Lithium Batteries: Safe Handling, Storage and Disposal</a>&rdquo;
10,11,13 T&Uuml;V S&Uuml;D, &ldquo;<a href="https://www.tuvsud.com/en-us/-/media/regions/us/pdf-files/whitepaper-report-e-books/tuvsud-lithium-ion-battery-storage-and-handling-white-paper.pdf">Protecting Your Facility From Lithium-Ion Battery-Related Fires &amp; Explosions</a>&rdquo;
15 National Grid, &ldquo;<a href="https://www.nationalgrid.com/stories/energy-explained/what-is-battery-storage">What is battery storage</a>?&rdquo;
16 Government of Canada, &ldquo;<a href="https://www.canada.ca/en/natural-resources-canada/news/2023/02/governments-of-canada-and-ontario-working-together-to-build-largest-electricity-battery-storage-project-in-canada0.html">Governments of Canada and Ontario Working Together to Build Largest Electricity Battery Storage Project in Canada</a>&rdquo;
17 Daily Commercial News, &ldquo;<a href="https://canada.constructconnect.com/dcn/news/technology/2023/04/inside-innovation-battery-storage-for-commercial-buildings-comes-into-its-own">Inside Innovation: Battery storage for commercial buildings comes into its own</a>,&rdquo; April 19, 2023
18 McKinsey &amp; Company, &ldquo;<a href="https://www.mckinsey.com/industries/automotive-and-assembly/our-insights/enabling-renewable-energy-with-battery-energy-storage-systems">Enabling renewable energy with battery energy storage systems</a>,&rdquo; Aug. 2, 2023
19 &nbsp;Control Fire Systems, &ldquo;<a href="https://www.controlfiresystems.com/services/battery-energy-storage-fire-suppression-systems">Battery Energy Storage Systems Fire Suppression</a>&rdquo;&nbsp; 
20 StatX, &ldquo;<a href="https://www.statx.com/whitepaper/fire-suppression-battery-energy-storage-systems/">Fire Suppression in Battery Energy Storage Systems</a>&rdquo;
21 MoviTherm, &ldquo;<a href="https://movitherm.com/knowledgebase/understanding-the-risks-of-fire-in-battery-storages/">Ensuring Safety in Lithium-ion Battery Storages</a>&rdquo;
22 National Fire Protection Agency (NFPA) Journal, &ldquo;<a href="https://www.nfpa.org/news-blogs-and-articles/nfpa-journal/2020/01/01/nfpa-13-january">NFPA 855 and sprinkler protection for energy storage systems</a>,&rdquo; Jan. 1, 2020&nbsp;
23 T&Uuml;V S&Uuml;D, &ldquo;<a href="https://www.tuvsud.com/en-us/resource-centre/stories/lithium-ion-battery-fires-myth-vs-reality">Lithium-ion Battery Fires: Myth vs. Reality</a>&rdquo;

Lithium-ion batteries: Safe handling and storage

The growing need to build and rebuild is putting pressure on both the construction sector and the government. As part of our annual Q&amp;A series, <a href="https://www.sovereigninsurance.ca/our-team/halifax/jeffrey-cunningham" target="_blank" rel="noopener">Jeffrey Cunningham</a>, Commercial Lines Specialist at Sovereign Insurance, shares his thoughts on loss trends and emerging risks in the construction sector in 2023, and what organizations should watch out for in 2024.
<h4>What were the trends or key exposures you saw in 2023?</h4>
Climate change and extreme weather events continue to be top of mind for construction firms and contractors around the world. In fact, research shows that adverse weather delays 45% of construction projects globally, costing project owners and contractors billions of dollars in additional expenses and lost revenue each year.1 And that&rsquo;s only expected to increase.
Closer to home, Canadian flooding and wildfires were very concerning for the insurance sector in 2023, especially in more urban areas like Halifax. But we also took note of several large fire incidents on housing construction projects in Ontario. This will likely put pressure on rating and capacity going into 2024.
Firms continue to struggle with labour shortages, both with their own staff and with sub-trades. The whole sector is having a difficult time attracting people, and those who are in it are overwhelmed with work. When you look at the building, rebuilding, and renovating that needs to be done, particularly in Nova Scotia and Ontario, there&rsquo;s a real influx of work and just not enough contractors to do the work.&nbsp;
<h4>What are some of the emerging risks to keep an eye out for in 2024?</h4>
As everyone has read about or knows firsthand, Canada has a housing shortage, and pressure is growing on the federal government to get new structures built. The Canada Mortgage and Housing Corporation (CMHC) says Canada will need 3.5 million more units built by the end of the decade, above what is currently planned.2
While housing activity is good news for the construction sector, contractors continue to face challenges such as the ongoing labour shortage, higher building costs, and higher interest rates. They should ensure they keep replacement values up to date and have enough skilled workers to complete the job, as labour shortages can affect timelines and budgets. From an insurance sector perspective, the increased activity in the building trades, on top of inflation on building materials, will likely impact rating and capacity.
For any project, it&rsquo;s important for clients and brokers to review the insurance specifications and confirm their insurance program meets the requirements &ndash; a crucial step when bidding and/or securing tender projects.
We&rsquo;ll continue to see increased use of new and emerging construction materials, for example, insulated metal panels and insulated concrete forms, which will require additional underwriting and an analysis of overall capacity for the project limits. With the demand for additional housing in a short 10-year time frame, we&rsquo;re also likely to see more high-rise mass timber projects being proposed. These structures can be erected much quicker than typical poured concrete buildings and construction is now approved to up to 18 storeys.
Contactors, brokers, and insurance partners will continue to work to understand the risks associated with new construction materials and how they perform. Proper construction classifications will have to be allocated to these risks so that proper rate can be achieved.
<h4>How can organizations mitigate these risks?</h4>
The housing and <a href="https://www.sovereigninsurance.ca/advice-and-tools/hot-topics/the-impact-of-the-skilled-labour-shortage">labour shortage</a> won&rsquo;t be solved overnight. But I can talk about this from a builder&rsquo;s risk perspective. For Sovereign, it&rsquo;s important that the client, the broker, and the underwriter work together on construction projects. That means providing all the information that&rsquo;s needed to underwrite the risk. Typically, that includes an application, as well as key documents such as blueprints, construction schedules, and <a href="https://www.sovereigninsurance.ca/advice-and-tools/managing-risk/the-importance-of-geotechnical-reports-before-breaking-ground">geotechnical reports</a>. It also means involving our Loss Control services team to visit the site, review technical information, and provide feedback. On larger projects, we typically involve our Loss Control team as well. It&rsquo;s really about collaboration between the insured, the broker, and us to ensure the client has comprehensive protection and is following risk management best practices.
&nbsp;
Sources
1 Air Force Institute of Technology, &ldquo;<a href="https://scholar.afit.edu/cgi/viewcontent.cgi?article=1740&amp;context=facpub">Weather-related Construction Delays in a Changing Climate: A Systematic, State-of-the-art Review</a>,&rdquo; March 6, 2021
2 CMHC, &ldquo;<a href="https://www.cmhc-schl.gc.ca/blog/2023/estimating-how-much-housing-we-need-by-2030">Estimating how much housing we&rsquo;ll need by 2030</a>,&rdquo; Sept. 13, 2023

Loss Trends and Emerging Risks: Construction/Builder’s Risk 

From new technologies to extreme weather events, manufacturers face a dynamic and ever-evolving landscape. As part of our annual Q&amp;A series, <a href="https://www.sovereigninsurance.ca/our-team/toronto/ray-larkey" title="" target="">Ray Larkey</a>, Senior Underwriting Specialist, Property &amp; Casualty at Sovereign Insurance, shares his thoughts on loss trends and emerging risks in 2023, and what organizations should watch out for in 2024.&nbsp;
What were the loss trends/key exposures you saw in 2023?
Some of the key exposures from last year have continued throughout 2023, namely inflation and supply shortages, and their effects on increased building costs. That has presented a challenge to ensure manufacturers&rsquo; property values are updated to reflect current replacement costs of buildings, equipment, and stock.
However, what really stands out and comes to mind for most Canadians are the devastating forest fires that we all vividly witnessed across the country, with 2023 being the worst year on record for damage from a wildfire season. More alarming was that these wildfires were more widespread, impacting communities across the country, and the resulting human hardship. Climate change events are evolving, and extreme weather will continue to be a key exposure for our industry in the form of property damage from weather perils, including increased wildfires and flooding.
What are some of the emerging risks to keep an eye out for in 2024?
As newer technology is adopted by manufacturers &ndash; whether in their processes, machinery and equipment, or finished products &ndash; it can bring new exposures companies may not be aware of.
What comes to mind as an example are lithium-ion batteries, which pose a risk of fire when not handled, stored, or used properly. These batteries are increasingly used to power manufacturing machinery and equipment, as well as electronics sold worldwide. An emerging trend is that facilities are using their own battery energy storage systems to provide power during outages and to save on electricity costs.
Beyond property exposure, manufacturers must consider product liability exposures. As finished products get more high-tech, and more are sold worldwide, they can bring new exposures manufacturers may not be aware of. For example, a product defect or design flaw can result in bodily injury.
With any new technology, manufacturers will need to understand the risks. At the same time, underwriters will need to be aware of new technologies that clients have implemented, understand and measure the risks, and collaborate with their engineering colleagues to provide comprehensive insurance solutions.
How can organizations mitigate these risks?
For both organizations and insurance providers, it&rsquo;s important to have a mindset that change is constant. When it comes to perils like wildfires and floods, organizations need to review their current insurance policies and ensure they&rsquo;re covered. On the technology front, it will be critical to follow current guidelines, codes, and best practices relating to specific technologies.
From an insurance industry perspective, there would be benefits in integrating Canadian loss data relating to all types of climate change events, including forest fires, to help us understand, measure, and protect against the changing weather risk going forward. Similarly, as underwriters become more aware of new exposures from advancing technology, it will be important to stay up to date, provide educated responses, and continue to offer competitive solutions and services to clients.

Loss Trends and Emerging Risks: Property & Casualty - Manufacturing

Company leaders are increasingly held to high standards of accountability, and their actions &ndash; or lack thereof &ndash; can be challenged through lawsuits. As part of our annual Q&amp;A series, <a href="https://www.sovereigninsurance.ca/our-team/toronto/eduard-lecker" title="" target="">Eduard&nbsp;Lecker</a>, Senior Underwriter, Management Liability&nbsp;shares his thoughts on key loss trends and exposures in this area in 2023 and what organizations need to watch out for in 2024.
What were the loss trends/key exposures you saw in 2023?
A lot of claims are more focused on environmental, social and governance (ESG). That can take a few different forms. Historically, ESG claims were focused on pay equity, social impact and consumer rights. Today, claims are increasingly related to organizations&rsquo; climate change strategies. Companies are more vocal about what they&rsquo;re doing to help the planet, and people are holding them accountable if they&rsquo;re not doing what they&rsquo;re saying &ndash; in other words, &lsquo;greenwashing.&rsquo;
Bankruptcies and insolvencies are on the rise, which in turn is bringing greater claims activity. The economic downturn hit some companies hard, which led to an increased number of bankruptcy and insolvency filings in Canada and the U.S. The rising interest rates have also made it a challenge for companies to obtain new credit and pay back existing loans (in cases of lines of credit and variable rate loans).
There&rsquo;s also increased mergers and acquisitions activity, which brings its own potential for D&amp;O (Directors and Officers) claims related to disputes with shareholders and employees. For example, after a merger or an acquisition is complete, there is a greater chance of employee terminations. This could be due to layoffs as some roles may now be redundant, or employees voluntarily leaving due to the new corporate culture. This increases the chances for employment practices liability (EPL) claims, especially for wrongful and constructive dismissal.
What are some emerging risks to keep an eye out for 2024?
The cost of litigation and costs of lawyers are always going up, so that&rsquo;s something to look out for. Even frivolous allegations can lead to a lengthy claim process. Fees for lawyers and other professionals still need to be paid, regardless of the validity of the allegations brought forward.
With the economic downturn, we can likely foresee a lot more layoffs. That could mean more EPL-related claims, more insolvencies and more companies entering bankruptcy protection, which is going to upset some shareholders and investors. There&rsquo;s also going to be a lot more coming up with ESG &ndash; not just related to the environment and greenwashing, but also pay equity, discrimination and social equality.
How can organizations mitigate these risks? 
To start with ESG, it&rsquo;s important to have sound policies in place. A good rule to follow is &lsquo;under-promise and over-perform.&rsquo; Don&rsquo;t try to make your company appear better than it is &ndash; be realistic about what you can achieve. You can be vocal about what you&rsquo;ve accomplished after the fact.
On the employment side, make sure there are policies and procedures in place for everything. Have these policies and procedures reviewed by an HR professional and legal counsel who are experts in employment law &ndash; and do this annually because things change. For example, five years ago, LGBTQ+ rights were maybe not on an organization&rsquo;s mind, but now policies around that are commonplace.
Educate your employees &ndash; have them read and sign the policies every year and keep records of all communications. In litigation, it&rsquo;s not about what happened; it&rsquo;s what you can show you&rsquo;ve done and what you can prove.

Loss Trends and Emerging Risks: Management Liability 

Cargo thefts across Canada and the US are on the rise. According to commercial transportation industry data, thefts have increased 15% from 2021 to 2022.1&nbsp; While the reason behind this significant jump in cargo crime is complex, according to cargo industry watchdog, CargoNet, supply chain disruptions that began during the COVID pandemic are a significant factor.&nbsp; During the pandemic, the scarcity and rising inflationary costs of many products such as computer graphic cards and raw meat products triggered an illicit market demand for these and other goods. Similarly, household items were found to be the most stolen items in 2022, which were often targeted during long haul and final mile distribution.2 The average value of cargo stolen during each event was $214,104, with an estimated $223 million dollars of stolen cargo across all cargo theft events in 2022.&nbsp;&nbsp; Along with the increase in supply chain demand, the sharp increase in cargo thefts may also be attributed to the reopening of borders post-COVID.
It&rsquo;s clear that cargo theft remains a significant risk factor for the commercial vehicle transportation industry. However, there are steps carriers can take to reduce the risk of cargo theft while also protecting the drivers that may be put in harm&rsquo;s way.
Carrier management should consider the following best practices to protect cargo from being stolen while in transit:
Employee Screening: It&rsquo;s an unfortunate reality that many cargo thefts are &ldquo;inside jobs&rdquo; by drivers and operations staff. That&rsquo;s why the first step carriers should take to help prevent cargo theft is to enhance their applicant screening practices. This includes establishing sound due diligence practices, such as carrying out reference checks and criminal record checks, and retrieving driver records (best practice is to receive permission from applicants to order fresh driver abstracts; do not accept copies offered by applicants, as they may be falsified). Third party verification services can provide an additional layer of effective applicant screening.
Be aware of new cargo theft strategies: Industry experts have observed a significant increase in fictitious cargo pickups, which relies on the subcontracting of shipments to a legitimate motor carrier and then having the shipment misdirected to another address. The use of this strategy increased by 600% in 2022 over the prior year, adding up to 96 fictitious pickups in total.2 Make sure the trucks picking up loads from your shipping facilities have real trucking company names on them, and that the MC/DOT numbers on the tractors correlate with those names.
Schedule delivery times with consignees: Whenever possible, confirm delivery times with the consignee, and ensure you have a contingency plan in place in case the consignee temporarily closes operations without notice.
Identify goods in-transit: Use a reputable electronic logging device (ELD) and/or GPS tracking system to track loads in transit. GPS tracking capabilities should include real time location services and geo-fencing that notifies a carrier of a tractor/trailer detected to be in motion when it is expected to be stationary. Best practice includes having a GPS tracker on both the tractor and trailer or cargo and covertly positioning the tracking devices. This offers the best opportunity for tracking trailer loads, increases the chances of recovery, and may even deter/prevent the theft from occurring in the first place. Finally, require drivers to check the seal integrity of their cargo at each stop while in-transit. This is especially important for specific trailer configurations, such as curtain wall trailers, which should be inspected regularly for signs of damage or tampering.
Stay in touch &ndash; give drivers clear instructions: A clear line of communication with drivers is critical to keeping them, and their cargo, safe. All trips should be planned by operations staff and discussed with drivers prior to departure. Any changes to planned routes or significant delays for any reason should be reported immediately to operations staff, and drivers must be clearly instructed on contingency plans prior to leaving with the load. Once they&rsquo;re on the road, prohibit drivers from stopping in identified high risk areas, secure safe parking for drivers along their pre-determined route, and ensure clear means of communication are maintained throughout their journey. Drivers should also be directed to never discuss cargo details in public, for example during meal breaks, or through any communication devices such as CB radios that could easily be monitored.
The top locations targeted for cargo theft include intermodal hubs, warehouse/distribution centers, and parking lots. Consider the following best practices to protect cargo while spotted at cargo storage locations and/or other areas where tractors and trailers may be stationary for significant periods of time:
Ensure your cargo storage locations are outfitted with security and alarm systems: Identify locations with CCTV coverage, fenced and gated compounds with electronic gate controls, security lighting, and onsite security.
Minimize preloading of trailers: Pre-loaded trailers are more susceptible to theft. When possible, do not pre-load trailers. If pre-loading is needed, do so within a secure compound. When required, define pick-up times and schedule accordingly.
Identify alternative storage locations: Having an alternate storage location available can help mitigate theft in the event the primary location is closed, or suspicious activity is noted.
Work with your customers and vendors to establish transit schedules that prioritize security: If timing doesn&rsquo;t prioritize security, and loads will need to sit in a trucking yard, suggest different schedules to minimize theft risk.
It&rsquo;s imperative that transport carriers take mindful and measured steps to protect the critical cargo being hauled. There are ample opportunities for thieves to strike along the route - whether in transit or parked. Cargo theft risk mitigation best practices are wide ranging and consider the myriad of potential factors and scenarios at play. By following these recommended strategies, carrier managers can help protect their people, cargo, and bottom line.
Additional Resources: 
<a href="https://www.canadianunderwriter.ca/claims/how-much-cargo-theft-rose-in-2022-1004229668/">How much cargo theft rose in 2022</a>
<a href="https://cantruck.ca/cargo-thefts-jump-in-2022/">Cargo Thefts Jump in 2022</a>
July 4 Holiday Cargo Theft Trends 2019 (no longer available)
<a href="https://www.cargonet.com/siteassets/images/pdf/cn_safe_tips.pdf">CargoNet Driver Advisory</a>
<a href="https://www.inboundlogistics.com/articles/mitigating-cargo-theft-risk/">Mitigating Cargo Theft Risk</a>
&nbsp;
Note: This bulletin is not a substitute for a thorough risk assessment and is intended to provide information only. 
Sources
1 Canadian Underwriter. <a href="https://www.canadianunderwriter.ca/claims/how-much-cargo-theft-rose-in-2022-1004229668/">How much cargo theft rose in 2022</a>.&nbsp; January 16, 2023 2 Canadian Trucking&nbsp; Alliance RSS <a href="https://cantruck.ca/cargo-thefts-jump-in-2022/">Cargo thefts jump in 2022</a> - January 20, 2022

Five strategies to help manage cargo theft risks in trucking operations

Running a trucking operation can be a risky business at the best of times. Whether hauling freight across the country or closer to home, carriers and drivers must contend with bad weather, vehicle breakdowns, safety issues, cargo theft or loss, and more. Add in today&rsquo;s challenging market conditions &ndash; from slowing consumer demand to rising interest rates and ever-thinning profit margins &ndash;being in business can be a fight for survival.1 &ldquo;In today&rsquo;s climate, there are a lot of pressures on trucking companies in terms of the cost of running their day-to-day operations,&rdquo; says&nbsp;<a href="https://www.sovereigninsurance.ca/our-team/halifax/tommy-mackinnon" target="_blank" rel="noopener">Tommy MacKinnon</a>, Underwriting Specialist, Commercial Auto, Atlantic Operations&nbsp;at Sovereign Insurance. &ldquo;Everyone is trying to maintain profitability and, in many cases, they are just trying to make ends meet as costs continue to increase.&rdquo; It may be tempting, then, for trucking companies to try to reduce operating costs to save money. However, it&rsquo;s imperative to not cut corners on risk management. &ldquo;To maintain compliance and keep their operations running smoothly and safely, trucking companies have to stay the course and stay on top of their risk management practices,&rdquo; says Tommy. &ldquo;Every dollar they invest in risk management brings a return in some form or another, ultimately helping to mitigate losses.&rdquo;
<h4>Key risks and how to mitigate them</h4>
One of the main risks facing trucking companies is the ongoing labour shortage. While today&rsquo;s market volatility has eased labour pressures somewhat, the industry faces a long-term problem. The Canadian trucking industry currently has around 20,000 vacant driver positions, and the workforce is rapidly approaching retirement, according to a report PwC Canada commissioned by Food, Health &amp; Consumer Products of Canada (FHCP). Without action, the shortage will soon grow to 30,000.2 &ldquo;The labour issue is only compounding &ndash; it&rsquo;s not getting any better,&rdquo; states Tommy. &ldquo;One of the biggest exposures and risks facing a transportation company is seeking out the right drivers in terms of qualifications. By not having a robust recruitment process in place, companies start to take on additional risks.&rdquo;&nbsp; Attracting qualified drivers with the right experience is the top priority. If companies don&rsquo;t screen and hire carefully, it can lead to costly and dangerous accidents and violations.&nbsp; Once hired, a comprehensive onboarding process is critical. &ldquo;Whether they&rsquo;re doing short-haul or long-haul runs, drivers must be familiar with the overall operation and be well-versed in their responsibilities on the road,&rdquo; says Tommy. That includes being educated and trained on safety policies and procedures, maintenance programs, disciplinary measures, and more.&nbsp; See:&nbsp;<a href="https://www.sovereigninsurance.ca/advice-and-tools/managing-risk/best-practices-for-hiring-and-onboarding-new-drivers" target="_blank" rel="noopener">Best practices for hiring and onboarding new drivers</a> &ldquo;Organizations should also have regular check-ins with their driver workforce, whether that be safety meetings or accident meetings where they review prior accidents,&rdquo; adds Tommy.&nbsp; Another risk management practice on the labour front is to offer an incentive plan for good driving behaviour and years of experience. Companies can offer perks and rewards for drivers&rsquo; performance and achievements, as well as provide feedback.&nbsp; In today&rsquo;s inflationary environment, high repair costs are another risk for trucking companies. Spare parts for trucks have become increasingly expensive and delays in shipping parts can result in idle trucks and drivers.3 More technologically advanced features in today&rsquo;s vehicles can further complicate repairs &ndash; and add to repair bills.&nbsp; &ldquo;With rising costs and ongoing supply chain issues, maintaining an existing fleet is a challenge,&rdquo; says Tommy. &ldquo;Trucking companies can help reduce expensive repairs by investing in preventative maintenance programs to keep their fleets in good working condition.&rdquo;&nbsp; Drivers have a big part to play in preventative maintenance. For example, they can conduct pre-trip inspections to ensure everything is in the right working order and they can also keep spare parts on hand for quick repairs while they&rsquo;re on the road.&nbsp; See:&nbsp;<a href="https://www.sovereigninsurance.ca/advice-and-tools/tools/fleet-preventative-maintenance-checklist" target="_blank" rel="noopener">Sovereign&rsquo;s Fleet Preventative Maintenance Checklist&nbsp;&nbsp;</a> As today&rsquo;s headlines attest, many industries are grappling with theft &ndash; and trucking is no exception. Recent estimates say cargo theft increased nearly 80% in Canada and the U.S. since 2022. In Canada alone, reported cargo losses increased nearly 30% last year compared to 2021.4 To protect cargo while in transit, key best practices include: confirming delivery with consignees; securing safe parking for drivers and establishing clear means of communication; tracking and monitoring goods while in transit; and using security devices, such as locks and seals. To prevent product losses from spoilage, companies can install monitored temperature alarms and power source backups in refrigerated trucks and trailers.&nbsp; See:&nbsp;<a href="https://www.sovereigninsurance.ca/advice-and-tools/managing-risk/cargo-theft-prevention-best-practices-during-the-covid-19-pandemic" target="_blank" rel="noopener">Cargo Theft Prevention Best Practices During the COVID-19 Pandemic</a> Perhaps less tangible, but most important, is an organization&rsquo;s attitude and mindset towards risk mitigation. &ldquo;For some companies, risk mitigation is not always at the forefront &ndash; it&rsquo;s an afterthought,&rdquo; explains Tommy. &ldquo;If they&rsquo;re proactive in their approach and are willing to invest in best practices &ndash; whether for driver hiring, maintenance procedures, or theft reduction &ndash; that is a big part and a big first step in mitigating risks.&rdquo;&nbsp; Insurance partners also have a big role to play, he adds. For example, Sovereign&rsquo;s Risk Specialists offer onsite risk inspections and provide tailored recommendations to help transportation companies better understand their exposures and address them based on industry best practices.&nbsp; &ldquo;Not only are we there in the event of a loss when they need us the most, but we can also provide value-added services to help improve their risk management through our in-house experts,&rdquo; says Tommy.&nbsp;
&nbsp;
Sources&nbsp; 1&nbsp;CTV News Montreal, &ldquo;&lsquo;<a href="https://montreal.ctvnews.ca/no-profit-right-now-trucking-industry-facing-leaner-times-as-consumer-demand-drops-1.6532896" target="_blank" rel="noopener">No profit right now&rsquo;: Trucking industry facing leaner times as consumer demand drops</a>,&rdquo; Aug. 24, 2023&nbsp; 2&nbsp;FHCP, &ldquo;<a href="https://www.fhcp.ca/Industry-Resources/News/View/ArticleId/664" target="_blank" rel="noopener">Canada&rsquo;s truck driver shortage will soon grow to 30,000 vacancies; immediate action needed</a>,&rdquo; Sept. 14, 2023 3&nbsp;Hardworking Trucks, &ldquo;<a href="https://www.hardworkingtrucks.com/opinion/article/15539682/managing-risk-in-the-trucking-industry" target="_blank" rel="noopener">Managing risk in the trucking industry,</a>&rdquo; May 31, 2023&nbsp; 4&nbsp;TruckNews.com, &ldquo;<a href="https://www.trucknews.com/transportation/reported-cargo-thefts-rise-sharply-and-thats-just-part-of-the-story/1003174760/" target="_blank" rel="noopener">Cargo thefts rise sharply and that&rsquo;s just part of the story</a>,&rdquo; April 30, 2023

Is your business addressing these top transportation/trucking risk management best practices?

On many fronts, it&rsquo;s sunny skies ahead for the transportation and logistics industry, as supply chain pressures have eased and global bottlenecks have improved.1&nbsp;However, there is a warning sign companies need to heed: Cyberattacks are on the rise &ndash; and they can have wide-ranging consequences.&nbsp; Just look at the headline-making cyberattack on Expeditors International of Washington in 2022. As The Washington Post reports, the Seattle-based global logistics company shut down most of its operating and accounting systems to protect its data and infrastructure following the cyberattack. In turn, that limited its ability to ship freight, manage customs processing and distribute products.&nbsp;2 In a statement, Expeditors said depending on the length of the shutdown, the impact of the cyberattack could have an adverse impact on its business, revenues, results of operations, and reputation.3&nbsp;The outage lasted three weeks. Later, in its annual report, Expeditors said the cyberattack cost the company US$47 million in extra charges, with an additional US$18 million for consulting services costs, including cybersecurity experts, outside legal advisors, and other IT professional expenses.4 See:&nbsp;<a href="https://www.sovereigninsurance.ca/advice-and-tools/managing-risk/do-you-need-a-data-breach-coach" target="_blank" rel="noopener">Do you need a data breach coach?</a> Truly, no business or sector is immune from cyberattacks today. According to IBM, transportation was the ninth most-attacked industry in 2022, with nearly 4% of all cyberattacks aimed at the sector. Phishing was the most common attack, accounting for 51% of cases. Data theft was the most common outcome of cyberattacks (50%), followed by extortion and impacts on brand reputation (25% each).5 While attacks are hitting close to home, cybersecurity may not be as top-of-mind in the transportation and logistics industry as it is in other sectors, says&nbsp;<a href="https://www.sovereigninsurance.ca/our-team/calgary/derek-james" target="_blank" rel="noopener">Derek James</a>, Commercial Auto Underwriting Specialist at Sovereign Insurance.&nbsp;&nbsp; &ldquo;Many transportation companies don&rsquo;t view themselves as computer-based operations, even though they have embraced digital technologies,&rdquo; he says. &ldquo;They may think because they&rsquo;re not a financial institution, for example, they&rsquo;re not as vulnerable to cyberattacks and will fly under the radar. But today, no one has immunity against cyberattacks.&rdquo;&nbsp; In fact, as the sector becomes more digitally connected, it becomes an even more attractive target. Many transportation and logistics companies now have large digital footprints, with vast amounts of data processing and information sharing. For example, documents that were traditionally paper-based, such as invoices and bills of lading, are now digital.&nbsp; See:&nbsp;<a href="https://www.sovereigninsurance.ca/advice-and-tools/hot-topics/what-you-need-to-know-about-bills-of-lading-and-fraud" target="_blank" rel="noopener">What You Need to Know About Bills of Lading and Fraud&nbsp;</a> That means fleet operators are sharing more data digitally with their partners, which can expose them to more cyber risks. In addition, companies all along the supply chain may have varying levels of cybersecurity measures in place, so cybercriminals can exploit weak links in the network.6 Trucks themselves are now electronically connected and house sensitive data, which can give cybercriminals reason to infiltrate computer systems or even shut down a truck completely.7&nbsp;Electronic logging devices (ELDs) house data on vehicles (including positions and history), drivers (including driver&rsquo;s licence and date of birth), and corporations and systems.8 &ldquo;Cybercriminals can not only access and steal data to sell to a competitor or hold for ransom, but they can also use the information to find out the physical location and contents of the cargo, making the cargo itself vulnerable to theft,&rdquo; says Derek. &ldquo;Even if they don&rsquo;t physically take the cargo but launch a cyberattack that prevents trucks from getting dispatched because their system is down, there&rsquo;s loss of business. If your shipments are delayed or ruined (if you&rsquo;re hauling food), your customers may turn to competitors and that could be a big concern.&rdquo; When it comes to employee data, Derek notes this is more readily shared in trucking &ndash; and as a result, is more vulnerable &ndash; compared to companies in other sectors. &ldquo;Driver details are not just given to the human resources manager; their information is given to fleet managers and safety managers and is often shared with external partners,&rdquo; he says. &ldquo;Not only is there a concern for the loss or theft of their personal information, but a company could face fines or penalties for not following proper protocols.&rdquo; How can companies mitigate risks? In any sector, a strong prevention strategy is the best defence against cyberattacks. For transportation and logistics companies, it starts with ensuring their business is equipped with the right cyber knowledge and skills. Trucking businesses, for example, often lack skilled IT personnel, leading to limited monitoring and defences.9&nbsp;With an ongoing shortage of cybersecurity professionals, companies may wish to turn to external partners for help.&nbsp; One of the most effective measures in protecting against cyberattacks is employee training. Since phishing emails represent the majority of attacks, training employees to be hyper-vigilant in recognizing the signs of a phishing email is a good first line of defence.10 See:&nbsp;<a href="https://www.sovereigninsurance.ca/advice-and-tools/managing-risk/cyber-loss-prevention-how-to-mitigate-cyber-risks-to-your-business" target="_blank" rel="noopener">Cyber loss prevention: How to mitigate cyber risks to your business</a> On the more technical side, a prevention strategy should include ensuring enterprise systems and software are run according to policy and have the latest updates to plug any potential vulnerabilities. Using a cloud storage service &ndash; while not foolproof &ndash; can also help ensure security.11 Another risk control is having the right insurance coverage in place, which can help with financial losses in the event of a cyberattack. &ldquo;Coverage is important to help protect your business from financial losses, but it&rsquo;s just one part of a proactive cyber risk management plan,&rdquo; says Derek. &ldquo;No company wants to deal with damage to their reputation or loss of customers if they experience a cyberattack, so prevention is key.&rdquo;&nbsp;
&nbsp;
Sources&nbsp; 1&nbsp;Forbes, &ldquo;<a href="https://www.forbes.com/sites/billconerly/2023/03/02/supply-chain-pressures-easing-good-news-for-inflation-and-production/?sh=23ced7ed15b5" target="_blank" rel="noopener">Supply Chain Pressures Easing&mdash;Good News For Inflation and Production</a>,&rdquo; March 2, 2023 2&nbsp; The Washington Post, &ldquo;<a href="https://www.wsj.com/articles/a-cyberattack-forced-a-logistics-company-to-temporarily-halt-operations-dde27a19" target="_blank" rel="noopener">A Cyberattack Forced a Logistics Company to Temporarily Health Operations,</a>&rdquo; April 26, 2023 3&nbsp;Expeditors, &ldquo;<a href="https://investor.expeditors.com/press-releases/2022/02-21-2022-032617120" target="_blank" rel="noopener">Expeditors Targeted in Cyber-Attack</a>,&rdquo; Feb. 20, 2022&nbsp; 4&nbsp; Expeditors, &ldquo;<a href="https://investor.expeditors.com/~/media/Files/E/Expeditors-IR-V2/annual-reports/expd-2022-annual-report.pdf" target="_blank" rel="noopener">Expeditors Annual Report 2022</a>&rdquo;&nbsp; 5&nbsp; IBM, &ldquo;<a href="https://www.ibm.com/downloads/cas/DB4GL8YM" target="_blank" rel="noopener">X-Force Threat Intelligence Index 2023</a>&rdquo; 6&nbsp;Supply Chain Quarterly, &ldquo;<a href="https://www.supplychainquarterly.com/articles/7239-the-rising-risk-of-cybercrime-in-the-supply-chain" target="_blank" rel="noopener">The rising risk of cybercrime in the supply chain</a>,&rdquo; Oct. 13, 2022 7,11&nbsp;The Trucking Network, &ldquo;<a href="https://thetruckingnetwork.ca/cyber-attacks-on-trucking/" target="_blank" rel="noopener">Cyber-attacks on trucking,</a>&rdquo; June 8, 2023 8,9&nbsp;TruckNews.com, &ldquo;<a href="https://www.trucknews.com/transportation/cyberattacks-on-rise-in-trucking-mainville/1003155650/" target="_blank" rel="noopener">Cyberattacks on rise in trucking: Mainville</a>,&rdquo; Dec. 6, 2021 10&nbsp;Cybersecurity Guide, &ldquo;<a href="https://cybersecurityguide.org/industries/transportation/" target="_blank" rel="noopener">Cybersecurity in the transportation industry,</a>&rdquo; June 5, 2023

Caution ahead: Cyber risks in transportation and logistics

It&rsquo;s something manufacturers can&rsquo;t do business without but don&rsquo;t often think about: water. And because it isn&rsquo;t always top-of-mind, manufacturers may be unaware of some of the loss exposures associated with water (called process water) across their operations.&nbsp; &ldquo;As part and parcel to their overall risk management strategy, manufacturers should be aware that process water is another exposure and take steps to protect their operations,&rdquo; explains Scott Litke, Senior Underwriting Specialist, National Underwriting, at Sovereign Insurance. Here&rsquo;s a closer look at process water, the risks it can present to manufacturers, and how to mitigate those risks:&nbsp;
<h4>What is process water?&nbsp; </h4>
Process water &ndash; often called industrial water &ndash; refers to water used in a manufacturing and processing operation, and that is contained within equipment, tanks or piping on premise. Manufacturing facilities use process water at nearly every step, from washing and cleaning equipment to cooling machinery to fabricating and transporting products.
<h4>Where is it sourced?&nbsp; </h4>
Process water is typically sourced from surface water, groundwater, municipal treatment plants, or a combination of these sources. In most cases, it&rsquo;s treated to remove contaminants and minerals to protect equipment and ensure consistent conditions for end-products.1 Industries that have high water usage and need for treatment include beverage, dairy, sugar mills and refineries, textile manufacturing, pulp and paper mills, oil and gas, and automotive and aircraft.&nbsp; &ldquo;Depending on where your water is sourced and what it&rsquo;s used for in your facility, you could have very specific requirements for removing impurities or other gases that are present,&rdquo; says Scott.2&nbsp;
<h4>What loss exposures are associated with process water?&nbsp; </h4>
Common exposures are punctured tanks or broken water lines, which can mean having to replace water that&rsquo;s been released or rendered unusable. Other perils like fire should also be a key consideration as this could lead to damage to the facility and loss of process water. Furthermore, given the often-strict requirements for water, even for a small fire or a fire at a neighbouring premises may create enough smoke that could severely impact the quality of process water on site.&nbsp; &ldquo;If there&rsquo;s smoke throughout the facility &ndash; even if it&rsquo;s not a large fire, that could contaminate the water source,&rdquo; Scott explains. &ldquo;A manufacturer would then have to flush it out, clean the equipment, and replenish the water before they can continue their operations.&rdquo; 
<h4>How can manufacturers mitigate risks?&nbsp; </h4>
Just like in other aspects of your operation, regular maintenance is key. &ldquo;A lot of build-up or scaling can occur over time, so it&rsquo;s critical that regular maintenance, cleaning and inspection is done,&rdquo; says Scott.&nbsp; Insurance (usually an extension of other coverage) can help cover costs to replace water. &ldquo;Water acts as a lifeblood for manufacturers &ndash; without it, they wouldn&rsquo;t be able to operate,&rdquo; says Scott. &ldquo;It&rsquo;s important to identify risks and how to mitigate them, which should include reviewing if process water is covered in their existing policy.&rdquo;&nbsp; To find out if you&rsquo;re covered, or for more information, speak to your broker or contact Sovereign Insurance.&nbsp;

Sources 1&nbsp;Veolia, &ldquo;<a href="https://www.veoliawatertechnologies.com/en/expertise/applications/process-water" target="_blank" rel="noopener">Process Water</a>&rdquo; 2&nbsp;Aqua Tech Trade, &ldquo;<a href="https://www.aquatechtrade.com/news/industrial-water/industrial-water-essential-guide" target="_blank" rel="noopener">Industrial Water: Our Essential Guide to Pollution, Treatment &amp; Solutions,</a>&rdquo; April 21, 2023

Process Water: A primer for manufacturers

Even when it&rsquo;s &ldquo;business as usual&rdquo; for manufacturers, the cost of raw materials is always fluctuating. But in today&rsquo;s world of constant turbulence, volatility is trending up.&nbsp; In recent years, manufacturers have been strongly impacted by volatility in the supply and price of raw materials resulting from the COVID-19 pandemic and the war in Ukraine, notes Boston Consulting Group. While those impacts are easing, research shows that market disturbances caused by extreme events, including natural disasters, geopolitical disruptions, and other global crises are becoming more frequent and more pronounced.1 At the same time, high price inflation is an ongoing concern in the sector. Data from June 2022 shows that raw material prices paid by Canadian manufacturers climbed 37% year over year, with coal, crude oil and bitumen, and wheat seeing the highest volatility.2&nbsp;While prices are on the downward trend &ndash; the May 2022 raw materials price index by Statistics Canada posted an 18.4% decline year over year3&nbsp;&ndash; unpredictability can mean pricing is a balancing act.&nbsp; &ldquo;A big challenge for manufacturers is balancing fluctuating costs of raw materials, which vary by industry and by month, and trying to maintain margins and competitive pricing for their products,&rdquo; says&nbsp;Ray Larkey, a Senior Property/Casualty Underwriting Specialist at Sovereign Insurance.&nbsp; How can businesses regain control of their margins and stay resilient? PwC lays out a few tactics for manufacturers, including addressing labour costs, assessing potential impacts of price increases on end-customers, and taking a closer look at their supplier contracts. For example, manufacturers can assess which contacts should be fixed-priced, determine if contracts can be negotiated, and align their trading strategy with the current pricing environment.4 It might also mean being more aggressive in finding alternative suppliers that have better pricing, or suppliers that are closer to their operations to reduce delivery costs.5&nbsp;This can also help reduce the impact of supply chain disruptions. In a 2022 survey by industry association Canadian Manufacturers &amp; Exporters, 46% of respondents indicated that dual sourcing of critical components and raw materials is an action they&rsquo;ve taken or are planning to take.6 While manufacturers have been trying to navigate price increases, there is one area they may have overlooked: valuations in their own businesses. Fluctuations in market price can impact the value of a manufacturer&rsquo;s building, equipment and stock, and consequently, the insurance coverage required to replace that stock in the event of physical loss or damage on premises.&nbsp; &ldquo;Manufacturers have to consider up-to-date valuations to avoid an underinsurance issue on their insurance policies,&rdquo; says Ray. &ldquo;Historically, valuations that come in year after year don&rsquo;t change a lot and a general inflation increase was applied across equipment and stock. But the world is different now&hellip; Valuations need to stay current to help ensure businesses are protected.&rdquo; &nbsp; While the onus is on manufacturers to provide up-to-date valuations, Ray advocates for a partnership approach. &ldquo;With inflation, supply chain issues and other global events, insurance companies, brokers and clients should all work together and be more proactive given the new awareness of cost changes,&rdquo; he says.&nbsp; Another consideration for manufacturers on the insurance front is considering a longer indemnity period &ndash; i.e., the length of time benefits are payable under a policy &ndash; such as a 24 month period of indemnity on their profits coverage. Supply chain issues, such as delays caused by extreme weather events or raw materials shortages, can result in longer downtime for manufacturers, so they may want to look at a longer indemnity period, says Ray. &ldquo;As with mitigating other risks, the key for manufacturers is to be proactive and stay up to date,&rdquo; he says.&nbsp; Sovereign offers comprehensive wordings designed for risks specific to the manufacturing sector, including fluctuation in raw material values, to help mitigate the impact of pricing volatility to their business.&nbsp; Contact Sovereign Insurance to learn more.
&nbsp;
Sources 1&nbsp;Boston Consulting Group, &ldquo;<a href="https://www.bcg.com/en-ca/publications/2022/gauging-risks-of-raw-material-price-volatility" target="_blank" rel="noopener">Gauging the Risks of Raw-Market Volatility,</a>&rdquo; Oct. 14, 2022&nbsp; 2&nbsp;Visual Capitalist, &ldquo;<a href="https://www.visualcapitalist.com/sp/raw-material-inflation-in-canada/" target="_blank" rel="noopener">Visualizing Raw Material Inflation in Canada,</a>&rdquo; June 27, 2022&nbsp; 3&nbsp;Statistics Canada, &ldquo;<a href="https://www150.statcan.gc.ca/n1/daily-quotidien/230619/dq230619a-eng.htm" target="_blank" rel="noopener">Industrial product and raw materials price indexes,</a>&rdquo; May 2023&nbsp; 4,5&nbsp;PwC, &ldquo;<a href="https://www.pwc.com/us/en/industries/industrial-products/library/inflation-supply-chain-manufacturing.html" target="_blank" rel="noopener">Inflation, supply chain snarls and the incredible shrinking margin: What do manufacturers do now?</a>&rdquo; Feb. 16, 2022&nbsp; 6&nbsp;Canadian Manufacturers &amp; Exporters, &ldquo;<a href="https://cme-mec.ca/wp-content/uploads/2022/03/CME-Supply-Chain-Survey-2022-CAN.pdf" target="_blank" rel="noopener">CME Survey on Supply Chains,</a>&rdquo; March 2022

Fluctuations in raw materials costs: What should manufacturers consider?

From automation on the factory floor to customer data in the cloud, new technologies are meant to make manufacturing more efficient, flexible and profitable. But they can also make businesses more vulnerable to cyberattacks, offsetting the gains from digitalization.1 &ldquo;As an industry, manufacturing is being targeted more frequently than it was in the past and costly cyberattacks are becoming more prevalent,&rdquo; says&nbsp;Michael O&rsquo;Connor, Assistant Vice President, Technology and Cyber, Professional Lines, at Sovereign Insurance.&nbsp; In fact, manufacturing was the most attacked sector in 2022, according to IBM Security X-Force Threat Intelligence Index 2023. It was the second consecutive year the manufacturing industry held the top spot in the index. Extortion was the leading cyber incident for manufacturers, seen in 32% of cases, followed by data theft (19%) and data leaks (16%). In the report, IBM states manufacturers are an attractive target for extortion because they have little-to-no tolerance for downtime.2&nbsp;Unfortunately, that can mean paying ransom to cybercriminals is the fastest way for businesses to get back up and running again.&nbsp; &ldquo;In healthcare, a doctor can still see a patient in the middle of a cyberattack,&rdquo; says Michael. &ldquo;But most manufacturers can&rsquo;t function without their network because so much is now automated in the manufacturing process. If you&rsquo;re a car maker and lose your computer network in a hacking event, you can&rsquo;t make cars. So, without the ability to produce goods and services, the loss of revenue for manufacturers can be significantly greater compared to other sectors.&rdquo; In a changing landscape, exposures such as ransomware and business interruption are major risks to manufacturers. &ldquo;Over the past five years, the cyber environment has evolved to the point where ransomware and business interruption risks often exceed liability exposures, which makes manufacturing more susceptible to large losses,&rdquo; says Michael.&nbsp; As manufacturers add new trends and technologies to their toolbox, they need to examine new cybersecurity risks that come along with them. For example, many manufacturers use supply chain integration, which connects processes and information across their supply chains, including vendors, suppliers and customers.3&nbsp; If a supplier&rsquo;s cybersecurity is weak, that could allow cybercriminals to infiltrate a manufacturer&rsquo;s system, for example, through malware. &ldquo;Risk mitigation goes beyond your own company &ndash; you have to also assess the cybersecurity of your suppliers,&rdquo; says Michael. &ldquo;Like any chain, supply chain integration is only as good as its weakest link.&rdquo;&nbsp; Another cyber risk is hybrid work environments. A key exposure here is phishing, a type of cyberattack that tricks users into clicking malicious links, downloading malware or sharing sensitive information.&nbsp; &ldquo;More communication is done over email than face to face, and so manufacturers become more susceptible to phishing attacks,&rdquo; says Michael. &ldquo;And with the pace that everybody is working at, people can be less diligent at reading emails carefully. They&rsquo;ll click on malicious links they believe are from an internal source or are legitimate requests from suppliers.&rdquo;&nbsp;&nbsp; To mitigate this risk, employee cybersecurity training is key. &ldquo;Most companies provide employee training, but you have to make sure you have updated training and that you conduct simulated phishing attacks to put the learning into practice,&rdquo; says Michael.&nbsp; The cloud is another frontier for cyber threats. Manufacturers possess valuable customer data, digital assets and intellectual property that are attractive targets for thieves. &ldquo;As more information goes into the cloud and more employees access it remotely, that data can be less secure than when it was on your own servers,&rdquo; Michael says. &ldquo;While the security at most cloud-computing organizations is good, it is still one more area where your data is exposed.&rdquo;&nbsp; Again, employee training can help maintain strong cybersecurity, as well as measures such as: encryption; access control, which can help prevent unauthorized individuals from accessing sensitive data; monitoring cloud activity; and securing a data backup plan.4 Shoring up cybersecurity is especially important for small- to mid-sized manufacturers, notes Michael. &ldquo;If you can&rsquo;t produce products and fulfill orders because of a cyberattack, your clients have options to go elsewhere, which can be devastating to a smaller business,&rdquo; he says. &ldquo;Once you know the risks, you can start taking preventative steps.&rdquo;&nbsp;
&nbsp;
Sources&nbsp; 1&nbsp;World Economic Forum, &ldquo;<a href="https://www.weforum.org/agenda/2023/03/why-cybersecurity-in-manufacturing-matters-to-us-all/" target="_blank" rel="noopener">Manufacturing is the most targeted sector by cyberattacks. Here&rsquo;s why increased security matters,</a>&rdquo; March 27, 2023&nbsp; 2&nbsp;IBM Security, &ldquo;<a href="https://www.ibm.com/downloads/cas/DB4GL8YM" target="_blank" rel="noopener">X-Force Threat Intelligence Index 2023</a>&rdquo; 3&nbsp;DFreight, &ldquo;<a href="https://dfreight.org/blog/supply-chain-integration-revolutionize-business-operations/" target="_blank" rel="noopener">Supply Chain Integration: Revolutionize Your Business Operations</a>&rdquo;&nbsp; 4&nbsp;EC Council Cybersecurity Exchange, &ldquo;<a href="https://www.eccouncil.org/cybersecurity-exchange/cloud-security/best-cloud-cyber-security-tips/" target="_blank" rel="noopener">10 Tips To Maintain Strong Cloud Cybersecurity,</a>&rdquo; Oct. 6, 2022&nbsp;

For manufacturers, more technology means more cybersecurity risks

When it comes to trade, the world&rsquo;s interconnectedness has many advantages, from improving efficiency and increasing global product availability, to fostering economic growth. However, ongoing supply chain problems, Russia&rsquo;s invasion of Ukraine, and rising geopolitical tensions have put the vulnerabilities of global trade in the spotlight.1&nbsp; For businesses, today&rsquo;s uncertain climate has led to growing sentiment towards &ldquo;nearshoring&rdquo; or &ldquo;deglobalization.&rdquo; For manufacturers, that means sourcing from domestic suppliers and being less dependent on foreign suppliers. A June 2022 survey found that 40% of American brands have included nearshoring in their sourcing strategies for 2023, and 50% of European manufacturers indicated their desire to nearshore supply chains this year.2 That&rsquo;s not to say the world is retreating from globalization. As Barclays notes, deglobalization is not happening uniformly across the planet and, in the U.S. and Europe, the net trend is still towards globalization. However, given the environment, corporations and governments are reconsidering external dependencies and looking closer to home for more resilient growth models.3&nbsp; What&rsquo;s the sentiment among Canadian manufacturers? A 2022 survey by Canadian Manufacturers &amp; Exporters (CME) found that 90% of manufacturers in Canada are facing supply chain disruptions, with over 60% indicating the disruptions are major or severe. More than a quarter (28%) of manufacturers said they are likely to relocate or scale up production in Canada to mitigate supply chain bottlenecks, with the availability and cost of labour named as the biggest hurdles in doing so.4&nbsp; Kyle Meadus, Underwriting Manager at Sovereign Insurance, notes that many issues faced by the manufacturing industry were just heightened by the COVID-19 pandemic.&nbsp; &ldquo;During the pandemic, there was concern that Canada relied too heavily on foreign partners and didn&rsquo;t manufacture enough of our own goods,&rdquo; he says. &ldquo;When supply was minimal to none &ndash; think back to the shortage of children&rsquo;s pain and fever medication, for example &ndash; shelves were bare and panic set in. So, these are some of the hurdles that will continue to happen if we continue to rely too heavily on other regions.&rdquo;&nbsp; Certainly, as the CME survey points out, cost is a barrier. &ldquo;Manufacturing products in North America is expensive and there are other countries that produce goods more cost-effectively,&rdquo; says Kyle. &ldquo;In addition, our dollar impacts our buying power abroad. So, when we do manufacture products in Canada, the majority goes to our biggest trading partner &ndash; the United States. Ultimately, we don&rsquo;t keep enough of our own goods because our weak dollar and strong demand leads to more lucrative opportunities outside of Canada.&rdquo;&nbsp; Although nearshoring or deglobalizing can come with a bigger price tag, finding alternate suppliers can help manufacturers build resilience when the next big disruption hits. Some additional advantages of deglobalization include reduced lead time, risk mitigation, faster shipping and increased sustainability efforts by reducing fossil fuels and pollution.5 Going forward, balance will be the key for manufacturers. &ldquo;There will be a balance of identifying how we produce products within Canada and not being solely reliant on other countries to provide us certain goods,&rdquo; says Kyle. &ldquo;Manufacturers will need to identify suppliers and regions that will enable them to diversify to help ensure supply chains are resilient.&rdquo;&nbsp; For example, Kyle points to the &ldquo;China-plus-one&rdquo; strategy, in which companies avoid investing only in China and diversify their business operations and supply chains into other countries. &ldquo;A Canadian manufacturer might find a supply partner in the U.S. or Mexico, for example, instead of solely relying on China.&rdquo;&nbsp; Wherever a manufacturer lands, they&rsquo;ll have to ensure their insurance policies keep pace with the changing landscape. For example, Contingent Business Income insurance can help reimburse you for your loss of business income if your supply chain is disrupted because of physical loss or damage to property at one or more of your direct or indirect customers, suppliers, contract manufacturers, or contract service providers.&nbsp; &ldquo;If a part comes from another region that experiences a severe weather event, a manufacturer may have to stop production of their product,&rdquo; says Kyle. For example, the 2011 earthquake in Japan&nbsp;<a href="https://www.reuters.com/article/us-japan-quake-supplychain-idUSKCN0WW09N" target="_blank" rel="noopener">crippled parts of the country&rsquo;s auto supply chain</a>. Such events can start a chain reaction to key part manufacturers that distribute to North America, which can shut down assembly lines, halt production and cause a disturbance in the overall global supply chain, explains Kyle. &ldquo;In the supply chain, small things can turn into complex problems fairly quickly, so manufacturers have to protect themselves.&rdquo;&nbsp; Ultimately, brokers and their manufacturing clients must work together and maintain strong relationships. &ldquo;The broker is the gateway to understanding the insured&rsquo;s business, the products they&rsquo;re manufacturing, and their coverage needs,&rdquo; Kyle says. &ldquo;For Sovereign, working hand-in-hand with brokers allows us to provide comprehensive insurance solutions tailored to the unique risks of the industry sector and the client&rsquo;s business.&rdquo;
&nbsp;
Sources&nbsp; 1 McKinsey Global Institute, &ldquo;<a href="https://www.mckinsey.com/mgi/our-research/the-complication-of-concentration-in-global-trade" target="_blank" rel="noopener">The complication of concentration in global trade</a>,&rdquo; Jan. 12, 2023 2 Avison Young, &ldquo;<a href="https://avison-young.foleon.com/ten-trends-for-2023/explore/deglobalisation-30" target="_blank" rel="noopener">(De)globalization 3.0: 10 Trends for 2023</a>&rdquo;&nbsp; 3 Barclays, &ldquo;<a href="https://www.cib.barclays/our-insights/3-point-perspective/Homecoming-The-acceleration-of-deglobalisation.html" target="_blank" rel="noopener">Homecoming: The acceleration of deglobalization,</a>&rdquo; Sept. 28, 2022&nbsp; 4 Manufacturing Automation, &ldquo;<a href="https://www.automationmag.com/survey-nine-of-10-canadian-manufacturers-facing-supply-chain-issues/" target="_blank" rel="noopener">Survey: Nine of 10 Canadian manufacturers facing supply chain issues</a>,&rdquo; March 9, 2022&nbsp; 5 ERP Software Blog, &ldquo;<a href="https://www.erpsoftwareblog.com/2022/07/why-manufacturers-are-embracing-deglobalization-to-strengthen-their-supply-chains/" target="_blank" rel="noopener">Why Manufacturers Are Embracing Deglobalization to Strengthen Their Supply Chains,</a>&rdquo; July 12, 2022

Is deglobalization the answer to supply chain woes?

Manufacturing,Wholesale Warehousing and Transportation

There is no end in sight to the labour shortage, and companies across many sectors are feeling the crunch.&nbsp; According to Statistics Canada, the overall job vacancy rate stands at 5.4%, and rates are particularly high in truck transportation (8%) and construction (6.6%).1 In the latest Canadian Survey on Business Conditions by Statistics Canada, nearly two in five businesses (39.7%) expected obstacles related to recruiting and retaining skilled employees over the next three months. Manufacturing was among the top sectors facing such challenges (49.8%).2 Since there&rsquo;s no quick fix to the ongoing labour problem, businesses must lean into long-term solutions &ndash; and a key one is technology. From bricklaying robots to remotely operated vehicles, technology can help companies in manufacturing, construction and logistics/transportation boost productivity, reduce costs and attract a new crop of recruits.&nbsp; Here&rsquo;s a look at some exciting technologies that can help bridge the talent gap.&nbsp;&nbsp; 
<h5>Robotics&nbsp;</h5>
While the construction industry has historically been slow to adopt automation technologies, that&rsquo;s changing. Robotics have great potential to take over repetitive, physically demanding jobs that can slow workers down, or even injure them.3 In the U.S., Advanced Construction Robotics has developed <a href="https://www.constructionrobots.com/tybot" target="_blank" rel="noopener">TyBOT</a>, which takes care of the &ldquo;repetitive, backbreaking task of tying rebar,&rdquo; the steel bars used to reinforce concrete together where they intersect. TyBOT can self-locate and tie more than 1,100 intersections per hour, or 36,000 in a single work week, which the company says is equivalent to what four to six workers can accomplish.4 FBR, an Australian company dealing in robotic construction, has developed a robotic brick-laying machine called <a href="https://www.fbr.com.au/view/hadrian-x" target="_blank" rel="noopener">Hadrian X</a>. The company says humans have been laying bricks in the same way for the past 6,000 years. But with its technology, FBR says bricklaying can be done with speed and accuracy in outdoor environments, with less waste and improved site safety. 
<h5>3D Printing&nbsp;</h5>
3D printing also holds a lot of promise in construction. This emerging technology can be used to manufacture specific elements or entire buildings by printing materials such as concrete, polymer or metal, layer by layer.5 3D printing is just starting to be used in Canada, with Kingston, Ont.-based <a href="https://nidus3d.com/" target="_blank" rel="noopener">nidus3D</a> printing the country&rsquo;s first multifamily apartment building in Leamington, Ont. last year. The company is now building two large warehouses near Kingston, which are set to become Canada&rsquo;s first 3D-printed buildings permitted for commercial use. Instead of the dozen or so workers that would typically be needed on site, there will be just a few people using mobile devices to operate a large 3D printing machine.6 Experts say 3D printing could revolutionize the industry by reducing the number of people needed onsite, which in turn improves safety. The technology can also increase productivity since work can continue outside of typical hours. 7 But that&rsquo;s not to say workers will be replaced wholesale. In fact, there will be increased demand for people with the skills and knowledge to use new technologies, which presents an opportunity to attract younger, more tech-savvy workers to the construction sector.8 
<h5>Remote and Autonomous Operating</h5>
Remote work isn&rsquo;t just for employees who clack away on their keyboards. Thanks to a Silicon Valley company called <a href="https://phantom.auto/" target="_blank" rel="noopener">Phantom Auto</a>, logistics companies can enable employees to remotely monitor, assist and operate unmanned vehicles (such as forklifts and trucks) from thousands of miles away.&nbsp; The software aims to help logistics companies create a larger labour pool, including employees who might not otherwise be able to do on-site logistics work, for instance, if they have a disability that precludes them from such work. The technology can also be a way to attract employees, as logistics jobs typically involve long hours and commutes, and require physical exertion.9 In construction, remote and autonomous vehicles are gaining acceptance as the technology advances. Caterpillar, for example, has a range of remote-controlled and autonomous solutions under its <a href="https://www.cat.com/en_US/products/new/technology/command.html" target="_blank" rel="noopener">Cat Command</a> product suite. The technology lets users run equipment, such as dozers and excavators, from a remote location offsite or onsite.10 Palo Alto, Calif.-based <a href="https://www.teleo.ai/" target="_blank" rel="noopener">Teleo</a> has developed technology to enable remote, semi-autonomous operations of heavy construction equipment. Any make and model can be retrofitted with the technology.&nbsp; Teleo says the technology can help with the labour problem by making the operator&rsquo;s job more comfortable, which could help attract more people to the industry. It also helps with productivity, as operators can put a machine into autonomous mode while remotely operating a second machine.11 
<h5>Augmented Reality (AR) and Virtual Reality (VR)&nbsp;</h5>
In manufacturing, augmented reality (which combines the digital world with real elements) and virtual reality (a computer-generated simulation) can be used to improve worker productivity through immersive on-the-job training. For example, AR smart glasses that project video, graphics and text can visually guide a worker through assembly or maintenance tasks.12&nbsp; These technologies are also a great way to attract talent. In the U.S., the National Association of Manufacturers&rsquo; annual &ldquo;Creators Wanted&rdquo; campaign has used 3D VR tours featuring several manufacturing facilities to change misconceptions about the industry.13 At an in-person event last year, students could take part in VR paint and assembly training.14 It looks as though businesses are keen to embrace alternate worlds. In a survey of operational leaders, 80% of respondents agreed AR will help their organization gain a strategic/competitive edge. They cited benefits such as increased employee productivity (43%), remote connectivity/collaboration (26%), and accelerated training (32%) &ndash; all of which can help alleviate the labour shortage.15 Technology may not solve all labour woes, but it sure can help. And with the labour shortage likely to continue for many years to come, it&rsquo;s worth a closer look.&nbsp; 
Sources&nbsp; 1 Statistics Canada, <a href="https://www150.statcan.gc.ca/t1/tbl1/en/tv.action?pid=1410032602&amp;pickMembers%5B0%5D=1.7&amp;pickMembers%5B1%5D=3.4&amp;cubeTimeFrame.startMonth=07&amp;cubeTimeFrame.startYear=2022&amp;cubeTimeFrame.endMonth=07&amp;cubeTimeFrame.endYear=2022&amp;referencePeriods=20220701%2C20220701" target="_blank" rel="noopener">&ldquo;Job vacancies, payroll employees, job vacancy rate, and average offered hourly wage by industry sub-sector, quarterly, unadjusted for seasonality,&rdquo;</a> March 21, 2023 2 Statistics Canada, &ldquo;<a href="https://www150.statcan.gc.ca/n1/daily-quotidien/230227/dq230227b-eng.htm" target="_blank" rel="noopener">Canadian Survey on Business Conditions, first quarter 2023,</a>&rdquo; Feb. 27, 2023&nbsp; 3,4 Built In, &ldquo;<a href="https://builtin.com/robotics/construction-robots" target="_blank" rel="noopener">Is the Construction Industry Ready to Embrace Robots?</a>&rdquo; Aug. 31, 2022&nbsp; 5 Technology Cards, &ldquo;<a href="https://www.technologycards.net/the-technologies/construction-3d-printing" target="_blank" rel="noopener">Construction 3D printing</a>&rdquo;&nbsp; 6 The Globe and Mail, &ldquo;<a href="https://www.theglobeandmail.com/business/industry-news/property-report/article-will-3d-printed-buildings-alleviate-the-construction-labour-shortage/" target="_blank" rel="noopener">Will 3-D-printed buildings alleviate the construction labour shortage?</a>&rdquo; Jan. 10, 2023 7 JLL, &ldquo;<a href="https://www.jll.ca/en/trends-and-insights/investor/3d-printed-buildings-push-construction-boundaries" target="_blank" rel="noopener">3D printed buildings push construction boundaries</a>&rdquo;&nbsp; 8 Forbes, &ldquo;<a href="https://www.forbes.com/sites/forbestechcouncil/2022/10/12/construction-tech-and-the-future-of-workers-in-the-industry/?sh=622590444874" target="_blank" rel="noopener">Construction Tech And The Future of Workers In The Industry,</a>&rdquo; Oct. 12, 2022 9 Forbes, &ldquo;<a href="https://www.forbes.com/sites/edgarsten/2023/01/16/phantom-auto-tech-helping-unlikely-workers-fill-logistics-labor-shortage/?sh=205cea3abd9d" target="_blank" rel="noopener">Phantom Auto Tech Helping Unlikely Workers Fill Logistics Labor Shortage</a>,&rdquo; Jan. 16, 2023 10 For Construction Pros, &ldquo;<a href="https://www.forconstructionpros.com/construction-technology/machine-grade-control-gps-laser-other/article/21134012/built-robotics-remote-and-autonomous-construction-equipment-technologies-increase-safety-and-productivity" target="_blank" rel="noopener">Remote, Autonomous Construction Equipment Technologies Increase Safety and Productivity,</a>&rdquo; June 4, 2020&nbsp; 11&nbsp; Pro Builder, &ldquo;<a href="https://www.probuilder.com/utopia/teleo-construction-semi-autonomous-robots" target="_blank" rel="noopener">Teleo Turns Construction Machines into Remotely Operated, Semi-autonomous Robots</a>,&rdquo; March 27, 2023&nbsp; 12 Business.com, &ldquo;<a href="https://www.business.com/articles/virtual-reality-changing-manufacturing/" target="_blank" rel="noopener">How Virtual Reality is Changing Manufacturing,</a>&rdquo; March 23, 2023 13,15 CGS, &ldquo;<a href="https://www.cgsinc.com/blog/how-mixed-reality-helping-offset-labor-shortage-twar" target="_blank" rel="noopener">How Mixed Reality Is Helping to Offset the Labor Shortage,</a>&rdquo; May 11, 2022&nbsp; 14 Creators Wanted, &ldquo;<a href="https://www.creatorswanted.org/creators-wanted-moves-the-needle-in-decatur/" target="_blank" rel="noopener">Creators Wanted Moves the Needle in Decatur</a>&rdquo;&nbsp;
&nbsp;

How technology can help ease the labour shortage

Technology and Cyber,Equipment Breakdown,Liability

An important piece of paperwork in today&rsquo;s trucking industry has been around in some form or another for centuries: the bill of lading. The document&rsquo;s history can be traced as far back as the 13th century, when merchants recognized the need for a written agreement documenting the transport of goods.1&nbsp; Today, a bill of lading (BOL) is a legally binding document summarizing the terms and conditions for a specific shipment. At its simplest, a BOL describes the type, quantity and destination of goods being shipped. It also serves as a receipt for the shipper once the shipment is delivered.2&nbsp; Why is a bill of lading important? The document not only helps ensure the safe and efficient delivery of goods, but it also provides a paper trail that protects both the carrier and shipper by documenting facts about the shipment.3 In addition, a BOL provides the driver and carrier all the details they need to process and invoice the shipment correctly. As one supply chain expert notes, not having this document removes built-in protection for the carrier and makes getting paid for a load, whether through a shipper or broker, extremely difficult.4 While a BOL is one of the most critical documents in shipping and transport today, it can also be used to commit fraud &ndash; and in turn, help protect against fraud. Developing a better understanding of bills of lading and fraudulent schemes can help transportation professionals and their insurance brokers identify and protect against losses.&nbsp; 
<h5>Here are some examples of how a BOL could be used fraudulently:&nbsp;</h5>
 Incorrect and fraudulent bills of lading: A BOL with false information can be used to commit fraud, money laundering and other illegal activity, which is more common with ocean freight.5 But trucking companies should take heed. When picking up loads, drivers should carefully check the BOL before leaving the pickup site, ensuring the items loaded on the truck match the inventory listed in the document. Any agreed upon terms should be listed on the BOL. Drivers are also advised to pay attention to any restrictions on delivery, especially those that could result in docking of pay, such as guaranteed delivery dates. Taking pictures of the load and paperwork can help trucking professionals protect themselves should any issues arise.6 Holding a BOL for ransom: Freight forwarders are legitimate: They act as an intermediary between the company making shipment and the final destination for the goods.7 But there are imposters. In a fraud scheme, a scammer (typically online) will pretend to be a freight forwarder offering unreasonably low rates. When the goods arrive at the port of loading, the scammer will withhold the BOL, which is required for the release of the shipment. They then proceed to contact the client and demand more money if they want to receive their goods.8 If the BOL is not released, it can cause severe supply chain delays and disruption. It can also cost companies thousands of dollars in losses, especially if quality of their goods is affected due to disruptions.9 Most ransom situations involve pirates and ocean-going cargo vessels; in trucking, this type of crime is much less prevalent. However, there have been incidents of drivers holding their cargo for ransom from their employer or the broker. Trucks and cargo aren&rsquo;t usually hijacked and held for ransom; they&rsquo;re simply stolen. The thief is usually intent on selling the stolen goods on the black market. Double brokering scheme: With some fraudulent acts, such as double brokering, a BOL can be a carrier&rsquo;s first line of defense. Double brokering occurs when a broker or carrier transfers a load to another trucking company without notifying the shipper. An unauthorized load transfer can lead to many potential risks, including liability, reputational damage and delayed or absent payments. In fact, carriers run a high risk of not being paid after hauling a double-brokered load and may have trouble identifying and contacting the original broker responsible for the load.10 The BOL can help carriers protect themselves from falling prey to double brokering. A BOL requires three signatures: the shipper&rsquo;s, the carrier&rsquo;s, and the receiver&rsquo;s. The shipper&rsquo;s signature confirms the quantity and quality of the loaded goods meet the industry standard, the carrier&rsquo;s signature verifies the load was in good condition upon receipt, and the receiver&rsquo;s signature verifies that goods were received.11 If you&rsquo;re a carrier and your name is not on the BOL, that&rsquo;s a red flag.12 With any type of paperwork&mdash;and there&rsquo;s still a lot of it in the trucking industry&mdash;the unfortunate reality is fraud does happen. By ensuring all the i&rsquo;s are dotted and t&rsquo;s are crossed on bills of lading, trucking professionals can guard against becoming a victim.&nbsp;
Sources&nbsp;
1 ATS, &ldquo;<a href="https://www.atsinc.com/blog/what-is-bill-of-lading-freight-shipping-definition" target="_blank" rel="noopener">What is a Bill of Lading (BOL) in Freight Shipping?</a>&rdquo; 2 Parseur, &ldquo;<a href="https://parseur.com/blog/what-is-a-bill-of-lading" target="_blank" rel="noopener">The Beginner&rsquo;s guide to Bill of Lading in 2023</a>,&rdquo; April 4, 2023 3 Redwood, &ldquo;<a href="https://www.redwoodlogistics.com/what-is-a-bill-of-lading-and-why-is-it-important/" target="_blank" rel="noopener">What is a Bill of Lading and Why is it Important</a>?&rdquo;&nbsp; 4 Truckers News, &ldquo;<a href="https://www.truckersnews.com/trucking-101/article/15114214/what-is-a-bill-of-lading-whys-it-so-important" target="_blank" rel="noopener">What is a Bill of Lading? Why&rsquo;s it so important?</a>&rdquo; Sept. 3, 2021 5 Safety4Sea, &ldquo;<a href="https://safety4sea.com/imb-protects-shipping-against-fraudulent-bills-of-lading/" target="_blank" rel="noopener">IMB protects shipping against fraudulent bills of lading</a>,&rdquo; Sept. 16, 2019&nbsp; 6 Western Truck Insurance Services, &ldquo;<a href="https://www.truckinsure.com/paperwork-fraud-dont-be-a-victim/">Paperwork Fraud: Don&rsquo;t Be A Victim</a>,&rdquo; Dec. 2, 2013&nbsp; 7 DSV, &ldquo;<a href="https://www.dsv.com/en-ca/support/faq/what-is-freight-forwarding" target="_blank" rel="noopener">What is freight forwarding</a>?&rdquo;&nbsp; 8 Best Yet Express, &ldquo;<a href="https://www.bestyetexpresstrucking.com/freight-fraud-scam/" target="_blank" rel="noopener">Freight Fraud Is a Real Problem. Here&rsquo;s How to Avoid Scams</a>,&rdquo; July 6, 2022 9 Global Trade, &ldquo;The Rising Risk of Cyber Crime in the Supply Chain,&rdquo; Dec. 22, 2022 10 eCapital, &ldquo;<a href="https://ecapital.com/en-ca/blog/dont-let-your-trucking-company-get-trapped-by-double-brokering/" target="_blank" rel="noopener">Don&rsquo;t Let Your Trucking Company Get Trapped By Double Brokering</a>&rdquo; 11 Commonwealth Capital, LLC, &ldquo;<a href="https://commonwealthmn.com/invoice-factoring-articles/one-thing-must-every-bill-lading" target="_blank" rel="noopener">The One Thing that Must Be on Every Bill of Lading</a>&rdquo; 12 Transport Dive, &ldquo;<a href="https://www.transportdive.com/news/owner-operator-tips-to-avoid-double-brokering-fraud-schemes/644898/" target="_blank" rel="noopener">3 red flags that could signal a double-brokerage scheme,</a>&rdquo; March 14, 2023

What You Need to Know About Bills of Lading and Fraud

It&rsquo;s a perfect storm.&nbsp; That&rsquo;s how Kevin Dutchak, Senior Risk Specialist at Sovereign Insurance, describes Canada&rsquo;s ongoing truck driver shortage. In the second quarter of 2022, the number of vacant driver jobs peaked at 28,210, remaining high at 26,900 in the third quarter &ndash; a 7.9% vacancy rate, according to the latest Labour Market Snapshot (Jan. 2023) by Trucking HR Canada, a national non-profit organization.1 &ldquo;During the pandemic, many drivers left the industry and as we&rsquo;ve eased back into things, a lot of those drivers aren&rsquo;t coming back,&rdquo; says Kevin. &ldquo;They&rsquo;ve either retired or they have found jobs in other industries.&rdquo;&nbsp; At the same time, Kevin notes, the industry&rsquo;s workforce is getting older. In fact, 35% of Canada&rsquo;s truck drivers are 55 and older, compared to 22% of workers who are in that age group in all sectors. The industry also has some of the lowest representation of women, accounting for less than 4% of truck drivers.2&nbsp; &ldquo;There&rsquo;s not a whole lot of young blood in the industry,&rdquo; Kevin says. &ldquo;In my experience, you don&rsquo;t see a whole lot of new drivers getting into it.&rdquo; On this front, research shows only 9.5% of truck drivers in Canada are younger than 30, compared to 24% of the entire Canadian labour force, and only 28%, are younger than 40, compared to 45% of the entire Canadian labour force.3 A few factors discourage workers from wanting to pursue trucking, according to Trucking HR Canada. The organization says the industry&rsquo;s image suffers from &ldquo;misleading stereotypes,&rdquo; especially among millennials, and trucking is not viewed as a long-term career choice. Work-life balance is also a priority for today&rsquo;s workers, including reasonable pay and benefits, a predictable schedule, safe working conditions, and job stability.4 This perfect storm of factors adds up to a hefty price tag. In 2020, Trucking HR Canada estimated that the driver shortage was costing the truck transportation industry as much as $3.1 billion in lost revenues every year.4 And the trucking industry isn&rsquo;t the only one bearing the load of the driver shortage. The Canadian Trucking Alliance (CTA) reports that the consequences for businesses that rely on trucking &ndash; from farmers to grocers to auto parts manufacturers &ndash; include cost increases of up to 30%, inventory bottlenecks, manufacturing disruptions, and risks to national food security.5 While there&rsquo;s no quick fix to solving labour woes, there is a range of ways to help attract and retain workers, including promoting the positive aspects of trucking and logistics (such as steady work and a sense of freedom and independence); promoting safety policies and procedures; introducing financial subsidies for education and training; and addressing perceptions of the trucking industry among women and younger generations.6&nbsp;&nbsp; Kevin, who actually worked as a truck driver early in his career, says the industry has to think outside the box. &ldquo;There&rsquo;s not a whole lot of interest in going on the road, being away from the family for two or three weeks, and spending that time in the sleeper berth,&rdquo; says Kevin. &ldquo;So, the number of drivers looking to do long hauls are waning. While we still need drivers to go cross-country, a lot of carriers are becoming more centralized in their regions and looking at options such as interline services and rapid relay trucking.&rdquo; Typically that means drivers meet at key transport hubs, swap trailers, and return to their home terminal every night.&nbsp; &ldquo;It&rsquo;s not without its challenges &ndash; there are some cargo transport situations that would be difficult to manage with a rapid relay system,&rdquo; says Kevin. &ldquo;But it&rsquo;s one way the trucking industry can adapt in order to make it more attractive.&rdquo;&nbsp; When drivers do get hired, it&rsquo;s important they are given all the tools necessary to be successful in the industry. &ldquo;To get it right, we have to make sure entry-level drivers are given appropriate mentorship, and that all drivers are provided with the right resources, support, and training to set them up for success,&rdquo; says Kevin.&nbsp;&nbsp; That can mean anything from enhanced employee perks to creating incentives tied to driver scorecards, a performance evaluation tool typically based on metrics like speeding, aggressive behaviour, or idling. Instead of using scorecards to provide only negative feedback, Kevin says it can be used to offer rewards for achievements and provide positive feedback. &ldquo;We have to continue to adapt the way trucking is portrayed to the wider audience, especially if we&rsquo;re going to attract people to the industry.&rdquo;&nbsp; Investing in drivers and showing you care will also go a long way. &ldquo;Companies that treat drivers with respect and invest in their success have a great reputation &ndash; and that drives people to the door,&rdquo; says Kevin.&nbsp; While the labour shortage is unquestionably challenging for trucking companies, there is one cautionary note from an insurance perspective. &ldquo;Do not let your guard down,&rdquo; he says. &ldquo;Make sure your driver screening process is as robust as it always was and don&rsquo;t drop your standards. By not performing your due diligence, you start to take additional risks and that will increase the risk of loss.&rdquo;&nbsp;&nbsp;
&nbsp;
&nbsp;
Sources&nbsp; 1 Trucking HR Canada, &ldquo;<a href="https://truckinghr.com/wp-content/uploads/2023/01/LMI-Snapshot-Jan-2023-1.pdf" target="_blank" rel="noopener">Labour Market Snapshot,</a>&rdquo; Jan. 2023 2 Trucking HR Canada, &ldquo;<a href="https://truckinghr.com/wp-content/uploads/2022/10/Opening-Remarks-House-Standing-Committee-Oct.17-2022.pdf" target="_blank" rel="noopener">Opening Remarks to the House of Commons Standing Committee on Transport, Infrastructure and Communities...</a>&rdquo; Oct. 17, 2022 3,6 Trucking HR Canada, &ldquo;<a href="https://truckinghr.com/wp-content/uploads/2022/02/Driving-Talent-to-Trucking-and-Logistics-Dec-2021-FINAL.pdf" target="_blank" rel="noopener">Driving Talent to Trucking and Logistics</a>,&rdquo; Dec. 2021 4 Trucking HR Canada, &ldquo;<a href="https://truckinghr.com/wp-content/uploads/2022/11/LMI-Snapshot-NOV-2022.pdf" target="_blank" rel="noopener">Labour Market Snapshot,</a>&rdquo; Nov. 2022&nbsp; 5 Canadian Truck Alliance, &ldquo;<a href="https://cantruck.ca/editorial-solving-the-truck-driver-shortage-is-an-investment-in-canada/" target="_blank" rel="noopener">Solving the truck driver shortage is an investment in Canada</a>,&rdquo; April 12, 2022

To combat the labour shortage, the trucking industry has to adapt

A New Year is always a good time to look inward. But Sovereign Insurance is going strong into 2023 with a decidedly external focus.&nbsp; &ldquo;The strategic period that we ended last year was internally focused &ndash; and it needed to be as we strengthened our business infrastructure,&rdquo; explains <a href="https://www.sovereigninsurance.ca/our-team/calgary/dave-mckeen" target="">Dave McKeen</a>, Vice President, Commercial Solutions, Underwriting and Risk Engineering.&nbsp; As part of Sovereign&rsquo;s evolution, he explains, the company bolstered its talent development process, developed a new product suite, and invested in new technology to support its latest offering. &ldquo;Now, with much of that work under our belt, our new four-year strategy is about looking externally and deploying our new capabilities into the market,&rdquo; says Dave.&nbsp; All of these transformative developments have a key goal in mind: to be a stronger partner for Sovereign&rsquo;s brokers, managing general agent (MGA) partners, and end clients. &ldquo;The pace of business has sped up for them and there is greater need for an insurance company that brings more than just a piece of paper and a promise to the table,&rdquo; says Dave. &ldquo;They need a partner that brings expertise to help navigate issues and solve problems in the industries and client bases they serve.&rdquo;&nbsp; Fittingly, Sovereign named this approach &ldquo;partners in resilience&rdquo; &ndash; and this was before today&rsquo;s economic volatility and geopolitical unrest was front and centre. But these uncertain times make Sovereign&rsquo;s focus on the ever-changing needs of partners and clients more relevant and important than ever.&nbsp; &ldquo;We are focused on understanding the issues their businesses are facing, so that we are able to effectively navigate their changing insurance needs and be in a true partnership with them along the way,&rdquo; says <a href="https://www.sovereigninsurance.ca/our-team/toronto/colette-taylor" target="">Colette Taylor</a>, Chief Operating Officer. &ldquo;By building greater sophistication into our business, we can build a tripartite relationship and work together on the risk-management needs of our end clients.&rdquo; Ahead of the new strategy, Sovereign <a href="https://www.globenewswire.com/news-release/2022/09/30/2525924/0/en/Trisura-Acquires-Sovereign-Insurance-s-Surety-Business.html" target="_blank" rel="noopener">divested its surety business in Canada</a> in September 2022. &ldquo;Over the past couple of years, we have worked to strongly position Sovereign as a niche commercial and specialty insurer,&rdquo; says Colette. &ldquo;We made the decision to focus on our core property and casualty products, and the divestiture of our surety business will allow us to put all our resources into the space we&rsquo;re in.&rdquo;&nbsp; While the new product suite isn&rsquo;t on the market yet, Dave provides a hint of what brokers and clients can expect when it launches later this year. &ldquo;It&rsquo;s an integrated series of products that provide holistic, flexible solutions aimed at specific industries, such as construction, manufacturing, warehousing and others,&rdquo; he says. &ldquo;We have approached this offering from the lens of the client, with a suite of products relevant to their needs and tailored to their industry.&rdquo;&nbsp; To deliver its latest product suite, Sovereign is implementing a leading-edge policy administration system. The new system will enable Sovereign to tailor its products to end clients more consistently and accurately.&nbsp; Central to supporting these exciting initiatives is Sovereign&rsquo;s strong financial foundation. Sovereign is a wholly owned subsidiary of Co-operators General Insurance company, which (as of 2021) has $9 billion in assets and a net income of $512.4 million. Sovereign is also proud to carry an &ldquo;A&rdquo; (Excellent) rating from AM Best, a global credit agency specializing in the insurance industry.&nbsp;
&ldquo;We continue to grow and have solid financial results, and we now have a platform to grow even more in our specific areas,&rdquo; says <a href="https://www.sovereigninsurance.ca/our-team/toronto/matthew-campbell" target="">Matthew Campbell</a>, Vice President of Finance, Operations &amp; Claims. &ldquo;As a niche player, operating within our appetite for risk is very important, and it allows us the financial outcome that we want to support our purpose as an organization.&rdquo;&nbsp; As Sovereign continues to grow its business and support its clients, the company hasn&rsquo;t lost sight of supporting the community. A key focus for Sovereign is its community impact work focused on <a href="https://www.sovereigninsurance.ca/diversityinclusionjourney" target="">Diversity, Equity and Inclusion (DEI)</a>. While Sovereign doesn't proclaim to be experts in DEI, the organization is committed to learning, changing, and making a significant impact within the insurance industry. So far, they've focused on topics like mental health, Indigenous reconciliation, and 2SLGBTQ+ allyship. In addition to making monetary donations, Sovereign is learning how it can provide more support to various individuals and groups.&nbsp; &ldquo;We want to be very authentic in our community impact work,&rdquo; says Colette. &ldquo;We are not experts in these areas, but we are on a journey of learning and we have invited our partners to be on that journey with us. We are going to continue to shed light on areas where we could all be learning more.&rdquo;

What's ahead for Sovereign in 2023 and beyond with Colette Taylor, Dave McKeen, and Matthew Campbell

What's ahead for Sovereign in 2023 and beyond

As part of our second annual year-end Q&amp;A series, Sovereign&rsquo;s <a href="https://www.sovereigninsurance.ca/our-team/halifax/bob-lawlor" target="">Bob Lawlor,</a> <a href="https://www.sovereigninsurance.ca/our-team/halifax/bob-lawlor" target="">Senior Casualty Specialist &ndash; Atlantic Region</a>, shares his thoughts on construction industry loss trends in 2022 and how businesses can strive to mitigate risks in the year to come.&nbsp; 
<h5>What are the loss trends/key exposures you saw in 2022?&nbsp;</h5>
The reality is, they haven&rsquo;t changed significantly compared to the previous year. In 2022, we continued to see rising building and material costs, which can leave commercial building owners exposed from an insurance standpoint. Property insurance policies have what&rsquo;s called a co-insurance clause, which typically requires policyholders to insure 90% of the replacement value of the property. If an insured doesn&rsquo;t keep their values up to date based on current replacement costs, they would have to pay the difference out of pocket. There&rsquo;s a formula for calculating this, but to do the quick math: if a $1 million building is insured for $500,000, you&rsquo;ll only get 50 cents on the dollar. So, making sure property owners have the proper insured values is an ongoing issue.&nbsp; <a href="https://www.sovereigninsurance.ca/advice-and-tools/managing-risk/cost-of-construction-materials" target="">See: Cost of construction materials: Is your building adequately insured?&nbsp; </a> Another loss trend &ndash; and this won&rsquo;t shock anyone &ndash; is supply chain issues. Everyone has read about microchip shortages and certain food shortages, but in construction it&rsquo;s things like insulation, copper wire, and electric panels. This leads to delays that can derail construction timelines and result in financial losses. There&rsquo;s a similar story with another ongoing challenge: the labour force shortage. It&rsquo;s increasingly difficult to find skilled construction workers, which can also lead to missed budgets and timelines.&nbsp; 
<h5>What are some of the emerging risks to keep an eye out for next year?&nbsp;</h5>
Insurance companies and contractors in Canada, and around the world, are paying more attention to climate change and extreme weather events. Flooding is really on insurance companies&rsquo; radars now because of so many incidents we&rsquo;ve had in Canada, with Hurricane Fiona in Atlantic Canada being one. Wildfires are also occurring more frequently.&nbsp; 
<h5>How can organizations mitigate these risks?&nbsp;</h5>
With regards to building values, it&rsquo;s the insured&rsquo;s responsibility to make sure their building and property values are correct. So, they should regularly review their insurance coverages with their broker.&nbsp; When it comes to the supply chain issue, that&rsquo;s a difficult one. But one way businesses can try to mitigate losses is to expand their supplier pool rather than rely on one supplier. That&rsquo;s easy to say and probably not easy to do, but it&rsquo;s one avenue they can look at.&nbsp; <a href="https://www.sovereigninsurance.ca/advice-and-tools/managing-risk/5-ways-to-mitigate-supply-chain-risks" target="">See: 5 ways to mitigate supply chain risks </a> On the labour force challenge, the construction industry, government, and various organizations are all looking at ways to attract and retain workers. For example, there are initiatives to get more young people and women into the trades. Companies are also looking at how to retain their current workforce, whether it&rsquo;s through compensation, benefits, time off and/or being flexible.&nbsp; <a href="https://www.sovereigninsurance.ca/advice-and-tools/hot-topics/the-impact-of-the-skilled-labour-shortage" target="">See: The impact of the skilled labour shortage </a> Finally, with any potential loss, it&rsquo;s important to have a business continuity plan. This should include everything from who to contact during an emergency, how to keep your suppliers going, and how to keep operations running when there&rsquo;s no power. A business continuity plan should help mitigate losses and should help owners get back in business quickly.&nbsp; <a href="https://www.sovereigninsurance.ca/advice-and-tools/managing-risk/5-steps-for-developing-a-business-continuity-plan" target="">See: 5 steps for developing a business continuity plan</a>

Loss trends and emerging risks: Construction

As part of a year-end Q&amp;A series, <a href="https://www.sovereigninsurance.ca/our-team/calgary/razvan-Ionescu" target="">Razvan Ionescu</a>, Underwriting Specialist, Equipment Breakdown at Sovereign Insurance, shares his thoughts on a key equipment breakdown loss trend from 2021, and what to watch out for in 2022. What are the loss trends/key exposures you&rsquo;ve seen in the past year? One loss trend is power fluctuations that cause damage to equipment, especially electronic equipment. There are several causes for a power surge, including electrical overload, faulty wiring, lightning strikes, and the restoration of power by an electric company following an outage. Voltage spikes can degrade cable insulation and destroy electronic components such as motherboards, which can result in downtime, lost income, and replacement costs for businesses.&nbsp; What are some of the emerging risks to keep an eye out for in 2022? One emerging risk that increases the downtime in a loss situation, is supply chain disruption. In early 2020 we saw non-essential industries shut down or reduce capacity due to the pandemic. The shutdowns created shortages of raw materials, key components, and subsequently a shortage of finished products. Later in 2020, demand for new products increased to pre-pandemic levels, however the shortage in raw material and key components made deliveries of finished products difficult. The increase in demand also created a disruption in logistics, including port of entry backlogs, warehouse availability and a shortage of truck drivers. As the supply chain continues to be disrupted, key questions arise for businesses that may need to replace equipment: Is the product available? And if it is available, how long will it take to receive it?&nbsp; See: <a href="https://www.sovereigninsurance.ca/advice-and-tools/managing-risk/where-is-your-supply-chain-most-vulnerable" target="">Where is your supply chain most vulnerable?</a> How can organizations mitigate these risks?&nbsp; When it comes to power fluctuations, organizations should identify locations or equipment critical to operations that could be affected by voltage spikes. There are a number of surge protectors on the market that prevent power surges from damaging electronics. Some considerations include: an upstream overload protection, surge protection on secondary panels, and an overload protection for each piece of electronic equipment.&nbsp; In the face of supply chain disruption, preventative maintenance is key. This will keep the equipment running and prevent costly downtime. In the event of a loss, organizations can reduce downtime by having the following: spare parts for key components in stock; a local supply of equipment and parts; a spare contract with the supplier to guarantee the availability of the part for the time of the contract; and a reciprocal agreement for spare parts and/or services with a similar company.&nbsp;

Loss trends and emerging risks: Equipment Breakdown

More than a decade ago, many business leaders viewed sustainability and green initiatives as an expense they had to incur to protect the reputation of their business. They believed revenue would suffer if they weren&rsquo;t seen to be making some effort to &ldquo;go green.&rdquo; Echoes of that remain today, but there&rsquo;s been a significant attitude change.
Today, we&rsquo;re more aware than ever before of the impact of our practices on the environment. Sustainability is an important moral and ethical responsibility for every business. But that doesn&rsquo;t mean green initiatives aren&rsquo;t also benefiting businesses. Increasingly, sustainable, green business practices help companies save money through operational efficiencies and lower costs. In fact, this trend could be detected as far back as a 2011 McKinsey study.1

<h4>Short-term pain for long-term gain </h4>
Going green doesn&rsquo;t come cheap. Depending on your business, there&rsquo;ll likely be an initial outlay for new equipment and upgrades, more efficient manufacturing processes, better recycling strategies, and the costs of employee training and education. These expenditures can be daunting and cause many to shy away from exploring these initiatives or take a reduced-cost approach that can be inefficient over the medium and long term.
There&rsquo;s evidence to show these improvements will pay off. Upgrading equipment, lighting, manufacturing processes, and conducting regular equipment inspections lowers your costs over time. Consider that by simply replacing old computers and monitors with ENERGY STAR&reg; certified models, your company could save up to 75% in electricity costs.2&nbsp;Plus, improving recycling strategies reduces the amount of waste your company produces at a time when the cost of shipping to landfills is increasing. These are just two examples of ways that your company can help make the Earth a greener place, as well as benefit your business in the long run. 
<h4>An opportunity to spark innovation </h4>
Businesses that regard sustainability as an opportunity rather than an obligation not only see new opportunities first but also understand that they can increase revenues by identifying and addressing social problems that intersect with their business.3
For example, your company may make gains by redesigning some of its products to make them more environmentally friendly. Meeting that challenge leads to innovation and the creation of better products, which can give your company increased market share and a foothold in new markets. In addition, there are cost savings experienced from the development of operational efficiencies through a systematic approach to management that includes continuous improvement.4&nbsp;As your company develops money-saving efficiencies and expertise, you&rsquo;re able to achieve an edge over your competitors.
<h4>Get ahead of government regulations and your competition </h4>
Being on the forefront of change allows your business to prepare for new regulatory requirements rather than simply reacting to them. It buys you added time to experiment with solutions to operational or procedural problems, leading to more efficient processes and a positive impact on the bottom line.5
When your company is in the vanguard of change, government will often look to you for input when developing industry standards. This allows your company to become a recognized spokesman for industry concerns and align your business practices with impending regulations in advance. This can also give your business advance notice and planning time to take advantage of any tax savings the government rolls out at the outset of a new program to incentivize businesses to get onboard.
Green initiatives will undoubtedly always be part of reputation management. Today though, the drive to use more sustainable business practices is also motivated by the desire to lower costs, encourage innovation, and gain a competitive edge. And we cannot forget that these initiatives are an important responsibility that all businesses have &ndash; the responsibility for our planet and its resources and eco-systems, which benefits us, our children and future generations. More and more, business leaders understand the myriad of benefits that come with integrating corporate social responsibility and green efforts into their overall business strategies.
&nbsp;
1 McKinsey &amp; Company, &ldquo;<a href="https://www.mckinsey.com/business-functions/sustainability/our-insights/the-business-of-sustainability-mckinsey-global-survey-results" target="_blank" rel="noopener">The Business of Sustainability</a>&rdquo;, October 2011, Accessed May 15, 2019. 2 Toronto Hydro. &ldquo;<a href="https://www.torontohydro.com/for-business/tips-and-resources" target="_blank" rel="noopener">Business tips &amp; resources</a>&rdquo;, Accessed May 15, 2019. 3 Tensie Whelan and Carly Fink, &ldquo;<a href="https://hbr.org/2016/10/the-comprehensive-business-case-for-sustainability" target="_blank" rel="noopener">The comprehensive business case for sustainability</a>&rdquo;, Harvard Business Review, October 21, 2016. 4 Hohnen, Paul, &ldquo;<a href="https://www.iisd.org/publications/corporate-social-responsibility-implementation-guide-business">Corporate Social Responsibility. An Implementation Guide for Business</a>&rdquo;, International Institute for Sustainable Development. 2007. 5 Nidumolu, Ram, &ldquo;<a href="https://hbr.org/2009/09/why-sustainability-is-now-the-key-driver-of-innovation" target="_blank" rel="noopener">Why Sustainability Is Now the Key Driver of Innovation</a>&rdquo;, Harvard Business Review, September 2009.

How green initiatives can save your company money

Green is green: How green initiatives can save your company money

As part of a year-end Q&amp;A series, Sovereign&rsquo;s <a href="https://www.sovereigninsurance.ca/our-team/toronto/ray-larkey" target="">Ray Larkey</a>, Senior Underwriting Specialist, Property &amp; Casualty, shares his thoughts on some of the popular property and liability loss trends from 2021, and what to watch out for in 2022.&nbsp; What are the loss trends/key exposures you saw in the past year?&nbsp; As many of us have experienced personally with spending more money for groceries and gas, there is an increased inflation trend that we haven&rsquo;t seen in many years. This higher inflation trend to insurance claim costs is an increased exposure for both property and liability lines of business. With the effect of increased rebuilding costs as a result of inflation, along with the market pressure of supply shortages, we can expect the average value of a claim to continue to increase. In some cases, the problem is exacerbated as long backlogs in building supplies results in a longer downtime for clients and longer business interruption periods. A key exposure for underwriters is this increased inflation effect on claims within a book of business and the challenge to adequately price the business in a changing economic market. See: <a href="https://www.sovereigninsurance.ca/advice-and-tools/managing-risk/cost-of-construction-materials" target="">Cost of Construction Materials: Is your building adequately insured?</a> What are some of the emerging risks to keep an eye out for next year?&nbsp; As all Canadians saw in British Columbia in the fall of 2021 with flooding along with the wildfires in the summer, the effect of weather is increasingly on everyone&rsquo;s mind and continues to emerge as an insurance risk. With more extremes in heat temperatures and rainfalls, we are seeing unprecedented weather and real change in weather patterns. Given the increased severe storms, the old weather patterns would seem to no longer apply, making it more difficult to predict/model future catastrophic events and costs. It will be interesting to see how the industry responds to this emerging risk and reconsiders past weather assumptions such as historical flood 50- to 100-year event designations. See: <a href="https://www.sovereigninsurance.ca/advice-and-tools/hot-topics/top-3-climate-change-risks-your-business-should-prepare-for" target="">Top 3 climate change risks your business should prepare for</a> How can organizations mitigate these risks?&nbsp; Organizations need to review and understand what their current insurance policy covers and also what&rsquo;s available in the insurance market with respect to catastrophic perils including wildfires, floods and water damage. With the increased potential of larger losses and total losses, businesses also need to reevaluate their property policy limits and ensure limits are updated to reflect current replacement costs. In addition, they need to consider &lsquo;what if&rsquo; large loss scenarios and the resulting potential effects of long downtimes both from an insurance and business perspective, through an increased attention to catastrophic event planning.

Loss trends and emerging risks: Property/Liability

Featuring: Kevin Dutchak, Audra Butt, and Leah Strader&nbsp;
As part of a year-end Q&amp;A series, three experts at Sovereign Insurance share the loss trends from 2021 and what to watch out for in 2022 in the transportation sector.&nbsp; KEVIN DUTCHAK, RISK SPECIALIST, COMMERCIAL AUTO What were the loss trends/key exposures you saw this past year? For fleet owners and operators, the loss trends I saw in 2021 were along the lines of sideswipe/lane change losses, rear-end collisions, and backing incidents whereby the driver strikes an object when backing up (pro tip: think GOAL&hellip;<a href="https://www.sovereigninsurance.ca/advice-and-tools/managing-risk/get-out-and-look-goal-in-action" target="">Get Out And Look</a>). The majority of these losses are related to driver behaviour issues, such as not following proper procedures or taking unnecessary risks. In addition to looking at loss trends, it&rsquo;s also important to look at loss severity. For example, the potential for a rear-end collision to be a severe loss event is significant.&nbsp;&nbsp; What are some of the emerging risks to keep an eye out for next year? While this isn&rsquo;t new, an ongoing risk is the lack of a sound driver-selection process. Many companies aren&rsquo;t doing pre-hire road tests, reasoning that the drivers they&rsquo;re hiring are experienced so pre-hire road tests aren&rsquo;t necessary. I always say it&rsquo;s great that the drivers are experienced, but without a pre-hire road test we don&rsquo;t know if they have the appropriate behaviours for the position. These include everything from doing pre-trip inspections to driving behaviours like using signals properly and taking sound defensive driving actions. When screening applicants, the focus should be on driver competency, not just experience. See: <a href="https://www.sovereigninsurance.ca/advice-and-tools/managing-risk/the-importance-of-pre-hire-road-tests" target="">The importance of pre-hire road tests</a> How can organizations mitigate these risks? It&rsquo;s critical for operators to hire the right drivers and do their due diligence, including conducting reference checks with previous employers and conducting pre-hire road tests. It&rsquo;s also important to hold orientation and training to provide new hires with information about the specific needs of the company. For example, what are your company policies? What are your expectations of your drivers? When you consider the importance of being safe on the road and the cost of equipment, it&rsquo;s more than worth the relatively small investment of pre-hire road tests and training. Final point &ndash; periodic refresher training with existing drivers will guard against complacency, ensuring the safety of all drivers within the fleet. See: <a href="https://www.sovereigninsurance.ca/advice-and-tools/managing-risk/best-practices-for-hiring-and-onboarding-new-drivers" target="">Best practices for hiring and onboarding new drivers</a> AUDRA BUTT, AUTO UNDERWRITING MANAGER&nbsp; What were the loss trends/key exposures you saw this past year? One loss trend is the theft of catalytic converters, a car part that contains trace amounts of precious metals. The value of these metals has risen significantly over the past few years, so catalytic converters continue to be an attractive target for thieves.&nbsp; See: <a href="https://www.sovereigninsurance.ca/advice-and-tools/managing-risk/catalytic-converter-thefts-are-revving-up-but-they-can-be-prevented" target="">Catalytic Converter Thefts are Revving Up, but they can be Prevented</a> The second loss trend involves thieves exchanging locks on gates at truck yards and construction sites. When a worker unlocks the gate, oftentimes they leave it hanging on the gate rather than locking up again. Thieves will come along and switch the lock with an identical-looking one. Then when the workers lock up and leave the site, the thieves have free access to the yard where they can steal equipment and cargo.&nbsp; See: <a href="https://www.sovereigninsurance.ca/advice-and-tools/managing-risk/be-aware-of-lock-swaps" target="">Be aware of lock swaps. Protect your business.</a> What are some of the emerging risks to keep an eye out for next year? Catastrophe loss should be on everyone&rsquo;s radar. For example, with recent floods and mudslides in B.C., many commercial vehicles are being rerouted into the U.S. and coming back into Canada. So, we will be seeing more U.S. exposure on accounts that previously had none. Another risk to watch is having too much of an accumulation of vehicles at one location. In this scenario, if there&rsquo;s a flood, fire or other disaster, all the vehicles will potentially be impacted.&nbsp; How can organizations mitigate these risks? When it comes to theft, increased security measures are the primary course of action. Security measures should range from administrative controls such as company policies, to enhanced on-site security measures, to prevention measures on the equipment itself. With catastrophe losses, it&rsquo;s important to pay close attention to new exposures that could potentially happen in existing policies. Organizations should also consider having their vehicles spread out at different locations where possible.&nbsp; LEAH STRADER, SENIOR UNDERWRITING SPECIALIST&nbsp; What were the loss trends/key exposures you saw this past year? When it comes to commercial trucking and transportation, we&rsquo;re seeing higher exposures and greater severity of losses. After the Humboldt tragedy in Saskatchewan, the public wants to be assured that big heavy trucks aren&rsquo;t going to be a hazard when they&rsquo;re sharing the same roads. As a result of loss severity, the market is tightening up on the types of limits that are available, which makes it more challenging for brokers to place an entire account with one carrier.&nbsp; What are some of the emerging risks to keep an eye out for next year? Autonomous commercial vehicles&mdash;with no driver at the wheel&mdash;is becoming a reality in some global markets. There&rsquo;s still a lot of testing being done on autonomous vehicles and with liability issues, again, the public is demanding that these vehicles are safe. On top of that, there is the question of whether autonomous vehicles would fall under an auto policy or P&amp;C because they&rsquo;re controlled by systems. While some people believe autonomous vehicles are just around the corner and others think they&rsquo;re still many years away, this emerging technology is definitely one to watch.&nbsp; How can organizations mitigate these risks? Fleet owners and operators have to make sure they have all their ducks in a row in terms of safety and maintenance. It&rsquo;s critical to conduct frontline training and ensure drivers know what the rules are, sign off on the rules every year, and follow them. From a carrier and broker perspective, it&rsquo;s important to work together and have a true partnership. At Sovereign, we value working with brokers who are knowledgeable in transportation, provide the right direction to their insureds, and are willing to work with us in getting risk assessments done. It&rsquo;s important for insureds to know that we are all working together to mitigate loss exposures and help keep our roads safe.&nbsp;

Loss trends and emerging risks: Transportation

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.

Innovation and Regulation: A Balancing Act for the Insurance Sector

The vast majority of scientists agree that climate change is impacting weather patterns around the world. We see it in the sharp increase in natural disasters that affect people and businesses globally. In fact, the United Nations Office for Disaster Risk Reduction reports that worldwide losses from earthquakes, volcanoes, floods, hurricanes and droughts have risen 151% in the past 20 years. These losses totaled about $2.9 trillion &ndash; more than twice the total of the previous two decades.1 Events like the 2016 fires in Fort McMurray, which caused approximately $4 billion in insured losses to be paid out,2 are largely out of the control of your business. That&rsquo;s why it&rsquo;s so important to prepare your business as best you can to reduce the risks that our new reality brings.
<h4>Climate change is risky business</h4>
Here are just some examples of potential risks associated with weather pattern changes and increased natural disasters:
<ul>
<li>Construction and logistics disruptions: Heavy rains and storms can not only cause weather-related construction delays, but also road closures that impact your supply chain&nbsp;&nbsp;&nbsp;</li>
<li>Forced closures: An increase in extreme weather means more involuntary shutdowns because of power outages, repair work and increased absenteeism as employees struggle to get to work safely.</li>
<li>Higher or unstable energy costs: Unseasonably hot or cold temperatures can result in higher energy costs. Plus, the finite nature of our primary energy sources, coupled with increased government regulations, means more price volatility.3</li>
<li>Property damage: Severe weather, like flooding, fires and windstorms, increases the likelihood of costly property damage.</li>
<li>Resource and raw materials shortages: Droughts, floods and dramatic temperature fluctuations impact crop growth and can cause resource scarcity. It doesn&rsquo;t matter if the weather event happens close to home or in a country halfway around the world; if it affects your suppliers or your end market, your business could suffer.</li>
</ul>
<h4>Identify risks and prepare for them</h4>
Part of mitigating risks to your business includes anticipating and preparing for the impact of climate change. This includes mapping out all scenarios that unpredictable weather that&rsquo;s aggravated by climate change can bring. Here are some tips to help you do just that.
<ul>
<li>Enlist the help of experts to review long-term weather forecasts, rising sea-level, temperature and rainfall patterns as well as earthquake, flooding and drought risks will help identify areas of your business that are vulnerable.4</li>
<li>Use forecasting data to allow your company to adjust its supply chain, provide insights into whether it should move office and manufacturing locations from high-risk areas, and give input into the construction materials and methodologies that should be used.</li>
<li>Choose green alternatives and upgrades as part of your overall risk mitigation strategy that help reduce the risks associated with extreme weather events. As we know, you can prevent future losses by investing in loss prevention up front.</li>
<li>Implement an enterprise risk management program. This entails creating an overarching strategy for your business and then tailoring/fine tuning it for each supplier/customer and location as there may be different risks associated with each.</li>
</ul>
&nbsp;
With more unpredictable weather comes a need to not only prepare but also review your company&rsquo;s current insurance against the potential risks. This may require additional coverage or new products to safeguard your business. Natural disasters and weather problems affected by climate change are predicted to set Canadians back $5 billion per year by 2020.5 The threat is real and largely out of the control of your company. What your company can control is its level of preparedness. Now is the time to take an in-depth look at the potential risks to your business and develop a plan to minimize or eliminate them &ndash; putting Mother Nature in the backseat and you back at the wheel. 1 <a href="https://news.un.org/en/story/2018/10/1022722" target="_blank" rel="noopener">&ldquo;Disasters: UN report shows climate change causing dramatic rise in economic losses,&rdquo; </a>UN News, October 10, 2018. 2 Clarke, Dominic <a href="https://www.theglobeandmail.com/report-on-business/rob-commentary/canadian-business-must-prepare-for-insurance-in-the-age-of-climate-change/article35625031/" target="_blank" rel="noopener">&ldquo;Canadian Business must prepare for insurance in the age of climate change,&rdquo; </a>The Globe and Mail, July 9, 2017. 3 McKinsey Global Institute, <a href="https://www.mckinsey.com/business-functions/sustainability/our-insights/resource-revolution-tracking-global-commodity-markets">&ldquo;Resource Revolution: Tracking global commodity markets,&rdquo; </a>McKinsey &amp; Company, September 2013 Report. 4 Hauke Engel, Per-Anders Enkvist and Kimberly Henderson, <a href="https://www.mckinsey.com/business-functions/sustainability/our-insights/how-companies-can-adapt-to-climate-change">&ldquo;How companies can adapt to climate change,&rdquo; </a>McKinsey &amp; Company, July 2015. 5 Williams, Elin, &ldquo;A primer on climate change mitigation and adaptation,&rdquo; Canadian Professional Accountants of Canada, March 2016. &nbsp;&nbsp;&nbsp;

Climate volatility and what it means for your business

Telematics is changing the game for the transportation industry. It isn&rsquo;t exactly a new concept, but the latest wave of telematics technology is increasing safety and boosting efficiency on a whole new level. Competitive pressures are driving transportation operations to cut business costs and improve both productivity and efficiency, and telematics plays a central role in making that happen. Savvy transportation firms are starting to see spending on telematics for exactly what it is: an investment in the organization that has the potential to create a tangible return on investment over time.
<h4>What is telematics? </h4>
Telematics is a technology that uses global navigation satellite systems and onboard diagnostics to track, collect and store information about a vehicle and its driver. Basically, it&rsquo;s a hi-tech computer that records every single move the vehicle makes from the time the driver turns on the engine.
Telematics sensors are usually housed in a black box, cell phone, smart tag or dongle. They collect an important array of qualitative and quantitative driver behaviour data, such as driving time, idle time, distance, acceleration, braking and cornering. That information is then analyzed alongside contextual data such as weather and road type.
If someone gets into an accident, the telematics device can determine in real-time where the car was damaged, the extent of the damage, the probability of bodily injury, and what other car was involved.
<h4>How can telematics help your business? </h4>
Utilizing telematics has many benefits for any fleet manager. Having access to real-time data on their drivers and vehicles can help a company boost fuel efficiency, cut maintenance costs and stop bad driver behaviours. It can save a company time and money and help improve the physical and mental health of its most important asset: the drivers.
The data that telematics devices collect can be analyzed by organizational leaders to make important strategic decisions. It enables management to optimize their business by selecting new routes, reducing their risks and assessing whether or not a certain driver needs to receive some updated training.
Telematics is also driving the adoption of Internet of Things (IoT) and improving the coherence in conversations between transportation companies and their insurers.
<h4>Telematics and your insurance policy </h4>
In addition to giving management a deeper insight into their drivers and freight, telematics can provide insurers with rich information so they can better assess a company&rsquo;s transportation risks. The information can in turn help transportation companies demonstrate that they&rsquo;re taking measures to improve safety and cut out things like driver errors caused by fatigue.
The way an insurer &lsquo;scores&rsquo; a transportation company&rsquo;s risk (and then prices the policy) is influenced by the telematics tool&rsquo;s data collection capabilities and more importantly, how the company uses the data to improve the safety of their fleet and mitigate risks.
Underwriting and pricing of a fleet considers all safety and risk management systems in place. A fleet with robust telematics &ndash; that uses the data regularly and effectively &ndash; would be considered as having implemented positive risk mitigation and risk management measures, which could be reflected in the pricing process.
There are various types of telematics-based solutions on the market and differences can dictate how much information is collected, which could in turn influence how much a transportation company could save on their insurance premium. The way an insurer &lsquo;scores&rsquo; a transportation company&rsquo;s risk (and then prices the policy) is influenced by the telematics tool&rsquo;s data collection capabilities and more importantly, how the company uses the data to improve the safety of their fleet and mitigate risks.
Certain simple devices only collect miles driven, while more advanced solutions can track acceleration, braking, cornering and driving context to support more complex behavioural models. Insurers are keen to get a closer understanding of the behaviours that correlate with risk of loss, and to what extent they can benefit from telematics.
Telematics sensors generally track measurable variables, such as surge, pitch, yaw, and roll, to identify when a crash has occurred. Depending on the device and the algorithms it uses, the accuracy of crash detection can vary significantly. By using data directly from the vehicle with a dongle or smart tag, insurers can gain insights into not only how the crash occurred, but also the severity of the impact and the path or trajectory of the vehicle just prior to the accident.
<h4>Telematics Opportunities and Benefits </h4>
Making the upfront investment in a new technology can be daunting for company owners. Taking a step into modernity can sometimes feel risky, but with a technology like telematics it&rsquo;s difficult to see how a transportation company will not benefit. Improved safety, reduced maintenance costs, theft deterrence, richer data collection and in some cases a lower insurance premium &ndash; and that&rsquo;s just for starters.
Investing in a technology like telematics has the potential to boost driver morale and change the image that other industry participants have of your firm. Attracting the best talent is always one of the biggest challenges and introducing telematics to your fleet lets drivers know that your company is driver-focused; that your company really cares.

How telematics is transforming transportation

&ldquo;Help Wanted&rdquo; is a common phrase in trades industries today, as Canada and other markets face a growing skilled labour crunch. The manufacturing, construction and transportation industries in particular are struggling to find qualified employees&mdash;a problem that can close the door to new growth and leave employers open to more risk.&nbsp; Just how big is the skilled labour problem? A recent report by Canadian Manufacturers &amp; Exporters (CME) found that 85% of manufacturers have difficulty recruiting and filling job vacancies.1 The most pressing need is skilled production workers and general labour, followed by management, engineers and production support.&nbsp; On the construction side, the trend is also intensifying. According to BuildForce Canada, employment in Canada&rsquo;s construction and maintenance industry is expected to grow by 50,200 workers by 2029.2 With the anticipated retirement of more than 257,000 construction workers over the same period, the industry will need to recruit more than 307,000 workers to keep pace with demand.&nbsp; Canada is not alone in facing an unprecedented labour shortage. In the United States, for example, 4.6 million jobs will need to be filled in the manufacturing sector over the next decade, and 2.4 million jobs may be left open due to a lack of trained workers, according to a 2018 report by The Manufacturing Institute and Deloitte.3 One significant reason for the skilled-labour shortage is the increase of technology in traditional industries. Machinery and equipment is far more technologically advanced today, and retraining an aging demographic of existing skilled trades employees has not kept pace. On top of that, it&rsquo;s an ongoing challenge to attract younger demographics to the trades, which typically aren&rsquo;t seen as attractive career choices.&nbsp; While job vacancies may be good news for candidates in the field, the labour shortage can have far-reaching, negative impacts on businesses. In turn, these issues can affect the insurance sector in the way of more insurance claims, which can result in increased insurance premiums and possibly reduced or restricted insurance coverage.&nbsp; Don Maxwell, Manager, Business Operations, Strategy and Planning at Sovereign Insurance explains key impacts the labour shortage can have on businesses:&nbsp; 
<ul>
<li>Lack of skilled labour can slow a company&rsquo;s growth. In the CME survey, the top three impacts of skills shortages identified by manufacturers are: they&rsquo;re forced to hire ill-suited candidates, there are foregone production opportunities, and there&rsquo;s less business investment and product development&mdash;all of which impede manufacturers&rsquo; ability to compete.&nbsp;</li>
</ul>

<ul>
<li>Slow growth, in turn, may lead to a company taking shortcuts elsewhere in their operations to save money and increase profits. This can take the form of less stringent maintenance or quality-control practices, which could lead to losses.&nbsp;</li>
</ul>
 For example, machine breakdowns due to poor maintenance schedules can result in expensive repairs and investment loss, which may not be insurable and consequently represent an out of pocket expense for the company.&nbsp; Also, a lapse in proper quality control could result in expensive product liability suits &ndash; ultimately increasing insurance claims, and resultant premiums.&nbsp; In some cases, it may even result in a loss of coverage.&nbsp; 
<ul>
<li>Quality of work can be affected if employees don&rsquo;t have the right skills. That can increase the cost of having to redo faulty workmanship or having to pay for damages to third parties as a result of negligence on behalf of a poorly trained or skilled employee.&nbsp;</li>
</ul>
 Apart from the trades, the transportation industry has also been struggling with a lack of properly trained and experienced drivers. This often results in companies hiring people with little or no experience to drive tractor trailers, which can have tragic consequences. Part of the issue is a lack of consistent trucking standards and regulations across Canada. Currently, mandatory training for transport truck drivers is only required in Ontario.4&nbsp; There is no easy solution to tackling the skilled labour shortage: it will take a combination of training, education and changing negative perceptions about the trades. The good news is much is already being done on this front, with involvement from government and schools. For example, The Government of Ontario recently launched a marketing campaign to attract more people to the skilled trades and to encourage employers to hire more apprentices.5 The government is also investing $75 million in programs to expose high-school students to the trades. On the education front, for example, Durham College in Whitby, Ont. is one post-secondary institution that&rsquo;s helping to close the skills gap. The college is expanding its Skills Training Centre to offer more opportunities for students to learn the next-generation trades skills. The $35-million expansion, scheduled to open in summer 2021, will feature a new 60,000 sq. ft. centre that will double the college&rsquo;s industrial skilled trades training capacity. For industry&rsquo;s part, companies can fill their future talent pool by partnering with local colleges and universities. Co-ops and internships give students a head start in their careers, while giving companies the opportunity to develop and hire potential candidates before their competitors.&nbsp; With a retiring workforce and dearth of new talent pools, the time for companies to take action is now. Those that do will find and retain qualified employees who produce quality work, which in turn will help mitigate risk and open the door for future success.&nbsp; Sources: 1Canadian Manufacturers &amp; Exporters (CME): <a href="https://cme-mec.ca/wp-content/uploads/2019/10/2019-CME-Manufacturing-Workforce-Survey-Report-FINAL.pdf" target="_blank" rel="noopener">&ldquo;We&rsquo;re Hiring: Manufacturing Workforce Survey Report&rdquo; 2019</a>&nbsp; 2BuildForce Canada: <a href="https://www.buildforce.ca/en/lmi/forecast-summary-reports" target="_blank" rel="noopener">&ldquo;Construction and Maintenance Looking Forward&rdquo;</a> 3Manufacturing Institute and Deloitte: <a href="https://www2.deloitte.com/us/en/pages/manufacturing/articles/future-of-manufacturing-skills-gap-study.html" target="_blank" rel="noopener">&ldquo;2018 Skills Gap in Manufacturing Study&rdquo;&nbsp;</a> 4Global News: <a href="https://globalnews.ca/news/4143655/humboldt-broncos-bus-crash-truck-driving-regulations-canada/" target="_blank" rel="noopener">&ldquo;Only Ontario requires truck driver training, but Humboldt crash could change that&rdquo;</a>, April 13, 2018 5Government of Ontario:<a href="https://news.ontario.ca/mol/en/2020/01/ontario-takes-action-to-address-skilled-trades-shortage.html" target="_blank" rel="noopener"> &ldquo;Ontario takes action to address skilled trades shortage,&rdquo;</a> Jan. 10, 2020&nbsp;

The impact of the skilled labour shortage

The annual planning cycle is an important time for any manufacturing company. It&rsquo;s a time to look forward; for outlining strategies to update operations and for investing in facilities and equipment. In years gone by, this planning consisted of mapping expected revenues back to production capabilities and purchasing new equipment to ensure that production rates could continue to meet demand and help grow the company.
Remaining relevant as the consumer landscape evolves and consumer expectations are transformed is a challenge being faced by all manufacturers.
Given the increasingly competitive nature of the marketplace, the capital investment decisions made by manufacturing leaders have never been more significant. Most modern production equipment is enhanced with new technology, digitalization and robotics, and the implementation of such solutions creates an increased emphasis on using data to drive an improved return on investment. Remaining relevant as the consumer landscape evolves and consumer expectations are transformed is a challenge being faced by all manufacturers.
Most end-to-end manufacturing processes are now enabled by computational capabilities linked via digitalization, Internet of Things (IoT), robotics and AI. There&rsquo;s a tangible shift towards Manufacturing on Demand (MOD), enabled by technologies such as additive manufacturing and real time big data processing. In addition to creating new opportunities, this new production environment creates new risks and interdependencies.
Here, Tina McAvella, VP of Product Manufacturing, Sovereign Insurance, outlines some scenarios that showcase some potential risks that the new wave of technology could create for manufacturers.
<ul>
<li>Breakdown and interdependency of various parts of your process: &ldquo;You&rsquo;ve expanded the risk inherent in inter-dependent parts of the process,&rdquo; says McAvella. &ldquo;This can be within the four walls of a single facility or across locations &ndash; and can even be extended to vendors and/or clients.&rdquo;</li>
<li>Failed delivery of equipment: &ldquo;You&rsquo;re decommissioning old equipment based on an expected delivery date and the new equipment doesn&rsquo;t materialize. You&rsquo;re not getting answers from your vendor. What contractual options do you have to resolve a delivery dispute/failure?&rdquo;</li>
<li>Decisions made on wrong data: &ldquo;You&rsquo;ve moved to a MOD processing model and your inventory is managed based on data received from your clients. You discover that there&rsquo;s a flaw in a critical report.&rdquo;</li>
<li>Security Breach/Ransomware Attack: &ldquo;You&rsquo;ve integrated your manufacturing equipment with a reports application that is the subject of a ransomware attack.&rdquo;</li>
</ul>
&nbsp;
McAvella also advises business leaders to pay close attention to some specific areas.
<ul>
<li>Business Continuity Plan: &ldquo;Keep your plan current,&rdquo; says McAvella. &ldquo;As capital investments are made, the business continuity plan should be reassessed to ensure that there&rsquo;s adequate redundancy in the business model and/or that there&rsquo;s a strategy to compensate, at least partially, in the event of an outage.&rdquo;</li>
<li>Insurance to Value: &ldquo;The insurance renewal cycle can be a bit of an administrative task that just needs to get done. And let&rsquo;s face it &ndash; you have a business to run!&rdquo; McAvella says. &ldquo;That said, the absolute worst thing that can happen following a large loss is that there&rsquo;s a lack of limits to cover the full extent of a loss. This is bad for you, your broker and your insurer. To avoid an underinsurance situation, the purchase of any piece of new equipment should involve a call to your broker and a discussion about property and business interruption values.&rdquo;</li>
<li>Vendor Selection and Management: &ldquo;Mechanical failure of production equipment has always been a problem but with today&rsquo;s technology, equipment delivery is now a &lsquo;project&rsquo; with all the challenges of an IT system delivery,&rdquo; says McAvella. &ldquo;Careful management of a Request for Proposal process and negotiation of the terms and conditions of an order, particularly where there is customization and long delivery times, will help ensure that you&rsquo;re mitigating the risk of the vendor to deliver on time, on budget and with expected scope/quality.&rdquo;</li>
</ul>
&nbsp;
&ldquo;Seeking legal input is advisable to ensure there are clauses in the contract that protect you from the failure and any errors or omissions of your vendor. This is particularly true when dealing with a vendor outside of Canada. Engage a lawyer who understands the market where equipment is being sourced.&rdquo;
It may seem as though there are a lot of risks to consider, but with the right knowledge and a solid plan, savvy manufacturers can leverage tech innovations to their benefit. Consumer demands are shifting at a rapid pace and manufacturers need to adapt their processes to keep up. Manufacturing on Demand will define the future of the industry - manufacturers just need to make sure they&rsquo;re a part of that future.

Risks to consider for your manufacturing floor upgrade

Selecting a business insurance policy isn&rsquo;t something most companies feel they have enough time to do while actually running their day-to-day operations. When it comes to purchasing insurance, the most common thought is &lsquo;how much is it going to cost?&rsquo; But most people don&rsquo;t know much about the work that goes into generating their insurance quote. It&rsquo;s time to demystify insurance prices, so here we outline how premiums are set. 
<h4>Who&rsquo;s involved in setting your premiums? </h4>
There are three key players that crunch the numbers and evaluate risks, which collectively contributes to how premiums are set.
<ul>
<li>Actuary: An actuary estimates the amount of losses an insurance company can expect to face in the coming year based on the experience of previous years. Using a number of data sets, the actuary establishes benchmark rates for the policies to ensure the company can fulfill their promise to pay in the event of an insured loss. The actuary will apply statistical methods, risk theory and external trends such as inflation in order to calculate premiums within groupings of clients sharing predictive attributes of risk. They also track payment statistics to assess the insurance company's ability to pay its claims and forecasts the potential financial impact of catastrophes.</li>
<li>Underwriter: An underwriter chooses who and what the insurance company will insure based on a series of assessments. The underwriter has specialized knowledge in risk and will adjust the benchmark rates provided by the actuaries based on their review and understanding of specifics of the insured&rsquo;s business and the risk mitigation practices the owners and employees put into practice at their operations. The underwriter assesses the risk of the policy coverage the client requested and looks for proactive solutions and alternative coverages that may reduce or eliminate the risk of future claims.</li>
<li>Adjuster: After a loss, the insurance adjuster works with clients to get their business up and running again as quickly and efficiently as possible. They inspect damage to determine how much the insurance company should pay for the loss. The adjuster will also examine information gathered by a variety of investigators as needed and develop a set of recommendations for the payout. The collective insights that they garner from adjusting losses is fed back to the actuaries to help inform their understanding of which attributes of risk are predictive of loss.</li>
</ul>
"Insurance premiums are set by the likelihood of the insured having a loss or a setback out of their control and are based on specific attributes of risk that are deemed to be predictive of loss. Companies that take measures to reduce their risks have a good chance of also reducing their premiums."
<h4>How are premiums determined? </h4>
Insurance premiums are set by the likelihood of the insured having a loss or a setback out of their control and are based on specific attributes of risk that are deemed to be predictive of loss. Companies that take measures to reduce their risks have a good chance of also reducing their premiums. Working out of buildings with fire resistance construction materials, installing sprinklers and continuously maintaining the quality of equipment are some straightforward steps that any company can take to reduce their risk. It&rsquo;s important for you to let your insurer know the steps you&rsquo;ve taken to mitigate your businesses risks. Transferring the information through your broker is the best way to relay this information. Develop a thorough risk management plan that documents all of your organization&rsquo;s risk management processes and procedures, including risk identification, risk analysis, risk response planning, and risk monitoring, controlling, and reporting. Include as much detail as you can. The more serious the risk factors your business faces, the more expensive your insurance may eventually be. For example, a construction company can expect to face a higher premium than, say, a florist. If a company relies on expensive equipment or systems that might be attractive to thieves, the premium could also be higher. Heavy industrial equipment costs more to cover than ordinary office equipment and common electrical goods. 
<h4>How can businesses manage their premiums? </h4>
Companies that have implemented robust risk management strategies that mitigate or reduce their losses can expect pricing that is better than their peer group who have not taken such steps. Most importantly they can expect stability in their premiums over time &ndash; insurers look to partner with and reward organizations that are aware of their risks and take a proactive approach to mitigating them. Create structured workplace training sessions or, depending on your line of business, send employees on offsite courses. If you&rsquo;re a construction company, having all your workers up to date on health and safety and equipment best practices is essential. If you&rsquo;re an office-based company, consider sending your employees on a cybercrime awareness course. Hackers rely on human error and gaining the trust of individuals, so educating the workforce could significantly reduce the chance of a breach and show your insurance company that you&rsquo;re taking emerging risks seriously &ndash; because regardless of the impact on your premiums, you should be. For manufacturers, simple housekeeping is an effective strategy. Using a Hot Works Permit ensures that areas are kept clear of debris or cardboard waste and reduces the amount of fuel for a fire, if one happens to start. Proper fire equipment, such as sprinklers designed for the occupancy, can put a fire out before it gets out of control, minimizing the down time of a business. Employees who are properly trained can recognize a problem on the assembly line or during the production process. Employees with the knowledge of what can go wrong during production can take steps to avoid a problem that could otherwise result in prolonged downtime. 
<h4>Cost vs. value </h4>
While lower premiums are clearly great (who doesn&rsquo;t like cutting costs?), getting good value from your policy is even more important. There&rsquo;s no point paying less for a policy with features that leave you exposed or doesn&rsquo;t fit your business needs. Paying a bit more to get the coverage that protects your business and the risks that are unique to you will also prove more valuable over the long-term. Work with your broker and insurer to understand the risks faced by your specific operations and where any hidden exposures may lie. And be proactive and analyze your own risks &ndash; no one knows your business better than you do.
While the cost of your premiums needs to fit within your budget, finding the right partner is equally (if not more) important. Partnering with an insurer who&rsquo;s invested in you for the long-term has so many benefits. The better your insurer understands your business, the more able they&rsquo;ll be to put in place the protection and risk solutions you actually need. With so much competition out in the insurance marketplace, it&rsquo;s a good idea for any business owner to shop around for the best partner. A partner who will be there for your business as it grows, who won&rsquo;t arbitrarily adjust rates each year and who will listen and understand the individual nuances of your operation. It makes good business sense to align with good partners for the long run.

How are insurance premiums set

From unprecedented wildfires to record-setting hurricanes, the impacts of climate change are front and center today. While the heat is on governments to tackle what the United Nations calls &ldquo;the defining issue of our time,&rdquo; G7 leaders are failing to meet climate change objectives.&nbsp; Research from the Universal Ecological Fund found that most participating nations aren&rsquo;t hitting their 2030 climate goals.1 The Fund&rsquo;s &ldquo;The Truth Behind the Climate Pledges&rdquo; report examines carbon-emission reduction pledges made by 184 countries under the Paris Agreement. Nearly 75% of the commitments to reduce emissions between 2020 and 2030 are inadequate to slow climate change, and some of the world&rsquo;s largest emitters will continue to increase emissions, according to the report.&nbsp; That paints a pretty bleak picture for the health of the planet and its inhabitants. It paints a bleak picture for the business world as well. In the World Economic Forum&rsquo;s &ldquo;Global Risks Report 2020,&rdquo; the top five global risks are all environmental. 2 Those related to climate change include extreme weather events with major damage to property, infrastructure and loss of human life, and failure of climate-change mitigation and adaptation by government and businesses.&nbsp; All of this points to the importance of businesses taking steps to reduce their risks as they face the headwinds of climate change. While the issues vary from company to company and sector to sector, there are three main risks that all businesses should be preparing for:&nbsp; 1. Transition Risks In the fight against climate change, many companies are exposed to transition risks. These arise from the policy, legal, technology and market changes required to transition to &ldquo;net zero&rdquo; greenhouse gas (GHG) emissions, which means removing as much carbon from the atmosphere as is emitted. 3 As Deloitte notes, these risks can lead to increased business costs, undermine the viability of existing products or services, or affect asset values. 4 To mitigate transition risks, establishing risk assessments and targets is a good starting point. Taking action in the transition to net-zero requires businesses to look for new opportunities and ways to innovate. According to the Task Force on Climate-Related Financial Disclosures, opportunities include developing new products that are less carbon intensive; reducing operating costs by improving efficiency across production and distribution processes; and building resilience along the supply chain, for example, by shifting from fossil fuels towards renewable energy. 5 Businesses could also consider sourcing/buying local to help reduce the carbon footprint. 2. Physical Risks&nbsp; Physical risks of climate change include direct damage to assets, such as buildings and infrastructure damaged by flooding and forest fires, and indirect impacts such as disruption to supply chain and food systems. There are physical risks related to human health as well: hazards like heat stress could affect the ability of people to work outdoors, or in extreme cases, put human lives at risk. 6,7 While their effects are wide-ranging, physical risks receive less attention from businesses than carbon reduction. According to CDP, a non-profit organization that runs the global disclosure system of environmental impacts, companies reported double the number of transitional risks than physical risks, indicating that the physical side of climate change is still underestimated. 8,9 Perhaps this is partly due to their perception that they&rsquo;re protected from physical risks through their commercial insurance policy. Business owners needs to consult with their broker to confirm what coverage they have in place, and what may or may not be available, to protect their business from certain physical risks.&nbsp;&nbsp; McKinsey Global Institute notes that while companies and communities have been adapting to reduce climate risk, the pace and scale of adaptation need to significantly increase to manage rising levels of physical climate risk. Adaptation is likely to entail rising costs and tough choices that may include whether to invest in hardening (physically improve or building new infrastructure to make it less susceptible to damage) or relocate people and assets.10 3. Liability Risks The third area of climate-change risk is the potential liability for emitting greenhouse gases. An increasing number of legal cases have been brought against fossil fuel companies and utilities in recent years, holding them accountable for the damaging effects of climate change.11&nbsp;In fact, recent estimates suggest there&rsquo;s been nearly 1,000 climate change related class-action suits filed in 25 countries. Victoria, B.C., for example, became the first municipality in Canada to endorse a class-action lawsuit against oil and gas producers for climate-related harms last year.12 A report from global law firm Clyde &amp; Co notes that in view of the wide range of possible liability exposure, there is no simple or one-size-fits-all solution for companies that want to limit their exposure to litigation. However, there are a few points to keep in mind: companies that understand their transition risks and physical risks will be better placed to understand their liability exposures; liability risk will differ from jurisdiction to jurisdiction; and as science becomes more certain and knowledge grows around climate change effects, best practices will develop. 13 Today&rsquo;s environmental issues are not going away. Companies need to take responsibility for their actions and reduce their negative environmental impact. Now is also the time to start being proactive about climate-related risk mitigation and talking to your broker about how to protect your business.&nbsp; Sources 1 <a href="https://www.nationalgeographic.com/science/2019/11/nations-miss-paris-targets-climate-driven-weather-events-cost-billions/#close" target="_blank" rel="noopener">&ldquo;Most countries aren&rsquo;t hitting 2030 climate goals, and everyone will pay the price,&rdquo;</a> National Geographic, Nov. 5 2019.&nbsp;&nbsp; 2 <a href="https://www.weforum.org/reports/the-global-risks-report-2020" target="_blank" rel="noopener">&ldquo;The Global Risks Report 2020,&rdquo;</a> World Economic Forum, Jan. 15 2020. 3,5<a href="https://www.fsb-tcfd.org/wp-content/uploads/2017/06/FINAL-TCFD-Report-062817.pdf" target="_blank" rel="noopener">&nbsp;&ldquo;Recommendations of the Task Force on Climate-Related Financial Disclosures,&rdquo;</a> TCFD, Financial Stability Board, June 15 2017.&nbsp; 4,11 <a href="https://www2.deloitte.com/us/en/insights/topics/strategy/impact-and-opportunities-of-climate-change-on-business.html" target="_blank" rel="noopener">&ldquo;Feeling the heat? Companies are under pressure on climate change and need to do more,&rdquo;</a> Dec. 12 2019.&nbsp; 6&nbsp;<a href="https://www.cisl.cam.ac.uk/resources/publication-pdfs/cisl-climate-wise-transition-risk-framework-report.pdf" target="_blank" rel="noopener">Transition risk framework: Managing the impacts of the low carbon transition on infrastructure investments,&rdquo;</a> University of Cambridge Institute for Sustainability Leadership (CISL), 2019.&nbsp; 7,10 <a href="https://www.mckinsey.com/business-functions/sustainability/our-insights/climate-risk-and-response-physical-hazards-and-socioeconomic-impacts" target="_blank" rel="noopener">Climate risk and response: Physical hazards and socioeconomic impacts</a>; McKinsey Global Institute, Jan. 16 2020.&nbsp; 8&nbsp;<a href="https://www.cdp.net/en/research/global-reports/global-climate-change-report-2018/climate-report-risks-and-opportunities" target="_blank" rel="noopener">&ldquo;Global Climate Change Analysis 2018,</a>&rdquo; CDP, June 4, 2019&nbsp; 9&nbsp;<a href="https://blogs.worldbank.org/ppps/factoring-climate-risk-infrastructure-investment" target="_blank" rel="noopener">&ldquo;Factoring climate risk infrastructure investment,</a>&rdquo; World Bank, Aug. 29 2019.&nbsp; 12 <a href="https://www.osler.com/en/resources/regulations/2019/climate-change-litigation-arrives-in-canada" target="_blank" rel="noopener">&ldquo;Climate change litigation arrives in Canada,&rdquo;</a> Osler, Feb. 5 2019.&nbsp; 13&nbsp;<a href="https://resilience.clydeco.com/articles/new-liability-risks-to-businesses-directors-and-officers" target="_blank" rel="noopener">&ldquo;New liability risks to businesses, directors and offices,&rdquo;</a> Clyde &amp; Co, July 31 2019.

Top 3 climate change risks your business should prepare for

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<div>With a rapid increase of telecommuting, follow these tips to help reduce threats.</div>
</div>

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