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Important Information to Help Your Office Prepare for the Year 2000 Thank you to Aon Reed Stenhouse Inc.; Cosburn, Griffiths & Brandham Professional Liability Inc. and the Government of Canada Task Force 2000 for their help in putting together this piece. There is a buzz around every office as businesses continue their efforts to prepare their information systems for the new millennium. Billions of date- sensitive computer systems that use two-digits to read years will be unable to interpret the Year 2000. Older systems may incorrectly register the date “00” to mean 1900 instead of 2000. Many computers may try to begin the century all over, while others may see “00” as an expiry date. The results could range anywhere from small inconveniences to outright disasters. This critical issue is universally known as the Year 2000 (Y2K) problem or the millennium bug. In addition to computers, devices such as elevators, security systems, vaults, telephones, fax machines, and heating and air conditioning systems may also depend on date-sensitive microchips. There is no universal way of fixing this software and the expense and amount of labour required to solve this problem is enormous.
The insurance industry is taking this issue very seriously.
RIBO wants to assist you in conjunction with other industry initiatives, including working together with your E&O insurer, in preparing your office and your clients for the Year 2000.
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Insurers' Response to Year 2000 Y2K INSURANCE COVERAGE
Insurers are being forced to take a hard look at their positions with regards to coverage for Year 2000 losses. The Insurance Bureau of Canada (IBC) has drafted a set of exclusions as a point of "clarification". These exclusions offer possible wording that insurers may use and while they are not mandatory a large number of insurers have chosen to implement them. Generally, insurers are taking one of the following approaches to Year 2000 losses under property coverage:
Under Liability Coverage, policies for the most part contain an absolute exclusion. In some cases, however, if you can prove to your underwriters that you are Year 2000 ready, the exclusion may be removed. Be sure that you are aware of the position taken by your markets so that you can reasonably inform your clients of their position and answer their questions.
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Brokers' Response to Year 2000 A YEAR 2000 MANAGEMENT CHECKLIST By this time you should have established a Year 2000 policy within your office. The following is a checklist to help guide and assess your Year 2000 compliance activities. The relevance of this guide will depend on the size of your office. Understand the full extent of your exposure. Make a complete inventory of all equipment, software and other devices that could potentially be affected by the Year 2000 problem. Be sure to consider all of the following areas: Information Processing Hardware and Software – Check support functions such as inventory control, accounts payable, accounts receivable, general accounting and other management information systems. Delivery Channels – Examine order entry/point of sale systems, telecommunications and transportation. Real Estate – Consider heating and ventilation systems, air conditioning, lighting, security card access and elevators. Office Equipment – Consider personal computers, PC software, fax machines, photocopiers and telephone systems. Make Year 2000 compliance a management priority. The Year 2000 compliance project should be assigned to a senior officer (the Principal or Deputy Principal Broker) who has the necessary authority to ensure that compliance efforts are undertaken in a timely and diligent manner. Managers must understand the important role they play in helping the organization become Year 2000 compliant. Each manager should prepare regular Year 2000 progress reports that should be reviewed by all staff members. Consider these areas: Budget – Set an appropriate budget for Year 2000 compliance activities and ensure necessary sources of funding are in place. Action plans – Create a Year 2000 compliance action plan that identifies essential systems, sets target dates for completion of compliance activities and identifies contingency plans to cover possible compliance failures. Staffing – Be sure you have an adequate team to implement your Year 2000 compliance program (you may need to supplement your own staff with outside consultants, hardware and software specialists and other experts). Make sure that you update your staff on all the changes surrounding the Year 2000 problem. If your office is large enough, train one staff person to answer all client questions. This way you will make sure that a consistent message is presented and that only the most accurate information is given out. Litigation Protection – Determine your exposure to potential litigation in case your compliance efforts are not completely successful. Client/Supplier Liaison – Be sure you know what your clients and suppliers are doing and how your program may tie-in with their Year 2000 compliance efforts, particularly with regards to system interfaces. Match Management Objectives in Each Operating Unit – Be sure the activities of each operating unit are on target and support the strategic objectives of the company as a whole. Be sure all of your employees understand the Year 2000 problem and the steps you are taking to assure that your office is compliant. Encourage staff to participate in the compliance process. WHAT TO TELL YOUR CLIENTS By this time you should be discussing the Year 2000 with your clients. If you haven’t, it’s not too late. As an attachment, we have provided a sample letter that you should be sending to your commercial clients (see page 4). This letter provides an understanding of the Y2K issue and lets clients know what they should expect from their insurance coverage. Please feel free to modify the letter to meet your needs. For example, you may want to change the letter to specifically meet the needs of your personal lines clients. Once you have opened the lines of communication and sent out a letter, make sure that your staff knows your Year 2000 policy. If you have a large enough office, designate one person as the Y2K spokesperson. They will be able to address client concerns and provide a consistent message. The next step is to keep your clients updated of any changes. You want your clients to feel confident that you have their best interest in mind at all times. E & O TIPS Every brokerage firm in Ontario is required to maintain errors & omissions insurance in an approved form. RIBO has not approved E & O policies that contain a Y2K exclusion. Be sure to work with your E&O carrier to take all reasonable steps to ensure that your policy will not attract this exclusion. Be aware that any firm with an E&O policy that has a Y2K exclusion attached will have its continued qualification for registration reviewed by the Qualification & Registration Committee. At a minimum, RIBO expects that all brokerages in Ontario will review their own external and internal exposure and that they will take reasonable steps (see management checklist) to inform their clients of potential Y2K problems. The following tips may also be useful:
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Year 2000 as a Business Expense For information on tax treatment of Year 2000 costs please consult issue 97-250 of Revenue Canada’s Technical News (No. 12) available on Revenue Canada’s website at www.rc.gc.ca/E/pub/tp/tn012et/tn012e.txt.html.
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Tax Tips In June 1998, The Honourable Paul Martin, Minister of Finance announced tax relief for small and medium sized businesses in conjunction with the Year 2000 computer problems. Under this tax relief, accelerated capital cost allowance (CCA) deductions of up to $50,000 will be given to qualifying businesses to purchase computer hardware and software to replace systems that are not Year 2000 compliant. This will affect computer equipment bought between January 1, 1998 and June 30, 1999. This will allow smaller firms to deduct up to 100% of eligible expenditures. For more details visit the Department of Finance’s website at www.fin.gc.ca/newse98/98-057e.html.
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Internet Resources
The following websites contain Year 2000 information that you can use as a resource.
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Sample Year 2000 Letter Dear Clients, By now you have surely heard about the potential for "disaster" on January 1, 2000 when everything from elevators to coffee machines could stop working. Billions of date-sensitive computer systems that use two-digits to read years will be unable to interpret the Year 2000. Older systems will incorrectly register the date "00" to mean 1900 instead of 2000. Many computers may try to begin the century all over, while others may see "00" as an expiry date. The results could range anywhere from small inconveniences to outright disasters. In addition, things like security systems, vaults, telephones, fax machines, and heating and air conditioning systems may also depend on date-sensitive microchips. There is no universal way of fixing this software and the expense and amount of work required to solve this problem is enormous. This worldwide problem has come to be known as the "Year 2000 problem" or simply "Y2K". Given the "dire prediction" it is easy to dismiss the whole thing. However, we urge you in the strongest possible terms to take the Y2K problem seriously – very seriously. We can assure you that the insurance industry is very concerned about the issue. In fact, they are so worried about the potential impact of Y2K on commerce that they are now introducing specific exclusions to be attached to all of their policies. These exclusions are intended to make it absolutely clear that there will be no coverage for losses that involve the Year 2000 problem. For example, insurers will not cover the failure of equipment to function properly or the cost to fix it. The main areas of concern are business interruption coverages and third party liability coverages. Specifically, the prospect of wholesale closure of business due to failure of computing systems or computer controlled machinery and the long line ups to find someone to do repairs is frightening in its scope. Equally, it is feared that third party litigation against suppliers who are even remotely involved in an interruption of business will rise sharply. You should work on the basis that losses suffered as a direct result of Y2K problems will not be covered by any insurance. Consequently, our recommendation is that you take whatever steps you feel are appropriate to ensure that your business has done all it can to prepare for the Year 2000, including seeking Y2K coverage if absolutely necessary. At a minimum you should:
Please take this problem seriously and make sure you have done everything you can to protect yourself from what could turn out to be a devastating event. We will continue to monitor this problem from an insurance viewpoint and will keep you informed of events and developments as they unfold. In the meantime, if you have any questions about this or you would like to discuss it further, please call your representative at Brokerage Name. If you remain interested in finding Y2K coverage, please contact us. We are always glad to speak with you.
Yours very truly,
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New Uninsured Vehicles Project The Insurance Information Centre of Canada (IICC) and the Ministry of Transportation (MTO) are in the process of testing the new Uninsured Vehicles (UV) Project prototype. A selected driver and vehicle office will be electronically connected to IICC for examining industry and MTO data accuracy. The success of this phase depends largely on two main components; timeliness in reporting and excellent data quality. MTO’s computer system will translate a vehicle’s plate number to its associated Vehicle Identification Number (VIN). The VIN will then be used to tap into insurance information related to the vehicle. An IICC Insured Vehicle Database (IVDB), developed from insurer-reported data, will be used to test the vehicle registration/insurance validation process for at least six months. During the prototype stage, information will be gathered for license plate renewals. Results will be measured and tracked in the background by IICC. The prototype will focus initially on private passenger, individually rated vehicles (including motorcycles), insurer reported policies and license plate renewals. An expanded prototype is expected to begin in the second half of 1999, when a group of intermediaries will begin to update their clients’ insurance status via a WEB application. IICC hopes this measure will improve the inquiry accuracy of the database by eliminating the reporting time lag of information exchange between the intermediary and the insurer. The prototype will be monitored at major milestones, and future plans will be assessed jointly with MTO and IICC’s Business and Technology Advisory Committee (BTAC).
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Continuing Education Reminder
The one-time 3 year exemption for individuals holding one or more of the following professional designations:
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Ontario Vehicle Impoundment Program Effective February 16, 1999, the Ministry of Transportation (MTO) implemented the new Vehicle Impoundment Program. Under this initiative, persons caught driving while suspended for a Criminal Code conviction will have their vehicles impounded for a minimum of 45 days. Vehicle owners will be responsible for paying all towing and storage costs, which are expected to range from $900 to $1,100 per vehicle. This penalty will apply even if the driver is not the owner of the vehicle. Vehicle impoundment is the final measure being implemented from Bill 138, the Comprehensive Road Safety Act, 1997. Vehicle owners can inquire about the validation of a driver’s license for a fee of $2.50 by phoning 1-900-565-6555. A driver abstract can also be obtained from one of the province’s private or public license issuing offices, or by using one of the province’s self-serve kiosks. Beginning in May, for a $2.00 fee, the same service will be available through MTO’s website at www.mto.gov.on.ca/english/dandv/check.htm. The Ontario Vehicle Impoundment Program will be featured in advertisements and brochures available from MTO. For further information visit MTO’s website or contact them at 1-800-387-3445 or (416) 235-2995 if calling from the greater Toronto area.
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Decisions of the Discipline Committee Caution: While the information contained below is public, members should take caution that inappropriate use of this information may be considered to be misconduct.
NEIL LOUDON, 6874
TIMOTHY GEORGE J. VOISIN, 12200
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Decisions of the Qualification and Registration Committee
JOEL A. CAREY, 15316 FYI.... A reminder that when contacting RIBO for background information on any registered broker, RIBO staff are subject to a confidentiality clause. Therefore, we cannot provide any information, other than a broker’s name and registration status, without receiving a written release addressed to RIBO, signed by the individual broker. Once we have received consent, we can disclose any information in a broker’s file.
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Additions & Deletions from the RIBO Register (Feb 19, 1999 - Jun 3, 1999)
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Members of Council
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Member Assistance Directory
P.O. Box 45, 401 Bay Street, Suite 1200, Simpson Tower, Toronto, ON M5H 2Y4
General Manager - Jeff Bear (jeff@ribo.com) Secretary - Lise Clements (lise@ribo.com)
ADMINISTRATION & FINANCE
COMPLAINTS & INVESTIGATIONS
CORPORATION LEGAL SERVICES
MARKETING & COMMUNICATIONS
QUALIFICATION & REGISTRATION
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