Canadian Underwriter

Aviva Canada/RBC, Economical announcements will impact broker channel, P&C conference speakers suggest

January 28, 2016   by Jason Contant, Online Editor

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Aviva Canada and RBC Insurance’s recently announced 15-year strategic agreement – which includes Aviva’s $582 million purchase of RBC General Insurance Company – will have implications for those selling retail personal insurance from a broker perspective, suggested speakers at the P&C Crystal Ball 2016 conference on Thursday.

Economical Insurance announced on Wednesday that it will launch a separately branded direct channel later this year

Likewise, Economical Insurance’s announcement this week that it will launch a separately branded direct channel later this year will also affect brokers, the speakers argued.

“I think it will force brokers to make more decisions about what is their strategy, how are they going to operate, how are they going to compete,” suggested Shawn DeSantis, president and CEO of Mississauga, Ont.-based Navacord Inc. during a CEO panel discussion at the conference, held at the International Plaza Hotel in Toronto. DeSantis added that he believes that both Economical and Aviva “will be significantly bigger businesses over the next three to five years, which will have an implication for anyone selling retail personal insurance from a broker perspective.”

Doug Maybee, Economical Insurance’s manager of public and media relations, told Canadian Underwriter on Wednesday that the company’s new branded direct channel, which will deal with personal insurance lines, is going to “operate completely independently from our broker channel. For 144 years, we’ve utilized the broker channel as our sales and distribution mechanism, but we’re now taking that very bold step and becoming a multi-channel organization.”

Asked how the move could affect brokers, Maybee emphasized that “we’re going to continue to foster our broker channel. It’s thriving and will continue to grow. Our new direct channel will not be competing with our broker channel.”

Still, DeSantis argued that retail personal insurance just got “two significant competitors.” Regarding the Aviva/RBC agreement, DeSantis even speculated that the transaction is “not going to operate like it operates today. I think that’s going to be worse for the broker channel than it is today.”

Another panel speaker, Duane Sanders, CEO of Travelers Canada, agreed that “it’ll be interesting to see how the broker community responds.” Sanders added that Travelers Canada will “stay committed to the broker channel as we have thus far,” but will “continue to watch that space” and see what the market brings with time.

The final panel speaker, Alister Campbell, CEO of The Guarantee Company of North America, noted that “practically speaking, more and more of the broker companies are multi-channel writers.” With less traditional brokers operating in the marketplace, DeSantis went on to say, “it seems that companies are making decisions faster and change is happening quicker. I can’t remember when you would see two significant market players making those announcements one week after another.”

Added DeSantis: “So the decision over whether that is meaningful transformation in the market is in your hands. I think 40 years of lobbying success around ensuring that every politician of every party agrees that insurance being sold in the same branch where credit granting decisions are being made is fundamentally immoral and should be illegal has probably been the largest single lobbying success story in the broker channel. I am concerned that one of the transactions that you asked me about could possibly erode that case.”

Currently, Canadian banks are “authorized” to sell eight types of insurance: credit or charge card-related; creditors’ disability; creditors’ life; creditors’ loss of employment; creditors’ vehicle inventory; export credit; mortgage and travel.

Canadian banks are prohibited from selling other types of insurance – such as home and auto – through their branches. They are allowed to sell through subsidiaries but are not allowed to provide access, from the banks’ web pages, to other web pages through which non-authorized types of insurance are sold.

Through the Aviva/RBC agreement, Canadian Underwriter reported last week, Aviva Canada will provide policy administration and claims services and RBC Insurance customers will be able to access Aviva Canada’s full suite of p&c products. RBC Insurance will continue to market and sell these products under the RBC Insurance brand.

RBC General Insurance Company includes certain home and auto insurance manufacturing capabilities, such as claims, underwriting and product development. The transaction is expected to close in the third quarter of 2016. Through the acquisition, approximately 575 RBC Insurance employees currently involved in underwriting, claims and other key functions will become part of Aviva Canada’s operations upon completion of the transaction.

More coverage of the P&C Crystal Ball 2016

IBC anticipates more rate reductions from Ontario auto insurers