Canadian Underwriter

Does it matter how brokers define independence?

July 25, 2022   by Jason Contant

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What’s the best way for a P&C broker to maintain its independence? Depends who you ask.

Back in April, Insurance Brokers Association of Ontario president Joseph Carnevale told Canadian Underwriter that independence is linked to the broker value proposition to act as a trusted advisor to clients. Provided the advice is in the best interests of the consumer, ownership of the brokerage providing that advice is not an issue, Carnevale reasoned.

“I think we need to…revisit what it means to be an independent broker,” Carnevale replied during a conversation about our 2022 National Broker Survey.

“If we figure there’s easily thousands and thousands of brokers working for insurance brokerages today, that may be owned wholly or partially by insurance companies or other potential specialists, it’d be unfortunate if we want to paint them with a brush that’s somewhat different from all the other brokers.”

Others disagreed and said ownership is crucial to whether a brokerage is offering truly independent advice. In the battle for scale, they advocate for two different kinds of models — networks and franchises — to make sure brokers can maintain independence in the face of widespread consolidation.

Strength in numbers is the only viable way Bruce Rabik, chief operating officer of Rogers Insurance and founder of the Canadian Broker Network (CBN), sees brokers maintaining their independence and gaining the necessary scale to survive.

A hot M&A market means many brokerages are consolidating under either major U.S.-based conglomerates or a couple of major domestic insurers or brokerages, he said.

“It has the potential to overwhelm the marketplace,” Rabik added. “The problem with most of these mergers and acquisitions that are fuelled by American private equity is they mostly lack long-term organic growth. Which begs the question: is that a customer-first strategy?”

The obvious answer is no, since those investments are short-term and mostly about satisfying pools of investors.

“On the [other hand], independent firms owned by their principals or employees, tend to focus their business models on longer-term organic growth, which essentially means you’re trying to satisfy your customers’ needs, and reinvesting back into your business,” he said.

Another brokerage, InsureLine, said its franchise model lets a firm be a “true independent brokerage” because it retains 100% ownership.

“We don’t own a single share in the business,” said president and CEO Aly Kanji. “You own your company; you own your book of business.”

InsureLine began nearly six years ago in response to marketplace consolidation. Every franchisee is a separate legal entity licensed with the regulator in their jurisdiction with their own principal broker, nominee or equivalent, Kanji explained.

Franchisees do their own accounting and payroll. And they pay insurers directly but have access to InsureLine’s market capacity, technology and marketing.

“There are people who have the desire to own their own business, and there really is no ability in Canada. There are way too many barriers to entry for somebody to start up a brokerage,” Kanji said.

Another issue is the scale needed to survive in today’s marketplace. “It almost feels like the runway for your business is shortening, or the light at the end of the tunnel is getting dimmer,” he said.

Excel Insurance Group also works “as a type of franchise model, where associates are independent brokers and retain sole ownership of their offices and client books,” said CEO and managing director Douglas Morrow. Associates contract with Excel for things like market access, accounting services and trust management, HR support and advertising.

“Our model combines all volumes, from all partner offices, under a single contract with each insurance company,” he added. “Presently, we have over 35 insurance companies under contract, plus additional MGA support for our partner offices.”

The arrangement creates options, beyond selling, and lets brokerage owners build viable succession plans for family members or staff who want to stay with a firm after an owner retires.


This article is excerpted from one the appeared in Canadian Underwriter‘s June-July issue and contains files from Gloria Cilliers and Philip Porado. Feature image by