Intact CEO Charles Brindamour is assuring his competitors that they are not at a competitive disadvantage with Intact should they distribute their insurance through Intact Financial Corp.’s BrokerLink brokerage unit.
“Our strategy is not to get the brokerage business to be an extension of the insurance company. Our strategy is to be the very best broker in the marketplace,” Brindamour said Aug. 11 during a virtual fireside chat with UBS analyst Brian Meredith.
“Your competitors can’t be happy if they all of a sudden see Intact buying one of the brokers they are using,” Meredith said of BrokerLink during the chat, part of the UBS Financial Services Virtual Conference.
“There is what our competitors think, there is what other brokers think, and there is what consumers think,” replied Brindamour. “The three are different, I would say.”
Intact Financial’s BrokerLink subsidiary recently announced it has closed nine acquisitions to date in Canada in 2020. It has more than 140 brokerage branches.
“One of our commitments is that if you put your product on our competitive platform [i.e. sell an insurance product through BrokerLink], there will not be a competitive disadvantage for you to be on our platform any more than [there would be by selling your product through] any other brokerage in the Canadian marketplace,” Brindamour said during the UBS fireside chat. “By that I am not saying everyone will have the same results. The competitors [to Intact Insurance] who are not so dogmatic and accepted our offer to be on our platform, you know what? We are now one of their biggest distributors and it’s been good for them.”
Meredith asked Brindamour whether there is regulatory “pushback” to Intact’s broker distribution strategy.
“Other than in one of the provinces, there is no ownership restriction,” replied Brindamour. “In the province of Quebec, there is a maximum ownership [a brokerage] can have. Therefore, we have partners there. We play more the role of a highly supportive private-equity investor. There is strategic alignment. In the rest of Canada, there are no constraints.”
In Canada, the provinces regulate the market conduct of brokerages, while the federal Competition Bureau reviews proposed business combinations in insurance and in other sectors.
“Information will not be used against you,” Brindamour said Aug. 11 of insurer competitors to Intact who place through BrokerLink. “You will not be adversely selected against. As a result, many of our competitors have built great businesses with BrokerLink, which is run separately from the insurance operation but run the Intact way.”
Quebec has rules in place that limit ownership of “financial institutions, financial groups or legal persons related thereto in damage insurance firms that act through brokers,” a spokesperson for the provincial regulator, Autorité des Marchés Financiers (AMF), told Canadian Underwriter in 2019, commenting in general on brokerage independence and not specifically on BrokerLink or any other company.
BrokerLink is not the only Canadian brokerage with an ownership relationship with an insurer.
Western Financial Group of High River, Alta., is owned by Trimont Financial Ltd., a subsidiary of The Wawanesa Mutual Insurance Company, which acquired Western from Desjardins Group in 2017. Noble Insurance Limited, which has brokerage offices in Ontario in Barrie, Collingwood and Alliston, was acquired by Gore Mutual in 2017.
If a brokerage’s parent company also owns an insurer, it can still be considered independent if the parent company does not provide an incentive to place with a specific insurer, Colin Simpson, CEO of the Insurance Brokers Association of Ontario, said in a 2019 interview. He was commenting in general on brokerage independence, and not on any specific ownership model or situation.
Added Simpson: “What we try to advocate to consumers is the quality of [the] advice [the broker gives the consumer] so there is confidence in getting the correct insurance advice when you approach a broker regardless of the corporate structure.”
At the time, Simpson drew a distinction between an insurance carrier that owns a brokerage, on the one hand, and the situation of BrokerLink, on the other hand. Intact Financial Corp., which is publicly-traded, owns Canada Brokerlink Inc. as a separate legal entity from the insurance carriers, which include Intact, Belair, Jevco, Novex, The Nordic, Trafalgar and OneBeacon.
Some insurance professionals say a brokerage is only truly independent if it is owned by employees – specifically the brokers who are actually placing the business, Steven Frye, a Toronto-based partner with Baker Tilly WM LLP, told Canadian Underwriter in an earlier interview.
Some brokers do not think a brokerage is truly independent if it is owned by passive investors such as private equity, Frye told Canadian Underwriter in 2019. He was commenting in general on brokerage ownership models and not on BrokerLink or any other company.
The ownership relationships between some carriers and brokerages came up in 2017 at the Insurance Brokers Association of Ontario’s annual convention.
When a brokerage changes ownership, it often leads to the book of business going to an agency-based company, said Heidi Sevcik, then CEO of Gore Mutual, during the CEO panel at the 2017 IBAO convention. Hence, Gore Mutual’s acquisition that year of Noble was partly about keeping Noble in the broker channel, she explained.
“There is a lot going on in distribution, and vertical integration is just one component in what is a rapidly-evolving area,” said Rowan Saunders, CEO of Economical Insurance, during the CEO panel at the 2017 IBAO Convention. “I don’t think, from our perspective, that we find a need to actually have a brokerage network of our own. We are more focused on supporting our brokers.”