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Why it’s not so easy for an insurer to go direct


January 21, 2019   by Greg Meckbach


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Wawanesa’s decision to write insurance in Canada through brokers only came as a shock to some consultants.

“If you talk to the consultants down on Adelaide Street [in Toronto] in their big offices, what are they going to tell an insurance company? ‘Go direct,’” Carol Jardine, president of the Canadian property and casualty operations of Wawanesa Mutual Insurance Company, said during a recent presentation. “Why do they keep saying, ‘Go direct?’ It’s an expense play. You don’t have to pay brokers that 15, 16, 17% commission. You can do it cheaper. That’s basically what they tell you.”

Wawanesa announced this past July it would stop writing direct in Quebec.

“Anyone who thinks it’s easy to do direct insurance is extremely naive,” Jardine said Jan. 17 during a luncheon hosted by the Insurance Brokers of Toronto Region.

“I have been in this business for over 40 years,” said Jardine, whose previous roles include president and chief operating officer of both Canadian Northern Shield Insurance Company in British Columbia and CUMIS General Insurance Company.

“The one thing I know is that brokers look after their customers better than the directs. Brokers know what their customers need and want, and brokers will provide the value that a customer requires, which is choice.”

When Jardine joined Wawanesa in 2016 as chief strategy officer, one of the first questions put to her by the board of directors was about Sonnet, the direct writer launched in 2016 by Waterloo, Ont.-based Economical Insurance.

Economical offers personal auto, homeowner, condo, tenant and landlord insurance direct to consumers through Sonnet.

Jardine suggested Thursday that she and other senior Wawanesa officials told the board they did not want to build a direct writer similar in concept to Sonnet.

“We want to give brokers an insurance company that they do not compete with,” Jardine said.

“Do the consultants think I’m insane? They do. They actually think I’ve lost it. When I go and talk to them, they go, ‘You are missing out on this great opportunity. You should look at what’s going on in England. You should look at what’s going on in the U.S.,’ and I say, ‘Hey wait a second, we are a contrarian insurance company. We still have an office in a 600-person village southwest of Winnipeg, in Manitoba, which any other consultant would have told us to close. We have seven service offices across Ontario which any other insurance company would have closed.’”

When launching Sonnet, Economical was targeting consumers who are “really comfortable making all their financial transactions online,” Karen Gavan, then Economical’s CEO, said during the CEO Panel at the 2016 Insurance Brokers Association of Ontario annual convention.

Economical reported earlier that 11.1 points of its 2017 combined ratio – of 113.7% – was attributable to spending on strategic investments such as Sonnet.

The huge amount of money Economical spent on Sonnet raised questions from some mutual policyholders.

“We only need to look at the success of the Amazons,” Economical chairman emeritus Gerry Hooper said during the insurer’s annual general meeting in May, 2018. “The development of Sonnet is necessary for our future.”


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7 Comments » for Why it’s not so easy for an insurer to go direct
  1. Thom. C.J. Young says:

    The logic of consultants will never trump the reality of the market.

  2. T R says:

    And that 11%, made off the backs of their Broker Channel.

  3. paul armstrong says:

    Insurers with diverse delivery methods have to be careful not to double cross themselves. Transferring or borrowing resources and support from a traditional system that works could leave broker clients without delivery and service they are entitled to when higher premiums are charged.” Seeing oneself coming down the street ” could be injurious to all. Carol is believable.

  4. Carol Mellor says:

    So glad to hear the voice of reason in the insurance industry. Thank you Carol for reiterating that brokers offer a huge benefit to their clients and to Wawanesa Insurance for supporting the broker network.

  5. Sandra Bowering says:

    Thank you Carol Jardine for being a voice of reason during this difficult period in the insurance industry. Supporting the broker channel is extremely important and appreciated. Many times I have dealt with clients whom have left to go to a direct writer only to come back to our brokerage because they were not getting the service and advice they require. The saying is so true – you get what you pay for.

  6. Lance says:

    I worked for a Direct writer. It was an absolute nightmare. Clients would prepare their own quotes online filled with errors and we’d spend all our resources trying to fix errors and often times those corrections would cause the premiums to surge and ultimately the client simply cancels the policy altogether. Capital costs were mounting along with the bad risks slipping into the book of business creating a claim surge. Solution? Fire most of the senior staff and replace them with inexperienced staff who are cheaper although far less efficient and knowledgeable.

  7. rheal Cousineau says:

    Thanks Carol, for being able to understand that insurance is about making money but you can make money when you have cients that have been with you for 25 years and now you are insuring the kids and grand kids because grandpa and grandma were always happy withe the fine local broker who was taking care of them through good times and bad times in small town canada. If you can take time off to see your doctor, your dentist your accountant and your life insurance man you should be able to see your broker to protect your net worth properly. Furthermore call a direct writer to get a cheque for your local charity, fundraiser, community involvement does not come with their great price. We as brokers also never see these companies E&o claims nor the loss ratios of direct writers. Wawanesa should be proud to have stood up for all the brokers in canada. Kudos

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