Canadian Underwriter

Cross-Border Broking

October 15, 2013   by Gary Hirst

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One of the less controversial elements of the US immigration bill recently passed by the Senate and being debated by the House of Representatives is a provision increasing the length of time foreign property owners can spend in the country. If the bill passes into law, foreign property owners—including Canadian snowbirds—will be able to spend up to 240 days at their villas and condos in Tampa and adobes in Scottsdale.

This change will add fuel to an already hot market for vacation properties. According to a Bank of Montreal report issued earlier this year, more than 500,000 Canadians now own property in the state of Florida alone. In fact, Canadians make up the single largest contingent of foreign property owners in the state and the trend of Canadians snapping up undervalued properties to turn into vacation homes is expected to continue.

As more Canadians explore the possibility of buying property south of the border, many are looking to their insurance brokers to provide coverage in the US, which can often cause problems if their carrier doesn’t provide cross-border services.

“We recently came to realize that a lot of our clients have properties in the US,” says Lorna Geldart, a personal account manager at Hartwell Thayer, an insurance brokerage in Aurora, Ont. “By offering cross-border insurance, we can benefit them by being the sole source for all their insurance needs.”

While all brokers want to provide full service for their clients, many of the typical approaches to placing cross-border business, such as partnering with an American broker or looking online for coverage, may cause problems for the broker or, worse, for the client. 

Service Consistency

Partnering with a broker on the other side of the border requires a leap of faith. You’re essentially ceding a part of your business to an unknown player. Over time the originating broker may be able to build relationships with partnering brokers who operate in popular destinations but any time a client looks for insurance in a new area, they’re required to place their trust in a new partner.

Patti Hull, the owner of EdgeHill Insurance Brokers in Toronto, used to place her business through a large brokerage in the US, but switched when she found a lack of consistency across the brokerage’s network.

“Not getting paid wasn’t a big deal,” says Hull. “But the company’s business structure meant that I had to deal with eight to ten brokers and there was no consistency for my clients.”

Service is an especially tricky quality to evaluate in an unknown partner, because you don’t really get to test their dedication until after problems arise. The high-net-worth individuals who buy properties in the US expect quality customer service and it’s the originating broker who suffers the consequences if they don’t receive it.

Selecting a partner who can manage coverage in Canada and across the US while still allowing the broker to keep control of the quoting and binding processes means that the client relationship is managed by someone with a stake in customer satisfaction—their personal broker. 

Commission & Compliance

Canadian brokers typically do not receive a commission on the premiums written in the US. In many cases, their clients are high-net worth individuals so the loss of commission is simply the cost of doing business with a long-term and valuable customer. While it may be the cost of doing business, as a client places more and more of their insurance with US brokers, the loss of commission adds up to serious money. On top of that, there are currency issues to be resolved when a US insurer wants payment, but a broker can only accept Canadian funds.

The right partner will enhance a brokers offering without taking their entire commission or seeing them pass along the loss in the form of a service fee. By choosing a partner that offers integrated, cross-border insurance solutions for their high-net-worth customers, brokers can continue to place their clients in the US, while retaining a portion of their commission.

Each state has its own laws governing insurance coverage and each law gives rise to legal quirks that introduces additional risk. Additionally, with so many regulatory bodies, it can be challenging to keeping track of changes to regulations over time.

“Each state can have different requirements for specific coverage,” says Geldart. “We are totally dependent on our partners for that kind of knowledge.”

Making mistakes in terms of compliance and regulation can hurt brokers and clients. If clients do not have proper coverage, they could be on the hook for damages to their property or liable for any injuries sustained on it. 

Market Knowledge

Local knowledge is essential. The coverage requirements for a house in Arizona are a lot different than the requirements for a house in Florida. For example, if a house in Arizona carries hurricane protection, someone is writing a bad policy. While the example is pretty obvious, there are many other potential pitfalls awaiting brokers in an unfamiliar market.

“Expert knowledge is very important to us,” notes Geldart. “The US has more unique coverage options than Canada that we would never know about. The different regions all have their own weather related coverage that homeowners need to purchase.”

There have been cases of brokers finding inexpensive insurance meeting their client’s coverage needs, not realizing that the company they were dealing with wasn’t financially rated. Without a rating, there was no way to gauge the financial health of the organization, putting the broker’s customer at risk. In the event of a major event, the firm could become insolvent and the customer would be on the hook for damages.

Finding a partner with a good network of offices across the US and Canada provides brokers with access to experts with knowledge of local markets to help them find the right mix of coverage for their customers.

Overall, the best solution to service Canadian customers who have properties in other countries is to choose a partner who offers expertise, but won’t compete against a broker’s own interests. Dividing coverage between markets creates a less than optimal piecemeal approach to risk management. Things get missed, exposures fall through the cracks. Having all of a customer’s insurance under a single risk management plan with one broker, even when multiple carriers are involved, is a more efficient way of doing business.

When selecting for a partner, brokers should look for a company that understands local jurisdictions, the filing and tax requirements in those jurisdictions, and has market access to place almost any property risk. They should also look for a partner that will allow them to maintain control of the client relationship and still make a reasonable profit on the work they do. The right partner will help brokers perform their most important task—keeping customers satisfied with their insurance coverage.

Gary Hirst is the national director of Burns & Wilcox Canada. He can be reached at


Copyright 2013 Rogers Publishing Ltd. This article first appeared in the September 2013 edition of Canadian Insurance Top Broker magazine

This story was originally published by Canadian Insurance Top Broker.