January 2, 2013 by Edited by Regan Reid
As this issue was going to press, new economic data was released that underscores the fragility of Canada’s economic recovery. Canadian GDP was down slightly in August due to weak demand for exports and natural resources and a slowing housing sector. Additionally, bankruptcies rose, thanks to still-skyrocketing consumer debt.
Despite these discouraging statistics, many of Canada’s leading brokerages have not only managed to weather the storm of the last few years, but have continued to grow their businesses. Moreover, the challenge of managing a brokerage through these difficult times has been compounded by the many issues that are reshaping the insurance sector. Industry consolidation continues to pick up speed in both the insurer and brokerage segments. Additionally, the mass exodus of Boomers from the industry has increased the competition for the existing talent that remains, as well as the urgency to recruit young people.
To examine these challenges in more detail, Canadian Insurance Top Broker held a “virtual” roundtable discussion with the CEOs from seven of the country’s top brokerages. The leaders were invited to offer their candid insights into how their firms are overcoming these obstacles and finding opportunities in inopportune conditions. Their responses also reveal the different personalities at the helm of some of Canada’s most successful firms, providing readers with a better understanding of who’s in charge and how they lead.
Roundtable participants in alphabetical order:
Christine Lithgow, president and CEO, Aon Risk Solutions Canada
Barry Lorenzetti, president and CEO, BFL Canada
Paul Martin, president and COO, RRJ Insurance Group Ltd.
Neil Morrison, president and CEO, Hub International / HKMB & Ontario
Aaron Nantais, CEO, Jones DesLauriers Insurance Management Inc.
Bruce Ogilvy, president, Ogilvy & Ogilvy Inc.
Mark Rankin, president and Managing Principal, Integro (Canada) Ltd.
In your opinion, what does it take to lead the market in today’s economy?
An insurance brokerage focused on short-term growth objectives will be challenged to succeed and forced to be reactionary. When you are only reacting, it is difficult to plan and even harder to stay with that plan. The ability (and being a private firm helps) and foresight to plan longer-term operational and financial goals coupled with the patience to see them through will position companies to the lead the market for years to come.
In this marketplace you really have to be creative, in thinking of ways that are a little bit outside the box.
I think our problem is that we see that this is the way it’s been done forever, it’s had a success, and we tweak those little things, and we put new spins and we put new names to them, but really it’s the same old way of doing business. So I think we need to start becoming more creative in leading this marketplace.
There is opportunity in every market. When the market was extremely hard, we focused our efforts and targeted the toughest classes of business with cross border exposure since they were the most affected. We targeted business that was with brokers who may not have access to the strong international insurers and who placed the business with domestic regular markets that did not have the underwriting or rating expertise.… In today’s soft market where the prices have bottomed out, we refocused our efforts on marketing, branding, value added services and our full value proposition. The primary differentiator now from the client’s view is the expertise and value proposition the brokerage offers.
Aon Risk Solutions
With 27 offices across Canada, and more than 600 offices in 120 countries, Aon certainly has a wide reach. The global firm offers clients access to all of Aon’s experts—from St. John’s to Shanghai. Christine Lithgow is a 30-year veteran of Aon, and was appointed Canadian president in April 2011. She assumed the CEO role this January.
Clearly our industry has a lot of value to offer during times of economic uncertainty. The leaders are those who trade in certainty. So we need to make very sure there’s quality in the advice and support we give, and the product we deliver.
What have been the top business challenges for your firm over the last year? What can you as CEO of your brokerage do to respond to these challenges?
We try to improve margins in a market that continues to compete with cheaper terms year after year. We’re challenged to fairly compete for buying other great brokers against insurers who we would prefer to be our suppliers and partners rather than our competitors.
Our industry is highly competitive and I think the biggest challenge that everybody faces is one of staffing, and making sure that your staff are knowledgeable on the insurance products and how to get the job done for their customers. And most importantly, attracting and maintaining, and motivating sales staff, because there’s a tremendous lack of good solid, technically, astute sales people, who know how to listen to what the customer needs, and put together an insurance program that adequately protects them.
Insurance companies, those whose product we bring to our clients, have changed their business model. Centralized command and control, layers of authorization and mountains of actuarial modeling have changed the tradecraft. The days of trading relationships between individuals who could negotiate principal-to-principal at a local level are behind us now. I’m not suggesting it is a bad thing—but for a broker with 27 offices across Canada, a lot has changed and, as CEO, I have re-tooled our organization to create a fast lane for our clients to the decision makers they need to connect with, globally.
What are some of the most significant areas of growth for your firm right now?
There are several areas where we are performing extremely well right now and they include RFPs for large public companies where we win against alpha houses, and the wood (pulp and paper) industry where a void was created when Lumbermen’s Underwriting Alliance made a decision to shut down its Canadian operations.
We are seeing growth in our non-traditional lines, specifically programs and travel insurance products. This is not a surprise since we have been investing in these lines for some time. We see better growth in these lines since we are specifically marketing in these areas, and these books of business are less time consuming to service, leaving more time to prospect and develop new business.
Hub International HKMB
Since joining the firm in 1994, Neil Morrison has seen HKMB grow from a Toronto-based firm to become part of a Canada-wide organization. In 2008, the brokerage joined with Hub international to become Hub International HKMB, with offices in Canada, the US and South America.
Our D&O department has seen double-digit growth this year. Upon reflection, we see this growth coming from two areas: 1) a function of the economy where companies are looking for broader corporate protection against an uncertain economy; and 2) a lack of sophistication in the mid-market space from brokers who can demonstrate the need for coverage to smaller, privately-owned clients.
We’re seeing more events happening where people are requesting special event insurance or host liquor insurance, whether it be an event at a convention centre, or whether it be an event at a golf tournament. So we’re seeing more of that type of insurance being asked for, which was certainly unexpected in my opinion. …. Also, an increase which is probably expected is in US second home locations, primarily Florida, Arizona and California where you saw the prices drop dramatically down there.
Our growth in the construction segment is sustained and still growing. Frankly, that was not something I foresaw would continue as long as it has. Connected to that growth, a higher concentration of people in smaller areas has the potential to create higher losses in human life and property and that has lead to growth in the real estate book. That urban concentration means great infrastructure and environmental stresses from which demand for our services has also grown because governments are becoming overwhelmed and unable to keep up with the increased demand on their resources. So public-private partnerships have sprung up.
What has been the impact of recent regulatory changes in the insurance industry on your business directly?
It is not so much the changes, rather than the enforcement level that has impacted us, especially with respect to cross-border business involving global programs. Foreign brokers and their clients are rarely aware of the Canadian regulation and are exposing themselves to fines and penalties from the CRA unless properly informed of the potential consequences. We have put a lot of effort into this in the past few years. … Compliance to regulation is a matter of education and we provide continuous training to our personnel to keep their awareness levels up.
I think it is the lack of regulatory changes in the insurance broking industry that has really impacted our business directly. Regulation has not kept pace with the way business is conducted today, where clients frequently have operations in multiple jurisdictions within Canada. Because insurance broking is provincially regulated, we are subject to 13 different regulatory schemes, which are frequently different in how they address specific issues. These issues include licensing, rebating of commissions, payment of referral fees and administration fees, placements with unlicensed insurers, and the ability to be compensated through fees in addition to commissions. These differences increase the complexity of our ability to act as the insurance broker for clients and make the administration of national programs more difficult.
If you could wave a magic wand, what legal and regulatory changes would you like to make in the industry?
My focus would be on maintaining fair competition in distribution and implementing measures to control fraudulent claims. Both of these areas will have a significant impact on customer satisfaction and particularly the perceived value of the insurance product.
We feel regulation needs to be harmonized. As a national company, we have to deal with regulation from every province, which, in our view, is highly inefficient, costly and, frankly, confusing.
We would hope that provincial regulators would all adopt the same rules and that there could be a single body to deal with rather than the current situation where we have to deal with 10 provincial and three territorial bodies, each having its own set of rules for eligibility for both companies as well as individual brokers, as well as different reporting requirements….
Jones DesLauriers Insurance Management Inc.
Jones DesLauriers Insurance Management Inc. has just ended a very successful year financially. Since finalizing its succession plan which made Aaron Nantais the new CEO, JDIMI has turned its eyes to moving the firm onto a national stage through a series of strategic acquisitions over the next five years.
… It also requires a layer of administration within our company that would be eliminated with one licensing body.
Streamlining administrative functions, such as licensing and payment of non-admitted taxes, across provinces through a common web-based platform would be a welcome advancement, but the one fundamental change I would like to see is greater transparency and disclosure to the public of insurance company ownership of brokers.
The industry is having a great deal of difficulty attracting new people to replace those who are leaving. What do you think needs to be done on an industry-wide basis and what is your firm doing to deal with this issue?
Our People Team in Ontario shared with me that the average industry turnover rate is about 14%; historically Hub has been about 10-12% and year-to-date, Hub is at 7%. So people are staying with Hub, but not necessarily in the same job. We recruit in a variety of different ways and we have honed how we fill certain types of positions with colleagues who have the greatest propensity to excel in those roles. So that reduces mistakes—and people mistakes are usually expensive.
The insurance industry as a whole needs to be more proactive in promoting the opportunities available to young professionals choosing a career in insurance. It needs to bring more awareness to the younger generation of how dynamic this industry is and the diverse opportunities available to them. At JDIMI we have developed a new recruitment and training program with Northbridge Insurance, that will allow new university and college graduates to gain experience in both the insurance company and brokerage side of the industry. This includes a complete CAIB offering and an ongoing documented mentorship plan.
I think the Insurance Institute has been a leader in trying to attract people into our business. We certainly need to make that a wider industry initiative to visit, not only universities during job fairs, but the high school level to educate them on the importance of insurance. I mean we have to understand nothing, nothing moves in Canada without insurance. Nothing sits without insurance. You can’t do anything. So people understand they need it, but they don’t understand the number of jobs that are available in our business.
Traditionally the industry has struggled to attract and retain talented young people but I sense that trend is reversing. …. I believe in the past our industry became too reliant on the experience found in the “older generation” and did not provide enough real opportunities to the younger generation looking to push their way up the ladder. A concerted effort over the past number of years by many in the industry to recruit talented graduates, through RIMS Canada scholarships, job fairs, university co-op programs, etcetera, together with the vacuum created by the “boomers” starting to retire, has created an unprecedented opportunity for young people to join and thrive in the insurance industry.
Ogilvy & Ogilvy
Ogilvy & Ogilvy first opened its doors in Montreal in 1924. The family-owned brokerage opened a second office in Toronto in the 1980s. In 2011, the Ogilvy & Ogilvy completed its succession plan and transferred the business to the third generation. Bruce Ogilvy works as president from the Montreal office while vice president David Ogilvy is based in Toronto
The idea of becoming a broker is not very sexy to the general population and the only way to change that is by actively providing information instead of letting old biases prevail.
BFL has an advantage on this front as we specialize in commercial and group insurance and these types of client accounts are always handled by a team rather than by a single individual. This makes for a greater variety of situations a young broker will be exposed to and a greater chance to learn about the business world.
Imagine you are interviewing a coveted candidate for a job at your firm. You know this candidate has offers from other firms. How would you answer the question: “Why should I come work for your firm? What makes your company special?”
We are still a family firm. We maintain the values that the business was built on over the last 88 years. We acknowledge the need to grow our business and drive profitability, but we are not only about that. We work at creating and maintaining a workplace where people can get to know each other and build their careers together.
Without wanting to sound too arrogant, I think we would want to determine with the applicant why she or he is interested in Hub, what the applicant’s motivations are, and mutually determine if indeed Hub is the right choice for that individual. People need to be in the “right seat on the bus,” even when egos initially think otherwise. [In] every good relationship, it is important to remember that being coveted needs to go both ways.
Hub invests in our colleagues’ continuing education with almost daily opportunities to better master our vocations and professional expertise either in-house, in our training centres, or externally through Hub paid-for courses—above and beyond what our regulatory continuing education requirements might be.
We have a very positive work environment. We encourage people to come forth with new ideas, how to do things better. You’ll never be terminated or fired for coming forward and criticizing the way something is done—the status quo—if you’ve thought it through and have a new idea of how to do something better….We have a culture of advancement. We do promote people, we do move them up and give them added responsibility and therefore, they get more money.
Our growth has and continues to be strong, so we must be doing something right. Everyone wants to be on a winning team and is attracted by joining a firm where innovation has been and continues to be highly encouraged. Also, we offer employees an opportunity to become owners – to join an established group of builders. This is a very attractive formula.
Our employees have unencumbered access to our entire global team and they know they have all the resources of an international firm at their disposal without concern for expense allocation. This allows us to provide clients with the intimate service of a boutique firm together with the expertise and experience of the “big box” brokerages.
Because we work with every sector of the Canadian economy and we work in 120 countries, there is a place for you to start and many places for you to flourish. I’m a perfect example of why to come to Aon. I started 30 years ago as a trainee account manager in Glasgow, Scotland and moved on to be a broker in Edmonton. Today, I’m the president and CEO, but I’m still running and still excited about what I do—every day.
In 2009, The RRJ Insurance Group brought together six independent insurance brokerages under a common brand and business model. Today, the company has consolidated its six brokerages into four and has a presence throughout Ontario. In addition to his role at RRJ, Paul Martin serves on the executive of the Insurance Institute of Ontario.
We have a very dynamic sales culture at JDIMI and a clear career path for new sales staff that takes them from producer to partner. Not many firms can articulate how a new producer can achieve the same level of success as the people ahead of them. Our stock option plan clearly identifies at what commission volume you become eligible to become a partner and how you continue to build your equity, so the candidate can see their future at JDIMI.
What do you think are the essential qualities of a good leader?
That you understand your primary job is to help others succeed, that you champion them and that if you serve their ambitions to excel, then most everything else usually falls into place. That you set an example, have integrity, and strive to do the right thing, every time… (And a great leader works at all this every day, never gets it right every time, but keeps trying regardless.)
I think you have to be visible to your people so that they see that you’re here, you’re working like them. … I think an invisible leader is probably, lacking the insight into what’s going to make their company great.
A good leader is honest, consistent, and approachable. … We think that there are a number of business strategies that we could follow and be successful. We know we will not be successful in any strategy if we can’t get the team to work together. Leaders need to build trust and loyalty within the company in order to get everyone working as one.
To me, a good leader is somebody you like and can trust. Somebody who knows their business inside and out, who not only has a vision of where the company needs to go, but has the practical skills to roll up their sleeves and get it done. To use a sports analogy, it is the captain on the pitch, making decisions while playing the game with their teammates, not somebody sending in the plays from the sidelines.
A good leader should have compassion and empathy. You have to know when to agree to disagree and feel for the other side – win, lose or draw.
What aspect of your job as CEO takes you the furthest outside of your comfort zone? How do you deal with that?
Until we sold HKMB to Hub, I never really had a boss (as an insurance broker) and I had never been a boss at a senior level. My experience at HKMB had been as part of a team with a number of other partners and we all performed functions that aligned with our respective competitive advantages—and that worked well. At Hub, I report to Jim Barton for some aspects of my job and to Marty Hughes for others—and I have had to work at appreciating how they each require things of me such as seeking approvals and timely reporting expectations that, once upon a time, rested within my sole purview. At the same time, I had to transition (not always successfully) from being a partner to being a boss.
Integro Insurance Brokers
Founded in 2005, Integro Insurance Brokers was one of the largest capital investment startups in the history of the business. It has quickly grown to have offices throughout the US, Canada and the UK. The brokerage focuses on complex and special risks. Mark Rankin has been with the company since the beginning/
I find speaking in front of large groups can sometimes be a challenge. I have been part of the executive team at JDIMI for over 10 years, but more like the drummer in the band and not the lead singer. To build up my comfort zone, I continue to volunteer my time to speak at industry conferences and events, as I truly believe in giving back to the industry… and I always feel energized after I have accomplished what I don’t necessarily like to do.
The mere scent of anything bordering on internal politics just makes no sense to me—I don’t get it. Becoming and remaining successful requires the full attention of all team members on what’s best for the firm, not for themselves individually. We have done a great job of all but eliminating this “disease,” but every now and then it rears its ugly head. I usually get the issue resolved very quickly by confronting the “politicians” as soon as possible. That sends a healthy message—believe me.
My background is in mechanical engineering, which means that virtually none of my formal training prepared me for my current role. The soft skills and patience required in human resources, and particularly managing staff, have been learned on the job through trial and plenty of errors. Particularly when outside of my comfort zone, I rely on opinions from various internal and external sources to help guide me.
I challenge everything head on, but if there was one thing that I’m still not completely comfortable with, it’s probably technology. It’s ironic because one of the most important strategic investments for my firm is technology. …I will admit that it is a generational thing and I deal with it by learning from others, staying open to change and engaging the best talent we can find to realize the full value of our investments in technology on behalf of our clients. Now, if I could just find someone to fix my home stereo….
What are your biggest personal concerns about the insurance industry and/or your business?
In order for brokers and insurance companies to thrive and grow in the present marketplace that we’re in, I think we need to do away with the traditional insurance company contract for brokers to deal with the consumers.
I am limited to dealing with only my contracted markets, I can’t give [the client] what’s best, I can only give [them] what’s best in my office. … If we truly want to give consumers a choice, the choice should be dealing with a broker who has access to all broker-driven business.
We need to be us against them, us being the broker channel and those companies that support the independent broker channel, against the direct writers, the Internet writers, and the banks.
First and foremost, as an independent brokerage, we are weary with respect to the consolidation that has been taking place in our industry for many years now. Secondly, the impact of social media on privacy and confidentiality issues; we’ve only seen the tip of the iceberg so far.
Continued consolidation within insurers and brokers means that smaller brokers will continue to struggle with defining their value to their customer. Furthermore, the next generation of buyer will not have the same loyalties that we have enjoyed in the past so our challenge will be how to attract this new breed of buyer and keep them long enough to be profitable.
What excites you most about the industry going forward? What opportunities do you see for the next generation of brokers (and perhaps your successor as CEO)?
The opportunities are still vast and the industry is growing through the emergence of new risks. “Risks” are discussed regularly now by CEOs, CFOs, and boards, so our industry needs to evolve and get much more sophisticated. Risks like cyber and supply chain are examples of the new reality. And what about climate-related risks? Surely this is an area where we will see much evolution in the coming years.
BFL Canada is currently celebrating its 25th anniversary. Barry Lorenzetti founded the company in Montreal in 1987, with a goal to create a culture like the one he enjoyed in his days at Tomenson Saunders Whitehead. Today, the brokerage has offices in nine cities across Canada and employs more than 400 people.
I get up in the morning and I love coming to the office because I work in a business and for a company where, on a daily basis, I know I am going to be challenged and, at the same time, have some fun.
If, as an industry, we are passionate about what we do then we will attract quality individuals to join our business and the next generation will have even greater opportunities and success.
Some industry experts, both insurers and brokers, see consolidation as a negative or uncertain future. Though it is uncertain, I choose to look at it positively. Consolidation also brings opportunity. Every insurer we have met with in the last 12 months to talk about business development is looking at their own planning very differently, partnering very strategically, developing new products and moving from traditional underwriter to marketing, sales development and brand awareness. … We will all need to plan, market and deliver excellent products to be successful in this new marketplace. That’s a good approach for our industry and our customers.
Our business is other people’s business. Few other professions provide such a wide-angle view of the business world. That should excite the next generation, shouldn’t it?
Copyright 2012 Rogers Publishing Ltd. This article first appeared in the November 2012 edition of Canadian Insurance Top Broker magazine.
This story was originally published by Canadian Insurance Top Broker.