September 26, 2014 by Ronan O'Beirne
This is a long-standing concern, of course. A 2007 report by the Insurance Institute of Canada found that more people were leaving the industry than coming into it, and this trend has “been in a pattern of steady decline for some time.” Not only are brokerages mostly comprised of older brokers, but there are few young successors to replace them when they retire.
“All the baby boomers are exiting the business already, so the challenge is, how do we grow the company in the future?” says Gilles Gervais of BFL Quebec. “How do [brokerages] make it so we have young, talented people in our firms as brokers? That’s a challenge many of us face.” The problem, he says, is especially acute among smaller firms. “Young insurance professionals will probably be more interested to work for a bank or an insurer versus a broker.”
The problem isn’t limited to Quebec. Phil Casey of Conexus Insurance in Lumsden, Saskatchewan, says, “There doesn’t seem to be a lot of uptake from kids getting out of high school wanting to get their CAIBs or CIBs.”
The president of the Insurance Brokers’ Association of Saskatchewan, Jim Seip, says the association is working to recruit young people to the industry and keep them there, primarily through its Young Brokers Network. “We get them involved in our meetings withhe government, we network with them and bring them in as part of the family,” says Seip. “Where we learned through the school of hard knocks, perhaps they can bypass some of that through our advice and mentorship and get to a point where their income is substantial.” (Several provinces have similar networks or councils.)
Gervais says the key is to aggressively recruit young people and keep them coming back.
“We must be better at soliciting those guys, making sure they come and work for us in the summer as students, and keeping them year after year.”
The income question might be one of the reasons that young people aren’t sufficiently drawn to insurance. New areas of risk, particularly cyber risk, are increasingly the domain of large financial institutions that offer competitive salaries. (Cyber risk also appeals more to a generation that grew up in front of its computers.) Another possible reason is the time it can take to fully grasp the complexities of the insurance market: some young people might be deterred by the fact that they won’t be able to quickly master their craft.
Some brokers are also finding their succession and growth plans challenged by the increasing presence of financial institutions in the market. When the government lifted the 10 percent ownership limitation on brokerages, these institutions increased their investment.
“If you’re a broker that is challenged by organic growth, then it puts a lot of pressure on you to acquire brokerages,” says Jeff Roth, managing vice-president, Ontario for BFL. “With the costs that are being driven up in the marketplace from either financial institutions or private equity, it’s prohibitive for an independent broker to make similar investments.”
Roth says this also risks redefining “the face of broker independence,” because of the potential conflict of interest posed by a brokerage owned or partly owned by a financial institution.
Casey, who sold his brokerage to Conexus 10 years ago, says that some Saskatchewan brokers shared those concerns at the time, but that the worry is eroding: “We’re following the restraints that have been applied to us.
This story was originally published by Canadian Insurance Top Broker.