January 18, 2017 by Martha Porado
Canada’s top insurance players aren’t having trouble maintaining market share, so smaller players are using creative strategies to reach the shifting demographics coming into the market.
Aviva Canada has nothing close to the name recognition of its most recent acquisition, RBC General Insurance. Hardly surprising, considering it’s a young subsidiary and wholly owned by the British multinational Aviva plc. “We don’t have some of the brand spend that RBC does,” says Jason Storah, vice-president of broker distribution with Aviva Canada. “Up until recently, we only sold our products through brokers, so mass marketing to the end consumer wasn’t really…a focus.”
The company known today as Aviva Canada started in 2003. Compared to the 129-year-old insurance giant Manulife Financial, the problem is clear. How to solve it? Get behind a name everyone knows.
Canadians love their banks, so it makes sense that Aviva chose to team up with the largest one. The asset known as RBC General Insurance Company—which “includes certain home and auto insurance manufacturing capabilities, including claims, underwriting and product development,” according to an RBC press release—was acquired by Aviva Canada. “We were a $4.1-billion company before this deal, [which now] pushes us up to $5 billion, so that adds almost 20% to our topline […] overnight,” says Storah.
The venture—announced in January 2016 and completed as of July 1—also includes a “15-year strategic agreement” with RBC. The practical upshot is that “Aviva Canada will provide policy administration and claims services, and RBC Insurance customers will access Aviva Canada’s full suite of property and casualty products.”
These products, provided by Aviva, will receive a new face, as they’ll be marketed and sold under the RBC Insurance brand, says the Aviva press release. “It’s business as usual for the customer,” Storah says, adding that if customers read “the policy documentation in fine print on the back, […] they will start to see documentation that says something like ‘underwritten by Aviva Canada.’ I’d say 99% of the customers wouldn’t even notice that type of minor wording change.”
“This transaction is definitely a game changer in the Canadian marketplace. There hasn’t been a similar type of transaction in this space.”
So, along with the asset, what type of customer is Aviva acquiring? “There may be some differences,” says Storah. “I think we look at the profile of our customers with brokers, and where our brokers win customers from, versus where other customers are going in the market.” Strategically, Aviva’s expansion considers “consumers looking to buy insurance the way they want to buy it, whether that’s online, through their bank or with a broker,” he says.
“They key thing about this partnership is that we can offer Aviva products to customers however they decide they want to buy that product. Not everybody decides to buy a product through a broker, but I don’t think people wake up in the morning and think, ‘I want to buy my insurance from a broker or a direct writer or a bank.’ They wake up and say, ‘Somebody last night recommended such and such a company, so I’ll call them or go to their website.’”
In reaching the new millennial customer, Storah says this deal has a part to play. “Young people aren’t buying cars,” he says. “And house pricing in Toronto […] is changing home ownership. So insurance needs are changing.” But the affiliation with a brand like RBC isn’t the only way to meet the needs of the oncoming customer. “Brands are great, but if the insurance products aren’t there […] then it’s not really going to matter,” he says. “We were the first company in Canada to come to with a ride-sharing product […] [that’s] the key thing for us, if there’s a need out there.”
“I think we bring to Aviva some new clients that it wouldn’t have been able to access through strictly a broker strategy,” says Neil Skelding, president and CEO of RBC General Insurance. “We had clients coming to us requesting products we didn’t offer. With Aviva, we’ll be able to offer a broader array….These are existing clients with whom we have a relationship, whom we couldn’t fully service before. Now we can.”
“This is a very sleepy industry, from a product development perspective….Our view is if we can keep challenging the status quo…and we can partner with a brand as fantastic as RBC, it feels like we’ve covered off both sides of the equation,” Storah says.
M&A activity within this space is nothing new. “This transaction is definitely a game changer in the Canadian marketplace. There hasn’t been a similar type of transaction in this space,” says Skelding. “Any insurer would be able to strengthen its brand with this type of arrangement. It’s a strong brand; it’s a trusted brand.”
This play lets competitors know Aviva is in the game. “In the home and auto business, scale is very important. That’s, in part, why you’re seeing lots and lots of activity in the marketplace, because there’s a need for scale but also growth….I think, if you bring those two elements together, you have a powerful combination,” Skelding says.
“There’s a lot of impetus in the market for [carriers] to think about transforming their distribution model and strategy. That’s essentially how I look at this play,” says Mukul Ahuja, senior manager in insurance strategy and information at Deloitte.
“We were a $4.1-billion company before this deal, [which now] pushes us up to $5 billion, so that adds almost 20% to our topline […] overnight.”
“Aviva, a trusted broker brand for 100-plus years, always wants to get into additional channels and access new customer bases,” he says. Other players, like TD Insurance, may already be too big to be overhauled. “TD Insurance has continued to focus on customer experience in expanding its digital capability,” says Ahuja. “Each of the top 10 [insurers] is continually in transformation mode and really thinking about how to make its business as efficient as it can be, while keeping an eye out to the future.”
A recent report from Deloitte—Property and Casualty Insurance Re-imagined: 2025—indicates the likelihood of increased strategic partnerships within the insurance world going forward. “Large insurers will be able to realize significant competitive advantage by cultivating integrated partnerships ecosystems that allow them to deliver value-added tools and services to consumers through frequent customer interaction. It is partnerships that help to enable interconnected consumer needs.”
Regardless of which players stand behind them, the sector-wide handshakes won’t cease any time soon.
Copyright © 2016 Transcontinental Media G.P. This article first appeared in the October 2016 edition of Canadian Insurance Top Broker magazine
This story was originally published by Canadian Insurance Top Broker.