October 1, 2001 by Vikki Spencer
As one of the “founding fathers” of the developing broker/company portal, incoming Insurance Brokers Association of Ontario (IBAO) president Danny Craig is confident the year ahead will be a time of massive, positive change for the industry. The association, he says, is putting the portal front and center in its plans for the future. But with the advancing technology comes an increased need to return to the roots of broker distribution — “people power”.
Ask Danny Craig what the year ahead holds for Ontario’s insurance brokers, and the answer can be summed up in one word – portal. As he assumes the presidency of the Insurance Brokers Association of Ontario (IBAO), Craig predicts the coming months will see all facets of the association’s work affected by the broker/company Internet portal currently under production by the Centre for the Study of Insurance Operations (CSIO). “It will be the central focus of everything we do,” he admits. In fact every committee under the IBAO banner will have the portal on its agenda.
Some may say Craig is overconfident of the portal’s potential success, but as one of the members of the CSIO committee that first tackled Internet-based single-entry, multi-company interface (SEMCI), he is in a good position to judge the portal’s potential.
Representing the Insurance Brokers Association of Canada (IBAC) on the CSIO committee, Craig witnessed the early squabbles and successes of the project. “The process has been not without its bumps,” he says, “the co-operation has been fabulous to get where we’re at now”.
And, although he is aware that some have criticized the project, particularly early on, as being too “closed door”, he notes that the goal was not to repeat the mistakes of the past. “We weren’t going to have another Synchron. There was nothing that was going to go out to the public until we had something [concrete] to say.”
Craig recognizes that it is only through cooperation as opposed to competition that the portal will become a reality. This means insurers, technology vendors and brokers making a commitment to a common goal. For brokers, the portal’s potential is massive. An informal poll of members at last year’s IBAO convention shows that almost all have access to the Internet in their offices. “We’re ready for change,” Craig observes.
“We need to bring a critical mass of brokers to the portal, and on the same hand we need to have the companies on board.” With the portal set for launch in its first phase early next year, company support seems to be present. The task moving ahead is to help brokers adopt the system. “We’re now looking at a business plan to market what we’ve built,” Craig says, and the IBAO will play a role in this.
Through IBAC, the provincial association will be able to offer a discounted rate for member brokers to use the portal, a feature he expects will help boost membership levels. The benefit for brokers, beyond increased efficiency, is one of cost. Craig believes the portal’s cost for brokers as a rating tool will be “very competitive” with existing technology. “We believe we can bring the portal to a broker for less than half the cost for a comparative quoting system.”
Convincing the industry of the portal’s value will be key to its success. “We have to show companies that there is an end value to this. And we have to show brokers the we can put the portal in place and that we’re building a better way to do business in the long run.”
Craig firmly believes that the portal represents a “last chance” for brokers to be part of an industry-wide solution. “If this fails, there will never be another chance for SEMCI, we’ll be on our own.”
The portal is but one facet of IBAO’s ongoing strategy to increase membership. While the number of member brokers is increasing, the number of brokerages has fallen since 1995, mainly due to merger and acquisition activity. “Revenue again has been an issue, ” Craig says. The association is, however, confident new solutions will inspire a turnaround. The first will come at the association’s annual convention in Toronto in late October, where a new dues structure will be up for vote.
Education will also be an important driver. The new Canadian Professional Insurance Broker (CPIB) designation is being rolled out. The program, a complement to the existing CAIB designation, was begun in Ontario and has now been adopted for nationwide use by IBAC. The first program, “law and ethics”, has been something of a test case, a chance for IBAO to show the value of higher education for brokers. “We have to make sure we do this right,” he insists, especially with the entire country set to follow IBAO’s lead in offering the new programs.
Another coup for IBAO is the broker handbook recently devised by its technical committee to assist brokers in utilizing the CSIO portal. The comprehensive nature of the book (which includes software requirements/costings) has led the CSIO and IBAC to adopt it as well.
Lest anyone think Craig’s only concern in the year ahead will be technology, he begs to differ. “My theme for the year is that we’ve taken technology and designed a portal that will take us into the future, now I want to focus on people. Technology drives change but people drive technology.”
Craig has been in the business since 1977 when he started his brokerage, Craig, McDonald Redden. While the brokerage has offices in Mildmay, Durham and Craig’s birthplace of Walkerton, Ontario, he now calls the Hanover location home, along with wife Melanie and sons Ryan and Michael.
An IBAO member since 1983, Craig served on various committees and as a territory director before joining the executive as vice president in 1999. He also served on the board of directors of the Facility Association, which manages the insurance company pool to cover high-risk drivers, as well as his latest work with CSIO.
Like many brokers, Craig sees the broker-client relationship as the key to their success. Brokers have always relied on their personal relationships with clients as a competitive advantage, particularly in the face of direct writers. “People are the one resource direct distributors don’t have. I don’t think they [direct writers] can ever replace consumers’ want of professional advice.”
Craig expects that the professional influence of brokers with the insurance buying public will grow as the price cycle firms, particularly in Ontario auto. Craig says some major rate increases have been brought across the province, as well as tightening of underwriting guidelines. Selling price increases, in auto and across many other lines of business, is what Craig describes as “a lot of hard work”. Brokers are having to “resell” this business, “you can’t just mail out a renewal on an increase that is maybe 20%”.
That said, the association has formally recognized the need for rate increases. The changes, Craig says, are necessary to bring profitability back to the industry. “We said we would support them [insurers] in trying to get reasonable rate increases, that we would talk to our clients.”
The changes may be a tough sell for brokers, and require the need for explanation of complex insurance price cycles, but in the end will benefit brokers’ bottom-lines. “For the last two years we’ve seen reduced incomes from brokers, with rates going back up we’re going to see an improvement in the bottom-line. You have to work for it, but brokers will be in better shape at the end of the year if they’re willing to do the work.”
The hardest sell ahead for brokers may be an impending showdown with Ontario’s regulators. With the announcement of the merger of the Financial Services Commission of Ontario (FSCO), which regulates insurers, and the Ontario Securities Commission (OSC), fears abound that insurance regulation will be “swallowed up” in a larger organization. In fact, early indications from FSCO discussion papers indicate the new regulatory structure could more closely mirror that of the OSC.
This could present special problems for brokers, who have been under the supervisory sphere
of the Registered Insurance Brokers of Ontario (RIBO). In a recent position letter to FSCO, the IBAO noted its preference to remain as part of the Ministry of Finance. “We didn’t feel we should be part of the FSCO/OSC merger. We’re involved in risk management, we have nothing to do with wealth management,” Craig says.
Brokers want to continue to be regulated by RIBO, which FSCO has recognized as a well functioning supervisory system. There has even been discussion of the RIBO model being used to regulate other financial services falling under the new regulatory regime, he notes.
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