Canadian Underwriter

Fifty shades of broker independence

May 26, 2023   by David Gambrill

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In a world dominated by growth via mergers and acquisitions, Canadian brokerages are operating under a variety of ownership models, making the modern concept of “broker independence” very nuanced, panellists observed Thursday in a Live with CU panel discussion.

“I think the challenge is the discussion always seems to be binary — am I independent or not?” commented Aly Kanji, president and CEO of Insureline. “I would actually suggest that it’s not a binary decision. I would suggest it’s probably more of a sliding scale.”

Kanji mapped out what he viewed to be the spectrum of broker independence during a spirited debate on LinkedIn Live, entitled ‘Declarations of (Broker) Independence.’

The points of the spectrum would be based on “the degree of impact that [ownership] makes on the customer experience, in terms of what the customer is experiencing. In the most independent part of the spectrum, brokerages would be locally operated and controlled.

“I could take a step out and say maybe multi-location, where ownership is removed from local operation, you start to see some separation. Then you can start talking about [whether] there is insurer- financed debt? Maybe there’s some influence there, although I think…you can take money and still operate the same way.

“Then you get into private equity ownership, where now there’s somebody different holding the purse strings, and I think that does make a difference. And then you can get to insurer-financed with equity, where the insurer has equity. And to me, the end of the spectrum would be insurer-owned. And to me, that would be the least independent.”

Several panellists expressed skepticism that a brokerage’s size or scale, or geographic location (including rural/urban), had much to do with broker independence. And Joseph Carnevale, chair of the Insurance Brokers of Ontario, challenged the notion that brokerage ownership influenced brokers in any way that negatively impacted clients.

“All brokers provide the best possible support for the clients all the time, and therefore they’re independent,” Carnevale said, aligning the notion of independence with the quality of client service. “The idea of a brokerage being independent versus dependent, I think the problem with that whole concept is it kind of taints the job that all brokers do everywhere.

“We have a handful of brokerages across Canada that are either fully owned by an insurance company, or partially owned or controlled by an insurance company. And on behalf of all of those thousands of brokers who work for all those companies, I can safely say I don’t think any of them woke up one morning and said, ‘I want the ownership structure to change where I have been working for 20-plus years. Now I want people to see me differently because I now work for a company that’s controlled by an insurance company.’”

Carnevale added that “we have to stop looking at the [brokerage ownership] structure and look at what’s the end result [for consumers],” he said. “If consumers are happy doing business with company-owned brokerages, then the [brokerage owners are] doing something well, and that’s a good thing…

“I think ultimately consumers are going to decide the services they want, and it’s just our job to make sure we’re providing that in an area we know we can grow over time and not shrink.”

After Carnevale made this point, one LinkedIn Live audience member commented that most consumers are not even aware of who owns the brokerage.

Related: Does it matter how brokers define independence?

Lori Phair, president of Canadian Broker Network, agreed with Carnevale that Canadian brokers always do their best for clients regardless of the ownership model. But she thought it was “naïve” to believe ownership didn’t influence the culture of the business.

“Independence is ultimately defined as, ‘Control is maintained by the [brokerage] owner/operators irrespective of size,’” Phair said. “So…those working in the business control it. They dictate where revenue is spent, they determine their own profit margins. They determine support in their community.”

Phair acknowledged brokerages often need outside investment, especially as more capital is required now for brokerages to do what they need to do. But setting the priorities for investment is a key part of acting independently, she said.

“An outside owner/controller that’s focusing…on profitability and return on investment might be a little bit different than the owner/operator who may decide they’re going to take a little less [profit] this year because they want to invest in people,” Phair said. “They want to invest in something in their community. If you are controlled by outside investors, you often just really don’t have that luxury.”

Linda Dolan, broker principal at Alport Insurance Agencies and president of the Insurance Brokers Association of Canada, said independence ultimately resides in whether the brokerage owners are calling their own shots.

“To me an independent brokerage is that you…don’t have an equity partner, you are not partially owned by an insurance company. You run your own operations and you make your own decisions.

“You’re making all the decisions that go with the brokerage. You don’t have anyone that is telling you what you have to do, or when you have to do it. It’s all on your shoulders. And so that, to me, is basically how I look at an independent insurance brokerage, having run one myself for 25 years.”

Ultimately, the panellists agreed Canadian brokers and consumers can choose from among many more types of brokerage ownership models than they could decades ago. The broader choice is a plus for consumers who may opt to deal with any one of these kinds brokerage ownership models.


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