Canadian personal & small business market will eventually be ‘dominated’ by two or three large insurers: Desjardins General president

Like life insurance, the Canadian market for property & casualty insurance – for personal and small commercial lines – will eventually be “dominated” by two or three major firms, the head of Desjardins General Insurance Group Inc. suggested to insurance professionals Thursday.

Sylvie Paquette (pictured), DGIG’s president and chief operating officer, was the luncheon keynote speaker at the Insurance Institute of Ontario, Greater Toronto Area’s 2015 CIP Society Symposium.

She said officials with Desjardins – which on Jan. 1 closed the acquisition of the Canadian operations of State Farm – “got really serious about making a large acquisition” in 2011 after Intact Financial Corp. announced its agreement to acquire the Canadian operations of AXA Group. 

“It forced us within Desjardins really to reflect on the future shape of the industry,” she said of Intact’s AXA acquisition. “We don’t have any crystal ball, but our opinion is that our industry in Canada will be dominated two or three really large players – the same thing that happened with the life industry in the 90s.”

Paquette is also senior vice president and general manager of P&C insurance for DGIG’s parent firm, Desjardins Group.

Intact had 15.68% of P&C premiums in Canada in 2013, followed by Aviva with 8.37% and TD Insurance with 6.56%, according to Canadian Underwriter’s Statistical Issue. DGIG and State Farm had 4.97% and 4.12% respectively in 2013.

During her speech Thursday, Paquette suggested that the life insurance market in Canada is dominated by Manulife Financial Corp., Sun Life Financial Inc. (which merged with Clarica Life in 2001) and Great-West Lifeco Inc. (which also owns The Canada Life Assurance Company and London Life Insurance Company). In reply to a reporter’s question, Paquette suggested the P&C market, in personal and small commercial lines, will eventually be dominated by two or three large players.

“Small commercial lines is becoming managed more and more like personal lines,” she said, adding there will still be some smaller companies serving niche markets.

Sylvie Paquette of @DesjardinsGroup giving our luncheon keynote address at #CIPSymposium pic.twitter.com/b7wdN6pms5

— IIO GTA (@IIOGTA) April 16, 2015

DGIG’s offerings include auto, property, pet, motorcycle and recreational vehicle coverage in Ontario, Alberta and Quebec. DGIG auto clients using telematics under the Ajusto brand can get discounts depending on driving behaviour.

In addition to personal lines, DGIG provides business coverage in Quebec, including property, liability, business interruption and equipment breakdown.

“State Farm does have a commercial book of business, so we have to roll out commercial lines products across Canada, at least to start where State Farm is,” Paquette said Thursday.

The agreement to acquire State Farm’s Canadian operations was originally announced Jan. 14, 2014. At the time, Desjardins officials had predicted that DGIG would become the second largest P&C insurer in Canada, after Intact.

But Paquette noted Thursday that Aviva actually holds the Number 2 position, suggesting State Farm Canada and Dejardins put together have about $4 billion in premium volume, about $4 million less than Aviva.

Aviva reported earlier it had net written premiums of £2.104 billion in Canada in 2014. The British Pound is trading at $1.82.

“We thought (the State Farm acquisition) would bring us to Number 2 but it’s Number 3 and that’s okay,” she said.

Desjardins is still using the State Farm brand in Ontario, Alberta and New Brunswick, though home and auto under the State Farm brand is now written by Certas Home and Auto Insurance Company.

In addition to State Farm’s P&C business, the acquisition also included State Farm’s life insurance, mutual fund, loan and living benefits operations in Ontario.

“For the group, having an agency network that sells more than p&c, that’s really great,” Paquette said. “If we had not started talking to State Farm, we would have built our own agency model in Ontario.”

Another insurance and financial services provider owned by Desjardins Group is Western Financial Group Inc., which Desjardins Group acquired in 2011. Western Financial owns more than 160 brokerages in British Columbia, Alberta, Saskatchewan and Manitoba.

“We are using their brand to access markets that would have been difficult to access otherwise,” Paquette said “Accessing the broker network with our own product – it is easy to say but challenging to do. It is the potential for growth.”

Western Financial was founded in High River, Alta. by Scott Tannas, who is now an Alberta Conservative senator. Western Financial also owns a pet insurance carrier (Western Financial Insurance Company), Western Life (originally the Canadian arm of Federated Mutual) and Marlin Travel.

“What’s really interesting in my position is, I sit with Western Financial Group thinking like a broker, I sit with State Farm thinking like an exclusive agent and I sit with the old DGIG thinking like a direct insurer and we all think that we have the best” distribution model, Paquette suggested.

The CIP Society’s Symposium was held at the Toronto Region Board of Trade in First Canadian place, the office building housing the Bank of Montreal’s corporate headquarters.

More coverage of the CIP Society Symposium:

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