CEO queries why insurers won’t cancel contracts with insurer-owned brokerages

George Cooke, president and CEO of The Dominion, challenged other insurers to cancel their business with brokerages that have been purchased by a competitor insurer.
Cooke was a member of the CEO panel at the Insurance Brokers Association of Ontario’s 91st Annual Convention in Toronto on Oct. 20.
When discussing the recent acquisition of Western Financial by Desjardins, Cooke said he did not understand why other insurers would choose to keep their business with Western Financial now that a direct writer owns the brokerage.
“You have a situation where a direct writer purchases a group of brokers and a small bank,” he said. “You can speculate as to what [the direct writer was] doing, but I suspect what they were doing was buying a brand and wanting to introduce their direct writing capability to Western Canada.
“It makes no business sense to me to stay where one of our competitors has purchased a brokerage, to sit there and let whatever capital or skill set we have to be used to the advantage of our competitor. It also doesn’t make any sense to allow my competitor to determine my clients. But others seem to approach this quite differently.”
Cooke noted one carrier, which he did not name, currently has 20% of its book of business with a brokerage owned by a competitor. He viewed companies continuing to do business with insurance company-owned brokerages as “complacent.”
Karen Gavan, president and CEO of the Economical Insurance Group, said the key is whether the brokerage continues to operate as an independent broker regardless of whom owns it.
Jean Francois Blais, Intact Insurance’s president, noted that 20 years ago, Desjardins used to distribute 100% through the broker channel. But when the company launched its direct arm, the brokers got upset and many cancelled their business with the insurer.
“Many good people transferred into the direct arm as a result, which only helped to facilitate their growth,” Blais said. “If a broker works in the interest of the clients, regardless of who owns them, then it is worthwhile to develop a relationship with that broker and keep the door open.”
Blais pointed to a instance in which a brokerage that an insurer had purchased had recently re-entered the brokerage channel.
Ultimately brokers are just like any other businessperson operating in a free market, in the sense that they are allowed to determine who their shareholders will be, said Alister Campbell, president and CEO of Zurich Canada.