Desjardins’ State Farm Canada combo a ‘distribution play around financial services’ former Dominion CEO Cooke says

The acquisition by Desjardins Group of the Canadian operations of State Farm is not just about insurance, a former chief executive officer of The Dominion of Canada General Insurance Company said Friday.

“It’s going to be a play of some kind around combining financial services types of products into one distribution model,” said George Cooke, president Martello Associates Consulting, of the Desjardins agreement with State Farm.

“One has to believe that this is a distribution play around financial services, and what you will see coming out of this, post-2015 when the deal is complete and the integration is somewhat underway, is that infrastructure is going to be use to sell more than just auto insurance and home insurance.”

Cooke made his remarks during a presentation at the AudaVision Toronto 2014 symposium, held by auto claims technology vendor Audatex Canada. In addition to being a former Dominion CEO, Cooke is an independent chair of the Ontario Municipal Employees Retirement System (OMERS) Administrative Corporation (OAC) and a former director of the Insurance Bureau of Canada.

During his presentation Friday, Cooke said consolidation in the insurance industry will be one of three of the most important trends in the industry. A prime example is the agreement, announced Jan. 14, by Levis, Quebec-based Desjardins to acquire the Aurora, Ont.-based Canadian businesses of State Farm, including its P&C, life insurance, mutual fund, loan and living benefits.

“If somebody had asked me month ago what I thought the chances were of Desjardins buying the Canadian assets of State Farm, I personally would have said ‘There’s no chance at all,'” Cooke said. “I didn’t see that one coming. I don’t think most people in the industry saw that one coming.”

Desjardins General Insurance Group already provides auto, property, pet, motorcycle and recreational vehicle coverage in Ontario, Alberta and Quebec. Desjardins Group owns Western Financial Group Inc. of High River, Alta., whose operations include a broker network with more than 100 offices in Western Canada.

Desjardins Group’s other financial services include personal and business banking, a full services brokerage, mutual funds and mortgages.

“It’s going to be a play of some kind around combining financial services types of products into one distribution model,” Cooke said of the State Farm Canada acquisition. “I would have never guessed that State Farm, particularly with its structure, being a Canadian piece of an American company, with a mutual background and a particular distribution approach, would be acquired by Desjardins, and quite frankly, in an environment where the principal product line is Ontario auto, given the circumstances that are inherent with the regulatory scheme in this province.”

Although Desjardins offers telematics-based auto insurance in Ontario, Cooke suggested that a different telematics offering –  Mobiliz – is “the way the future will unfold.”

Mobiliz is provided by Industrial Alliance Insurance and Financial Services Inc.

“You put the device in the car and a lot of the historical rating variables and the data associated with it become irrelevant,” he said. “Claims history is irrelevant, convictions are irrelevant. How you accelerate, if you have lane drift, or if you’re speeding in a school zone, the conditions that you drive in. You can  overlay weather data. There are all kinds of great things that you can do to get at the actual risks associated with driving the vehicle.”

By contrast, he noted, with Desjardins, “you use the device for a period of a few months to get information from it, you score it, and the output becomes a rating variable that’s mixed in with everything else that has been there traditionally: Claims, convictions, type of vehicles, those sorts of things.”