November 23, 2020 by Adam Malik
With the global COVID-19 pandemic affecting specific sectors harder than others, brokers may see the value in the diversification of their offerings so as to not have their business depend on the success of one sector, says one broker leader.
However, another argues, a broker being a specialist in a specific area means they are well-versed and better positioned to help clients as they face challenging times.
Canadian Underwriter recently asked a pair of brokers for their opinion on the topic of specialization as it relates to the COVID-19 pandemic and the hospitality sector. Hotels have seen dramatic drops in business as travel is mostly shuttered. Restaurants, meanwhile, have faced operating restrictions — from customer limits to operating hours — across the country. Some have had to endure full closures.
An economist recently told Canadian Underwriter that such rules and the added uncertainty could push some to close up for good. “The longer the pandemic goes on,” said Francis Fong, chief economist at the Chartered Professional Accountants of Canada, “the more risk there is that those businesses end up throwing the keys on the table and say, ‘What’s the point? Why keep dragging this out? I can’t afford it. I still have fixed overhead I have to pay.’ And they walk away. Each time that happens, that’s a little bit of economic capacity that we’re never going to get back.”
For Kent Rowe, president of the Insurance Brokers Association of Canada, this type of situation highlights the significance of being a diverse broker. “I think that by and large brokers have a pretty good cross-section of personal lines, business, commercial lines, business life insurance or any other lines,” he observed.
On the flip side, Carol Mills, chief sales officer at Hub International, says the pandemic has only reinforced the need to be a specialist. A broker who knows the ins and outs of a particular industry is best suited to serve clients best. It’s a strategy that Hub has undertaken.
“It’s difficult for one person to be everything to everyone and to really take that holistic approach to risk management that our clients need,” she told Canadian Underwriter. “It requires not just one person but collective brainpower in order to achieve what we need to do for our clients, whether that’s an employee benefits, group retirement, wealth management, general insurance, or risk mitigation strategy. It’s so multifaceted. So specialization is absolutely key.”
For business in general, the trend has been to be more of a specialist and less of a generalist, Rowe said, noting that some in the insurance industry may re-think their approach post-COVID.
“While I still think that there’s tremendous value in [specialization], I think that the recent circumstances highlight the benefit of not having all your eggs in one basket either, and really trying to insulate yourself from an economic downturn or pandemic, which none of us have the ability to foresee,” he said. “I think that the lesson is: The greater that you can spread risk in your own business through diversification, the better off you’re going to be and the more benefit you’re going to glean in the long run.”
Demand is strong, Mills pointed out, which is why brokers need to be focused in order to serve their clients.
“We specialize in some very challenging classes of business. The reality is, there’s still so much demand for those classes — they aren’t going anywhere,” she said. “COVID-19 has reinforced the need for the specialization strategy that we had in place before and it’s affirmed that we must be proactive and diverse in order to ensure that our clients are ready for tomorrow and for the future.”
Feature image by iStock.com/Balavan