January 29, 2016 by Greg Meckbach, Associate Editor
Insurance brokers cannot win a price war in personal property & casualty lines, and consumers want to buy coverage from providers who are “fully fluent” in technology, the new president of the Insurance Brokers Association of Ontario (IBAO) suggested Thursday.
“Brokers cannot win in the price commodity race,” IBAO president Doug Heaman said during a presentation at the P&C Crystal Ball Conference. “They must find a way to ‘wow’ their customers.”
Heaman quoted from a book – The Three Rules: How Exceptional Companies Think – by Michael Raynor and Mumtaz Ahmed. One of those rules is to make products “better not cheaper,” Heaman suggested.
“Insurance companies are looking to support and invest in brokerages that are growing,” he said during the Crystal Ball, an annual event produced by CW Group and held at the International Plaza Hotel near Toronto International Airport. “If your strategy rests on cutting costs to survive, then maybe you need to rethink your strategy or maybe you need to find a broker that is growing and sell out to that broker.”
Heaman quoted from a Deloitte survey in which six in 10 respondents said they “received no particular service from their broker beyond shopping” for insurance coverage.
“Are your customers receiving greater value from your brokerage outside of simply shopping for their policy?” Heaman asked the audience. “Are you confident that your needs-based approach and value proposition is serving your customers? And how do you measure that? Your carriers are looking at this statistic and they are trying to figure out if you are relevant. Your customers are looking at this even more and trying to figure out if you are needed.”
Quoting from an Accenture report, Heaman said insurers “are accelerating the shift to a radically different distribution model where digital plays an increasingly important role” in the “majority of actions” of brokers and agents.
“This radically different distribution model obviously means a direct channel and as we have seen with Aviva going direct and purchasing RBC and then Economical announcing their direct presence yesterday – this is going to happen,” he said. “We can’t just sit there and dig our heels in and say ‘Hell no, we won’t go.’ Change is coming and we need to figure out how we can embrace it.”
Waterloo, Ont.-based Economical Insurance said Wednesday it plans to start a “new branded direct channel” which will “operate completely independently” from its broker channel.
A week earlier, Aviva PLC announced it agreed to acquire RBC General Insurance Company, the Royal Bank of Canada subsidiary that writes home and auto insurance through retail insurance branches as well as through affinity programs.
In Canada, RBC sells insurance through its retail insurance branches, field sales representatives, advice centres and online, as well as through independent advisors and affinity relationships.
RBC’s property and casualty insurance revenues from Canada were $958 million in the year ending Oct. 31, 2015. The firm placed 15th – when ranked by net premiums written in 2014 – in Canadian Underwriter’s statistical issue. Those rankings excluded life and purely A&S insurers. Aviva (with 8.55% market share in 2014) ranked second, behind Intact Financial Corp., which had 15.35% market share.
Aviva’s acquisition of RBC General will leave Toronto-Dominion Bank as Canada’s only Big 5 bank that writes its own home and auto insurance. RBC Insurance – which also sells life and health – now has a 15-year agreement with Aviva, in which it will continue selling p&c insurance under the RBC brand. The Canadian Imperial Bank of Commerce and the Bank of Nova Scotia sell home and auto insurance written by subsidiaries of Desjardins Group, while the Bank of Montreal does not sell home or auto.
TD Insurance ranked third (with 6.51% market share) in Canadian Underwriter’s statistical issue based on premiums in 2014, but that was before Desjardins closed its acquisition of the Canadian operations of State Farm. That deal essentially placed Desjardins in second place in 2015, tied with Aviva. Desjardins writes insurance directly through DGIG and through State Farm Canada agents. It also owns High River, Alta.-based Western Financial Group, which owns more than 160 brokerages in Western Canada.
Intact – whose holdings include Brokerlink – sells both through brokers and through belaidirect.
The issue of insurers moving towards a direct model raises several questions for brokers, Heaman told attendees Thursday at the Crystal Ball.
“How many of your carriers are going to be your direct competitors?” Heaman asked the Crystal Ball audience. “What pressures will this put on the compensation model – something we don’t often talk about, but rest assured your carriers are talking about it. Is your current team built to align with the cross-selling, up-selling online demands that this trend will require, and do you have a digital strategy for your brokerage?”
Quoting statistics from the Centre for the Study of Insurance Operations, Heaman noted that more than one in 10 Ontario brokers do not even have a website. CSIO reports only 43% of Ontario brokers have mobile website while 57% are active on social media.
“The expectation of the market is that you will be fully fluent in that technology and using it in the next three years,” Heaman said.
More coverage of the P&C Crystal Ball 2016 conference