Insurers buying brokerages can help to advance the broker channel: Intact CEO

Insurers should be able to purchase brokerages to ensure the survival of brokerages in the marketplace, argued Louis Gagnon, president of Intact Insurance.
Gagnon expressed his controversial view during the CEO Panel at the Insurance Brokers Association of Ontario’s 90th Annual Convention in Niagara Falls on Oct. 21.
His opinion is in stark contrast to the other panel members: George Cooke, president and CEO of The Dominion of Canada General Insurance Company; Kevin McNeil, president and CEO of Gore Mutual Insurance Company; Jean Francois Blais, president and CEO of Axa Canada; and Maurice Tulloch, president and CEO of Aviva Canada.
“I’m not suggesting that insurers shouldn’t be able to buy a brokerage,” said Cooke. “I don’t want to buy a brokerage. But if an insurer buys a brokerage, that brokerage can no longer be called independent.”
Gagnon maintained this is not the case. He argued it wasn’t necessarily true that a brokerage was “controlled” by an owning insurance company.
He suggested further that by purchasing a brokerage, an insurer might in fact be preserving the broker distribution channel.
He pointed to Quebec as an example of what might happen if insurers are restricted from acquiring brokerages. That province, he says, implemented a law that limited an insurer’s ownership of a brokerage to no more than 20%.
“And in the 1980s, when that law was put in place, there was a rampage of direct writers buying brokerages, because insurers couldn’t own brokerages,” he said.
The issue of brokerage ownership was raised again at the convention on Oct. 22, during the IBAO’s Industry Luncheon.
Peter Burns, IBAO’s president elect for 2011, reinforced the opinion of the majority of the CEO panel during his remarks at the luncheon.
Burns quoted a 2006 speech by then-IBAO president Steve Wagler. “Investing in the brokerage channel does not mean buying the brokerage channel,” Wagler said at the time.
The trend has started again, said Burns. “And both brokers and insurers are to blame,” he said.
“Insurance brokers are all independent business people, our greatest strength, and our greatest weakness, and we will all have choices to make about succession.
“There is much more to this decision than jumping at the best negotiated deal, no matter who is offering it.”