November 5, 2020 by David Gambrill
Brokers tend to be an optimistic lot. In both 2018 and 2019, most brokers in our National Broker Survey predicted that their financial performance would be better the next year than it was the year before.
The same was true in 2020, despite the pandemic and the global economic meltdown associated with it. More than two-thirds (68%) of Canadian brokers in this year’s survey said the financial performance of their brokerages would be “somewhat better” (50%) or “much better” (18%) next year compared to this year.
They had every reason to be pessimistic. By most meaningful performance metrics, the Canadian P&C industry’s financial results took a beating during COVID-19. Federally-regulated insurers reported an $893-million underwriting loss in 2020 Q2, according to statistics released by Canada’s solvency regulator, the Office of the Superintendent of Financial Institutions (OSFI). MSA Research’s quarterly stats show the Canadian P&C industry posted a combined ratio of 103.6% during the second quarter, when government-ordered lockdowns shuttered the businesses of broker clients. (That means insurers were paying out $1.03 in claims and expenses for every dollar of premium revenue they collected.)
Economists and industry analysts don’t see much improvement for the global economy until some kind of vaccine or treatment for the virus is found, which many sources in the medical community predict will not be widely commercially available until next year at the very earliest.
So, where is the brokers’ sunny sense of optimism coming from?
To be sure, the broker’s sense of financial optimism is more muted this year than it has been in the past. In 2019, 71% of brokers surveyed expected a somewhat or much better year this year than last year. (If only they knew about the pandemic then.) But while some brokers admitted that the pandemic tempered their forecast and financial results, others said it had no impact at all. Many brokers in the survey found reasons for optimism in the future.
“It affected business in the short term (Mar., Apr., May),” one broker reported, “but we have normalized now, and we see opportunity in the uncertainty ahead.”
It helped that insurance is an essential service, meaning brokerages across Canada were able to keep their doors open to clients, although many brokers are still working from home to prevent the spread of the virus. One broker in the survey highlighted how the pandemic caused many clients to contact the brokerage for advice.
Many Canadian brokerages took calls from clients who wanted to change their coverage to reflect the fact that their business operations had either been closed or restricted. Clients also looked to their brokers to advocate for premium relief measures. These dynamics accentuated the value of brokers’ services to their clients, which in turn was good for broker business.
“The pandemic has been good for business,” one broker reported, “because we are personal service-centric and [we] were available to speak to our clients at any time.”
Feature image courtesy of iStock.ca/RyanKing999