Canada’s hard market continues to be the Number 1 concern of brokers right now, but with the end of many COVID restrictions, brokers are starting to worry more about the growth of direct-to-consumer distribution models.
Market consolidation is slowly but steadily gaining steam as the Number 3 top challenge to the broker channel.
In its 2022 National Broker Survey, Canadian Underwriter asked more than 250 brokers across Canada in February what they thought were the strongest challenges to the broker distribution channel.
“Companies not wanting to write risks, particularly Alberta auto and commercial,” one senior broker from a mid-sized brokerage wrote anonymously in the comments section.
In fact, the hard market was the top challenge for all brokers across Canada, by a wide margin (76%). That’s slightly higher than when Canadian Underwriter asked the same question one year ago, during the middle of the COVID-19 pandemic (the number then was 74%).
Consistent levels of concern about the hard market were voiced by new and experienced brokers, and by big or small brokerages. The gender split of those answering the question was most prominent, with 86% of women picking the hard market as their top concern among a list of 12 options. For men, only 67% identified the hard market as their top concern.
Concern about the direct-to-consumer distribution model is on the rise, after dipping during the pandemic.
For the past two years, clients highly prized their brokers, since many needed advice on how to change their coverage during uncertain times between COVID virus waves. Many businesses had to shut down and re-open based on changing provincial health guidelines, or set capacity limits. In the meantime, car owners sought discounts from their insurance providers for not driving their cars as much; and homeowners made material changes to their homes in the absence of travelling and while working from home.
These were heyday times for brokers, whose value has always been linked with choice, advice, and getting the right coverage for clients for the right price. During their finest hour, brokers’ concerns about the growth of the direct-to-consumer model waned considerably – from 62% in 2020 to 53% in 2021.
But now that many public health measures and restrictions are being removed, brokers are once again paying attention to direct-to-consumer models, with 59% saying this is the channel’s top concern moving forward.
Some of this has to do with how much work the broker has to do nowadays, finding quotes from multiple markets — part of giving the consumer a choice — as compared to an agent that sells only one type of policy to a consumer. Or as one broker put it in the survey: [Broker] principals expect [client service representatives [CSR]/sales to push through huge amounts [of business] to compete with the direct market, who only need to know one company’s coverage.
One broker thinks the compensation structure needs to change to reflect the amount of work the broker must do in preparation for a new prospect, or to maintain the account once the business is gained.
“If I go to a dentist, a lawyer, a physiotherapist’s office, or any of many other professionals, I have to pay for that first appointment,” one experienced respondent from a large brokerage wrote. “A broker can spend hours a year on first, and even subsequent visits or interviews, and gain zero in compensation.”
And finally, mergers and acquisitions are increasingly gaining prominence on brokers’ radar screens.
“Market consolidation [among P&C insurers], in addition to broker consolidation,” as one broker put it.
The role of private equity — which invest in larger brokerages so that the larger brokerages can acquire smaller, Canadian independently-owned brokerages — hasn’t escaped the attention of some.
“American Private Equity — the biggest thing happening,” wrote one broker.