Canadian Underwriter

What this direct writer learned by starting up its own broker channel

March 14, 2019   by David Gambrill

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We’ve all heard about multi-channel insurance companies that sell through the broker channel while at the same time beefing up their direct channel. But how about CAA Insurance, a direct writer that has become a multi-channel writer by building up its broker channel?

CAA Insurance, the insurance arm of the country’s well-known auto club, has taken the step recently of starting a broker channel from scratch, appointing brokers to sell CAA’s insurance products. Starting in 2015, CAA Insurance appointed three Ontario brokers; four years later, CAA now works with 50 brokers located in Ontario, Atlantic Canada, Manitoba and Saskatchewan.

The growth of CAA’s broker channel has been exponential. Last year, CAA sold 5 percent of its book of business through the broker channel; this year, that’s up to 20%.

Why did CAA make the move into the broker channel to begin with?

“What we learned is, consumers want choice,” Robin Joshua, vice president of CAA Insurance, told Canadian Underwriter in an interview Wednesday. “We looked at how we can expand our successful direct operations to give CAA members more opportunities and choices. We realized very quickly that half the P&C insurance public buys insurance through brokers. So, there is an opportunity here to try and get into the world of the broker channel to give our members another way to access CAA insurance.”

What is it like to go from a purely direct writer into the world of the broker channel? What kinds of things did CAA learn as part of the process?

Perhaps the biggest learning was the importance of establishing pricing and product consistency across all of the insurer’s available channels, Joshua said. He was asked whether paying broker commissions affected the consistency of product rates across the board. Joshua said the expenses associated with direct call centres and agents’ offices were “close enough” to those of broker commissions that each of these expenses could be managed in a way that would not require changing the price of the broker channel product. To account for broker commissions, some insurers, for example, may offer a product through the broker channel at a price increased by 1% or 2%.

“We looked at that and said, ‘That’s not where we want to go,’” said Joshua. “We want what’s best for the consumer. Any CAA member, or any other consumer who walks through the door, whether they walk through the broker’s door, an agent’s door, or call into our call centre, anywhere, it should be exactly the same product and price. That was a guiding principle going down this road: we wanted to be one for everybody.”

The simplicity of this message made it easier for CAA to appoint brokers to sell the product, said Brent Closs, director of B2B marketing in the insurance section of CAA Club Group.

“The biggest advantage is that I can go to brokers with a very simple proposition: you can sell us with the same product, the same price, under the same brand,” Closs said in an interview. “The brand really is an excellent entry point into the broker channel. When we look at our own brokers, 30% of them are CAA members. They have membership with us, so they are already very familiar with the brand.”

While the CAA brand is well recognized throughout the country, its insurance product needed to be tweaked somewhat to accommodate the move into the broker channel.

“When you’re dealing with brokers, you may have to expand [the product offering] a little bit, because now we have a comparative in the broker’s office,” said Joshua, noting that many brokers sell anywhere between four and 10 different insurers’ auto products in their offices. “For example, [as a direct] we offered comprehensive and collision coverage – two separate coverages. Brokers wanted a combined coverage, which is what the industry was doing, so we said, ‘Okay, we will offer you a combined coverage.’ That’s a very simple example, but we had several of those types of [tweaks to the product].”