August 20, 2019 by Adam Malik
Intact Financial Corp. agreeing to buy On Side Restoration will likely lead to similar deals going forward and while risks exist, one adjuster believes it will probably bring more good than bad to the insurance industry – with a lot more change.
“In this particular case, you can bet that other insurers are paying close attention and they’re going to be deciding on whether or not to follow suit,” said Dennis Schembri, vice president of Ontario operations with Kernaghan Adjusters, about the deal announced on Aug. 6.
“It makes sense that when insurers reach a particular size … the next thing is profitability, and I think this is one of the steps that goes towards controlling their costs.”
Concern over recent years has been contractors playing the role of independent adjuster, Schembri told Canadian Underwriter. He recalled an instance where a contractor asked him for a proof of loss form, meaning they were adjusting claims.
“I think the fear of other independent adjusting firms out there in regards to this particular purchase is that it may eliminate the need of an independent adjuster to go out and assess on their behalf because this particular contractor will be the eyes and ears of the insurance company,” Schembri said. “But there’s integrity and I think Intact’s aware of that and I don’t think that they’re going to be using this contractor as an adjusting firm. But time will tell on how this progresses.”
Sarah Hirst, president of the Canadian Independent Adjusters’ Association, downplayed this concern to Canadian Underwriter. “The opportunity remains for adjusters to confirm causation, interpret and explain coverage, help their customers with a straightforward claims process while operating under confines of our licenses. On Side’s role remains similar with estimating damages and moving on to repairs, albeit maybe more quickly now.”
Still, a major insurer buying a restoration company is new territory, Schembri said, and we better get used to these types of deals. “As time goes on and if this is successful for them then may even be buying engineering firms and other vendors that they normally do business with and control their costs even more.”
The big continue to get bigger, a situation Schembri is familiar with. He ran his own adjusting firm, Vanler, which was bought by a bigger player, which was sold and then sold again. Moving different companies under one roof makes things easier for a company like Intact.
“Based on the consolidation that is taking place in the independent world, yeah, I think we realize that insurance companies want to deal with one firm and I think that’s why there’s so much consolidation taking place in our space,” he said.
Venturing into the supply chain isn’t new at all, Hirst noted. “Insurers are entering the repair portion of the claims supply chain on both property and auto repairs. We have seen this over the last five years. The objective of moving quickly through repairs is important given what we know about how reduced cycle time increases net promoter score.”
So is the industry better served?
“Potentially. It’s still new so we have to see how this develops and how it’s going to work in the long term,” Schembri said. “Could I see positives? Absolutely. I think the negatives that I see are minor and are things that can be overcome.”
Insurers and adjusters rely on the good performance of restoration companies. Preferred contractors chosen by insurers can be beneficial if the common goal is to “serve” all concerned but once in not always does that happen as communication breaks down and the system fails. Will ownership serve differently? Let’s wait and see.
There’s a seat for everybody at the table. Large brokerages have been dominant for years. If a so-called ‘small’ brokerage remains content remaining small, their book of business will reflect the maximum the insurers will extend provisions. And so it should be. No such brokerage should step foot in the realm of risks beyond the weight of its controlling dollars. And no insurer should provide levels of exposure that could reduce or prevent operation at established levels.
What we read from this and other such enlightenment’s is that, beyond any doubt, the insurance industry is in an exceptionally fine state of health. Insurance company expansion, by way of example, allows for greater growth and that should not be anything but good news for any and all brokerages.
There is no contest or rivalry here.
Re my response, this was intended for the article – ‘How smaller brokerages can survive in a mega-merger environment” – August 16, 2019
No this should never have been allowed, Canada is bad enough off with the insurance industry being allowed to hire and manage adjusters, this is just going to make matters much worst, by the time the public realizes what has happened it will be far to late to turn back the hands of time, I have a perfect example, I just need to figure out how to get it out to the public without risking my claim being squashed in court.