October 26, 2020 by Greg Meckbach
With a week to go before Hallowe’en, Ontario brokers heard some spooky stories last week about what happens if a brokerage does not invest in keeping up to date with technology.
“Technology is going to be a much more permanent feature of your investment budget, and I don’t think it has to eliminate your margins; in fact, it could enhance them,” Rowan Saunders, CEO of Economical Insurance, said during the 2020 Annual Convention of the Insurance Brokers Association of Ontario (IBAO). “But it’s a big commitment and you really have to start now.”
IBAO CEO Colin Simpson moderated this year’s CEO panel, held on Oct. 22. Simpson asked panelists whether some brokerages will be left behind because they have not kept up with investments in technology. And how soon do brokers need to pick up the pace?
“I don’t want to be alarmist on this one, but I think it is almost too late for some that have just not stepped up to this,” said Saunders. “I think you get these tipping points in business and, without overly exaggerating, I think back to the industrial revolution: I think this could be a digitization revolution, and it’s happening now.”
Carol Jardine, president of Wawanesa Mutual Insurance Company’s Canadian property and casualty operations, echoed Saunders’ comments.
“If a broker thinks that they are going to survive without embracing the ability to do paperless transmission of documents, good luck to them,” said Jardine, adding that Ontario has a very competitive broker market. “In other provinces, we are finding brokers that don’t have a [broker management system] and don’t have a website. Now that’s scary.”
Jardine alluded to the $300 million that Wawanesa spent on its transformation to Guidewire.
“The bucket of money that technology is requiring is growing, so brokers have to be prepared to do that, too,” she said. “If they are not prepared to make the investment, and perhaps give up some of the [earnings before interest, depreciation, taxation and amortization] they have historically enjoyed, then perhaps they will have to look at amalgamating with a different broker. But it’s really a business decision.”
Mergers and acquisitions are already happening for this reason, Saunders suggested.
“If you don’t really step up your game, I just think you can’t deliver,” he said. “What you are seeing already, and I think it is correlated, is consolidation. Look what’s happening to the number of brokers. Look what’s happening to the size of brokers. Look at how aggregators are building; and partly it’s because they have been proactive — they have better technology, they are prepared to invest.”
“Brokers had to make that decision whether they were opting in or opting out,” Heather Masterson, CEO of Travelers Canada, commented during the CEO Panel. “The majority of our brokers have opted in. Of course there are brokers that have decided to opt out.”
The “writing has been on wall for many, many, many, many, many, years,” said panelist Louis Gagnon, president of Intact Financial Corp.’s Canadian operations. “We have been having that discussion forever about the size of brokers, and investment in technology, and investment in your operation.”
Feature image via iStock.com/Bet_Noire