A highlight reel of major developments in the Canadian auto insurance market from this year would make for a depressing watch.
In Alberta, auto insurance premiums are expected to increase in 2020, with multiple insurers planning increases of as much as 15%. Meanwhile, Ontario as well as Atlantic Canada have seen their own jumps in premiums this year. In British Columbia, the battle over the auto insurance monopoly rages on, with over 8,000 residents signing up in support of the Driving Choice campaign, which is endorsed by the Insurance Bureau of Canada (IBC) and calls out the Insurance Corporation of British Columbia (ICBC) for its alleged excessive control over the province’s auto insurance market. In Manitoba, the provincial government is being accused of interfering in the setting of the province’s auto insurance rates. All in all, there’s little cheer left in this marketplace.
“2019 definitely would be categorized as a difficult year when it comes to car insurance,” said Justin Thouin, co-founder and CEO of LowestRates.ca. “It was a difficult year for drivers because insurance prices continued to rise. It was a difficult year for insurance companies because, despite increasing premiums, in many cases they were still losing money and paying more out in claims than they were collecting in premiums because they weren’t able to charge what they felt like they needed to for every driver in Canada. And, it was a difficult year for insurance brokers because with many insurance companies not making any money on certain policies, their feedback to brokers was, ‘we don’t want new business,’ so it was very, very difficult for brokers to grow their business in an environment where the insurance companies in many cases did not want new policies.”
Nonetheless, there was a silver lining to the gloomy auto insurance cloud hanging over many provinces.
“There definitely is some positive news that’s come out of late that makes the industry feel as though this year could be considerably better,” said Thouin. “In Alberta, the main issue was the cap put on by the former NDP government that limited the increases that could be put through by insurance companies, and while this was an attempt to keep prices in line in the Alberta market, what it did instead was simply drive insurance companies out of the market, leaving those that were charging more so drivers had to pay more.”
Even more problematic was that drivers often couldn’t find insurance. However, the new Conservative government in Alberta lifted the price cap in 2019, leaving insurance companies and brokers in the province hopeful for a more collaborative relationship with the government moving forward. In Ontario, the government has been working with insurance companies, brokers, sites like LowestRates.ca, as well as drivers to figure out what can be done to create a healthy industry that can be a win-win for everybody, says Thouin.
“There’s definitely some light at the end of the tunnel,” he told Insurance Business.
In the meantime, as the auto insurance market takes baby steps in the right direction in some provinces, brokers can benefit from partnering with LowestRates.ca to give their customers what they want.
“If you look at the world and how it’s evolving, consumers are going online for everything. In Canada, if you’re looking for a flight or hotel, you go to Expedia or Trivago. If you’re looking for an everyday item, you go to Amazon. If you’re looking for a vehicle, you go to Auto Trader, and in other countries, this is just a way of life,” said Thouin. “If we look in the UK, 80% of auto insurance transactions start on rate comparison sites like LowestRates.ca, so this is where consumers are going – they want to go online, and they want to compare options for free.”
The proof is in the pudding, with LowestRates.ca remaining the fastest growing insurance-related company in Canada for the past four years, says Thouin.
“Canadians are flocking to our site for the convenience and for the impartiality that we bring to match them with the lowest priced insurance company or broker for their unique needs,” he explained, adding that there are upsides for brokers, too. “At the same time, it’s difficult for brokers to acquire new consumers at scale because a broker’s specialty is not online marketing. It’s very difficult for a broker to rank in the first five search engine listings in Google, which is where consumers are going when they’re looking for car insurance right now.”
With massive insurance companies pouring tens of millions of dollars into advertising, this is also driving consumers away from brokers and towards the direct-to-consumer models.
“This is where LowestRates.ca comes in. The way we work with brokers is brokers tell us where they want new business and how much new business they want, and we match consumers with them when they have the lowest priced option for that consumer,” said Thouin. “The beauty of our leads is that it typically is the lowest cost per acquisition or lowest cost per sale marketing channel for these brokers and it’s also a very predictable marketing channel. If they tell us they want 100 leads per day, we send them 100 leads per day.”
By comparison, a broker has no idea if they do a TV, radio, or print ad, how many consumers they’re going to acquire from that marketing spend. As a result, brokers might see a ton of customers one day and the next day, they could see zero.
“With LowestRates.ca leads, you can keep your brokers busy and be as efficient as possible,” said Thouin. “And because consumers find us through Google, they’re in the market to buy insurance, and because we match consumers with the lowest price, that consumer already feels like she’s done the research and she’s ready to purchase. Therefore, when we pass them to the broker, they have a very high propensity to buy. All that leads to a lower cost per sale for brokers than when they try to do advertising in other ways.”
