A recent acquisition has provoked a robust discussion in the broker community about the unspoken downfalls of selling to large insurers.
Last week, news broke that Co-operators General Insurance Company purchased independent Ottawa brokerage Carleton Insurance Brokers Ltd.
Since that time, many brokers have raised concerns that this purchase could signal an unsettling trend taking place within Canadian P&C.
“Anytime an independent broker sells their business to a direct writer such as The Co-operators, State Farm or anybody like that, it certainly hurts the independent broker channel,” said Jordan Manzer, president, Manzer Insurance Services Inc.
Manzel recently started his own brokerage, and feels that its greatest strength would be compromised if it were purchased by a direct writer or large insurer.
“A lot of consumers purchase policies from an independent broker because they have a personal relationship with that broker, but once the broker sells the business, it changes that relationship between broker and client.”
Moreover, he is apprehensive that this may be an impending new reality for small brokerages, due to changes that are taking place within the market.
“Unfortunately, the trend is only going to continue because insurance companies are consolidating, which gives independent brokers less companies to provide our clients insurance, so ultimately the easiest way to solve that is to partner up or sell to a larger agency such as The Co-operators or
Desjardins,” he said.
While this topic remains largely overlooked, some industry leaders argue that it could be one of the most pressing issues affecting P&C brokers in Canada today.
“Brokers’ associations are still stuck in the battle of fighting the banks when I’ve long argued that the real threats to brokerages are outside entities buying up the channel and carving out the distribution,” said Bruce Rabik. “That’s the real threat, but for some reason, we still seem stuck in the 1980s paradigm of fighting the banks.”
While the desire to monetize a brokerage that took years to build is understandable, many brokers encourage the community to refrain from it whenever possible, and keep their clients a priority instead.
“I will try to remain independent in perpetuity because it’s the policyholders we should be looking out for, not lining our own pockets,” said Al Sibilo, COO, HighStreet Insurance Brokers.
Those who do wish to sell, however, are urged to remain patient and await an offer from another independent brokerage that can carry on its client-focused legacy.
“There’s a frenzy going on in the marketplace right now where a lot of people are trying to get the best dollar and walk away from businesses that they’ve spent years building,” Rabik said. “My message is you can still get top dollar for a brokerage, just think about it more before selling out quickly.”
