Small- and mid-sized brokers are feeling the squeeze to increase their premium growth, and the pressure is on to expand their premium base through broker mergers and acquisitions.
“Brokers get approached to sell their business, and we could sell overnight,” said Gord McBride, vice president of GR McBride & Company Ltd., a family-owned brokerage since 1923. “We don’t want to do that, but being a small broker, there are pressures from markets to get volumes. You will find a lot of brokers telling you that.”
Canada’s premium growth has been minimal over the past two years. As of the third quarter in 2011 Q3, Canadian insurers wrote net premiums of $28.003 billion. One year later, in 2012 Q3, insurers wrote $28.101 billion – a meagre 0.4% increase in premium sales.
Low premium growth, higher claims costs, and poor investment income have stretched insurers’ profit margins to razor-thin levels. When adjusted for claims and expenses, Canadian insurers had a modest underwriting profit of $987 million in 2012 Q3, an improvement over a $104-million loss in 2011 Q3.
And thus, insurers are pressuring brokers to find them more business.
Mark Lipman, principal of Consolidated Insurance Brokers of Toronto, agreed that small and mid-sized brokerages are under pressure to grow their premiums through mergers. He said this pressure can be withstood through an unwavering commitment not to sell.
Please see 'Resolve not to Sell' on Page 2#pb#
Resolve not to Sell
“If it’s on your mind that you don’t want to sell, then you do whatever you need to do not to sell,” Lipman said. “That’s where the growth issue comes in. We want to try to grow. Even if it’s only a small amount, you want to try to grow your policy count, the amount of premium you have with each insurance company that you represent.”
How to do this organically?
“Return people’s phone calls,” Lipman replied. “Give them service. People appreciate service, and they will refer other people to you if they get it.”
In addition to seeking referral business, brokers should scare up new business through marketing and advertising, said Anastasia Manolakos of ICON Insurance Brokers. “We advertise and have a lot of referral business,” she said. “We’re in a good economy. You handle a lot of business, and multi-task a lot, and efficiencies could be gained through [improved] technologies.”
