Low-cost insurer enters the fray

Brian Johnston, the former president of Liberty Canada Holdings and Cigna Insurance Company of Canada, has launched a new low-cost general insurance company, Markham General Insurance Company. The operation is capitalized at $20 million.

Financially backed by a group of 22 brokers and an U.S. private investment fund arranged by managers Dailey & Partners, the new insurer recently opened doors in Ontario with plans to go national by the end of the year, says Johnston. Markham will initially underwrite homeowners and auto insurance through the broker channel, with plans afoot to enter commercial coverage next year.

The strategy behind Markham was to create a low-cost producer utilizing the latest technology from underwriting, claims management through to electronic interface with its brokers, Johnston explains. “If you look at the companies which have performed well, it’s those which have developed niche markets and have become competitive on expenses.”

Two years ago, Johnston notes, “the idea of Markham took focus when I realized that very little has been done in the property and casualty industry over recent years to reduce expense ratios. I saw the opportunity for a new company to exploit this by employing more efficient technology-based management systems.” Markham has developed its own “real time” broker interface system based on high-speed connection through the Internet. The system, Johnston notes, was developed in conjunction with brokers, “everything has been broker driven, even the design of screens”. Eventually, the company plans to market its broker interface system on the market.

Johnston’s objective is to keep the company’s expense ratio to within the mid to low 20% range. “We may not achieve this initially due to start up costs, however, all of the testing of systems suggests that this is very achievable. The expense ratio can be extremely burdening for companies in a highly competitive market.” Markham began operations with 20 brokers on its book with this figure expected to climb in coming years to about 80 brokers across the provinces. Johnston’s revenue target for the first year of operation is between $50 million to $60 million in premium, with a longer term objective of annual revenue of up to 250 million.