Rallying Ontario’s Brokers

Incoming Insurance Brokers Association of Ontario (IBAO) president Dan Danyluk is no stranger to “selling passion”, he says. And, in a time of intense regulatory change, e-commerce explosion and swift market shifts, he intends to sell insurers, brokers and the province on the added value the IBAO brings to the table. With aggressive goals for increased membership and a commitment to the profitably of the broker distribution channel, Danyluk is ready to rally Ontario’s brokers to battle the challenges of change.

In light of the emergence of direct writing and Internet selling, there are some within the property and casualty insurance industry predicting a dim future for independent brokers. However, Dan Danyluk begs to differ.

In fact, there may be no more ardent a supporter of the value brokers bring to the insurance table than Danyluk, a partner in Crawford & Danyluk Insurance Brokers of Delaware, Ontario for more than 15 years. Danyluk is incoming president of the Insurance Brokers Association of Ontario (IBAO) for the 2000/1 term.

Brokers provide a true public service, Danyluk remarks, not unlike his former work as head of Junior Achievement of London, Ontario (where he met current business partner Patty Crawford, then a volunteer with the organization). “It’s great to be in a business where I can be of service,” he says of the role of brokers. “There is a great deal of satisfaction when something happens to someone and you’ve done a good job of protecting them.”

Now, Danyluk is ready to market this passion to those who doubt the staying power of the broker profession. The ability of brokers to serve their clients is under threat, he concedes, from a variety of sources including regulatory change, trying to keep up with new technology, new approaches to distribution and the struggle to remind insurers of the value of the broker distribution channel. In these areas, and on the educational front, the IBAO has set a long-range course to protect and promote brokers, not only externally, but also to members themselves.

Building the broker cause

Ontario’s brokers would have difficulty finding a better advocate than Danyluk, who has been an active member of the IBAO since he entered the profession in 1984. His involvement has ranged from work on various committees including corporate governance, finance, broker administration and membership, to a seat on the association’s executive board since 1997. He has also been involved with representing the broker cause at the national level through the Insurance Brokers Association of Canada (IBAC) where he has been involved in areas such as professional development and serving on the association’s broker identity committees. Much of this effort surrounded the creation of the national Bip branding campaign. The Bip project is one he views with enthusiasm. “We’re branding a business process…it’s unique. We’re saying, ‘You can trust this person’.” That trust is key to promoting the value of the broker distribution channel as it is threatened by direct writing, including the prospect of Internet selling. “Our first duty of agency [as brokers] is to the client, no other insurance distribution source has that responsibility.”

Danyluk sees the Internet in particular as both a challenge and a force for brokers. While many fear the impact Internet sales could have on the broker channel, others see the possibility for quicker, more effective service through new Internet-based tools. The IBAO is working with the Centre for Studies in Insurance Operations (CSIO) to develop such tools for brokers. “Web-enablement is obviously going to be an important management tool for brokers,” notes Danyluk, “and some insurers are moving in that direction.”

As such, he sees a strong future in CSIO’s work under president Klaas Westera, who is “incredibly broker-oriented”. However, Danyluk is also cautious of too much focus on e-commerce, and warns insurers that sacrificing the broker channel for direct Internet sales could prove costly. The lack of success reported by several high-profile e-commerce ventures is a direct result of lack of control over distribution, he contends. Brokers provide the direct channel to the customer and a source of research and development for product. The heavy merger and acquisition activity among insurers that is challenging brokers is actually a result of their effectiveness as a distribution channel. Brokers “provide the profitable business that lets insurers expand”.

“One of the advocacy challenges is for us [as brokers] to remind insurers of what incredible partners we are.” In tough market conditions, insurers have relied on relatively stable distribution costs thanks to brokers, he adds. “Periodically insurers forget that and we need to remind them,” he comments.

FSCO merger

Another advocacy challenge awaits with proposed changes to provincial regulations. The Financial Services Commission of Ontario (FSCO) has announced its intention to change the rules on broker ownership, a move the IBAO has expressed its displeasure with from the start. When such a regulatory change might take place, however, is up in the air with the announcement that FSCO will be merged with the provincial securities commission.

While Danyluk accepts that regulatory change is going to happen, and appreciates the pressure government regulators are under to harmonize legislation across the country and across financial services, he worries some changes may not be for the better. “In Ontario, we’re fortunate… the Registered Insurance Brokers of Ontario (RIBO) really does work,” he observes, pointing to the effectiveness of self-regulation. “In a time when regulators are awash with change, it is important to ensure our regulations are maintained.”

For example, Danyluk fears changes to legislation might allow insurers with no assets in Canada to set up shop here, offering no guarantee that the funds will be there to protect policyholders. Among the areas he says do bear “tidying” by government regulators are provisions surrounding collateral benefits and group policies, particularly with regards to what constitutes “a group”. Currently he sees many groups being established on an affinity basis that are questionable, and not based on based on the traditional “employment structure” of past plans.

Paying dues

While the IBAO advocates on behalf of brokers, it also needs to work on advocating to brokers, says Danyluk. The association has set a lofty goal of increasing its membership to encompass 75% of Ontario’s brokers by 2002. As it now stands, membership is estimated at around 65%. Raising that standard is especially difficult given the proliferation of small brokerages in Toronto, and the desire to maintain a high standard of professionalism among IBAO members.

But, Danyluk believes that this membership drive goal is reasonable, and a first step is the establishment of a Young Brokers Committee to encourage involvement in that segment. The IBAO is also “wrestling with” the idea of a “Big Broker Committee” to respond to the increasing number of large brokerages resulting from the market’s consolidation. Although membership levels have not dropped off, membership revenues have declined slightly due to broker mergers and acquisitions, and the association is entertaining ways combat this without raising dues for larger brokerages. One encouraging sign is the association’s high rate of membership retention. “Obviously we’re doing a good job,” Danyluk observes.

Back to school

“A lot of the value our members feel we [as an association] bring is in proper education,” notes Danyluk, who has also acted as an instructor at the association’s “School of Insurance”. With that in mind, the IBAO has come up with a “somewhat radical” plan in moving forward. “We’ve decided that the IBAO should be the education manager for brokers”, including taking programs offsite. The investment in distance learning is intended to make IBAO courses more accessible to brokers in small communities, including setting up 23 education sites across the province. Four insurers have been brought i n as partners to fund educational expansion, with the pay-off being specially designed in-house programs. And with heavy merger activity creating larger brokerages, IBAO is taking advantage by customizing courses to offer big brokers, who “have the audience right in-house”.

Despite the price tag associated with increasing its educational reach, IBAO is committed to revisiting its plans this year to keep them on track and effective. The biggest challenge, he says, will be to get the word out to members about new initiatives. Work on the IBAO website this past summer is one step to better communicating the association’s investment in education to its members.

IBAO’s long-term plans also include a new level of broker designation, a post-CAIB designation. The ambitious project will begin next year, and includes both university and college credits with broker-specific courses. The first offering, a law and ethics unit, is “not just an off-the-shelf course, but something specifically geared to brokers,” Danyluk says. Although the IBAO was disappointed by the IBAC’s recent decision not to participate in the program due to funding concerns, he believes the course will have great appeal for brokers and will pique the interest of other provincial associations. All in all, Danyluk believes that the IBAO is set on the right track to ensure the future of Ontario’s insurance brokerage community.