Restoring Broker Image

After two years of extremely difficult market conditions, independent brokers in Ontario are hopeful of a period of stability. However, the immediate future will not be a period of “easy sailing” as brokers tackle the delicate task of rebuilding consumer confidence in the insurance industry, and specifically regaining the trust of communities which has always been the cornerstone of the brokerage profession, observes David Hare who will take over presidential helm of the Insurance Brokers Association of Ontario (IBAO) for the 2004/5 term. The coming year will also bring about dramatic change to the auto insurance product which will have far-reaching ramifications from regulation through to professional education and training of brokers, Hare predicts.

The next 12 months will be anything but lethargic, comments David Hare, incoming president of the Insurance Brokers Association of Ontario (IBAO) for the 2004/5 term. “My over-riding theme as the association president for the year ahead is ‘restoration of the broker image’,” he adds.

Restoring consumer confidence in the independent brokerage community has become top-priority after the damage inflicted over the past two years of the hard market which not only brought about double-digit rate increases and limited coverage capacity, but saw questionable “insurer behavior” with regard to the handling of customers, Hare says. And, compounding the stress the brokerage community has been subject to in handling irate customers, brokers also had to deal with market consolidation and company contract cancellations, he notes. “The problem [with public impression] is the perception that there is not much difference between brokers and insurers. Various polls have been conducted, which confirm this [misconception]. So, [as brokers] we have a lot of work to do [in restoring consumer trust].”

BETTER DAYS

Overall market availability in Ontario has improved significantly over the course of this year, Hare says, with price softening in some lines – particularly commercial business – being reported by brokers. “We don’t have the problems of two years ago with [market] availability,” he notes. And, he observes, some reports even suggest at aggressive pricing behavior by insurers. “Hopefully this doesn’t mean we’re [the insurance industry] going back to the silly days [of the last soft market].”

Although market availability has improved, the number of markets per broker continues to be a problem in some areas, Hare says. “There are still some isolated cases [of limited markets] in Ontario.” In this respect, the IBAO has held meetings with insurers and the regulatory bodies. “In each case, we have solved the problem.” But, on the whole, insurers are now looking for growth in both personal lines and commercial business, he notes.

PRODUCT CHALLENGE

While restoring consumer confidence in the brokerage community is a forefront objective of the IBAO, another monumental challenge lurks in the form of the proposed changes to the regulated auto insurance product, Hare says. This primarily relates to the provincial government’s desire to increase auto product choice and enable consumers the option to “buy down” to basic coverage. “We’re unsure of the exact timing [of such a move], but we definitely expect to see this happen in 2005. We [brokers] don’t believe consumers will be best served this way, but it’s apparent that a ‘choice product’ will come in.”

The introduction of a basic auto insurance product with add-on optional coverages will present a “huge project” for the IBAO in terms of professional training, Hare observes. The IBAO is currently “at the table” with the provincial government and other industry-related bodies that would be affected by such a dramatic product revamp. The IBAO hopes that sufficient time can be built into the planning to allow for brokers to be fully trained. “It will be up to the association to provide training for brokers…which will likely start off with a ‘road-show’.”

Hare points out that the kind of auto product changes envisaged will mean that all broker training material, from the basic training course to more comprehensive levels, will have to be changed accordingly. And, the interaction required within the industry will be broad, with implications for the Registered Insurance Brokers of Ontario (RIBO) to the Financial Services Commission of Ontario (FSCO). “It’s [auto product change] going to be a major challenge.”

PORTAL POWER

Gaining the necessary critical mass of broker support behind the Centre for Study of Insurance Operation’s (CSIO) company-to-broker Intranet portal is another “right up front” priority for the IBAO in the year ahead, says Hare. Development of the CSIO’s portal is at a critical stage, he notes, with the launch of “phase-II” set for 2005. “When we get to phase-II in early 2005, the cost saving for brokers in terms of single sign-on will be tremendous. Future development of the portal to policy processing will also produce huge savings for insurers.”

However, Hare admits that the portal has been dogged in the past by technical and cost problems, all of which have created a sense of wariness by brokers and companies. “There have been fingers pointed at brokers for not signing up for the portal. But there are BMS [broker management systems] vendors who are currently not ‘portal friendly’, so you can’t blame brokers [for this delay].”

To enhance the attractiveness of the CSIO portal, the IBAO has entered into negotiations to allow non-participating insurers the opportunity to partake on a trial basis, Hare says. If this happens, it will definitely boost broker participation. This will stop the finger pointing and name calling.” There are currently about 174 IBAO member brokers signed up to the CSIO portal, he notes, out of an expected 203 members. “At this stage, we’re right on target.”

The future of the portal cannot be forsaken by brokers, Hare stresses, as failure now will likely be the end of any such industry endeavor at a future point. The technology alternative would be for brokers to have to sign onto each insurer’s website, which presents significantly greater operating costs in equipment, time, and the training of staff. “There’s confidence that all of this [development of the CSIO portal to phase-II] will come together next year when it will begin to produce savings,” he adds.

PROFESSIONAL INDEPENDENCE

While the troubles of the hard market have kept brokers busy, the profession has emerged from this “dark period” with its honor and strength intact, Hare says. The IBAO has enjoyed growing demand for its professional education products, and will continue to look for new opportunities to advance broker professionalism, particularly through online courses. “We’ve had a significant increase in [educational] program participation due to the introduction of online registration.”

But, while independent brokers remain the overwhelmingly dominant force in insurance distribution, Hare cautions against passivity in the face of alternative competition. These new forces include offshore telemarketing centers as well as Internet distributors. As such, the IBAO will be launching a new “broker identity program” (BIP) branding kit at its soon to be held annual convention, which will be made available to members for free, Hare notes.

FAMILY TIES

Insurance definitely runs in the family blood, Hare observes. He began “working” in the insurance business whilst still in high school doing part-time work at the family-owned insurance brokerage. After several years on the road as part of a rock band, Hare returned to Petley-Hare Ltd. in 1971. He became president of the company in 1976.

Petley-Hare currently operates out of two Ontario offices located in Oshawa and Bowmanville, retaining 17 employees. The firm generates about $10 million in annual sales from activities in personal lines, commercial and marine insurance, as well as a division dealing in life insurance and other related financial services products.