Positive Signs

Entering a new insurance market is a bit like running a marathon. After months of training and preparation, race day finally arrives. Some inexperienced runners take off like a rocket, but halfway through the race, they have exhausted their energy and taper off or even quit altogether.

Then there are the runners who take a different approach – starting more slowly, knowing that they are in it to the end. That is the approach SGI CANADA intends to take as it enters the British Columbia insurance market in the summer of 2015.

So what goes into the preparation phase? For a runner, it is hours and hours, and miles and miles, of training. For an insurance company, it is months and months of research.

There are a lot of variables to consider when entering a new market. Risk analysis and geographic proximity to existing markets are factors that any insurer would evaluate and weigh against its own unique products, capabilities and long-term strategic plans.

But when it comes to B.C. specifically, two of the most important factors considered were fairly simple – population and economic conditions.

British Columbia is a province of four million people with a population steadily on the rise and an economy that continues to grow. Its economy has performed as well throughout the recession as any province with a strongly diversified economy. So for those reasons alone, it was seen as an attractive market.

The strength of the economy was one consideration – the specific make-up of that economy was another. SGI CANADA has historically targeted small business and will continue do so in B.C., offering products that are tailored specifically to suit the insurance needs of oil and gas servicing companies and the transportation industry. The insurer’s experience with resource-based industries in Saskatchewan and Alberta runs deep.

It has been important as a Western Canadian insurer to fit these unique needs with commercial property products, including those that cover select oil and gas industry exposures; all manner of cargo being shipped; all manner of commercial exposures, small to medium in scale; select home-based businesses; small (micro) contracting exposures; and a variety of small-scale exposures such as retail, contracting, professionals, offices, auto servicing, realty and restaurants.

All of these will be available to customers in B.C. this summer.

Another primary factor that made the province especially attractive is the healthy proportion of brokers in the insurance market. SGI CANADA sells 100% of its products through brokers, and in B.C., brokers have captured 85% of the market, with direct writers and agents servicing 15%.

Brokers tend to dominate throughout Western Canada, in fact, while retaining a lower percentage of the market throughout Eastern Canada.

The B.C. focus for the short term will be to provide brokers in the interior with an additional market and capacity. To reach a reasonable market share, the company will eventually offer products in higher earthquake regions.

Before then, however, the resources need to be put in place to be comfortable with additional risk.

Part of that process is ensuring reinsurance coverage is in place to deal with that additional risk, and that work is being done now. Phase 2 will be both geographic and product-based, as SGI CANADA prepares to offer personal lines products to homeowners, condo owners and tenants.

Selling property and casualty products in four provinces through a network of 500 brokers, the insurer wrote $540 million in premium in Western Canada last year. The company has grown in Alberta from $0 in premium in 2006 to $100 million in premium in 2015.

Within British Columbia, the target for 2015 is about $500,000 in written premium to start with, eventually growing to $200 million with the two lines of insurance – commercial and personal.

The move into B.C. also allows SGI CANADA to reach geographic diversification targets more quickly – ideally, 50% of written premium within the company’s home province of Saskatchewan and 50% in other markets.

Currently, the company has a spread of 70% within Saskatchewan and 30% outside of Saskatchewan.

Geographic diversification means risk is spread, thereby benefiting insurance customers in all regions in terms of the ability to offer competitive rates.

SGI CANADA’s actuarial analysis shows that earnings would stabilize with a more geographically balanced book of business.

Spreading risk, and stabilizing earnings, translates into stable rates for customers because the company is better able to absorb major losses in one particular region. This is especially important as weather-related losses become more frequent and severe.

It also translates into the ability to offer more services and products to customers.

British Columbia is a province with strong growth and profit potential, but that profit may not come instantly. As with the marathon runner, it is important to start slowly and pace oneself.

Growth is best achieved by developing strong relationships with brokers, growing premium in profitable segments, diligent underwriting practices and effective claims handling – all through a lens focused on customer-centricity.