Stepping Stones

Ask most people entrenched in the insurance industry how they came to enter the field, and chances are that you will get a common thread throughout the range of answers — serendipity. Rodney Hancock, the Insurance Brokers Association of Ontario (IBAO)’s incoming president, is no exception.

Hancock spent his early working life as a professor of psychology at London, Ontario’s University of Western Ontario. When most people think about psychology, they think of leather tufted sofas and exploring the inner crevasses of the mind. But the clinical aspect of the science held little appeal to Hancock.

“My Ph.D is in psychology, but it was social psychology that interested me, so that has a lot of application to business,” he says.

He had the opportunity in 1979 to join Rowlands Insurance, a small London-based brokerage, to earn some extra cash for his family. He gave it a shot and it turned out that his academic background, combined with a keen sense of business, was a recipe for success.

“I was interested in group performance, motivation, leadership, that sort of thing and that kind of fits,” he says. “It’s a long way to get to insurance, and I’m not sure that most people would follow that path, but it does fit and I’m sure it has an impact on how I think about things.”

By 1985, the brokerage had grown; at the same time, the size of Hancock’s family had increased, forcing him to make a life-altering decision. He put down the chalk and stepped out of the lecture hall for good.

“What I found was that I liked the ups and downs of business,” he recalls. “It gave me the opportunity to build something for me and the people around me. I liked that idea. And it turned out that I was pretty good at it, and that helped.”

Rowlands Insurance in 1998 merged with another Southwestern Ontario firm, forming McFarlan Rowlands Insurance Brokers Inc. Now, nearly 10 years later, the firm has 14 offices across Southwestern Ontario and employs about 120 people, with Hancock serving as the president and CEO.

OWNERSHIP AND CONTROL

As he prepares to be sworn in as president at the IBAO’s convention in Toronto in late October, Hancock has a clear sense of the priorities he would like to tackle during his term. They include brokerage ownership, increasing consumer awareness about the role of the independent broker and succession and perpetuation planning.

The largest looming issue, the ownership of brokerages by non-brokers, likely won’t be completely tidied up while he is in office, Hancock notes. But he says that if he can lay a strong foundation and start the association down the road of dealing with it, then he’ll leave the presidency office a happy man.

“It’s probably going to be a two-year deal to take care of the issue,” he says. “But I really do think that the issue of who owns brokerages and who can own brokerages is really the essence of whether the broker model will survive.”

The ownership and control of brokerages by insurance companies is a multi-faceted problem, he argues. “For one, if insurers own the brokerage, because they have an interest in the insurance contracts that they are selling, that creates a problem,” he says.

“Consumers are not served well at all when they think that they’re dealing with an independent broker, but in fact they are dealing with a broker owned by an insurance company.” The conflict of interest would be the same, he notes, if a brokerage firm owned an insurer. “It’s hard for me to understand how a broker can act in the best interest of the consumer if the brokerage owner also owns an insurance company,” he says, illustrating the principle further.

The IBAO, he explains, has a plan to address the issue. It is drafting a position paper, in which the association plans to present the results of its discussions with stakeholders about how to resolve the issue. “We believe that we have a solution,” he says. “By the time I take over, we should have talked to all of the stakeholders and then we will lay out where we are going.”

At the risk of sounding alarmist, Hancock stresses his belief that the insurance industry is doing itself a disservice by allowing brokerages to be owned by insurers. “You can’t solve this issue with transparency and disclosure,” he says. “That doesn’t fix the fact that there is a conflict of interest. The [issue] can’t be resolved by just acknowledging it is there.”

BROKER ADVOCATES

In order to achieve long-term profitability, and therefore the survival of the independent channel, brokers will need to reach out to the consumers and make themselves known as their advocates, Hancock says.

In fact, many of the “bells and whistles” direct writers offer — such as crash-proof policies, multi-line discounts, identity theft coverage, and multiple quotes from competition — are all items independent brokers have been offering for years, he says.

“Brokers have done all of those things for ages but really haven’t told anyone,” Hancock says, noting that brokers always represent many insurers when it comes to comparison quoting. “When the directs say: ‘We’ll give you our quote and the quotes of five competitors,’ that’s fine,” Hancock says. “Except we [brokers] do that all of the time. In addition, if you chose one of the other ones [i.e. any quote from an insurer besides the one quoted by the direct writer], we can actually write it for you.”

To help boost the brokers’ public relations, the IBAO has developed an advertising incentive program, including print, radio and TV. The campaign was rolled out in part throughout 2007, but will be ramped up in 2008.

While the Insurance Brokers’ Association of Canada (IBAC) has developed its Broker Identity Program, the IBAO plans to help brokers add their own personal flare to help target consumers in their immediate market.

The association plans to assist its member brokers by taking the lead with some Provincial advertising initiatives and provide them with ways to tag on to IBAO’s bulk buys of media advertising material and air time. “We can buy it cheaper, and then the broker can tailor the message to what they want to say,” Hancock says. “By that means, we facilitate their getting the message out.”

Hancock says the IBAO is also trying to make its members’ lives easier, (allowing individual brokers to use advertisements provided on the association’s Web site), thus sparing the individual member the costs of developing the print or broadcast ad themselves.

CONTINUITY DOWN THE LINE

Of course getting a message out won’t really matter, Hancock continues, if there is no one behind the megaphone. In many cases, brokers are just now starting to turn their mind to the issues of succession and perpetuation. Over the years, many small independents have grown, he says, creating complexity when trying to plan for the future. “In my place, we have 120 employees,” he observes. “It’s harder to plan for that to go on than if we only had five. We have to give brokers the tools so they can be able to do that.”

His advice: “Plan it and lay it out as to how you want it to work, and we [at the IBAO will] give professional advice on how to achieve that.”

He may be biased, he admits, but “I want the independent broker channel to carry on as a model. There are lots of ways to buy insurance, I obviously think that this is the best one.”

While Hancock has his work cut out for himself and his team at the IBAO, he knows that Rome wasn’t built in a day. “I would be happy with laying a really great foundation for getting it all done, as long as we start down that road.”