Seizing Opportunity

“Opportunity.” It is a word few in the industry would use to describe the current market, but in a testament to faith in the broker distribution system, that is how Ken Orr describes the current challenges facing his profession. As incoming president of the Insurance Brokers Association of Canada (IBAC), Orr is under no delusions that brokers, and the industry as a whole, face tough times. “The market’s awful. It’s certainly the most difficult market I’ve experienced.” He points to the ongoing auto insurance crisis gripping private markets in Ontario, Alberta and Atlantic Canada, as well as availability issues in commercial lines. In fact, Orr says, “my biggest issue with this market is not the pricing, it’s the availability”. Nonetheless, Orr says the current market is “a great opportunity for us [as brokers], we’re doing what we’re supposed to be doing.” The market’s ills represent a chance for brokers to show their value. “We’re earning our money, that’s for sure.”

Talking premiums

The association has a role to play in the prevailing market melee, Orr notes, educating consumers and government on the market, particularly in auto insurance. One example is the association’s brochure, “Let’s Talk Premiums”, which has received positive feedback. It is a tool to explain the myriad causes of the hard market – claims growth, investment losses, fraud, global catastrophes and the rising cost of reinsurance. It also offers consumers tips on how to reduce premiums by taking higher deductibles or not buying more coverage than needed.

At the association’s June “lobby day” in Ottawa, Orr says IBAC put itself forward as a resource on the reasons behind rate increases, answering government questions and helping legislators deal with questions from their constituents. Overall, the response by governments has indicated an understanding of the underlying issues behind the auto insurance crisis. “They certainly understand investment losses like everybody else does,” he notes, but governments are also acknowledging the price of claims growth. “They see if you don’t control what goes out [i.e. claims], you’re never going to control what comes in [premiums].”

While provincial governments act on the auto issue, the solution for commercial lines is not so obvious. Orr notes that while terrorism insurance is starting to trickle back, other coverages were scarce, with little rhyme or reason. One example is “hot tar roofers”, who have seen rates jump as much as 10-times, and capacity drop to just two or three carriers in the market. Anything with a welding exposure is similarly difficult to place, and U.S. exports continue to face a tough market. Commercial carriers are “focusing their market desire”, being extremely selective about what they will write. “Things [coverages] that might have been questionable two years ago that were taken quite readily, they [insurers] are not even talking about.” The only solution, Orr believes, is for brokers to wait out this hard market turn, and hope the commercial market comes back.

Bank battle

With the passage of Bill C-8 in 2001, some may have believed the “battle with the banks”, in which brokers won the lobby effort to prevent banks from selling insurance through their branches, was over. But with the legislation’s five-year “sunset” drawing ever near, and the banking market expected to change significantly in the coming years, brokers must stand firm in their resolve to keep the playing-field level. “We need a fair and level marketplace,” says Orr. “You’ve got to have an arena that allows competition.”

IBAC’s stance is that while allowing banks to retail insurance through branches might increase competition in the short-term, it will reduce it significantly in the long run, as has been the case in bank competition with stock brokerages and trust companies. In the west, brokers are also concerned with the movement of cooperative banks or credit unions into insurance sales. All of this is somewhat confused by last year’s move by broker consolidator Western Financial Group to open its own bank. Of Western Financial CEO Scott Tannas, Orr says, “he’s done well, he’s worked into an area maybe banks haven’t serviced well [small western communities].” But, IBAC’s stance remains unchanged, according to Orr, in that the association believes that banking and property and casualty insurance should be kept separate.

Portal concerns

Beyond its lobby efforts, the most significant initiative for IBAC in recent years has been the CSIO portal. The Centre for Study of Insurance Operations (CSIO) recently withdrew its president and CEO, announcing it would seek a third-party vendor to develop the insurer-broker web-based portal. The project, in development since 2001, is still struggling to get its first-phase quoting engine tested with brokers.

The CSIO says the third-party vendor will be developing subsequent phases that would give full online policy transaction ability. “That [announcement] certainly did scare us at the start,” admits Orr. “There are a lot of cases where the industry gives away information and then pays to get it back. As long as we’re looking at a partnership and not someone to take it over, that is our concern.” The project is critical for brokers if they are to remain competitive, he asserts. What is needed now is to get this tool into the hands of brokers. “I really believe that once we get the rating phase off the ground, it will fund itself, and future development will fund itself. We need to stop promising dates and get people on the portal.” Once brokers use the system, Orr sees critical mass being achieved quite quickly, due to the technology’s ease of use.

The portal is not the only new technology IBAC is getting behind. The “RS Means” system, which originated through the efforts of the Insurance Brokers Association of Ontario (IBAO), is an alternative system for assessing rebuilding costs. Orr predicts the new system will “be a boon to brokers” and lead to more accurate rebuilding cost levels being used. It will also address the growing cost of other assessment systems on the market. The system is now being rolled out to brokers in other provinces

BIP plans

In its mandate to promote the independent broker channel, IBAC has invested significant time and resources into the “broker identity program”, or “BIP”. A new national advertising campaign was recently launched, including television ads based on the theme of the “blanket” of comfort and security offered by brokers. “We really like our new ads, we think they’re strong,” says Orr, adding that the ads have received better buy-in from brokers than the previous “Insurorama” campaign. Notably, Orr recently saw the “power of the BIP” while attending a meeting of the World Federation of Insurance Intermediaries where, he says, one Australian member was “blown away” by the Canadian identity program.

IBAC is also continuing its efforts to round out the CPIB (Canadian Professional Insurance Broker) program. Originally to be complete by January, 2004, the program is still being developed. However, great strides have been made and the final course is in the contracting phase, with hopes for a January pilot. And, the CPIB will see its first graduate this fall.

Talking the talk

Orr, when asked what he likes best about being an insurance broker, responds simply, “talking to people”. He entered the insurance industry in 1978, with some incentive from his father, who purchased John C. Dew Insurance in King City, with the intention of running it as a father-and-son brokerage. Orr later purchased the business from his father, and in 1998 joined David Forster to form Orr & Forster Insurance Brokers Ltd. The brokerage now has offices in King City and Tottenham.

A long-time member of IBAO, Orr joined its board of directors in 1991, and vaulted to president in 1999-2000. He is a recipient of the Wally Wood award for his many years of leadership and dedication to the provincial association. It was in 2000 that he was elected to the IBAC board, becoming vice president the following year , as well as executive liaison officer for professional development and technology.