Three key issues facing the broker channel

Expect the quickening pace of mergers and acquisitions (M&A) activity to present a big challenge — or advantage — to brokers, Joseph Carnevale, president at Insurance Brokers Association of Ontario, said at the Young Brokers Conference.  

The Insurance Broker Association of Ontario is predicting a big year for M&A activity in 2022. Coupled with the evolving role of regulators and keeping brokerages accountable to change, these make up the three key issues facing the broker channel right now, suggests Carnevale.  

“In 2019, we had a peak just before COVID. There were about 40 transactions a year in Ontario, as far as mergers and acquisitions,” Carnevale says.  

While M&A activity stalled in 2020 and 2021 due to the COVID-19 pandemic, 2022 is on pace to exceed 2019’s record high, according to IBAO records.  

The fast-moving M&A activity will see all or most brokers in Ontario affected. In fact, 5% of brokerages employ 55% of all brokers in Ontario, according to IBAO figures. “One of the issues in Ontario we’re all facing [is] at some point our brokerage is going to acquire someone, or be acquired or merged with someone,” says Carnevale.  

While M&A may put some brokerages at a disadvantage, savvy brokers will be able to maximize opportunities that come from merger activity, Carnevale said. 

“How do I position myself to be able to take advantage of that? What does that mean for my clients? What does that mean for market access?” he said. “In many cases, you’re joining a larger brokerage, you have access to more markets. That’s a good thing for your clients.

“In some cases, people are concerned you’re losing that local field, because now you’re taking on a mega-national brand.”  

The evolving influence of regulators also affects brokers, who need to stay on top of regulatory changes.  

The recently issued take-all-comers rule, for example, says auto insurers, agents and brokers are required by law to accept all auto business, and provide all clients with the lowest quotes available to them. 

With the implementation of the take-all-comers rule, brokers must work with regulators to ensure consumers are aware it’s not always in their best interests simply to take the cheapest auto quote. Brokers take seriously their responsibility to advocate the best coverage for the best price. Regulatory changes need to reflect this balance, he says.  

“We had to take a very big role in making sure that brokers are well-represented in those discussions, and [that] ultimately, consumers are the benefactors,” says Carnevale.  

And given the new Ontario government’s proposal to allow drivers to opt out of the purchase of not-at-fault property damage coverage (also known as Direct Compensation–Property Damage), brokers will be on standby on how to best find coverage for their clients.  

The third main issue facing brokers is “making sure the brokerages in Ontario keep up with change,” says Carnevale. 

Keeping brokers accountable for progress and ensuring that their businesses are constantly evolving — for example, by implementing new technology — is a key issue brokers need to address, he suggested.  

 

 Feature image by iStock.com/skynesher