Defining the Threat

Insurance brokers are facing considerable challenges in 2016, with different overland flood wordings, competition from direct writers such as Sonnet and the changes to Ontario auto that took effect this past June.

But to properly address threats and to take advantage of opportunities, a broker first needs to determine both the true threats and true opportunities. This is not necessarily a straight-forward consideration.

Consider the notion, touted by some, that a good place to shop for insurance is the same place that sells paperback novels online?

How many licensed agents would an online retailer hire? How accessible would those agents be to consumers with detailed questions about insurance?

Tara Chammartin – president of the Insurance Brokers Association of Manitoba and 2016 recipient of the Dale Rempel Award – says she is “not scared” of online competition. She says the service brokers offer “will outshine” an 800 number. [For more details please see Passion Play, page 54].

There was once a notion that a good channel through which to purchase insurance is an Internet search engine.

But Google Compare – which did not provide advice and shut down this past March- did not last much longer than Joanie Loves Chachi.

In a recent survey by Insurance Institute of Canada, some brokers identified the need for greater education in some product areas, especially cyber. [For more details please see Learning Curve, page 60].

Traci Boland, president-elect of the Insurance Brokers Association of Ontario, notes that different insurers have different residential water policies. [For more details, please see Broker Management, p. 14].

Consumers could, in theory, do their own research on the various overland flood coverages and try to decide what is best for them. But in reality, homeowners need advice.

While a lack of detailed knowledge of insurance products could be characterized as a challenge for brokers, it is inconceivable that this could be considered a threat rather than an opportunity for the broker channel.

One reason brokers add value is because the average consumer does not understand insurance terms and conditions very well.

One challenge for brokers is errors and omissions liability – the threat of being sued for negligence by a policyholder whose claim was denied because the plaintiff’s policy did not cover a certain risk. This risk is a challenge, but one that should be seen as an opportunity rather than a threat.

Without coverage gaps, there would probably be fewer lawsuits against brokers arising from denied claims, but there would also be fewer opportunities to upsell.

Some might consider the banks to be a threat. However, of the Big 5, only one (Toronto Dominion) actually writes home and auto insurance, now that Aviva has acquired RBC General Insurance. The Bank of Montreal sells neither home nor auto insurance. Meanwhile, the Bank of Nova Scotia and the Canadian Imperial Bank of Commerce sell home and auto but those policies are written by subsidiaries of Desjardins.

With the impending five-year review of the Bank Act, there could be political pressure from financial institutions to ease restrictions on banks selling non-authorized types of insurance. Is this really a threat?

Consider how knowledgeable banks are when it comes to authorized insurance. Many borrowers have been pitched creditor’s disability insurance by a bank employee. But how many banks actually employ licensed agents to sell insurance to creditors?

Perhaps one overlooked challenge for brokers is complacency on the part of consumers and corporate decision makers.

Convincing some people that something bad could happen to them is easier said then done. After all, once a person suffers a catastrophic loss, it really is too late to sell a policy.