The Future of Commercial Insurance Brokers

The Future of Commercial Insurance Brokers

 

Commercial Insurance Brokers“The reports of my death have been greatly exaggerated.”

-Mark Twain

 

 

 

Throughout 2017, we were all barraged with countless articles about the future prospects of commercial insurance brokers. Much of it was negative, given all of the innovative disruption aimed at our industry.  The focus was on disintermediation, direct to consumer business models and artificial intelligence.

2017 was an exciting year in the life of our company. We are now an integral part of Trisura Group, a new publicly traded company (symbol TSU on the Toronto Stock exchange). However, on a personal level for 2018, I am very much looking forward to getting back to focusing on our business and continuing our work of delivering on our goal as the Canadian specialty lines leader.

I was pleased to have an opportunity to speak at the recent Canadian Insurance Top Broker Summit, and used Twain’s words to sum up how I feel about the future of commercial insurance brokers in Canada.  However, I also cautioned that I believe brokers must not be oblivious to all of the change swirling around our industry. Brokers, and their insurer partners, must collectively “up our game” if we are to succeed and thrive in the future.

As I wrote in our June newsletter, businesses built on a foundation of relationships are among the most expensive models.  In highly commoditized products or segments, expensive business models are most susceptible to disruption and lower cost alternatives.  Welcome to the reason why billions are now being invested globally in insuretech.

Mission Critical

The traditional broker-insurer model is not immune to these forces. Indeed it is now a target, and I believe it is mission-critical that insurers and brokers partner together to address the issue. These partnerships must be focused on delivering more efficient solutions. The ultimate cost borne by the consumer must be driven down, thereby disarming the direct writers greatest weapon: lower cost.

Brokers demanding more commission from insurers is not only ignoring this fundamental issue, but is actually making it worse.  In the immortal words from the John Hughes classic, Planes, Trains and Automobiles, “You’re going the wrong way”.

John’s Candy’s retort, “Oh, he’s drunk.  How would he know where we’re going” is of little comfort.  But I digress.

Imagining the Future of Commercial Insurance Brokers

The conventional broker-insurer model remains incredibly inefficient. Furthermore, our cost structure is too high in order to guarantee future success.   There are a lot of folks looking at our traditional model and licking their chops.  We need to find ways to reduce our costs and pass some of the savings on to the consumer.  Why is this an imperative?  Because if we don’t, others will eventually eat our lunch.  Imagine, for example, a world where a business model yields an ultimate cost for commercial insurance to the consumer of less than half of what it is today.  How do we compete?

There is good news. We have a little time before online direct to consumer adoption hits a tipping point and becomes irreversible.  In the commercial space, particularly in specialty lines, most customers still value, need and appreciate expert advice and advocacy.  Most commercial consumers are not quite ready to buy their P&C products online without the involvement of commercial insurance brokers. However, if the cost structure remains so high, the traditional broker – insurer model is at risk.

The Overall Goal

We have to get our collective acts together.  Improvements have to be continuous, relentless and accretive to the overall goal of delivering a broker – insurer model that gives customers what they want and need, how they want and need it, and all at a lower cost structure than what exists today.  While this won’t guarantee success, it will certainly give us a better chance.  What I will guarantee is those brokers and insurers who fail to address these realities will face a difficult future.

Getting back to business for Trisura in 2018 will definitely include working hard on delivering more efficient solutions. Our efforts will go towards helping to reduce and eliminate costs in our structure.

I would again like to thank you very much for your unwavering support of Trisura Guarantee. I wish you and your families the very best of the holiday season and a happy, healthy and prosperous 2018.

 

 

Email Mike your feedback

 

 

Employee Feature – Sian Davies

Employee Feature – Sian Davies

Q: How did you get started in the insurance industry? What drew you in/how did you get drawn in?

A: Prior to Trisura I worked as a Financial Analyst at Health Canada in Ottawa. I enjoyed it, but was looking to move home to Toronto. I started in the industry because a friend forwarded Trisura’s posting for a Business Analyst role to me as she had heard good things about Trisura. When I interviewed for the position I was surprised by how different Trisura felt to my expectation of an insurance company. I was drawn in by the people, energy, and overall culture of Trisura as an organization.

Q: You joined Trisura in 2013 as a Business Analyst and now hold a Senior Business Analyst role – how has your role developed/changed from the time you started until now?

A: When I first started at Trisura the concepts and products of the Risk Solutions product line were completely new to me. Since then I have developed an understanding of how our business works and programs are structured. As a result, I can contribute more analysis and insight to our team.  My focus has also shifted to working on ways to scale our programs and reduce the administrative load by automating reporting and billing.

Q:  What has developed/changed in the insurance industry since you started? What do you think will be the biggest change in the future?

A: Like most industries, technology is one of the major forces driving change in the insurance industry today. From the way that people carry out and transact business to improvement of internal processes, technology is impacting all facets of the industry. Right now, there is a focus from both brokers and underwriters to keep up and be the first or have the best new technology. It will be interesting to see what sticks and becomes industry mainstay in the coming years.

Q: What, in your opinion, is the most important thing to get right when doing business from the perspective of the insurer?

A: Understand the risk that is being underwritten. Without proper analysis of the risk we cannot accurately price premium or forecast earnings. From an external point of view, providing excellent service to our clients and brokers is a critical success factor. While excellent service means speed and relationships, it also refers to the actual service we deliver. By understanding our client’s business we can provide advice and solutions that that are mutually beneficial.

Q: Ok now the fun one…you have won the grand prize in a contest that grants you an unlimited supply of one thing (anything you want) – what do you choose?

A: This is going to make me seem like a huge nerd, but my answer would absolutely be a Tardis from Doctor Who. How could you not want to travel through both space and time! Plus, you can bring all your friends.

Breaking Down Complexity in the E&O Space

VIDEO TRANSCRIPT

JOE: The E&O space is filled with complexity, and can be a challenging area for brokers to navigate. To find out how brokers can up their game in the E&O space, IBTV visited the Trisura office in downtown Toronto to get some insider knowledge from their specialty lines team.

Caitlin: So we’re definitely seeing a variety amongst the various Miscellaneous E&O wordings out there, and different markets have different approaches to their wordings, so it’s very important for brokers to emphasize to their clients that not all wordings are created equally. To do this, they really have to dive in to the wordings, and look at the different definitions, exclusions, conditions that the different markets have in their wording. A lot of clients right now are really focused by price, or driven by price, so brokers really need to point out the differences and show the clients exactly what coverage they are getting with the different policies.

For brokers to fully understand their client’s exposures, it’s very important for the market selection for their risk. Different markets have different risk appetites and with that some markets will exclude certain services, where some are open to including them. So really knowing the full breadth of services that your client is performing is really important for choosing the right market that will cover all those services.

JOE: Taking the time to understand a client’s business model and functions is crucial because in the modern market, any broker who doesn’t understand the full extent of their clients exposures is likely to struggle.

Kathy: If you have a hard-to-place risk,  by not understanding the true exposure, you’re not able to rely that information to the underwriter, which in turn could determine whether the coverage is put in place or declined. By having  a better understanding of your clients business, you’re able to understand exactly what type of coverage they are looking for and what they need, and ensure there are no gaps in coverage.  A broker can go about getting that knowledge by keeping up to date with current market trends and risk analysis. They’re constantly changing, so It’s best to just keep up with what’s going on in the market. They can utilize their insurers by going on their website, they often offer online training, that’s always helpful and with certain niche markets, you can utilize their specialty underwriter. That’s extremely beneficial; they can walk through the product with them and ensure they understand the full coverage.

JOE: In an increasingly competitive market, it’s essential that brokers mark themselves out from the crowd. In order to differentiate themselves, Elliot Ford believes that brokers should be focusing their attention on some specific market niches.

Elliot: I think that brokers should certainly pay close attention the technology sector where there’s certainly all kinds of room for growth. As services and information are digitized in the modern world,  brokers need to ensure that these businesses are properly insured, especially as the products and services evolve. Finding somebody who you enjoy working with, leaning on an underwriter who’s an expert in their field and understanding their processes on how they underwrite a risk, will help them communicate with the insured as to what coverage is necessary to properly cover their exposures.

Canadian Surety Brokers and Bill 142

Canadian Surety Brokers and Bill 142

The Construction Lien Amendment Act, Bill 142, recently passed after an 87-0 vote in the Ontario Legislature. The bill brings about long expected improvements for the Ontario construction industry. The new legislation is limited to Ontario, but there is potential for a national impact. Other provinces continue to update their lien acts, which includes dealing with prompt payment.

Therefore, the new legislation presents a big opportunity for brokers. Brokers can assist their clients in understanding the new legislation, and how it might affect their business.

Basic rundown of Bill 142

  • Much-needed updates to 35 year-old legislation includes payment protection throughout the construction pyramid.
  • Contractors and sub-contracts now have security and assurance about timelines for payment.
  • Mandatory performance and payment bonds on public funded projects over a threshold contract price (like the Miller Act in the USA).
  • The judgement process will provide a chance for resolution of construction disputes without disrupting project schedules. Furthermore, it will assist in avoiding costly legal battles.
  • No exceptions rule to hold-back release deadlines means a no exceptions rule to when contractors and sub-contractors are paid.
  • Mandatory payment protection for sub-trades.

Brokers have a chance to lead the discussion with their current clients on how Bill 142 will impact their business. Moreover, a new group of contractors will be reaching out for support and advice. In particular, contractors will need help preparing to provide bonds they may not have needed before. This is a long-term opportunity with the potential to increase the Ontario surety premium pool in a material way.

Canadian Centre for Economic Analysis (CANCEA)

Early in the lien act review process, The Surety Association of Canada ordered a report from The Canadian Centre for Economic Analysis (CANCEA). The report yielded an fair look at the value of surety bonds in Canada. The findings strongly supported the economic value of surety bonds in protecting the construction process and the wider economy.

The CANCEA report was useful in proving the value of our industry’s primary product. Trisura has taken part in discussion and development about surety bonds and their role in the lien act review. We’re excited at the results and look forward to further progress. The regulations are a key point of interest. All of the details about the new act will be held within the regulations.

The construction landscape continues to shift. Trisura continues to innovate with new offerings, like our e-bond platform. Trisura e-bonds launched in 2017. The goal is to provide Trisura brokers and contractors access to a free online platform to procure electronic bonds. Furthermore, the Contractors Bond Program (CBP) has also been developed. The CBP provides brokers with the ability to obtain modest surety credit for their clients through a quick online process.

As always, Trisura remains intent on helping our broker partners, and the Canadian construction industry. We look forward to helping brokers and contractors through this transition.

Valuable Links

Looking for more information on the Construction Lien Amendment Act review and Trisura products? Click on any of the following links:

TRISURA WINS NATIONAL INSURANCE AWARD

TRISURA WINS NATIONAL INSURANCE AWARD

On November 30th, Insurance Business Canada hosted their 2nd annual Insurance Business Awards night. Throughout the evening, those who work in the industry are acknowledged and rewarded for their hard work. Hundreds of insurance professionals gathered at the Liberty Grand near Lake Ontario to enjoy champagne courtesy of Trisura, and hopefully to enjoy victory as well. 21 awards were up for grabs. When all was said and done, Trisura was not left empty handed. The winner of the Employer of Choice Award was presented to Mike George and the team in attendance. The decision of a committee of esteemed judges chose Trisura as the best among 9 other formidable nominees.

Trisura was also nominated as a finalist in 4 other categories: Woman of Distinction, Advertising Campaign of the Year, Outstanding Philanthropy and Community Service, as well as P&C Insurer of the Year.

This is Trisura’s second employer-related award of 2017, having won the Aon Best Employer’s in Canada award earlier in the same month. Check out some pictures from the Insurance Business Awards below.