2013 FORECAST: Rising expectations forcing technological integration

January 7, 2013

CONNECTION, connection and connection.

To hear Daniel Mirkovic tell it, those are the three most important words for selling insurance this year.

“Probably the most important trend for 2013 and beyond is the expectation by customers that you’re fully integrated across channels,” said Mr. Mirkovic, a former insurance VP at the B.C. Automobile Association who now heads Vancouver-based Square One Insurance, an MGA dealing exclusively in home insurance.

“For many years now there’s been all this discussion about how you have to have a web presence. If you don’t have a web presence you’re not really in business.”

Now even an Internet presence no longer does the trick, he said.

“Increasingly that’s not even going to be enough, just having a storefront and a web presence. Customers are expecting that all of your channels, from the phone to the web to the storefront, are going to be fully integrated. What that means is that when someone starts an interaction with you-let’s say a quote-in person, they expect to be able to finish it online or by phone.”

The new president of the Insurance Brokers Association of Ontario said it is imperative for those in the channel to keep up with the rapidly changing customer attitudes regarding technology use.

Today’s consumer wants to have a variety of interaction points, and therefore I would argue that they have adapted to using technology to connect with us,” said Debbie Thompson, of Beyond Insurance Brokers in Whitby. “As brokers we just need to accept their offer. We have the ability to become social in the social media space. Something our competitors can’t do.”

Meanwhile, the CEO of the Insurance Brokers Association of Alberta said he believes the channel is losing customers to new Canadians, new entrants and new technology.

“People want to do online transactions, and changes are when you go online you’re going to find a direct writer or a bank before you’ll find a broker,” George Hodgson said.

That’s why IBAA is turning to the myinsuranceshopper model, which is due to be up and running in the province by March 15.

“We’re working feverishly to try and get the brokers signed up onto it and to get them involved in it,” he said.

“When we do talk to them, in excess of 90% actually then sign up. So it’s just a matter of us reaching each and every broker.”

In an irony not lost on Mr. Hodgson, many brokers ignored or forgot emails about the new online service, and responded only when he or other IBAA representatives contacted them by phone.

“Who are we to assume…that doing emails and brochures and stuff like that is going to work when the very reason for the broker existing, in part, is the personal touch?”

Intact Insurance president Jean-Francois Blais noted that Canadians are embracing new technologies as they have never done before.

“Thanks to these new technologies, consumers are increasingly empowered, informed, sophisticated, enabled and demanding,” he said. “They have instant access to information, products and peer reviews. They use their laptops, tablets, and smart phones to interact with each other and with businesses.

“Despite these technologies, consumers still value, probably more than ever, what brokers have to offer-valued professional advice and product choice.”

The Internet and enhanced call centre technologies open up opportunities for brokers who wish to reach out to new customers, interact with them and generate positive response to their marketing initiatives.

“This is the reason Intact Insurance has rolled out a new buy online tool for brokers supported by enhanced marketing initiatives. This new tool provides brokers the opportunity to reach out to serve the new and existing customers while remaining at the heart of the transaction and offering their valued professional advice.”

Mr. Blais said technology also increases efficiencies as new standards allow insurers to better integrate their systems with broker management systems.

Mr. Mirkovic and his colleagues at Square One monitor their clientele’s demographics and communication preferences closely.

“What we’ve found – and these are way different than what we had expected – is that about 60% of our customers start a quote online and 30% of our customers actually buy online.

“Of those who buy online, a portion of them started their quote either in person or on the phone. So having those channels fully integrated is becoming a must.”

He said this shouldn’t come as a surprise to anyone watching the way major retailers-not only Amazon and Apple, but Staples and Future Shop – are exploiting new media.

“I know that many within the insurance industry in Canada think, ‘Oh, we’ve got time. Our customers aren’t expecting that of us,’ or, ‘Those are…retail stores and we’re more a professional service’ and so forth, and it’s not going to happen to insurance.

“And the reality is you just need to look south of the border or across the Atlantic and you’ll see how much insurance distribution has changed as a result of changing customer expectations as well as changing technology.”

Nor are these expectations limited to Generation Y. One of Square One’s first customers two years ago was an 80-year-old who sought a quote online, phoned with a few questions, then bought his policy online.

“I think it’s becoming commonplace across all ages and really, it comes (down) to how comfortable people are with using the web. And if your web is designed well, or if your channels and processes are designed well, what we’ve found is this need and this expectation spans all age bands.”

However, there will always be those who prefer the personal touch – and they’re not always older folk.

“We’ve been surprised how many 20- and 30-somethings come into our office and want to meet face-to-face with someone,” he said.

“So I think there is room for various distribution models, but if you limit yourself to only having phone access or having a storefront access, you will definitely be limiting your market.”

The IBAO’S Ms. Thompson, who took the reins of that association on Jan. 1, saids the believes brokers may be missing an opportunity with their market share challenges.

“Brokers that have taken the time to educate themselves on how to adapt today’s consumer are seeing growth from outside the channel,” she said.

“We need to stop recycling business. Education and understanding is the key to this success, and IBAO will continue to provide brokers with the information they need to succeed.

Ms. Thompson said brokers are facing further challenges with the commercial sector.

“The commercial market in itself remains fairly competitive and brokers need to recognize that a higher degree of attention is needed in order to retain that business,” she said.

“Providing value added services, like risk management advice, are table stake in today’s commercial market. The professionalism and advice that comes dealing with a broker needs to be what drives the customer experience.”

Fraud and consumer protection are other areas she noted the association will be focusing on this year.

“Anti-fraud needs to be the focus of all stakeholders, and without implementation of the (Anti-Fraud Task Force’s) recommendations, further rate stabilization will be out of reach.

“And consumer protection as it related to credit is still an issue that needs to be resolved. Other provinces are leading the way, by taking action to protect consumers from this unfair and deceptive practice.”

The IBAA’s Mr. Hodgson said 2013 is going to be a tough year for personal property insurance in Alberta.

“Over the last two years there’s been tow very significant catastrophic loss events in Alberta, one being the wind and hail in Calgary and the other being Slave Lake,” he said.

“I do know that some insurers are looking at fairly significant increases in premiums. I also know that some are looking at fairly significant increases in deductibles. And I also know that some are looking at coverage.

“And I would imagine at the end of the day there will be the odd one that will be looking at all of the above.”

But he indicated the Calgary hailstorm and Slave Lake wildfire may have been triggers, rather than root causes, of a rate increase.

“The bottom line is a lot of companies have kept property low for quite a number of years and my reading of climate change and whatnot generally is, I think people knew that storms were going to become more severe and in some cases more frequent. I think some knew that this was coming and now we’re playing a certain amount of catch-up.”

He also expects mergers and acquisitions to continue, among brokers and insurers alike. He said broker consolidations don’t affect IBAA’s structure or revenues much and are offset by an ongoing counter-trend of small start-ups.

But the disappearance of major insurance markets from brokers’ shopping baskets is a worry.

“A merger in my view, whether it be in insurance or Target buying out Zellers, I don’t think the consumer’s very often well served by it,” he said. “Having said that, I guess having a few large markets is better than having no markets, right?”

“So I think this is inevitable over time. There’s still a pile of small markets out there.”

Smaller companies, especially mutuals, may find niches in the marketplace vacated by the big boys, but Mr. Hodgson said they do only so much. “The problem is that if catastrophic events cause larger companies to rethink, a smaller company doesn’t have as much to rethink with.”

A bigger concern is that mergers have affected more broker-based insurers than direct writing companies.

“My greater concern is that, in Ontario and Alberta in particular, we have been losing market share to the direct writers,” Mr. Hodgson said.

With that in mind IBAA directors are hitting the phones to inform members of services and educational offerings.

“They’re really glad to hear from us. It’s funny because they’ll say, ‘I wish you had a course on this,’ and we’ll say ‘Actually we have three courses on that.'”

“‘Oh I didn’t know that.’ “Well we sent you four emails….'”

Like other associations, the IBAA has had to grapple with the increased ownership of brokerages by financial institutions. In the case of Western Financial group the Alberta association has taken a slightly different tack from its Saskatchewan counterpart.

“There’s always some discussion but at the end of the day Western Financial Group qualifies as a broker,” Mr. Hodgson said.

“They’re not owned by a credit union, they’re owned by a company that also happens to own a credit union. And they also market insurance for a number of insurance companies. So in that way they qualify as well as anybody else does in our membership.”

Saskatchewan brokers association president Garth Neher of Southey Agencies said he and his colleagues will be watching January membership renewals with more interest than usual.

They are the first since October’s annual general meeting ratified a rule change affecting brokerages owned by credit unions in that province.

There are limits to their representation on the board of the Insurance Brokers Association of Saskatchewan, and they are permitted the use of the Bipper logo only if their insurance offices are not in the same building as their credit union owners.


“From the initial conversations that we had (it) sounds like they’re still going to apply for full membership even though that restriction is in place,” Mr. Nehar said.

“But kind of like every other process, we don’t have the signature on the dotted line or the payment at this point.”

There are no other big-ticket changes planned for IBAS in 2013 and no major negotiations with Saskatchewan Government Insurance.

“Touch wood, we don’t have a lot of panic fires at this time.”

But that doesn’t mean there’s no work to be done. Mr. Neher told Thompson’s it will be a priority this year to make sure the broker channel stays up to date technologically in order to hold its ground against direct insurers and to keep up with changes at SGI.

“SGI has been evolving their online product that they introduced last year, and any time SGI makes a change we all want t be aware of it,” he said.

“That is why part of our goal is to try and make sure we’re in communication and see if we can align ourselves as much as we possibly can to make sure that broker-centric model is in place.”

So far that effort has stopped short of using the myinsuranceshopper online model, pioneered in Ontario and New Brunswick, which the Alberta brokers association is rolling out early this year.

“We looked at it a number of years ago and due to economics at that point we just couldn’t really piece it together,” he said.

“But it’s definitely a (vehicle) that we see as a way for brokers to be in the public’s eye. So we’ve been talking to Alberta and waiting to find out how (it works there).

“Every company is developing their online presence and touch, as SGI is. So we want to make sure that we work with them to make sure that we don’t lose the broker-centric portion of that.”

Saskatchewan’s economy continues to thrive, and Mr. Neher expects this to create more business in and draw more insurers to the province.

“There are definitely some hotter spots than others in the province, ” he said.

“But the mining, oil fields, has been keeping our members busy writing business and has created an opportunity where some of the markets that didn’t necessarily view Saskatchewan as a real hot place to be have changed their view.”

Quebec’s broker association is hoping to dodge a bullet looming for its members this year with harmonization of the QST and HST and the associated increased operating costs.

Michel Duciaume, new chair of the Regroupement des cabinets de courtage d’assurance du Québec, said in a letter to members that the province’s finance minister has confirmed the broker’s situation will be reviewed.

The RCCAQ says the tax harmonization that took effect Jan 1. I will increase brokerage operation costs by close to 10% of their taxable purchases.

“Representations are continuing and we may well end up asking the RCCAQ members to support our efforts by asking to meet with their (members of the National Assembly). In our view, the future of a significant portion of the brokerage sector in Quebec is at stake.

Mr. Duciaume, of Assurancia Gatineau, said he would like to see the brokerage sector recover 1% to 5% of the direct insurers’ market share over the next five years.

“To that end, we will have to change how we do things and rigorously follow a market share plan.”

Please note: This story was originally published in the print copy of Thompson’s World Insurance News on January 7, 2013. A PDF version is available.