It was a face off between two company presidents with opposing business models for property and casualty insurance (P&C) brokerage distribution: Claude Dussault, president and CEO of ING Canada, the creator of the Televente business volume concentration formula, against Igal Mayer, president and CEO of Aviva Canada, a staunch supporter of the independent brokerage network.
Both company leaders participated in a lively discussion on their different approaches in front of a packed audience at the 2005 Insurance & Investments Convention organized by The Insurance Journal on Nov. 21 in Montreal.
According to Mr. Dussault, concentration is here to stay, while Mr. Mayer contends that calling a concentrated broker independent is a fallacy and misleading to consumers.
However, these two giants of the P&C industry agree perfectly on one point: brokers who concentrate their business with one insurer should disclose this information to their clients.
On the practice of business concentration, Mr. Dussault and Mr. Mayer’s opinions were at times diametrically opposite with respect to brokerage distribution, which is under attack by direct insurers.
Calling himself “pro-choice,” Mr. Dussault insisted on the freedom that brokers should have to embrace any kind of business model. An overly heavy regulatory burden should be avoided, or else creativity and initiative will be dampened, he said, no doubt alluding to regulatory proposals expected soon from Quebec’s regulator, the Autorité des marchés financiers (AMF).
Mr. Mayer stated that a spade should be called a spade: a broker who concentrates business volume with one insurer should be called a “captive broker.” According to him, the traditional broker who shops around with several suppliers offers the best value proposition for the consumer. This type of broker adds value and plays the role of an advisor.
Meanwhile, ING’s chief said that the Televente model, launched in Quebec 10 years ago, has improved efficiency and profitability for the brokerage firms involved. Televente firms must accept to concentrate at least 50% of their business with ING.
Mr. Dussault acknowledged, however, that there are many successful brokerages who do not follow a concentration model. That shows, he said, that the P&C industry can support various business distribution models, each offering advantages for brokers, insurers and consumers.
Mr. Mayer agreed that brokers should have the choice to choose their own business model. But, he added that he believes independent brokers are in the best position to provide customers with “real choice.”
Technology, he added, has improved so much in the past 15 years that independent brokers now have access to the point-of-sale capability they need to compete against captive agents and direct writers.
Mr. Mayer said that one of the main reasons why brokers leave the independent channel is their desire to have a “guaranteed exit.” Knowing that one day they can sell their businesses and retire gives them a sense of security.
To counter this trend, Aviva is now aggressively promoting its own succession plan solution. The company has $150 million to finance in-channel acquisitions to independent brokers. The goal of the financing plan is to keep independents from “selling out,” said Mr. Mayer.
While Aviva offers this financing with no strings attached in terms of volume requirements, he admits it is a self-interested strategy in the end. “Certainly I’m a little afraid where this trend (concentration) is going.” Aviva will not have an independent channel to support if it continues, he remarked.
Mr. Mayer also admonished the brokers’ associations for their failure to communicate the value proposition offered by independent brokers to consumers. He said a full scale marketing campaign is required to get the message across that independent brokers offer consumers choice and add value in their role as advisors.