Over 80% of P&C brokerages in Quebec now offer life insurance products. More than 40% distribute investment products and RRSPs. Brokers seem to be enamoured with integrated financial services.
There is no stopping progress, at least not for general insurance agencies. A survey by Quebec’s brokerage lobby group, the Regroupement des cabinets de courtage en assurance du Québec (RCCAQ), found that the majority of agencies opted for diversification of financial services to remain competitive.
Ten years ago, the insurance distribution network comprised two very distinct channels. General insurance brokers sold P&C insurance, while life brokers stuck to life insurance.
The survey of the RCCAQ, conducted last winter by the firm Gobeille Ressources Humaines, revealed that the traditional boundaries have been obliterated. Some 300 general insurance brokerages out of the 550 members of the association completed the survey. Given that the RCCAQ represents 45% of the 1125 brokerages registered with the province’s insurance regulator, the Bureau des services financiers (BSF), it is clear that the survey is fairly representative of the market.
General insurance brokers are increasingly offering a full range of financial services. The survey shows that over 80% of brokerages offer life insurance services in urban centres and rural areas alike. More than 40% deal in investment products and RRSPs.
Hubert Brunet, President and General Manager of the RCCAQ, is thrilled with this finding. He sees this movement as the culmination of a long gestation process. “It took time to develop because of the immense conservatism of brokers and brokerages. The products were not ones they had already been selling. But once the brokerages discovered the products, the companies took great strides ahead.”
Claude Dussault, Chairman and CEO of ING Canada Brokerage Network, is keenly aware of this trend, particularly because he was one of its pioneers. He mentioned that the merger of the National Netherlands (NN) bank and the NMB Postbank in 1991 has enabled the new entity ING to offer an integrated financial services (IFS) concept. This trend had already emerged on the international scale when ING spearheaded it in Canada.
Mr. Dussault pointed out that two different economic contexts shaped the development of IFS in Quebec and Ontario. In Quebec, the reaction was somewhat defensive. The rise of direct insurers namely Desjardins obliged brokers to diversify to ensure their survival, he explained.
In contrast, the Ontario agencies seized a business opportunity. From a meagre 5% to 6% of products other than P&C, 80% of Ontario brokerages currently offer integrated financial services, including those that had signed referral agreements.
Bonds of trust
Not only are general insurance brokers intent on conserving their market position, but they are also striving to reaffirm the bonds of trust with its clientele, Mr. Dussault explained. He hesitated to use the expression “one-stop shopping” to describe integrated financial services, whereby consumers no longer have time to run around and hope to find everything under the same roof.
“It is not the convenience factor that is important here. It is more the fact that agencies want to expand relations with the clients and hope to provide new more complete solutions. The potential of this relationship with the clientele had not been fully harnessed.”
The deregulation of distribution networks has also fuelled the diversification of financial services, added Mr. Dussault. The reorganization of the regulators in Quebec in October 1999 also made it easier to establish the model. Life, P&C and mutual funds were all brought under the roof of the same regulator.
Mr. Dussault is confident that the IFS concept is here to stay. “One of the current challenges is that the network has been transformed.” He sees two factors as weighing heavily in the balance. Brokerages are larger today, and the industry is attracting a growing number of college and university graduates. “They would not necessarily have gone into P&C insurance before. Young people will discover how interesting the insurance sector is. A lack of knowledge is the reason they were not attracted by the industry. We have to promote the financial products network more intensively.”