The leadership of Quebec's managing general agencies (MGAs) has broken down. The association that represents them may even disappear by the end of May.
The players contacted by The Insurance Journal were unanimous: it's impossible for MGAs to sit at the same table if there's no mortal danger to gather them together. Fierce competition makes them fear exchanging strategic information. And, the earliest and most active members hesitate to invest more time for others who remain uninvolved.
In 1997, the turmoil created by controversial proposed legislation affecting distributors, Bill 188, acted as a catalyst to unite several MGAs which created an association of life insurance managing general agencies Association des cabinets gestionnaires de services financiers (ACGSF). The goal of the association was to balance the interests of MGAs and insurers and enable MGAs to maintain all of their independence. The association continued its watchdog work after the controversial Act regarding the distribution of financial products and services was passed into law in June 1998.
The MGA group concentrated its efforts on five areas of concern: compliance, the business practices of multi-channel insurers, the expansion of MGAs' responsibilities in their contracts with insurers, better coordination between the license issuance and membership in the professional liability insurance plan, as well as better communication with members.
These challenges are still apparent today, but they are fading in the face of others that are even more threatening. Some curse the volume requirements that force MGAs to place more and more of their business with one insurer. Others worry about seeing the law evolve, making it mandatory for a financial advisor to deal with one single firm, as it is with mutual funds. Recruitment, technology, and consolidation are also on everyone's priority list.
Finally, the entrance of the banks into the insurance business is worrying MGAs like never before. After they acquired AIG Life this spring, everyone is certainly talking about BMO Insurance. Once again, agencies watch helplessly as their range of preferred product providers shrinks.
Despite such galvanizing forces, the ACGSF is struggling. It suspended activities last October. Its outgoing President, Phillippe Corriveau, doubts that they will even be able to attract enough members to the upcoming general meeting to decide the organization's fate.
"The ACGSF will probably come to an end on the 26th of May, 2009," says Mr. Corriveau, director of finance and administration at BBA Group. Mr. Corriveau is currently serving a forced presidency, since no other candidate came forward when an attempt was made to transfer power in October 2008.
"All these challenges justify a banding together, but that kind of movement requires resources. Who will see to that? We're all competitors. Nobody wants to develop a solution to the advantage of those who didn't want to become involved," he says.
Mr. Corriveau estimates that there are about 35 potential members, that is to say Quebec MGAs who have more than two product providers. "Out of those, there are twenty we never hear about. That leaves 15 potential members," he says regretfully. That's very few. Last year, the ACGSF required individual membership dues of $300 from 14 members, for a total funding of $4,200. "A thousand dollars would be a more natural contribution, but if there are ten of us who belong, that wouldn't even offset the cost of a part-time employee."
Everyone for themselves
All the MGAs say they sincerely regret the end that awaits the ACGSF, but they don't have any solutions to offer.
"Is there a leadership crisis amongst managing general agents in Quebec? I have to respond ‘yes'," says Michel Kirouac reluctantly. He's the former president of the ACGSF and Vice President and General Manager at Groupe Cloutier.
According to Mr. Kirouac, MGAs are too caught up in their daily activities to unite themselves. "Join together to settle what? Besides, who would want to be the leader of something in which nobody wants to participate?" he asks when questioned about the absence of a replacement for the ACGSF presidency.
According to Mr. Kirouac, MGAs will only group together if a threat to their survival arises, for example because of new regulations. "Yes there are threats: the banks, consolidation, companies' volume requirements. But these are the types of threats you can do nothing about."
This is also the opinion of Sid Copoloff, President of Copoloff Insurance Agencies, an MGA created in 1964 and focused on the Quebec Anglophone market. Joined by his son Chuck Copoloff, who is President of Insurfact, a subsidiary of Copoloff Agencies, Mr. Copoloff told The Insurance Journal that he's not unduly worried about the banks' penetration. "We're not afraid because we can't stop it. It will happen, it's inevitable," he said.
Sid and Chuck Copoloff say that they are saddened by the potential fate of the ACGSF. However, they don't think that current circumstances favour the creation of a cooperative group. "It's the ‘me first' that prevails," laments Mr. Copoloff. Nevertheless, he admits that, like the others, he is not inclined to sit at the same table because there is certain "sensitive" information that he does not want to share.
Be that as it may, the two leaders of Copoloff Insurance Agencies point out that they were never formally approached by the association and asked to join.
Force Financière Excel's President, James McMahon, acknowledges that MGAs are too absorbed in their own affairs to join together in the face of current problems. "There's definitely a crisis of leadership. Everyone is in his own corner, in his own business. I don't see much of a future for the ACGSF unless there is a great awakening," he comments. According to him, the most promising path would be to link up with another group of MGAs outside Quebec. However, ACGSF's attempt with the Canadian Association of Independent Brokerage Agencies (CAILBA) last year did not produce any results.
Mr. McMahon remains stoic about the possible outcome. "If the ACGSF disappears, I won't miss it because it didn't do anything. It's always the same three or four players who are active, the rest do nothing. To have a strong association, we have to put our egos to one side and reach a consensus."
He believes, though, that the MGAs should roll up their sleeves and demand greater uniformity in contracts from their suppliers. He says the question of unlicensed agents who no longer provide service but continue to receive commissions also merits closer attention. A strong association would also be better able to deal with business succession issues, he adds.