With the sale of its general insurance operations to Aviva Canada, RBC Insurance expects to be in a better position to serve its customers as it will be able to offer them more products. As for its life insurance products, the company will continue to promote them, especially to individuals.
In March of 2015, RBC’s management publicly questioned the bank’s presence in the Canadian general insurance market. A year later, these questions were answered when it sold its P&C operations to Aviva Canada.
Two reasons were behind the decision, says Neil Skelding, president and CEO of RBC Insurance. The first relates to the size that is required in order to be successful in general insurance, as well as in all areas of financial services. “Size is now very important in our industry. You have to make sure you have the right resources to deliver value to the customer,” he said in an interview with The Insurance and Investment Journal.
Another advantage resulting from the transaction is that RBC will gain access to more general insurance products, which will be sold under the bank’s brand. “We are adding things for which we did not have the capacity. So these are extra products that we are including in the mix. We are focusing on the development of our life insurance and wealth management products, which is where we do most of our business,” explains Skelding.
Several interested parties
Skelding says that several companies expressed an interest in acquiring RBC’s general insurance portfolio. He was reluctant to disclose the exact number, but he did say that it attracted interest from major players in the market. “Our outlook is very good, as is our profitability and growth,” he comments.
RBC ultimately chose to sell to the second largest player in Canada, but it is also one of the world’s ten largest insurers. “Since we distribute their products under the RBC brand, there was considerable interest there. Especially since they have a strong presence in the market, it will give us the ability to create products that mesh well with our customers’ needs,” says Skelding.
He also notes that Aviva deals with over 60 banks worldwide, including four of the five largest ones in Britain. The UK is a market where the financial services industry has undergone profound changes in a short time. “Aviva can bring us global capabilities,” says Skelding.
Other banks have taken a similar path in the past. In the mid-2000s, National Bank handed over the management of its general insurance policies to AXA Canada, both at the application level as well as for claims. This agreement is still in force today, even though AXA was purchased by Intact Financial Corporation.
Intact, through its subsidiary belairdirect also formed a partnership with Sun Life Financial to distribute its products through their network. Another example is the Desjardins Group, which produces white label products for Scotiabank’s insurance operations.
“Size is something that is very important at the moment, explains Skelding. However, it is something difficult to achieve. A company like ours, which has very strong distribution capabilities, wants to add products to its shelves. For an insurer, this is an excellent opportunity. We are developing multiple relationships, which allows us to cross-sell. We are beginning to take this approach with general insurance,” he notes.
Skelding point out, however, that the majority of RBC’s insurance business came from the life sector. While he did not disclose the proportion of profits from each segment, RBC’s financial report for 2015 indicates that the life insurance division generated revenues of $1.5 billion, annuities and segregated funds accounted for $283 million, and general insurance was responsible for $958 million.
Group and life insurance
“We are a big player on the group insurance side. In life insurance, we are very close to the top five. We have an appreciable size there. We have also just launched a new benefits program, in addition to a dental program for small and medium-sized businesses. We are having success there, and we want to continue to grow in that area,” he says.
Skelding wants RBC to build a closer relationship with the client. During the interview, he said he wants to develop “a sticky relationship” with customers. “By offering multiple products to clients, we are able to make cross-sales. We want to do business with someone over the long term. The transaction with Aviva will allow us to pursue this goal,” he says.
He emphasizes that RBC will not forsake individual insurance, although his company has abandoned some products and agreements in recent years. “We have realigned our offering to improve profitability. In addition, we changed the pricing of some products in cases where we felt it was inadequate. That led to a rationalization of our products. However, we remain very present in this market. We are competitive in some segments, in others less so,” he comments.
Skelding believes that RBC’s individual life insurance offering is strong in term insurance, particularly with the Protection products. He also points to disability insurance, where RBC is a market leader. “We are also very competitive on the group side,” he adds.
On Jan. 25, RBC launched its YourTerm product, which allows clients to choose coverage for any length of term between 10 to 40 years. According InsuranceINTEL, the product research database operated by The Insurance and Investment Journal, only iA Financial Group offers a similar product. On this same date, InsuranceIntel also reveals that RBC also modified its T10 and T20 products.
As for wealth management, RBC launched its GIF Invest Series of segregated funds in November 2014. This series was added to the two existing series, to which some adjustments have been made.