On March 30, RBC Insurance celebrated the grand opening of its first near-branch retail insurance office in the province of Quebec and the fourth of its kind in Canada. On hand for the event, Neil Skelding, president and CEO of the insurer, told The Insurance Journal that the strategy to open insurance offices next to bank branches is working “extremely well. It has exceeded our expectations.”
The goal of setting up retail offices next to bank branches is, of course, to attract clientele traffic from the bank (see The Insurance Journal August 2005). This strategy is effective, he said. “They’re making their way over.” He declined revealing the insurer’s sales figures or objectives for these offices.
What is perhaps more surprising is that half of the clientele of these offices are not RBC bank customers. This is “higher than anticipated.” The strong RBC brand probably accounts for part of this interest, he said.
In terms of products, the “vast majority” of sales are home and auto, with some travel insurance, he added. “On the life side, these offices tend to work on the small cases.” Customers with complex insurance needs are referred to an RBC Insurance career agent, said Mr. Skelding.
The full implementation of RBC Insurance’s retail insurance office strategy is well underway. Twenty-five more offices are in various stages of completion across Canada. The long-term goal is to have 100 or more of these outlets.
Like the other three near-branch insurance outlets opened by the insurer since last summer in the Ontario cities of Scarborough, Hamilton and Kingston, Mr. Skelding says the new Quebec location respects federal legislation that forbids the sale of insurance products within bank branches. To reach the insurance office, bank customers must leave the bank premises and go through a separate entrance. This is not hard to do, however, since the bank branch and insurance office share a common hallway. The office has three insurance agents who are dual-licensed to sell life and property and casualty (P&C) insurance.
RBC Insurance’s near-branch office strategy has come under attack by various stakeholders in the life and P&C insurance industries who have raised concerns about tied selling and privacy issues.
Mr. Skelding said that the insurance offices “have very strong compliance.” There is no sharing of banking customers’ information with the insurance offices and tied selling is illegal and not permitted, he stated. “You can buy insurance from whomever you like.”
Revisions of the federal Bank Act are set to be revealed this October. While “hopeful” that the Act will be “modernized” to allow bank branches to become involved in insurance distribution, Mr. Skelding said the insurer will continue to focus on its near-branch outlets if the status quo prevails. “I would like it (the Bank Act) to change, but we have a viable business strategy if it doesn’t.”
Mr. Skelding does not see RBC Insurance’s outlets as a threat to independent life insurance advisors since the life sales volume is a small part of the business.
On the other hand, these retail insurance outlets are competing head on with traditional storefront P&C brokers. But it’s not just RBC Insurance’s new strategy that is threatening traditional brokerages, Mr. Skelding underlined, pointing out that sales growth for direct distribution channels is exceeding growth in the market place. In addition to RBC Insurance, “ING, Aviva and Desjardins are all players in that,” he said.
“The market for (P&C) brokers is shifting,” Mr. Skelding observed. The traditional brokers who want to be successful in this changing market should ensure that they have strong relationships with their clients and provide added value, he said, noting that direct distributors now have over half the market share in Quebec.
The P&C distribution strategy for RBC Insurance includes offering consumers a variety of ways to buy products, whether it is through the near-branch storefront operations, the call centre or online, he explained, adding that since the end of February, RBC Insurance is now able to renew or sell general insurance products online, 24 hours a day. Consumers can get a quote through the online quoting system, purchase the policy and print out a binding contract. RBC Insurance is the first to offer this online purchasing capability in the Canadian market.
“I look at it as a breakthrough in our industry,” said Mr. Skelding, adding that consumers are now in control of the sales process and can purchase in their preferred method, “face-to-face, by phone or online.”