Insurance

Ownership critical to independence: broker exec

Independence insurance

Brokers are justified in thinking independence is shrinking due to increased consolidation in the P&C industry, according to Lorie Phair, president of the Canadian Broker Network (CBN), Canada’s largest network of independent brokers.

To think ownership does not influence a brokerage’s decision-making would be “naïve,” she adds.

Phair refers to a finding in Canadian Underwriter’s 2022 National Broker Survey, which shows 50% of brokers think P&C industry consolidation poses a strong threat to the broker channel, whether through insurance company mergers or brokerage M&A.

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CBN’s independent, largely employee-owned members have grown to represent over $2 billion in property casualty premiums. But Phair says the amount of industry consolidation has the potential to overwhelm the independent broker channel. And at the end of the day, she believes, it will affect insurance buyers.

“I think we need to look at what true brokerage independence is: an owner’s ability to make decisions without being influenced by outside equity ownership,” Phair said. “That is the reason we look for independent brokerages as potential members of CBN, because they’re free to make decisions they feel is right for their firms.”

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More importantly, look at how brokerage ownership plays out for clients, Phair says.

“When you’re not influenced by an outside controlling interest, you’re free to hire the people that best meet your customers’ needs, you’re free to partner with the right insurance providers to meet your customers’ needs, and you’re free to provide services and operate your business overall, emphasizing the areas that you deem are important to your business and clients,” Phair said.

“To say it will be business as usual once you sell or bring in an outside equity partner; that you will be able to freely create solutions, services and align your business needs with the needs of your clients, would be naïve.”

The intent of every broker may be to do the best for their clients, but ownership matters, she adds.

At least, that is what CBN believes. From its vantage point, it sees pressure on a brokerage from new owners who have acquired it to support certain markets. Or sometimes the acquired brokerage is unable to protect employees due to cost reduction following the acquisition.

“These consolidators will influence how you run your business, who you buy from, what resources are available to you and how you service your customers,” says Phair.

It’s why the industry is seeing more startup opportunities, and different types of franchises and brokerage ownership models like CBN are growing, Phair says. “Because brokers who don’t want to sell or answer to outside [equity] partners, are looking at these options.”

Models like CBN’s are designed to allow brokers to remain truly independent, Phair explained. With the support of a network of like-minded peers, brokers “recognize there’s strength in numbers,” she says.

“Our members are committed to preserving the future for the independent broker channel, and leverage the tremendous value of true independence into the best possible value propositions for insurance customers, employees and insurance partners.”

Feature photo courtesy of iStock.com/oatawa

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