Like the rest of the financial services industry, the insurance sector finds itself in the throes of consolidation. But, arguably, nowhere has the reality of mergers and acquisitions been felt harder than among insurers.
“Consolidation has been brutal and companies are continuing to disappear,” says Byren Innes, senior vice president and director of NewLink Group Inc. of Toronto, a leading consultant to the insurance industry. “The top 10 manufacturers have 90% of the sales and it’s not good for competition. Many brokers find it difficult to be loyal to carrier suppliers because they don’t know if they’ll be bought out next week.”
Consolidation has made life more complicated for insurance advisors in other ways, too. Many thought they’d stay with a company until retirement, but now face a great deal of uncertainty. “What ends up happening is that the Manulifes start getting more and more business because brokers are sure [Manulife Financial Corp.] will be around,” says Innes. “I know one guy who’s giving 90% of his business to Manulife.”
That’s the way many brokers see it. “Consolidation hasn’t affected my income, but it has affected the way I do business,” says an independent broker in Saskatchewan. “It’s getting more and more difficult to spread clients out because there are so few manufacturers.”
The broker in Saskatchewan was one of almost 200 brokers and agents from across the country surveyed for this year’s inaugural Insurance Advisors’ Report Card, in which advisors were asked to rate their company or their managing general agent. Investment Executive asked advisors to rate their employer anonymously on delivery of support, products and services in 17 categories ranging from front-office technology to compensation and strategic focus. The survey covered career agents, such as those at State Farm Insurance Cos. and Clarica Life Insurance Co., as well as brokers who work under national MGA brands, such as Equinox Financial Group, and a group of independent brokers. It also gave advisors the opportunity to sound off about the state of their industry.
Not all agents, for example, feel mergers and acquisitions are good for the consumer in the short term as companies fight for market share. One Ontario broker under Equinox thinks consolidation is having the opposite effect. “It’s a bad thing. The more [manufacturers] in the market, the more interest there is in product development,” he says.
While having to cope with consolidation, the broker’s life is also getting both easier and harder, says Innes. Easier because technology has made processes flow more quickly and efficiently; at the same time, products and markets have grown more complex and clients are becoming more demanding. “Companies are trying to one-up each other for market share, and some of these term life policies require the broker to have a Ph.D.,” he says. “So a broker’s life isn’t any easier from an administrative point of view.”
Another concern for many insurance advisors is with the direction consolidation is pushing the industry itself. In recent years career agents have been disbanded in favour of independent brokers. Now several brokers say they fear the industry is regressing.
One Great-West Life Assurance Co. agent in Ontario doesn’t like the direction the whole industry is moving in: “Great-West is trying to recapture its agents and encourage us and reposition us to sell only Great-West Life. The overall industry is consolidating, there’s no doubt about it, and they’re trying to control the agent population.”
“This industry is in trouble,” echoes another advisor in Ontario. “It’s going to evolve back to a career agency system. It’s already happening.”
Another conclusion from the survey is that captive agents look more favourably upon the company they work for than their freer, more independent counterparts.
The survey also shows there is very little separating the groups in the report. In the top spot is Toronto-based State Farm, while the lowest group are the independent brokers. In second spot is Waterloo Ontario-based Clarica, while career agent London, Ont.-based Freedom 55 Financial Corp.and Equinox Financial tie for third place.
Brokers who operate under Winnipeg-based Great-West Life banner fell into the bottom half of the survey, in fifth spot.
There are some obvious reasons why firms with career agent rank higher in the survey than the others. For one, firms with a captive sales forces offer more services and support to their agents and have deep pockets to promote the brand name. This in turn garners higher scores (advisors were asked to rank their companies on a scale of zero to 10) from agents in categories such as marketing and advertising, as well as availability of client or prospecting materials.
One British Columbia broker with Equinox says the worst aspect of his MGA is the lack of branding. “There’s no image,” he says. “The public doesn’t know who they are. There’s also a reluctance to use technology. They could make so much more available for the people who serve them than they do.”
A common complaint from many independent brokers surveyed is that their MGA’s regional office is too removed from their own office and they feel isolated and lack support.
“The regional office is too far away and sometimes it’s lonely,” says an independent rep in Nova Scotia.
Another broker in Ontario echoes the sentiment. “We’re a satellite office and their continuing support of satellite offices has waned. We could use a little more attention up here,” he says. IE