Brokerage firms owned by insurance companies: the big debate continues

Founded in 1946, McDougall is a significant player in Ontario’s P&C distribution market, representing over 50 insurers and operating in over 40 branches with over 450 employees.

“This is a very well-known broker,” Definity president and CEO Rowan Saunders (pictured, top left) said of the deal at the Ontario Insurance Brokers Association (IBAO) annual meeting in October. said when we talked. “It is an outstanding organization, very good at serving the community and growing the business organically. As such, we have reached the stage of finding a partner for the next stage of our journey.”

Definity and McDougall have been partners for about five years. The brokerage first took an equity investment from an insurance company in 2017 and has since completed 14 broker acquisitions, doubling its annual premium base to about $500 million.

Read the following: Definity Increases Ownership of P&C Broker McDougall Insurance

The opportunity for Definity to purchase a majority stake in McDougall came at “perfect” timing, Sanders described the transaction as “a logical extension of our partnership.”

“We have the capital to deploy,” he said. “We said to our investors, ‘We want to introduce it.’ I think so, if you look at the last 10, 20 years, they also say they want to invest in distribution, which is a very good complementary source of income for a company like ours. I like the channel and I’m bullish on it, so this was a logical extension.

“Regarding the philosophy going forward, what we see in the organization is a great leadership team…and they will continue to be as entrepreneurial as ever. It continues and continues to grow, and we are happy to be a part of it and to support it.”

“Don’t break new ground”

Sanders spoke on the McDougal acquisition at the CEO panel at the IBAO Annual Conference, where Carol Jardine, President of Canadian P&C Operations, Wawanesa Insurance; Lewis Gagnon, Canadian CEO, Intact Financial Corporation; was sitting next to me. insurance.

A Definity leader noted that insurers that invest in or buy brokers are “not breaking new ground.” In fact, Intact Financial Corp. owns BrokerLink, a national network of insurance brokers, with over 200 branches and his 3,000 employees. Both Saunders and Gagnon emphasized the investor’s “vote of confidence” in the broker channel.

“Brokerage values ​​are a strong financial proposition right now,” said Gagnon (pictured, top right). “It’s an asset that so many people covet. Not too many brokers are buying other brokers right now […] It’s an enterprise, PE [private equity firms]and VC [venture capital firms] Going to the market to buy a brokerage firm. That’s the capital. why? I think it’s because the returns are so good. ”

Who works with an insurance company-owned brokerage firm?

In that the Canadian market has a “very flexible and friendly” distribution environment, with “all kinds of middlemen, all kinds of direct writers, room to do all kinds of things,” Gagnon said. We think it’s unique. Intact Financial Corp. is a great example of this because it does both direct-to-consumer sales and a broker-based business. As a BrokerLink owner, he has financial partnerships with nearly 200 brokerage firms, but across Canada he also trades with over 2,000 independent brokerage firms. “Now we know what’s going on in the market,” he says Gagnon.

read more: BIG’s Stephen Billyard explains how AI and automation are transforming personal insurance underwriting

Wawanesa Mutual Insurance Company, represented on the CEO panel by Carol Jardine (pictured below), relies solely on broker sales. As an underwriter, Wawanesa has “strong partnerships” with all brokers owned by insurance companies, Jardine said.

“Most importantly, the question we always ask is how much influence does the firm have on you. We will have that conversation with the broker or underwriter, depending on the situation,” she explained. […] and retain their value proposition. ”

Some insurance companies, like CAA Insurance, do not work with company-owned brokerage firms. CAA Insurance began selling through brokers in 2017, promising to only work with truly independent brokers.

“It’s not one broker partner versus another broker partner. It really lives up to the commitment we made to our broker partners when we entered the broker channel. […] We don’t partner with insurance brokers owned by insurance companies,” Turack said (pictured above). True to their word, CAA Insurance has already given notice of termination to his partners, brokers who sold to the insurers, and Turack said the company will continue to do so.

What are your thoughts on brokerage firms owned by insurance companies? Whether you’re a broker testing the waters of M&A or an insurance company looking for a broker partner, please share your comments below.