Move over Mom and Pop brokerages, some of the big boys are taking your place on Main Street.
“I think we’re all facing increased competition,” Michael Saunders of Saunders Insurance Ltd. told Insurance Business, when asked what he thought was one of the major issues facing Alberta brokers. “It’s coming from everywhere. As everyone is trying to expand their business opportunities, we’re starting to see a lot of the bigger brokerages that don’t traditionally enter into small towns are coming down.”
Canada has 11,481 insurance brokerages or agencies chasing after approximately $9 billion in business, according to a February 2013 report by IBIS World. And the expansion of that business has been hard to come by, with the nation’s brokers showing a slow growth rate of 1.3% between 2008 and 2013.
“The competition is very tight in Alberta, especially in our area,” said Jackie Doell of A-WIN Insurance in Medicine Hat, Alberta.
“We haven’t really grown as a community in economic development, in my opinion, and the business just keeps circulating. Our population hasn’t grown, so we’re not bringing in new development or any new businesses that are opening up. A lot of insurance brokerages are being purchased from larger insurance brokerages or insurance companies, and they are dominating the marketplace.”
Financial institution Western Financial has bought several local brokerages over the past six months, most recently Craig Insurance in Barrhead, Alberta.
“We are building a network of insurance and financial services offices across Western Canada,” Western Financial Group president and CEO Scott Tannas told Insurance Business at the time. “Our focus has been primarily in small towns, and Barrhead is indeed a small town of about 10,000 when you count the town itself, plus the immediate environment.”
The strategy cuts to the heart of the independent broker value proposition, which has always been that independent brokers are closer to their local or rural communities than banks, credit unions or insurance companies that are headquartered in major urban areas.
‘It’s concerning because the true independent insurance brokerage offices are dwindling, because the larger insurance brokerages or companies have been purchasing the insurance brokerages,” said Doell.
Some independent brokerages have banded together within networks as a means to combat the encroachment of larger companies in their smaller communities.
For example, The Canadian Broker Network, a group of nine leading, independent commercially oriented insurance brokers, recently bought the wholesale insurance intermediary South Western Insurance Group from Intact Insurance, bringing the brokerage back into the independent channel.
Doell’s A-WIN Insurance is an independent brokerage that negotiates contracts with the insurers based on the volume of its 35 offices in Western Canada, which the business flowing through each of these offices.
