There may be no shortage of challenges for independent brokers – from talent to technology, to the sheer financial cost of running a business – but many continue to proudly fly the flag even in the face of widespread consolidation.
Multiples may be tempting, and many independents have no shortage of could-be buyer offers, but for some broker leaders, the agency that independence offers them is worth turning down what can be a bumper payout.
Independent brokers can, though, sometimes feel like they are too on their own, something that Kanwar Bola, A-KAN Insurance president and owner, said could contribute to a willingness for some to sell up.
“The main reason is because they are on their own, they don't have other people sharing ideas with them,” he said.
For Bola, who also pointed to current valuations as a big driver of broker sales, one of the biggest challenges for independents is “just being ahead of the game”.
With larger players tapping into greater resources and debuting programs on a regular basis, any independent might be forgiven for feeling overwhelmed where it comes to keeping up.
“The challenge, I find, is always having to find something where you have a good program so that you can have good retention and good new business,” Bola said.
Independent brokers are not just hearing from the bigger acquisitive brokers, but also insurer owned businesses.
“We are getting bombarded by people trying to buy us all the time,” said Rorie McIntosh, McCam Insurance Brokers president.
“For me, [staying independent] is about clarity, my allegiances are clear, and I don't have to look over my shoulder or second guess anything.”
The fear of being put under pressure to give an insurer all the best clients in a book, else to not place business with the insurer owner due to concerns a claim might put the brokerage in a bad situation, were both cited by McIntosh as reasons he intended to remain independent.
“As an insurance broker, the idea is you are supposed to work for the customer – our advice, what we do, how we say it, and what we're thinking should all be what's in the best interest of the customer,” McIntosh said.
“I'm not having a struggle as an independent broker where I have to say – well, you know, maybe my boss doesn't want me to do this or that, so I’ll put it with another company.”
For McIntosh, having “as many options as possible” where it comes to insurer partners is vital, as it means the customer’s unique risk profile can be placed with the best provider for them. This is not always possible for brokers operating as part of bigger businesses, he said, with some capacity providers – like CAA, which only works with independent brokers – not willing to do business with some of the larger brokerages.
Being independent keeps those options on the table for McCam.
“I know when I deal with a customer, I'm not being pulled in 20 different political directions,” McIntosh said.
“I know that if I say to a customer, ‘you should be with this market,’ it’s the right market, and the advice that I'm giving them, it's the best advice I can give.”
Bola and McIntosh have more in common than being proudly independent broker leaders, as they are both part of the same broker network.
“From a financial point of view, you really have to try to group yourself with a much larger organisation just so you get some better terms,” McIntosh said.
“For example, [an insurer] may give some of their companies a 50% discount on commercial lines compared to me, so then how on earth do I fit when another broker may get a better quote than I will?”
Canadian Broker Network, the alliance that A-KAN and McCam belong to, has grown three-fold in recent years, according to CBN president Lorie Phair. It now has 21 members, and while independence is the “main quality” required to join the network – the second required quality is that they run a “good business”, according to Phair – this does include acquisitive businesses like Synex.
The network handles $2.5 billion in premium and offers pooled resources and research to its members, and past triumphs include the development of Canada’s first digital brokerage, Bullfrog, and the purchase and sale of managing general agent Southwestern. It also gives independents a chance to compete with larger players without giving away ownership of their business, according to Phair.
“We're so aligned and so integrated together that when we talk to our insurer partners, we talk about the size and scale of the network, and we work with our insurance company partners to create different solutions that our members can take to the market,” Phair said.
It is an individual broker owner’s decision whether to take the M&A route, continue going it alone, or sign up to a network. For Phair, it comes down to whether broker leaders want to take a more “entrepreneurial” approach or cede some control to a wider business.
“Do you want to decide who you buy from, what markets you want to partner with, what kind of staff you want to bring into your business, what you want to pay them, and basically chart your own course?” Phair said.
“Or do you want to be part of a larger entity? And once you're part of a larger entity, you lose some of that freedom – you might gain some other things, but you're going to lose some of that freedom, and that includes the ability to run your own business, to partner with the insurance providers that you want to, to provide the services that you want to provide, even to decide how many and what kind of staff you want in your business.”