The splash made by
Berkshire Hathaway Specialty Insurance expanding into Canada has generated a lot of feedback from the broker channel.
Many are welcoming Berkshire Hathaway’s entry into the Canadian insurance market, with some hoping it will disrupt the channel and free brokers from insurer contracts.
Paul Armstrong, broker partner at Paul C Armstrong Insurance Brokers Inc., Halton Hills, Ont., welcomes the entry of Berkshire Hathaway, and is looking forward to more competition and perhaps a no-contract relationship with an insurer that would be a breath of fresh air for brokers.
“The seasoned insurers in Canada, for lack of a better word, are working from all sides,” Armstrong told
Insurance Business. “They have contracted brokers, and at the same time decide they are dealing direct with the consumer.”
Armstrong argues that FSCO should oversee the suitability of the insurers, to see that they are dealing appropriately with the brokers or agents.
“The contracts are one-sided. If you don’t produce a suitable volume of business or a suitable loss-control type of business which in turn relates to percentages of loss, then they’ll dump you anyway,” he says. “And we don’t have a body that is overseeing that. You’ve got good brokers out there serving the public that nobody is protecting.”
Commercial insurance company Berkshire Hathaway Specialty Insurance announced last week that it is expanding into Canada, after entering the U.S. market in April 2013.
The company has also picked up licenses to operate in Hong Kong and Singapore, with an eye to operate with an average $25 million limit in most markets.
However, Berkshire Hathaway executive vice-president David Bresnahan said that the company does have the ability to offer coverage rates of more than $100 million for clients it is confident underwriting. (continued.)
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Although the expansion has been whirlwind by industry standards, one Insurance Business reader was certain that the move by Buffett to enter the Canadian market was not done on a whim.
“We don’t need to be worried whether or not ‘they did their homework,’” wrote Paula MacMillan in the comments section. “We are talking about the most successful investor and entrepreneur in history here!”
Armstrong agrees, saying that “it will be interesting to see how Mr. Buffett and his company might perform.”
For another broker, the arrival of Berkshire Hathaway is welcome news – but is waiting to see what kind of legs the company will have in the long term.
“Competition in itself is fantastic,” says Joseph Carnevale, account executive, Brokers Trust Insurance Group, Vaughan, Ont. “Consumers benefit by having more choice and having access to more products. That’s a given.”
But Carnevale also cited the Target example, of a U.S. company coming to Canada and simply expecting Canadians to “line up” to buy.
“The concern I have, whether it is grounded or not,” says Carnevale, “is are they (Berkshire) are going to pick up the capacity in the next year or five years, please a lot of clients and please a lot of brokers, and then come to the decision that, ‘We’re really not making the money we thought we were going to make here – let’s just close up shop and go back home.’”
A Canadian company is less likely to pull up stakes than an American company, adds Carnevale, and points to the problems that are created when you suddenly take capacity out, leaving a ‘hole’ in the system.
“It either gets filled or it gets abandoned; and if it gets abandoned, there is a trickle-down effect on companies and clients everywhere,” says Carnevale. “On a high level, it is great competition is coming – I just worry that once that gets built into the system, what happens when that gets pulled out?”
