J. Hylands
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Need to Reconsider Our Value to the Client | Canadian Insurance
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Need to Reconsider Our Value to the Client

Letter to the Editor

RE: October 2009 & November 2009

I read the article on Bob vs. The Banks (October 2009, pg. 10) and the subsequent Letter to the Editor [November 2009, pg. 7].

First let me state that I am not a big fan of banks, nor a proponent of banks selling insurance. [Banks] are arrogant and spend all their time telling customers what to do instead of listening to what we want. That said, I believe the story and the subsequent letter did not accurately reflect how the broker business is different from banks. For that reason, I would like to examine a few statements through the context of auto insurance, which is the largest segment of the P&C market, and my experience as an insurance consumer.

…brokers, the last true customer service bastions.” (Letter to the Editor, November 2009, pg. 7): I placed my motorcycle insurance with a specialty broker five years ago. I haven’t heard from them since. My renewals come directly from the insurer and my premium is paid directly back to the insurer. So, what is my broker doing for his/her commission?

[the problem with the banks is their] more sophisticated computer systems” (Letter to the Editor, November 2009): I have to ask, is this a bad thing for consumers? The insurance industry has been trying, unsuccessfully, to implement broker/multi-company interface for over 30 years, but different parties block the process by refusing to cooperate. How do we know this? Because the banks achieved global interact years ago. As for the consumer, most would be quite capable [and comfortable] renewing our auto insurance through a computer kiosk or online–just like we renew our driver’s licence, vehicle plate stickers and fishing licences.

[the banks have a] one-size-fits-all cookie-cutter policy.” (Letter to the Editor, November 2009): This argument seems to negate the fact that at least two provinces in Canada have brokers that support government insurance–insurance that is prescriptive and is maintained through the “one-size-fits-all” mentality; in addition, absolutely no province allows consumers to customize their automobile policy (up until the Ministry of Finance recently supported changes to Ontario’s automobile product). This means that across Canada, the auto policy is based on a cookie-cutter policy. Let’s face it: Profits are made by standardizing the product. [The problem is the use of] “credit-rated policies” (Bob vs. The Banks, October 2009, pg. 10): A number of private insurance underwriters and carriers–across Canada and the U.S.–support the use of credit-rated policies. Banks don’t threaten to implement the use of credit-rated policies as insurers are already using this rating method.

[Need to consider] “challenges in the financial sector” (Bob vs. The Banks, October 2009): There is absolutely nothing to indicate that P&C insurers in Canada are more financially stable or responsible than the banks. In fact, the banks seem to have the advantage in profitable business track records, at least according to current economic conditions.

brokers spend a lot of timev for which they receive no payment.” (Letter to the Editor, November 2009): First off, this really is not true. Brokers are paid “up front” for their time. If a broker does not consider a 6% (or more) commission as adequate [compensation] for the time spent on a case, then why do brokers in B.C. support ICBC insurance? There is always the option of charging per service–prompting brokers to charge by the hour, like lawyers and accountants. Presently, brokers get paid a sizable commission, rather than a per-piece payment. That means all time spent on a case is compensated through the current commission structure.

[banks will feel] “free to adjust their premiums upwardsv” (Letter to the Editor, November 2009): In 40 years of dealing with banks, I readily admit that they have never reduced my fees; then again the banks have never increased these fees by 20% or 30% in any one year, either. Insurance companies are famous for the ridiculous yo-yo rates and, quite frankly, huge rate swings are more difficult to live with than regular reasonable rate increases.

[We need support] “brokers employ staff and pay bills.” (Letter to the Editor, November 2009): So do banks. Furthermore if the banks sold car insurance they would need to hire more staff and pay more taxes and bills. This is a redundant point; it needs to be removed from the debate.

[Brokers] “contribute to their communities” (Letter to the Editor, November 2009): Not to belittle the efforts of community service, but I have served on charity boards and in community service organizations with as many bank employees as insurance brokers. I also see bank sponsors of charity events as by insurers and brokerages.

The fact of the matter is that more people either just renew their auto insurance policy “as is” or they shop for the “cheapest price.” Service and quality mean little to nothing and we, as an industry, have taught them to do business this way. Consumers are purchasing a commodity, because we choose to sell a commodity. Couple this with potential changes–such as a simpler rating system like insuring drivers based on experience instead of based on car standards–and the days of “brokered” auto insurance will be over.

If the insurance industry wants to stay in the car insurance business, it needs to deliver a better product, and brokers need to figure out what, if any, service the auto insurance customer actually needs and/or wants, rather than painting the banks as the big, bad, boogeyman.

J. Hylands, Oakville, Ont.

© Copyright 2010 Rogers Publishing Ltd. This article first appeared in the January 2010 edition of Canadian Insurance magazine.