Would you like Banking with that
February 2014 - Editorial
The January announcement that Quebecbased Desjardins Group is buying out the Canadian operations of State Farm came like a bolt from the blue. According to his recently quoted remarks, former Dominion CEO George Cooke said if he’d been asked a month ago about the likelihood of such a deal—which nearly doubles Desjardins’ premium volume to $3.9 billion—he would have said there was “no chance at all” of it taking place. But come it did, bringing with it tectonic shifts in the Canadian P&C landscape.
Those looking for a reason for the deal needn’t search beyond recent headlines. At last month’s CW Group Crystal Ball in Toronto, Alister Campbell, CEO of The Guarantee and no friend of an over-regulated market, offered the view—echoing a Tweet by former Insurance Brokers Association of Ontario (IBAO) chairman Rick Orr—that government meddling in the Ontario auto market is “the largest single likely explainer” of State Farm’s decision to leave.
Guiding minds at Desjardins, however, obviously feel like they have the tools to solve the business problem that is making money in Ontario auto; and they’re scooping up a huge load of cost-conscious customers looking for their next price-break fix. Technology may be what provides it for them.
Brokers have already spent the last few years grappling with how to compete more effectively against the natural technical advantages direct writers have when it comes to interacting with clients. But the rise of telematics in Canada changes the game again. Our cover story observes just how Desjardins is having success targeting customers attracted to the discounts offered by usage-based insurance (UBI). Brokers have relied on the expert-advice factor as their differentiator in the war over convenience they are having with directs, and they are wisely making advice the central pillar of the telematics counter-offering from IBAO-owned Independent Broker Resources Inc. (IBRI).
That’s good, because the Desjardins/State Farm deal also ups the ante for brokers in other ways, too. Cooke has observed that Desjardins’ mission to be a major full-spectrum financial services provider is the bigger-picture play. To continue to compete, brokers will need to keep distinguishing themselves based on the special advantages of their channel. A strong tech offering is now merely table stakes in that game.
Copyright 2014 Rogers Publishing Ltd. This article first appeared in the February 2014 edition of Canadian Insurance Top Broker magazine