Brokers respond to Wawanesa’s plan to add a direct channel

Wawanesa’s plans to explore explore creation of a direct-to-consumer channel hit Canadian brokers’ desks more or less simultaneously in early March when the company emailed a letter “in the spirit of openness” outlining its thinking.

For the most part, brokers who’ve spoken with Canadian Underwriter concede the move makes sense from a business perspective. A lot of customers shop online and you have to meet people where they are. Plus, they point out Wawanesa has been consistent in its messaging that the new channel is at the blue-sky stage.

“What they’ve explained to broker associations…is that they have to compete with the directs, so maybe all the carriers now have a broker channel and direct line like Intact does [and like] Definity does,” a Quebec broker tells CU.  “They’re trying to reassure us that, ‘We’re not gonna be competing,’ but that’s [expletive]. They’re gonna be competing like everybody else. They’re just looking for new revenues.”

That said, he doesn’t specifically see Wawanesa’s plans as a threat but says he is concerned about how much overall premium has shifted to direct channels over the past several years.

As for the letter’s promise that any new digital service won’t compete with brokers, most view that as a “political positioning or PR thing,” says a western Ontario broker.

“They, like everyone else, are trying to increase sales, increase margin, and make their business more efficient,” he tells CU. “Are they competing? Yeah, they will absolutely be competing over the same clients that…I desire to write. That’s the free market. They’re allowed.”

But an Ontario broker in the greater Toronto area calls the move “disappointing,” noting many carriers that brokers rely on have gone direct and that Wawanesa “is just the latest” to do so.

“I see this as more of a move for Wawanesa to appease their board with a hybrid distribution channel. I’m less concerned that it will impact our business as a broker,” he tells CU. “In reality, brokers have been holding firm on our market share over the past decade or more. Directs aren’t the threat to brokers that they used to be.” 

The western Ontario broker adds it’s sensible for an insurer to explore ways to optimize distribution and growth. And that includes keeping tabs on whether Definity is being punished by the broker channel for having Sonnet or if Intact is viewed differently by brokers because it operates Belair.

“I have to think that this would be in some of the calculus. If [they] want the option to go to Bay Street, [they’d] better have a good answer for [the question] ‘What am I doing about the other 50% of distribution in the market and having something in the running?’”

Wawanesa’s president and CEO Evan Johnston tells CU there’s been no contemplation about external financing at present, adding the company has been able to generate the capital it needs internally.

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“We are [a] mutual, we are different…and the reason why we do these things is maybe different than our competitors…but we don’t have shareholders, we won’t have shareholders…” he says. “But we also have to evolve as the market evolves.”

Structural speculation

But that status as a mutual also means money’s available to explore ways to streamline distribution models, says the Quebec broker. “Mutuals are full of cash because they don’t have to [give] back returns to the shareholders. So, they might be able to invest in AI,” he tells CU.

“And I think [any new offering won’t just] be digital. That’s not going to work. They’re going to build captive agents. They have to…They’ll have to compete with everybody else. At [some] point in the process, [clients] want to speak to human beings [and] say, ‘Hey, this is what the computer got me. Do you think that’s right?’”

Creation of captive agents has come up in Wawanesa’s discussions, Johnston tells CU. “This will take some time to work out the details, but that is something we have talked about as being a possibility, but no definitive decision on it,” he says.

He adds the company has “started to contemplate” having a feature within a future direct sales tool that offers customers an off-ramp connecting them to brokers in their area, or that provides contact information. This would address customer needs that turn out to be more complex.

“That’s something…we’ve talked about, again no details, but this is about working with our brokers, taking feedback from our brokers on how we can continue to build a long-term sustainable business by not ignoring that segment of the population that is buying direct [while being] as broker-friendly as possible…,” Johnston says.

“We have said we’re committed to brokers. That is not changing, but we’re exploring, for the long-term health [and] sustainability of our business, this portion of the market [that] is buying direct already.”

He tells CU that such an off-ramp is buildable, again emphasizing details remain to be worked out, “but this is something we have talked about and frankly to me feels like it’s probably the right way to go.”

Editor’s Note: This is the second part of a two-part series on Wawanesa’s plan to add a direct-to-consumer offering