Canadian Independent Broker Channel Predicted To See Continued Erosion

Canada’s independent broker channel can expect to see continued erosion into their market share by direct writers over the next few years, Joel Baker, president and CEO of MSA Research, told a Standard & Poor’s industry overview panel.

Baker observed direct-linked agencies and companies held 37% of the auto insurance market share in 2002 — a figure that now stands at 43% in 2008.

Similarly in personal property lines, Baker noted, the market share of direct writers increased from 35% in 2002 to 46% now.

“If you add in the insurer-controlled brokers, you’re probably looking at over 50% direct agency-type control of the marketplace on the personal lines,” Baker observed. “And I see that trend continuing.”

Baker said the independent broker channel is likely to “hold the line” in Western provinces because of the public auto insurance models in B. C., Saskatchewan and Manitoba.

Bruce Thompson, director of the monitoring and analytics support division of the Office of the Superintendent of Financial Institutions (OSFI), noted the broker channel still appeals to the higher-income financial bracket, which uses more insurance products and therefore benefits from the advice brokers can provide.