ING, Aviva pledge to review discrepancies between direct channel and broker prices

ING and Aviva assured Ontario brokers on Oct. 18 they are both looking into why premium prices on personal lines risks offered by their direct writing channels are between 15-24% lower than those offered by subsidiary companies distributing through the independent broker channel.

The question was asked directly of ING Insurance Company of Canada president Derek Iles and Aviva Canada Inc. president and CEO Robin Spencer during the Insurance Brokers Association of Ontario’s CEO panel. ING and Aviva are multi-channel insurers whose subsidiaries distribute products using both direct writer and broker channels.

“Does the discrepancy in rate [reflect] an overall corporate strategy to secure business in favour of direct writers over brokers?” IBAO CEO Randy Carroll asked, reading aloud a prepared question for the CEO panelists.

Elsewhere in the panel discussion, CEO panelists noted that prices offered by direct writers will typically be 3-12% lower than brokers (and may sometimes be higher), depending on the business models of the different channels and the stage of the business model they are following.

Even so, Iles and Spencer acknowledged, price discrepancies between channels of between 24% and 30% were “unacceptable.” Both stated categorically that their companies were not cross-subsidizing the business of one channel with the other.

Iles said he questioned the price difference himself and raised it internally at ING. Different underwriting rules and actuarial teams at each organization may be at play, he observed.

Spencer, likewise, said Aviva’s subsidiary companies — including direct writer PC Financial and Pilot Insurance, which works through independent brokers — needed to “act as a more unified group than as separate groups.” He said “it is not acceptable that our actuaries look at things differently, or we’ve got different territories, or we’ve got different ways of looking at things. We’ve got to look at things in one way.”