Mobility series, Part 2

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MOBILITY SERIES - PART TWO Gaining the upper hand

How brokers can defend their turf in the mobility space, as digital disruptors such as directs, OEMs and vehicle subscription services start to crowd the market

BY SCOTT COBER, National Practice Leader — Transportation, BFL Canada

The shift to mobility is bringing further disruption to the distribution channel for brokers across many insurance verticals.

This gradual disruption has already started to make an impact on personal property and automobile lines. First, it was Economical Insurance launching Sonnet Insurance in 2016 and then Onlia Insurance launching in 2017. Onlia Insurance is a joint venture of Fairfax Financial Holdings Limited and Achmea Canada Holdings Inc.

Consumer choice and willingness to share data in exchange for a quote to bind gives Sonnet and Onlia a first-adopter advantage in helping these carriers learn consumer mobility buying behaviours. Millennials are the anticipated target audience, but the reality is that quoting and binding insurance coverage appeals to any consumer looking for a seamless and efficient online experience.

When a consumer gives consent to use their data and answers a limited number of underwriting questions to confirm coverage through their smartphones, antiquated insurance brokerages are on notice. In theory, online direct insurance companies should have lower premiums by cutting out broker commissions, increased claims efficiencies, and limited bricks-and-mortar costs.

Apart from direct insurance companies, other potential disruptors to the broker channel in the mobility space may include automotive original equipment manufacturers (OEM). It’s predicted that they may launch mobility insurance

products offering consumers further digital choices. Embedded telematics devices and connected vehicles provide automotive manufacturers with a real-time gateway to driver and vehicle data.

The looming threat from OEMs and other emerging intermediaries could expose brokers to other future disruptions as the car ownership model shifts. For example, vehicle subscription services are beginning to see uptake with automobile insurance included as part of the monthly vehicle cost.

Close to five years after Uber’s usage-based insurance (UBI) platform disrupted the insurance industry, other approved technology companies in ridesharing, car sharing, food delivery and last-mile delivery programs continue to enter the non-owned fleet space.

An insured vehicle in this area potentially has its asset under several different primary policies in any given day or week, providing sharing economy companies with a tremendous advantage: They can use mobility data with premiums adjusted on mileage and/or behavioural ratings.

How can insurance brokers counteract the growing mobility threat when partner insurance markets have cut broker distribution by renaming or rebranding their business model? One solution will be the growth of specialty MGAs to customize and provide additional capacity as digital platforms and more favourable provincial insurance regulations begin to allow the unbundling of products.

A second solution is education and navigating clients to what makes sense for their specific risks. Direct writers will face hurdles to service multi-line insurance policies and provide the same broker expertise, and challenges with current insurance industry labour shortages may also arise. Engaged, forward-looking brokers have already started to see a service shift with clients requiring expertise in personal and commercial lines as mobility and primary platform insurance policies continue to evolve.

A broker’s role requires educating clients about which platforms are approved and which do not provide primary coverage; it will be a necessity to review coverage gaps and additional product offerings.

Brokers will be needed to further advise their clients using UBI programs that “double-dipping” in the primary automobile policy may be occurring. The double-dipping occurs when the insured’s primary traditional automobile exposure is transferred to the digital insurance platform, yet their primary auto policy does not adjust to credit the limited annual mileage that is coming off the coverage.

Post-COVID, assuming that a majority of vehicles are not being used as much as before, a broker can help clients find cost-effective solutions by understanding their true exposures. The Financial Services Regulatory Authority of Ontario’s recent approval of telematics surcharges will be a positive step to help UBI programs grow, whether they are simple products to adjust premiums on mileage or on-road behaviours.

Higher-risk drivers who decide not to change their driving patterns will no longer enroll in data-sharing programs, returning them to the traditional pool. The broker’s professional skillset will continue to be a valuable asset to communicate with clients and help guide them through their digital channels.

Individually rated commercial automobile insurance will be the next target for direct insurance writers and is ripe for similar mobility disruptions in select risk classes. The non-fleet risks look very similar to personal lines automobile insurance.

Brokers have the ability and trust from their insureds to defend this space and to advocate for industry changes with commercial auto being a more specialized class. Risk management expertise will be paramount in educating clients, as they become more comfortable using different mobility solutions.

Similar to personal auto lines, it could be common in the future for an insured’s commercial automobile to have multiple primary insurance platform coverages on a daily basis.

Scott Cober is national practice leader — transportation at BFL Canada, based in Toronto.

Latest acquisition news & activity

NFP EdgeHill

NFP Corp. has acquired EdgeHill Insurance Brokers Ltd., which was founded in 2006 and is located in Toronto’s financial district. EdgeHill’s coverages include personal lines for high-net-worth clients, including home, auto, watercraft, and personal excess liability.

EdgeHill’s principals, Patti Hull and Ross Schofield, are joining NFP as a vice president and a consultant, respectively. In commercial lines, EdgeHill covers transportation and real estate, among other things.

NFP has made dozens of acquisitions a year over the past few years. Its previous Canadian acquisitions include Dalton Timmis Insurance Group Inc., McLean Hallmark Insurance Group Ltd., Mass Insurance Brokers Limited and PBL Insurance Limited, among others.

Lundgren & Young Excel

Lundgren & Young Insurance is forming a new Alberta brokerage, Excel & Y Insurance Services, as a result of a partnership with Excel Insurance Group Inc.

Excel & Y has two Calgary offices, plus one each in Camrose and Edmonton.

The new partnership will now independently operate 17 brokerage offices in Alberta, plus three in British Columbia. The deal is neither a merger nor an acquisition.

Excel & Y’s CEO is Robyn Young, president-elect of the Insurance Brokers Association of Canada and a past president of the Insurance Brokers Association of Alberta.

Other Excel partners include Edmonton-based Treasures Insurance & Risk Management Inc., whose CEO, Scott Treasure, is a past president of IBAC.

FirstOnSite Spectrum

Spectrum Restoration, a family-run disaster response contractor, has been acquired by Mississauga, Ont.-based FirstOnSite Restoration.

Spectrum has one office in Cold Lake, Alta. and another to the southeast in Lloydminster, a town that straddles the Saskatchewan-Alberta border.

Travis Stieb, who until recently was Spectrum Restoration’s general manager, is now senior project manager of the complex commercial division at FirstOnSite.

The deal closed Dec. 1, 2021.