Some brokers wary of rise of MGAs

July 19, 2021 — THE RISING profile of MGAs is bad news for most brokers, the president of the Insurance Brokers Association of Canada warned his colleagues recently.

“Anybody that’s paying attention to what’s happening with MGAs, they’re starting to get very well organized . . . and they have big, big plans for the future,” Kent Rowe told a panel discussion at this year’s Insurance Brokers Association of B.C. virtual convention in June.

“They’re mobilizing, they’re capitalizing and they intend to take more of the marketplace.

“I think we’ve got to be absolutely careful about how we as brokers choose to place business with these MGAs. I know our brokers, for example, we’ll do everything in our ability to not put a piece of business through an MGA.

“We have no relationship with them, we have no leverage in terms of volume with them . . . I don’t think there’s a lot we can do other than pressuring insurance companies.”

Brokers make less money when filling orders for an MGA. But insurance companies increasingly turn to MGAs for commercial insurance.

“It irritates me to no end to have an insurance company decline a risk only to see their name as a subscriber for an MGA. One thing we can do as brokers is pressure those insurers that offer capacity to various MGAs on slips, or to various treaty agreements . . .  to at least create some consistency as to how they underwrite risks,” said Mr. Rowe.

“So if they’re not going to do something for a broker using their own paper or underwriting resources, they shouldn’t do that for an MGA, particularly .  .  .  not something for which we have to do an equal amount of work and receive lesser compensation for that effort.”

But the president of the Insurance Brokers Association of Ontario took a more sanguine view.

“I think that it’s probably a short term issue,” said Joseph Carnavale.

“I think that once the market turns you’re going to see those domestic carriers looking to put that volume back on,” he said.

“I don’t see that MGAs in the future are going to hold a huge market share position once this market turns.”

Fellow panellist Brett McGregor, president of the Insurance Brokers Association of Mani-toba, said his group was finally settling into a good working relationship with Manitoba Public Insurance after three years haggling over MPI’s plans to offer auto policies online.

“We were lucky, though, that we had a conciliator appointed (who) did an excellent job,” said Mr. McGregor.

“The conciliator said brokers are key to this process, they’re bringing value and they need to remain a part of this process.”

Mathieu Brunet, president of the Regroupement des cabinets de courtage d’assurance du Québec, said some brokers in his province face a tight squeeze as Intact takes over the Canadian operations of RSA.

“We have legislation requiring brokers to have at least three different carriers,” he explained.

Moderator Aly Kanji, outgoing IBABC president, said there was a major upheaval in B.C. as a result of the province’s switch to no-fault insurance.

“While the decline in premiums has been popular with the public, it has also meant a sharp decrease in revenues for brokers.”

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