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Rule of 20 % : «the battle of the independence of the broker is lost for a long time»


Serge Therrien


Hubert Roy

10 July 2017 11:00

John Martin

John Martin, a signatory to the memory of the tripartite Committee on the reform and regulation of the insurance brokerage of 1987, did not return to see the findings of this report to return to the order of the day 30 years later. He considers inconceivable that brokers refer to it in the current debate of the rule of 20 %. He was thus obliged to leave the record straight in an interview-shock given to the of the insurance Journal last Friday. And Mr. Martin is not tender with the brokerage to the brokers and the insurers.

Mr. Martin has been a size large in the brokerage in the 1980s and 1990s. He has led the firm family Martin Insurance and risk Management, which was bought eventually by Hub International, a brokerage firm listed on a stock exchange in North America. Mr. Martin has also participated in the foundation of the Group Ultima as a shareholder. Several saw it as «the business man brokerage» in Quebec, at a time when the brokers had, on average, a volume of half a million dollars. He remains involved in the brokerage today as a member of the board of directors of PMT Roy, it is the second largest shareholder, according to the Registraire des entreprises du Québec, Mr. Martin confirmed.

Tripartite committee : «there was not a vision of 50 years in there ! »

He entrusted the Journal of insurance that it does not intend, originally, to intervene in the debate on the rule of 20 %. Brokers, however, have begun to refer to the work of the Committee in support of their argument. Then, the Journal of insurance has echoes in the memory of 1987. Mr. Martin felt that he had to reset the clock to time, considering that what was valid 30 years ago no longer is today.

«I am astonished that you use it ! There was not a vision for the next 50 years in this memory, » he says. In an interview to the Journal of insurance, he said he hoped to be his last public intervention in this debate, it has been found to have felt the need to submit a memorandum to the deputy minister in the framework of the consultation to refresh his thinking.

For Mr. Martin, there is no need to delude ourselves. The brokers have lost the battle of independence for a long time. In fact, they lost the day they have agreed to focus their volume, » he said.

«30 years ago, the dealer dealt with several insurers, who accepted the volumes as low as 50 000 $. Today, insurance to individuals, many brokers deal with an insurer that has 85 % of their volume. Many say that they are dealing with two insurers, but in reality, they only have a single. There is no independence in this context. The independence in which many brokers want to drape himself no longer exists ! «

The insurers took control of the distribution, particularly at Intact Insurance, when the market shares of the brokerage have started to decrease, he said. They bought firms, which tripled their value. The multiple sales have gone from 1.5 to 4.5 commissions. The reality of 30 years ago is no longer the same today. «

«Dealers are more imaginative»

Mr. Martin said deplore the fact that brokers are more imaginative and they rely on insurers to promote their development. It gives for example the battle in the mid-1980s, which has allowed brokers to become issuers, but also to settle claims. «We no longer see this today. «

Mr. Martin did not lose faith in the brokerage. It still considers to be extremely important. However, it deplores the fact that there is no longer a great deal of reflection within the network on the future of the brokerage. He therefore calls such reflection, which would be the main issue : how to be more efficient while basing itself not only on insurers. «We need that reflection, brokers have need of such tools. «

It is essential that the organic growth is extremely difficult among brokers, says Mr. Martin, who sees that Intact succeeded better with his taxi driver.

A financing that does not make sense

Mr. Martin also calls into doubt the claims of those who say that it is easy to get financing from the banks. He said he is well aware of the presence of BMO for a long time. «The National Bank and the Laurentian Bank have followed because they have seen that the first was not planted. «He said, however, doubtful whether these banks provide financing to a firm with$ 10 Million of premiums, that has a lower rate of commissioning of 16 % or 17 %, who wants to buy a firm in which the owner retires. «A 4-or 4.5 times the commissions, it does not make sense in the long term. «

As to the funding offered by insurers, he sees it as a way for them to get the market. «When an insurer participates in the financing, a transfer of volume is done. And the insurer will exercise its influence to keep its volume. «Mr. Martin has against those who play «pure» against such transfers. «Over the past 20 years, brokers have carted their volume from one insurer to another. The client received a letter saying that his broker had changed insurer, without really understanding why. Now, when an insurer buys, he wants the volume returns to him. And the client receives the same kind of letters. This is the reality that we live today. «

The insurance companies : «this is where the brokerage is justified»

What is the future then the brokerage ? For Mr. Martin, the battle of the insurance of individuals is lost. The broker must concentrate to fill the other needs of its clients as the direct insurer would not be used. It is focused on the insurance business in the first place.

«This is where the brokerage is justified. Even if it is concentrated to 85 % in individual insurance, the broker can meet the needs that the direct insurer will not be able to answer. «

Mr. Martin has-t-he of the bitterness before the turn of things ? A little conceded there. «The concentration, that is beautiful, but it deems an urgent need to find ways to ensure that there are still players in the brokerage in 20 years. The insurers are able to provide this aid, » he said. The maintenance of the rule of 20% does so more respect to him.

He said that he was shocked to see the Caisse de dépôt et placement du Québec take a stake in the us broker USI. «It is a track to explore, even if the concentration is very strong in Quebec.»

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