A new managing general agency (MGA) offering optional auto insurance has launched in British Columbia, with the goal of moving into homeowners’ insurance within a year.
Originally published at Canadian Underwriter.
Vancouver-based Stratford Underwriting Agency is the only MGA selling the complete private passenger suite of products for optional coverage, the company’s CEO, Colin Brown, told Canadian Underwriter Wednesday. Optional coverage includes extended third-party liability (up to $4.8 million), collision (vehicle repair), and loss of use and comprehensive protection for things like cracked windshields or property theft.
“We’re only doing auto right now, that’s the way Canadian Direct Insurance (CDI) started, but we did move into the homeowners’ market,” said Brown, a veteran insurance professional who founded CDI in 1995, which was sold to Intact in 2015. Before founding CDI, Brown worked for the Insurance Corporation of British Columbia (ICBC) for 22 years, finishing his career there as the chief underwriting officer.
“We’ve already been approached for some of the easier [home] products like tenant and condo insurance, so we’re working on partnering with people who can provide that kind of product,” Brown said. “Within a year, we’d be looking at that. We’re always looking at new ideas and that’s definitely on the list for us.”
The product is distributed through brokers in B.C., and Brown expects to have over 100 brokers in its network within the first three to six months. Stratford, which launched Aug. 19, will manage the claims.
In two months, Brown anticipates Stratford will have an online presence. “People can go online, they can click on their broker of choice and then they can just buy directly from us and issue the policy online,” he said. “The broker will get the credit for the sale, including the commission, but it can be done online.”
What prompted Brown to launch the MGA in the first place? “When we started, we looked at being an insurance company – we had been at CDI – but it’s quite an extensive process to start an insurance company and obviously you need a lot more capital and all those things,” he said, noting that regulatory approval can sometimes take up to two years. “Fairly quickly we decided the best route was to be an MGA and find a strong backer for us, an underwriter, to underwrite the product.”
Brown retired in 2016, but did some consulting work “and that was when this most recent situation with ICBC kind of blew up,” he said, referring to the public auto insurer’s poor fiscal performance (it lost over $2 billion since that time. On Sept. 1, ICBC will transition to its new insurance model. Earlier this year, major reforms came into place, such as a limit on pain and suffering for minor injury claims and a new dispute resolution process, which the public insurer anticipates will help save $1 billion per year).
“So, I was following all of that and it occurred to me that the private sector, the few companies that do operate here in B.C., didn’t respond all that well,” Brown said. “In fact, a couple of them ceased taking new business when they heard this because they were afraid their rates might be all wrong. That’s really what led me to believe that with the experience of myself and some of the people that I’ve brought along with me from CDI, that we could do a better job.”
While many of the MGA’s base rates are similar to ICBC’s, where Stratford differs is through offering discounts to the “right” customers. “We have given our broker force some discounting capability, so they can offer, say, multiple policy discounts or multiple vehicle discounts,” Brown said. “Even if our rates are quite close to ICBC, on a purely base level rate, we have other discounting opportunities. Plus, we rate vehicles slightly differently.”
Stratford estimates it can offer better prices for an estimated 80% of British Columbians. For example, the MGA will take people who have had one accident in the last five years. It also has two apps: the first is telematics-based “that will allow us to get into areas that are not traditionally of interest to underwriters, like young drivers,” Brown said. Initial discounts could be 10%, so if a new driver is paying $4,000, they could save $400. Even “when you’ve got a $2,000 policy, $200 is attractive to people.”
The second app involves a partnership with distracted driving app provider eBrake, which will not allow the driver to use their phone at all, even to check to texts, for example. “There’s another 5% discount,” Brown said.
“Our idea is rather than just hit people over the head with punitive rate increases after the fact, we would like to get out there and identify people who are proactively trying to drive better and we’ll offer them discounts upfront to do that.”
Originally published at Canadian Underwriter.