How will Digitization Impact Canada’s P&C Brokers?

October 14, 2021

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We are seeing online, and digitized insurance distribution grow and many brokers are faced with being left behind or adapting to digital trends. The difficult question is which trends need adapting to. Traditionally, customers trusted in their broker’s insurance knowledge and personal relationships were sufficient to keep clients. In today’s environment, streamlining business processes and improving the customer experience has become top of mind at least in terms of brokerage digitization.

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We believe the digitization of insurance distribution is necessary for a couple of reasons. First, the customers are demanding it, and second, the repetitive nature of brokerage workflows are well suited to it. We are less convinced that digitization is going to replace the need for professional advice given by brokers throughout the buying process. Instead, we would suggest that digitization will likely enhance the customer experience and enable brokers to focus on value-added services to strengthen customer relationships.

The Canadian Council of Insurance regulators reported that in 2019, $9 billion or 12% of written insurance premium was fully digitized, and this is expected to double by 2024. This is a significant number that cannot be ignored by either brokers or those of us who observe the industry. The Sonnet Insurance Company results over the past three years are a good example of the success of digitized distribution. Their direct premiums written (DPW) have average annualized growth of 50% going from approximately $72 million in 2017 to $240 million in 2020. And the growth is continuing with year-to-date DPW up 25% to June 30, 2021 compared to the same period in 2020[1].

There is a common perception that digitized insurance attracts customers that are more likely to switch carriers and are poorer quality risks. While there might be some truth to this, insurers that distribute insurance online are improving both retention and underwriting. Again, if we look at Sonnet, we can see that they now earn an underwriting profit. 

Digital Distribution is Gaining Traction

We expect that digitized insurance distribution will continue to gain traction as processes improve and consumers become accustomed to buying insurance online. We have also seen that there has been plenty of investment in Insurtech. Willis Towers Watson estimates that funding of Insurtech companies totaled $7 billion across 377 deals in 2020 [2]. While not every Insurtech business will succeed, this investment will create some winners that will impact the industry. However, the question that is at the forefront of our brokerage clients’ minds, is whether digitized distribution is going disrupt the industry by taking away significant business and reduce the value of their brokerages.

Digitized distribution will undoubtedly absorb market share, but we are confident that brokers can and will adapt as insurance policies are complex products with inelastic demand. Consumers rely on the expertise of their brokers to pick the right coverage at the right price, especially when it comes to home and business insurance. At the same time, consumers want the convenience of the digitized experience and like the ability to comparison shop.

Digitization is not just about online sales, it is about providing better service to existing customers with less friction for both the brokerage and the customer. If you can use digitization to reach more potential customers and grow your business, all the better.

As professional business valuators and M&A advisors, Smythe is engaged to value or sell brokerages across Canada. In broad strokes, value is driven by:

  • Profitability as represented by EBITDA
  • Scale of the business
  • Pace of revenue growth
  • Ability to manage operations
  • Risks associated with maintaining it all

Six Benefits of Digital Distribution

A strong digital strategy touches each of these value drivers. Here are six examples:

  1. Configuration and training on broker management systems to provide data that supports both sales and client service can improve service and lower labour costs.
  2. The ability to quickly obtain and communicate alternative coverage and price quotes helps customers understand the value of the broker relationship
  3. Automated renewal workflows lower labour costs.
  4. Quote bind and issue capability for specialized products creates efficiencies and a wider funnel for new business.
  5. Ability for customer to quickly download policy information, certificates of insurance and account information improves customer experience.
  6. Provide producers with digital tools to quote and bind coverage quickly which improves closing ratios.

Moving Forward in a Digitized Environment

There will continue to be a place for small to medium sized brokers. Nevertheless, it is incumbent for brokers to understand how the industry is changing. A good place to start is to increase knowledge and awareness of trends in the industry and how technology can improve the customer experience, grow revenue and reduce labour costs for repetitive workflows. Some of the areas that we view as important include:

Defense against price comparison websites – Price comparison websites have become a significant factor in driving business to underwriters and digitally integrated brokerages. Brokers need to highlight that they are also comparing prices and coverage.

Digitized policy quote bind and issue – This has been the holy grail for the industry for many years. There are several white label platforms, MGAs and online brokerages that can provide these services to brokers.

Legacy systems – Unfortunately many brokers have systems and procedures that have evolved over time that are entrenched in the organization. This makes it difficult to implement digital processes.

Better utilize current broker management systems – We understand that many brokers are content that their broker management system works. Having said that, these systems are often under-utilized.


The P&C industry has been slow in adopting a digitized eco-system, but this is evolving quickly with numerous products being introduced. While there will certainly be winners and losers, it seems inevitable that digitization will continue to impact brokers. Those brokers who adapt will be in a better position to grow the businesses and protect their value.

[1] MSA Researcher

[2] Willis Towers Watson – Quarterly InsureTech Briefing Q2 2021


For additional insight to digital insurance distribution please read our article on the evolution of online distribution or contact our P&C insurance team.


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