Consolidation is a fundamental part of today’s property and casualty insurance industry. Recently, there has been a surge of merger and acquisition (M&A) activity in the marketplace. ACE Ltd’s ‘s $28.3 billion proposal to purchase The Chubb Corp., announced in July, is just the latest in a string of blockbuster announcements. Hardly a week goes by without someone mentioning a big deal (or at least rumor) looming on the horizon.
According to a recent A.M. Best report, Active M&A Market for Canadian P&C Insurers Expected to Continue, market consolidation has been a hallmark for insurance over the past several years. In 2014, Canada’s top 10 p&c writers, as ranked by A.M. Best, generated 66.2% of the market’s direct premium, compared with 56% in 2007, the report noted.
Looking ahead, A.M. Best said that as the industry moves into the third quarter of 2015, it “anxiously awaits the next merger that is likely around the corner. While time will tell when the next big deal goes from a mere discussion to a full blown announcement, there are a myriad of factors that could lead to continued activity over the near- to mid-term. In addition to the competitive market pressures, the desire for scale and access to additional distribution channels as well as regulatory developments will likely influence how quickly the market consolidates.”
Is this a good thing? One can debate the pros and cons of consolidation endlessly. One can also speculate about the role of regulators and whether they will put in place controls on the level of concentration in the insurance industry.
But the fact is, as adjusters, we have to face the reality of larger insurance players and ongoing M&A activity. Those who think their relationships are solid and their markets secure may be in for a big shock when the latest round of amalgamation announcements hit the headlines. Often, insurer corporate decisions on which adjusting firms will be used (or the degree of in-house staff adjusting) are made at a head office or senior management level, with little regard for past relationships or service history. To paraphrase Pierre Trudeau, it is a lot like sleeping next to an elephant – one is affected by every twitch and grunt.
Much like insurance companies, independent adjusting firms have seen their own share of consolidation in recent years. There are several larger national companies that have put their stamp on the adjusting profession and continually vie for market share in a competitive economy.
At CIAA, we represent adjusting firms of all sizes. We are agnostic when it comes to the question of whether larger companies or smaller operations are the appropriate fit for the marketplace. The fact is there is no right or wrong answer. Niche players in geographic regions or specialty business lines play a key role in serving customer needs. So too do large national or regional independent adjusting firms that have invested in economies of scale, technology and resources to handle complex client demands. It is this diversity in our membership that lends strength and vitality to our organization.
That certainly doesn’t mean it is easy to find the common ground that will please all adjusters when it comes to our priorities – advocacy, professional development, continuing education and regulatory liaison. But it’s an ideal that we pursue in our board meetings and in all of our discussions with individual members and regional chapters.
In the midst of ongoing consolidation and change, the emphasis on broad membership representation is a constant that will continue to guide the CIAA in all of our efforts.