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(Photograph for John Cullen for Report on Business Magazine)
(Photograph for John Cullen for Report on Business Magazine)

Top 1000 Companies

Banks' last frontier: Insurance Add to ...

Ken Orr is not, in the main, a scary-looking dude. Bearded and bearlike, the 55-year-old insurance broker has the confidently convivial manner of a small-town businessman for whom the jagged line between customer and neighbour has long been smoothed down by years of Lions Club events, kids' hockey tournaments and Canada Day barbecues.

Orr & Associates, the firm Orr's father, Gord, started in the 1920s, is sandwiched between a beer store and a drugstore in an unprepossessing mall in Schomberg, an hour's drive northwest of Toronto. He has 17 employees, plenty of referral business and "lots and lots" of second- and even third-generation clients. "They're the best," Orr says, smiling broadly.

As a broker, he creates insurance plans (home, business, automobile and farm) that fit his customers' specific needs, then sources the appropriate policies from a range of underwriters, almost all of them Canadian firms. While he sells what most of us consider a necessary (and increasingly costly) evil, Orr makes it his business to negotiate the best premiums for his clients, year after year, decade after decade.

Outwardly benign appearances aside, Orr and the 33,000 members of his profession also understand how to put the fear of God into Canada's Members of Parliament; indeed, they may inflict the big squeeze more effectively, and more tactically, than almost any other industry group-including the chartered banks.

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In fact, the brokers are the only lobby group that has been able to impede the banking industry's imperial ambitions. After Ottawa dismantled the barriers between the so-called four pillars-banks, investment dealers, trust companies and insurers-the chartered banks ingested the brokerage firms, the trusts and some of the underwriters. Now, besides Ottawa's disinclination to allow bank mergers, the only remaining restriction is that banks are prohibited from selling most types of insurance through their branches and, as of last year, their websites. But the banks are not giving up, and it's a battle that gets Orr's competitive juices flowing. "I'll beat 'em on service every time," he boasts. But, he adds, "Let's compete on a fair and level playing field."

The restriction on banks' ability to sell insurance, designed to thwart "tied selling," is ostensibly about maintaining healthy competition and protecting consumers. After all, if you're waiting for your bank to approve a $300,000 mortgage and the manager inquires, ever so politely, if you might want to buy some insurance while you're at it, you may well think twice about passing up the offer.

So despite their obvious stake in this contest, the brokers have long positioned themselves as selfless consumer advocates, protecting Main Street from avaricious Bay Street bankers-the same crowd, it might be mentioned, that has closed branches throughout small-town Canada. "Credit-granting institutions ought not to be selling insurance at the point of granting credit," says Dan Danyluk, CEO of the Insurance Brokers Association of Canada (IBAC), who has a bone-crunching handshake, a steely manner and a dash of self-righteousness. "I don't know what your life experience is, but going for a mortgage or a business loan is not the most empowering experience." Got that right.

Like most established insurance brokers, Ken Orr transacts the lion's share of his business over the phone. There's little to see in the company's office besides several floor-to-ceiling banks of colour-coded vertical files, each one containing a detailed story about the lives of the firm's 6,500 clients.

More from ROB Magazine's Top 1000:

  • Rankings of Canada's top 1000 public companies by profit
  • Rankings of Canada's 350 biggest private companies
  • Definitions for Top 1000
  • Overview: Canada's top companies facing capital crunch
  • Retail sector: How Sobeys is taking on Loblaws
  • Mining sector: Goldcorp's Big Shoes
  • Finance sector: Banks' Last Frontier -- Insurance
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  • Oil and gas sector: The oil sands -- redeemed by fire?

Perhaps more than any other service profession, insurance brokers have an intimate perspective on how communities function economically. They know about the addition the Richards put on the back of their house. They've watched the Feldmans update their family vehicles with the arrival of kids. They've read the appraisals on the new equipment that the local printer bought for his plant, and know all about the inventory levels at the manufacturer in the next town over. But they will also know that the Browns are facing some kind of cash crunch because they downgraded all their policies at renewal time last year.

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