When valuations climb, staying small gets harder. That’s the pressure point Nicholas Rawluk (pictured), president and CEO at One Insurance, sees tightening around Canada’s independent insurance brokerages. “Brokerages are worth a lot,” he said. “But then if they're worth a lot, it's hard to keep them local.”
Ownership succession is at the centre of the shift, but the drivers go beyond demographics. “I think the age factor and a lot of these broker principals aging out is a catalyst,” Rawluk said. “I don't think it's a pressure in of itself, but it's definitely a catalyst for looking at change.” The challenge, he added, is that many principals don’t have internal successors - and increasingly, younger generations aren’t interested in taking over. That, combined with rising price tags, is shutting down staff buyouts and local ownership options.
“There isn't necessarily the capacity internally to finance a buyout,” he said. “So while you have a family that maybe had children that were interested - and now they don't - it’s harder for them to justify trying to do a staff buyout or find someone local.”
The market is tilting toward national players with institutional backing. “It’s hard to deny the pull of the nationals that have the venture capital and fund-backed money,” Rawluk said. “They have cheap access to capital and they have mandates to grow.”
Independent brokerages are being pushed not just by money, but by market access constraints. Clients expect more variety, more transparency, and more sophistication in coverage than many smaller shops can deliver. “If you have one market and an MGA, you're technically a brokerage,” he said, “but it's not really cutting it for a lot of clients.”
Carrier expectations are also increasing. Independents are being held to growing premium volume thresholds and are finding it harder to retain access even when they hit targets. “Even if they meet those goals, they get told the next year, OK great, now your goal is this,” he said. “I just killed myself to meet your one threshold. Now I have to meet another.”
Those pressures trickle down into profitability. Rawluk pointed to a market recently raising its stop loss threshold from $750,000 to $1 million. “Just to cover that extra $250,000, we've got to add 200 clients per loss,” he said. “That’s a lot for anyone. It’s a real lot for a small shop.”
New entrants face a tougher path. Rawluk shared the example of a seasoned broker in the GTA trying to launch his own shop. “He was saying that it's almost impossible. I've got to start a book size of multi-million dollars. Well, in year one, that's unattainable,” he said.
If that’s the case in Toronto, it’s worse in smaller markets. “If we're talking about someone based in Regina, that's almost impossible,” Rawluk said. “It does bring a broader challenge to the industry if the new, young and upcoming can't enter - and the independents can't stay independent.”
The end game? A market with fewer players and less diversity. “We're then going to be left with just 10 big brokerages,” he said. “Which is not good for the ultimate insured for sure.”
Rawluk referenced his time in the credit union sector, where mid-sized players were squeezed out in a similar wave of consolidation. “Even just in my time there, it went from about 32 credit unions in Manitoba to now it's like 18. The big get bigger, and the small stay small but specialized. It's the middle that drops out.”
But specialization, he warned, is also getting harder. Carriers are increasingly selective, focusing only on relationships large enough to justify the resource load. “They want to have less relationships - unless it's enough size to justify the relationship manager and the time spent and making the connections and doing the compliance.”
As commoditization creeps further into personal lines, Rawluk sees commercial and specialty coverage as the last strongholds for independents. “Retail auto or retail home - there isn't that same edge or opportunity for service,” he said. “The strategy now is to build capabilities into the commercial, the farm, and the things that haven’t yet gone as far down that automation route.”
He pointed to personal experience: “I put my home address, instantly they know everything about it,” he said. “I give my car’s VIN number, they know everything about that car.” But that level of automated underwriting doesn’t exist for complex risks. “If you're a commercial trucking company, you can't just provide your tax reference number and they know exactly how many trucks you've got.”
Those higher-value books - commercial, farm, and other specialty risks - are also what national consolidators are targeting. “They're not bothering to buy basic personal lines in some city in Canada,” he said. “Eventually they will. And they’re going to have the resources to do it.”
That leaves smaller brokerages with a shrinking window to carve out their local niche and protect it. “If you’re not really connecting with your local community and being active, being known, then I think that window of opportunity is closing really quick,” he said.
Local presence still matters - but only when it’s genuine. “We're a very community-focused brokerage,” Rawluk said. “We're in a lot of small towns that we might be one of the only businesses in the town - it’s us and a general store.” But simply having a sign isn’t enough. “Some local owners still own a brokerage in a small town but now they live in the city. So is that local ownership? Not really.”
