Jean-François Chalifoux, President and CEO of La Capitale/SSQ Insurance, believes firmly in gaining critical mass. The new insurer plans to invest heavily in technology and the digital shift. This is what the members want, he explains to the Insurance Portal.

La Capitale and SSQ Insurance sought to achieve this critical mass by officially becoming one entity, whose name will be revealed this fall. With over 4,700 employees in Quebec City, Montreal and Toronto, the new business boasts that it is “the largest mutual insurance company in Canada, with over 3.5 million members and clients.”

Chalifoux also outlined he insurer’s presence outside Québec. Today, SSQ Insurance has 125 employees in the Toronto area, and La Capitale 400. They are divided among the former York & Fire staff in P&C insurance and Penncorp, mainly in life and health insurance. La Capitale acquired these two companies to solidify its presence in Ontario.

$5.5 G in insurance premiums

The new business will be a heavyweight in the commercial group insurance market: it is the leading insurer in Quebec and the fourth-largest in Canada in the sector, with nearly $3.0 billion in premiums. 

The General Insurance Council of Manitoba rendered its decision and reasons, July 8, in its case against insurance agent, Darcy Dion Boguski. In the decision, the council says it has fined Boguski $2,000 and assessed costs of $900 for doing business without a license.

Boguski, having completed the Insurance Council of Manitoba (ICM) online licensing application to obtain a supplemental insurance license in December 2018, verified that he would not undertake to act as an insurance agent without first obtaining a license. By May 2019, both of his level 2 licenses had lapsed due to non-renewal. September 2019 he was notified that he was under investigation for unlicensed activity and holding out as an agent.

Based on emails between an insurer and Boguski, the decision outlines the incidences in late May and early June 2019 where he negotiated premiums, received quotes, discussed coverage with clients and asked the insurer to bind coverage. The day he requested the insurer to bind coverage, the ICM’s licensing portal notes that he also called and indicated to a senior licensing officer that he was still obtaining continuing education credit hours needed to renew his licenses. “The officer reminded the licensee that he was unlicensed,” say the decision documents.

“On June 3, the licensee held out to Insurer A and Client A as a licensed agent when he negotiated and solicited insurance between the parties and requested overage be bound, while not authorized or licensed to do so,” they write. “By failing to disclose his unlicensed status the licensee (also) misrepresented to Client A that he was a licensed agent.” They conclude, saying Boguski knew his licenses had lapsed, and should have declined to act or advised his client to seek a licensed agent or broker.

In P&C insurance, the insurer ranks third in Quebec and 13th in Canada, with premiums of $1.5 billion.

In individual life insurance, the merged firm occupies fourth place in Quebec and sixth in Canada, with premiums of $1.1 billion including individual annuities. “It also holds an enviable position in savings, ranking 7^th in Canada in segregated funds,” La Capitale/SSQ Insurance says. The insurer’s segregated fund assets under management total $5.2 billion. In this sector, the firm will focus on proximity with the distribution network.

“We will remain very close to MGAs. With time, we will group our sales forces and products to offer a complete line,” Chalifoux says. As the two insurers combine their operations, he says that each firm’s products will gradually supplement those of the other.

For all business sectors combined, the new entity’s premiums total $5.5 billion, including $4.2 billion in Québec, Jean-François Chalifoux says.

“The group is a great step forward, a historic milestone for both of our organizations. We are joining forces and continuing to honour all our contracts and agreements,” Chalifoux explains. He adds that he is maintaining the business models of both insurers. For example, the new business will continue to operate the two distinct networks within life and health insurance distribution at La Capitale: the public institution network and the MGA network.

SSQ organizes its individual life insurance distribution networks differently. “We had affiliated agents, but this sales force was more marginal compared with that of La Capitale. We had no business development team in public institutions,” Chalifoux explains. He thinks that La Capitale’s experience running this business model will benefit SSQ.

Investing heavily in systems

When they first announced the merger in January 2020, then La Capitale CEO, Jean St-Gelais (now chairman of the board of the new organization) and SSQ CEO Jean-François Chalifoux said their goal was to become the largest mutual insurer in the country. The executives said they wanted to stoke the digital shift of the two insurers. In the strategy he shared with the Insurance Portal, he strongly emphasized the tech angle.

Pooling their strengths is crucial, Chalifoux stresses. “We are looking for size and economies of scale, but also the means to invest optimally in technology and the digital shift. We want to invest heavily in our P&C and life and health insurance systems, to better meet members’ rising expectations,” he explains.

Integrating technological ecosystems

The archaic (legacy) IT systems are weighing heavily on the merged firm. Their competitors are shouldering a similar burden. Harmonizing the systems is a gargantuan undertaking. “Over a three-year horizon we aim to integrate our technological ecosystems in P&C insurance, group insurance, individual life insurance, and financial services, together with the corporate functions and business support. Up to now we were competitors. Now we are becoming one, and integration must be done in steps to achieve a harmonious and successful transition for all stakeholders,” Chalifoux says.

He adds that investments that each insurer foresaw before the merger will move forward. La Capitale planned to upgrade its P&C insurance system in the coming years, whereas SSQ Insurance planned to allot a sizeable amount to make its group P&C insurance systems more efficient and modern.

“We are mapping our IT systems to determine which platforms will best serve the business we are launching today,” Chalifoux says. Asked about the supplier, the CEO said they were thinking it over. He adds that the final decision will be made in the coming months.

COVID-19 and the digital shift

Chalifoux is proud that his firm has successfully realized the merger, announced well before the pandemic hit Canada. “We also thank the Ministry of Finance for having approved it on time. Despite the remote work context, the project advanced smoothly. Large numbers of our employees are on board.”

Sweeping trends have fuelled the merger, Chalifoux adds. He cites in particular consumers’ requirements in 2020, and the technological evolution that is creating new expectations regarding insurers’ digitalization processes. COVID-19 has accentuated these trends, he says, notably spurring the digitalization process. In the context of this acceleration, larger firm size has become even more important, he says.

High-speed digitalization is here to stay, Jean-François Chalifoux adds. “People don’t want to handle paper anymore, and prefer non face-to-face conversations.” Similarly, clients want to do business remotely. The CEO thinks the recent launch of simplified issue individual life insurance products is aligned with this major trend.

“The need to do business remotely and digitally was there well before the pandemic, but it is accelerating,” he continues. When the staff of both organizations began working remotely on March 27, the organization realized that the time was ripe to launch products that reflect this shift.

No turning back

Chalifoux doubts that things will go back to normal when the employees gradually return to the company’s premises starting in early September. “I don’t anticipate a massive return to work for the 4,700 employees,” the CEO says.

“Workers will have much more flexibility and mobility. They will be given the choice of how and where to do their work. There will be more occasional telework. COVID-19 will leave its mark. Management practices will evolve, and there will be adjustments and redesign of the workplace. We are currently preparing space to make it more user-friendly and adapted to the employees’ needs. Our new work environment lets us do this.” Since the end of March, nearly 98% of the employees of the two merged insurers have been working remotely.