Echelon Insurance: Not your standard ‘specialty’ insurer in Canada

The firm has reaped rewards from this unique strategy, achieving growth of close to 80% since joining CAA Club Group, from $400 million in gross written premium (GWP) to around $720 million.

“In 2022, our growth has continued,” said Robin Joshua (pictured), president of Echelon Insurance. “It’s coming in commercial lines; that’s where the growth is predominant. Our bottom line is really good. The pandemic did not hurt us from a growth or profitability standpoint; we survived that and managed it very well, and now we’re headed in a direction where we’re going to build our specialty niches.”

Why makes Echelon Insurance a specialty insurer?

The IRMI defines ‘specialty risks’ as: “A term used by commercial insurers to describe unusual coverage features or types of risks not underwritten by most insurers.”

Historically, a high percentage of specialty risks from Canada have been underwritten overseas in London, which is home to Lloyd’s, the world’s oldest specialty insurance and reinsurance marketplace.

Joshua mulled over the definition of ‘specialty’: “If you define specialty as risks that are complex and difficult to manage, then yes, you [may likely] need an entity like Lloyd’s [to find an adequate risk transfer solution]. But we take a slightly different slant on specialty … than what is normally associated with the word.”

Echelon is focused on niche lines of business that many of Canada’s large insurers are not interested in – either because they’ve experienced poor loss ratios in those lines in the past, or they lack the underwriting capacity and expertise to tackle those lines effectively and profitably.

“We’re not competing with them [Aviva Canada, Intact Insurance, etc.]; we’re competing for a space they don’t occupy,” said Joshua. “A lot of the business they don’t write ends up coming our way, and we try to find a way of managing that. When other insurers say: ‘That’s no good for us,’ we’re ready to jump in.”

A good example of that is hospitality insurance. During the COVID-19 pandemic, Echelon expanded its commercial insurance offering for hospitality businesses, contradicting a trend, which still exists today, of insurers retreating from the market due to extensive pandemic-related losses.

“Lots of insurers got out of the hospitality business during the pandemic because businesses were going under, there was a lot of risk, and just so much uncertainty,” Joshua told Insurance Business. “But we jumped in and decided we could make it work – and we’ve been successful.”

Beyond hospitality insurance, Echelon (which has historically been focused on auto risks) is also one in only a handful of insurance companies in Canada to tackle long-haul trucking, tow-trucks, motorcycles, non-standard auto risks, and taxis.

What enables insurers to tackle specialty risks?

According to Joshua, there are three main reasons why insurance companies retreat from certain classes of business:

Capacity: They don’t have enough capital to manage the business;
Expertise: They don’t have the expertise in-house to be able to manage what, in their shop, is probably a small book of business; and
Underwriting requirements: They have to be much more focused on specialty classes of business than cookie cutter classes, like personal auto insurance.

“You can build those things – we built the expertise around long-haul trucking, motorcycle, and all our niches in-house,” the business leader said. “We also partner with brokers that are strategically aligned. With motorcycle risks, for example, we work with 11 broker partners across Canada, and no more. Why? Because no other brokers have the right expertise in-house for motorcycles. That’s a key component of how we specialize.”

Another component that enables Echelon to fulfill its specialty strategy is its careful combination of risk segmentation and loss control. On the risk segmentation front, Echelon uses data analytics to give every risk the unique attention it needs, even if two risks in a portfolio may look identical in every way. 

“We’re underwriting every risk individually, and not using a broad brush,” explained Joshua. “We look at every risk, we analyze it, we have an underwriter that manages that, and then we go and inspect them [prospective or existing policyholders] to make sure that we understand the risk. We’ll then provide advice and [loss control] consultation around: “Here’s a hazard, here’s a potential hazard. If you plug this hole, your risk becomes more acceptable, but if you don’t, your premium will be X instead of Y.’ Through that exercise, we can make risks more palatable and manageable.

“The other component of this is bulk – insurance uses a law of large numbers. If we can write a lot of tow trucks, we can make it profitable, because we’ll [likely] only a few have losses. But if we only write a small number of tow trucks, unfortunately we may not be profitable, because we don’t have the scale. That’s another methodology we use [to grow our specialty business] by working with brokers to bring us bulk books of business.”

Partnering with insurance brokers to build specialty expertise

Echelon’s specialty insurance strategy is unique, but Joshua admitted the firm would not have been able to achieve the growth it has without strong broker partnerships.

“We’ll help our valued broker partners to build expertise,” he said. “We did that recently with a brokerage that was writing motorcycle risks, because we didn’t feel they were doing it in the best way. We helped them to build their expertise, and get the right talent through the door that could manage their motorcycle book, and now they’re one of our motorcycle broker partners. We work very closely with our broker partners to do that, and it’s not always easy, because not every broker necessarily wants to change their way of thinking – but the good ones do, and they’re the ones we partner with.”