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TD Insurance sale cuts out the middle man

A pedestrian walks past the TD Canada-Trust Head office in Toronto, May 26, 2011.

J.P. MOCZULSKI/THE GLOBE AND MAIL

TD's decision to sell TD Insurance Inc., which had become one of the largest bank-owned insurance agencies and brokerage firms in the United States, is all about distribution.

The business is being sold to USI Insurance Services, a U.S. insurance brokerage that is owned by Goldman Sachs Capital Partners. The deal will have no impact on TD Insurance's Canadian operations.

Explaining the rationale for the deal, a spokeswoman for TD said that in Canada the bank's insurance arm sells products through direct distribution channels (i.e., straight to the customers by way of, say, mail or phone or the internet). But the U.S. operates on a brokerage model.

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"We're making this change to ensure we're aligned to a single distribution model, which is a key part of our long-term strategy," she said.

Selling through brokers is a more expensive proposition for banks, since brokers get a cut. With the sale of this business TD will no longer be selling the breadth of insurance products that it had been offering customers in the U.S., but the move is expected to allow TD Insurance to bolster its focus on its growing Canadian business.

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