Thank you, Mr. Chair. Merci, monsieur le président.
My name is Steve Masnyk. I am the manager of public affairs for the Insurance Brokers Association of Canada.
As most of you know, the Insurance Brokers Association of Canada represents over 33,000 general insurance brokers across Canada. These brokers purchase insurance on behalf of Canadian consumers in virtually every community across this country. The vast majority of our member brokerages are small and medium-sized businesses that employ nearly 100,000 Canadians and together constitute a major player in an industry that contributes over $6 billion in direct corporate and personal taxes to Canadian governments.
As you will know, small and medium-sized businesses are the engines of prosperity in every community across the country. These businesses are also very geographically and operationally diverse. Insurance brokers write the vast majority of policies insuring these businesses and the individuals that run them and thus have a very good understanding of the challenges they face in their respective markets.
The insurance brokerage industry has grown and has earned a reputation over the past century as an industry that is local in nature, one in which consumers can deal directly with an experienced insurance professional to advise them on the complicated process of making an insurance purchase. This local component is one of the strengths that consumers benefit from tremendously. It is this neighbourhood presence that Canadians have come to expect and trust.
In the last century, family-owned brokerage firms were often passed down from generation to generation. A brokerage firm operated by the same family for several generations normally stays in the same geographical area, where it continues to serve a community and a clientele it knows well. That stability goes against the general trend of an increasingly interprovincial and interterritorial economy.
In Canada, almost 50% of insurance brokerages go back two or more generations. That number shows that consumers and communities recognize the importance of the stable and efficient services provided by brokerage firms. The marketplace, meanwhile, clearly recognizes the value brokerage firms give to consumers and the important role of their ongoing presence as a community service.
However, communities are getting smaller and smaller because the younger generations are leaving home to look for work in urban centres. We believe that one of the government's roles is to help young entrepreneurs invest in the community where they grew up and where they still live. The appeal of high-paying jobs in urban centres tends to dissuade young people from staying home and exploring business opportunities in their own community.
We propose that the government consider making it easier for younger generations to invest in their local communities by deferring the capital gains tax should a transfer of a small business occur between an owner and his or her children. This deferral would lower the already high barrier to entry into a business and make it more attractive and affordable for children to invest in their parents' businesses. The parent/seller could lower the purchase price by the amount of the capital gains tax and make it easier for the child to make an investment. We do not believe in tax breaks or subsidies simply deferring this tax to promote family-owned businesses.
With the average age of principals in brokerages being 57 years old, succession is of vital importance to this industry, more so than at any time in the past.
The CD Howe Institute notes that most industries are going through tremendous consolidation. As a result, fewer businesses are likely to remain in family hands. It is therefore vital to make it easier for younger generations to invest in the family business.
We believe it is crucial for Canada to maintain strong, dynamic economies in all rural communities. The government can and should adopt incentives to make it easier for younger generations to invest in their parents' businesses. We firmly believe that this will go a long way toward promoting a solid small business culture in communities from one end of the country to the other.
Thank you for giving me this time.