Selling insurance is about finding the best price and coverageto fill a client's needs, while being a risk manager is all aboutidentifying how a business can improve its loss experience and bestcover its exposures, even if that means going to alternativemarkets. The challenge for most independent agents today issuccessfully combining the two approaches, regardless of whetherthe insurance market is hard or soft. A role model that vividlyillustrates how to deliver such a one-two punch is Barney &Barney, LLC, which is why the San Diego-based risk managementspecialist was chosen as the fifth winner of National Underwriter's"Commercial Insurance Agency of The Year" award.

Barney & Barney is certainly not new to the scene, havingbeen founded in 1909 by two brothers--Phillip and Lorenz Barney.But a commitment to risk management over the last five years inparticular has certainly changed the way the agency presents itselfto clients and how it positions itself against the competition.

Today, the firm--with 21 owners, over 200 employees and morethan $250 million in commercial lines premiums--features a10-person division of loss control specialists who can hit theground running for any client, acting like a SWAT team to identifyand minimize major exposures.

"We're a risk management organization, not a quote generator,"noted Paul Hering, the agency's chief executive officer--only thethird person to hold that title in the agency's history.

"Our producers work under the philosophy that we do so much morethan just push quotes. We try not to do business with priceshoppers, because they do not really listen to the total cost ofrisk," Mr. Hering explained in his award essay.

"We do not talk price," he added. "Rather, we discuss our skillsets. As a result, when a client is ready to do business with us,they ask us about buying insurance almost as a secondarythought."

The agency has stood fast with this approach despite the sirencall of the softening insurance market in most lines. "We investover $1 million each year in resources dedicated to managing riskon behalf of our clients...and in spite of the soft market, we havecontinued to add to these resources," Mr. Hering said.

This isn't always an easy discipline to maintain, he confessed."A challenge for a top agency is to successfully keep riskmanagement at the apex of their priorities in spite of theinevitable industry ebbs and flows," Mr. Hering said. "At the cruxof this is our insistence on considering ourselves risk managersrather than insurance salespeople."

He added that "whether the market is hard or soft really becomesirrelevant to us because we look beyond insurance premiums to theoverall cost of risk."

Noting that his producers will "get under our clients' skin" toinfuse a buyer with the firm's risk management mentality, he saidthat "most brokers will not help clients develop claims managementand loss control programs from the ground up. This is where we aredifferent. We are proactive and strategic."

The key when selling Barney & Barney's approach against thecompetition, according to Mr. Hering, is to point out that "we useour resources not to sell based on price, but on the basis of howwe can deliver the lowest net cost of insurance over time."

He added that while "someone may offer a lower price today,based on what we offer--a competitive price, plus the ability tohelp a client reduce claim activity and better manage claims--overtime we can deliver a lower net cost of insurance. This affords amore lasting impact and is of more value to our client over thelong term."

A key player in executing this philosophy is Jack Galloway,director of the firm's commercial department, who manages 90people. The agency pays particular attention to what it defines aslarge accounts--those generating $25,000 or more in commissions orfees.

A team of three representatives is assigned to an account--nosmall task for a firm with some 250 accounts of that size in itscommercial book. The trio includes a producer, an account servicerepresentative (a senior employee who spends time with the account)and an account administrator (or, as Mr. Galloway put it, a keeperof the files). The strategy is that when a key account needsassistance, someone knowledgeable is always available.

From there, the firm's risk management blanket gets wrappedaround the account, he explained.

Robert McAlister, director of the risk and loss advisorsdepartment, recalled that about five years ago he was asked tobuild a division of specialists who could deal with a wide range ofrisk management challenges--including workers' compensation, claimsmanagement and advocacy, general loss control, occupational healthand safety, among other key service functions.

"We were looking for ways to take some of the work off [ourclient's] plate," Mr. McAlister explained. That meant targeting aclient and reviewing their frequency and severity history. The goalwas to put the client's risk profile in a better light, which wouldresult in lower pricing for insurance.

But this was not enough. More had to be done to modify theclient's claim experience, he pointed out, and that is where theloss control team shined.

Often, for a lone human resource manager trying to find ways tocut the number of employee accidents, he explained, the agency'srisk management team would come in and take a tremendous burden offthe buyer's shoulders.

The initial effort, he said, requires a buy-in from the clientto commit to risk management--agreeing to safety initiatives andquarterly tracking reports to keep the focus on loss mitigation. Italso means developing training programs and auditing eachfacility's performance.

For a new client, the first 30 days involves "a lot of handholding," he said. Throughout the year, the team sticks close tothe client, helping roll out loss control initiatives to targettrouble spots uncovered in the agency's initial analysis.

Having a highly experienced loss control team in place toidentify and shore up a client's weak spots makes Barney &Barney unique, according to Mr. McAlister, who said each of hisplayers has five-to-10 years in the field under their belts.

Barney & Barney keeps risk management front and center bysending a loss control team member, along with the producer, out towork with an account throughout the year. The aim is to develop andimplement a comprehensive plan to lower the cost of risk--via bothloss control and risk transfer (whether in the traditional marketor via the alternative markets).

Barney & Barney does not charge clients for these losscontrol services, viewing them as an intricate part of its riskmanagement culture. In addition, the firm emphasizes that it doesnot cut corners by stamping out cookie cutter risk control plansfor clients, instead customizing a program for each. "No twoclients are the same," said Mr. McAlister.

While distinguishing itself from the rest of the pack with itsrisk management approach, Barney & Barney sees its loss controlfocus as an important sales tool. "Without these services tocomplement our [insurance] sales, we would not be where we are,"said Mr. Galloway. "We would not be as effective as we are on largeaccounts. We would not be able to differentiate ourselves."

He added that while "we have good brokers, the ability toattract good people and can pick-off talent from others," the keyto the agency's success is that "we can surround them with a greatsupport staff and wrap our risk management staff of experts aroundthem, so we can get results for clients."

Probably the biggest challenge for a Barney & Barneyproducer is overcoming a new client's skepticism, according to Mr.Galloway. So one of the first things producers do is enter into awritten commitment that the firm will do what it promises. The firmthen uses its resources to come through on that commitment. Thepayoff is not only reducing costs in the long-term for the client,but a high retention rate for the agency.

A key part of the Barney & Barney approach is to include therisk and loss advisor division in the sales process. Having thepeople who walk the walk on risk management on hand with those whotalk the talk--the producers pitching the account--can make a bigdifference, noted Mr. McAlister.

Indeed, he cited one instance where a human resource manager wasfirmly convinced there was no need for change--that her currentbroker was providing the same level of service--insisting thatnothing Barney & Barney could say or do would change the firm'sloss picture.

Barney & Barney's loss control specialist asked to take atour of the work floor with the human resource manager right thenand there to review conditions. After the specialist spotted aseries of ergonomic issues that were causing muscle strains amongemployees, and made on-the-spot recommendations to remedy thesituation, the human resource manager was so impressed that shechanged her mind and became a Barney & Barney client, henoted.

"A culture of safety is our ultimate goal within theorganization," Mr. McAlister pointed out. "If we can look at whereyou are at today, make these recommendations and project where youare going to be 12-to-18 months from now, and we achieve thosegoals--that says a lot."

Besides de-emphasizing the sale of insurance, Barney &Barney is prepared to offer alternative market solutions toclients.

In one such case, the agency created a captive facility for whatMr. Galloway described as some very loyal clients in thelight-service industry who were suffering the strains of"out-of-control" workers' comp rate hikes. Barney & Barneyactually had skin in the game, literally putting their money wheretheir mouth was by helping finance the new entity.

Partnering with The Hartford and a third party, the three put upthe financing to provide more reasonably priced coverage withoutasking the clients to take any of the underwriting risk. The firmalso created another captive to provide general liability for ahomebuilder client who was finding it impossible to get affordablecoverage in that distressed insurance marketplace.

"This program helped our clients save money, and it was a toolthat we could offer exclusively," Mr. Hering noted in his essay."We took risk in the captive, so we put out own resources atrisk."

Indeed, Barney & Barney is so confident of its ability toachieve results for its customers that in a few cases it hasentered into agreements to return a percentage of its fee to a newclient if it fails to deliver on its risk mitigation promises. Mr.Galloway said that sales strategy, used very rarely, has won over askeptical prospect or two--adding that the firm has never had toreturn any percentage of its fee.

You certainly cannot argue with the results of Barney &Barney's approach. Mr. Hering noted that for the past six years,the firm's annual revenue has grown at just under 20 percent ayear, while the agency has doubled in size over the past fouryears. All of that growth, he proudly noted, was organic.

"Our last acquisition was 25 years ago," he said. "That isunusual for our [industry]. We have hired talented people who havebeen more productive than our competitors and have found ways tooperate our business more efficiently through technology systemsand procedures. All of that has accounted for our tremendousgrowth."

However, the firm might begin looking for acquisitions inconsideration of its size and M&A market conditions, accordingto Mr. Hering.

"That's just a natural," he said. "As your market share grows,you have to look for ways to grow the company, and that is fuelingour interest into going into new geographic regions." He said thatsuch a move would probably remain in-state, or at least closeby.