Woodruff-Sawyer Goes The Extra Mile In Handling Claims, Advisory Services

Woodruff-Sawyer & Company can point to many elements that factor into the firm's success--including its emphasis on providing a multitude of advisory services and its ability to lower a client's cost of risk. But a focus on getting customer claims paid is a critical ingredient--"where the rubber meets the road," according to Chief Executive Officer Charlie Rosson.

Excellence in claims-handling was one of many factors that sets this firm apart, earning Woodruff-Sawyer the coveted "Champion" designation among a trio of winners in the eighth annual National Underwriter Commercial Insurance Agency of the Year award program.

Customers at the San Francisco-based firm, Mr. Rosson said, want to know their agency will stand behind them to negotiate with insurers on their behalf and work to obtain any claims money they are due.

"We've made a significant investment in our claims department. We have 17 people. That's bigger than most of our peers," Mr. Rosson remarked.

The payoff from that and other service-intensive strategies has been a steady rise in annual income, up to $62.2 million last year--maintaining its growth trend despite the financial crisis, recession and a $27 million drop in commercial lines premium volume.

On the claims side, the agency will do what it has to even when that cuts into the bottom line. One vivid example of that was outlined by Zac Overbay, the firm's senior vice president for claims operations.

The claim in question, which eventually totaled $20 million, involved a large office building located near the Bruncefield fuel depot in Hertfordshire, England, owned by a large U.S. public technology company.

In 2005, a gigantic fire erupted at Bruncefield--fueled by three million gallons of gasoline. Explosions at the site were so loud they were heard 100 miles away, and 2,000 people living nearby were evacuated.

The client's building was turned into a shattered shell--still left standing but otherwise "a total loss," Mr. Overbay noted. Within 48 hours, Woodruff-Sawyer executives were on the case, making flights to the client company's Massachusetts headquarters to brief management.

Even before the final loss assessment was completed, they had secured several seven-figure advances from carriers. Meanwhile, there were trips to England to set up a team of loss experts--including a property loss engineer, inventory specialist and forensic accountant as well as information technology specialists.

"We contacted our client's insurer and put them on notice and worked frantically to get money into the client's pocket," recalled Mr. Overbay. Within 12 months the claim was fully resolved. "The insurer said for a loss of that magnitude they had not seen one that went so smoothly," he recounted.

Two partners--the account executive and property claims consultant--worked on the claim, in Mr. Overbay's words, "from start to bitter end."

While that was "not our best profit year on that account, to put it frankly," according to Mr. Overbay, he added that "you cannot put a price tag on doing the right thing in the client's time of crisis."

That claim is not the only example of the agency's use of intense individualized service to keep business. Part of its award essay told the story of a U.S.-based semiconductor client to which it had provided coverage and consulting services for seven years, but in 2008 the client's new emphasis on cost containment led it to shop its business with a request for proposals.

At that point, Woodruff-Sawyer said it faced a number of hurdles in keeping the account. Staff in the client's finance group had turned over almost completely, with the exception of the day-to-day buyer.

Further, a third-party purchasing group was hired to manage the RFP, leaving the agency removed from its contacts. Additionally, competing brokers were suggesting fees well below those of Woodruff-Sawyer.

So the agency said it went back to the basics of the relationship, spelling out its values in its response to the RFP, with specific discussions of the company's situation. It also did an internal review that looked at its team members and organization as well as the program's terms and structure, "to make sure we were indeed providing the best possible perspectives and solutions" and had a well-thought-out strategy for its oral presentation.

Woodruff-Sawyer said it eventually kept the client by showing it provides added-value that included:

o Reducing the cost of directors and officers liability coverage by 47 percent (price per million overall) despite coverage enhancements, through the agency's ability to leverage the client's risk profile effectively in the market.

o Improving D&O coverage substantially, through consolidation of carriers and numerous contractual enhancements.

o Reducing property and casualty coverage cost of risk by 51 percent (premium cost as a factor of revenue) between 2002 and 2008.

o Improving P&C coverage in many areas through audits of acquisitions, rebates and credits, marketing the program year-over-year, and an international compliance audit.

o Delivering service continuity, as the key members of the client's team had not changed throughout the life of the relationship.

In addition to its philosophy of service to clients, Woodruff-Sawyer points to many other factors that make it an outstanding sales and service organization--including the ability to achieve success in troubled times.

The firm is employee-owned with an ESOP trust structure, which the company says allows it to put its long-term stability and clients' interests first, rather than shareholder quarterly expectations.

That pays off. Commercial lines premium volume fell from $402 million in 2007 to $375 million last year, but income was still up, Mr. Rosson explained, because the agency has moved a good number of large clients to a set fee "built around the advice we are giving" rather than a premium-based arrangement.

The downside to such a move is that "you don't profit as much when rates are going up," but it avoids fluctuations, he pointed out.

The firm also reacted quickly to reassure clients about the financial stability of their insurance carriers. Indeed, according to their award essay, "at the first sign of the extraordinary financial troubles facing the major carriers, our firm formed a high-level Market Security Committee that conducts rigorous analyses of carrier financials and their exposure to credit default swaps and mortgaged-backed securities. The resulting information is delivered to clients through e-mail updates, on our Web site and in person through our account service teams."

The agency also benefits from being an Assurex Global partner agency, with the franchise for the San Francisco region. "It has allowed us to compete for global business. It's a global platform for clients' non-U.S. needs," said Mr. Rosson. The firm boasts global reach on six continents and relationships with all major insurers.

Another factor that strengthens the agency's position, said Mr. Rosson, is its strong independence, which makes for a cautious attitude toward any merger activity. At this point, he said, the agency has little debt and a strong balance sheet, thanks to a long record of organic growth.

Mergers are not ruled out, but it would have to be with a firm that is complementary and shares Woodruff-Sawyer values, he explained. "We would not do it just to grow revenue," he noted.

In addition to its independence, the agency's culture since its inception is to keep "a very flat organization, where senior leadership works directly with clients... We're very, very active with clients. I spend a large part of my time visiting clients and going to prospective client meetings," said Mr. Rosson.

The agency is also geared to provide year-round service. "We're in virtually constant contact with our clients and, given the complex nature of most clients' business, and the dynamic nature of their business, we are busy doing analysis, helping with mergers and acquisitions and changes in their business," Mr. Rosson added. "Our service delivery model is geared around being an advisor to them."

Helping provide some of that advice is a partnership with the Milliman actuarial firm. Mr. Rosson outlined how that partnership "brings financial modeling and actuarially certified analysis to our benefits clients," and helps them comply with the corporate accounting requirements of the Sarbanes-Oxley Act. In addition, he said, Milliman enables the agency to negotiate with insurers "using analytics that are more sophisticated and credible."

Boosting the firm's financial strength and expanding its product offerings to clients is its hefty employee benefits practice, which accounts for 22.5 percent of Woodruff-Sawyer's commission income.

Mr. Rosson said benefits sales is a great source of the firm's growth, and he is optimistic about its future even as Congress works on health insurance reform, because "the benefits of an employer-sponsored marketplace will be apparent and our business will continue to thrive."

Woodruff-Sawyer also looks to innovation to keep its business flourishing, noting that it was the first brokerage among its peers to provide in-house compliance expertise led by a staff attorney. Its newest effort is a practice dedicated to the emerging clean/green technology industry.

Mr. Rosson said the group with that "green" expertise understands what makes that different from a typical technology client, and can work with carriers to structure policies and pricing appropriately.

The agency is "most proud of our culture," he noted. "We take what we do seriously, but we don't take ourselves seriously. We're not hierarchical."

Mr. Rosson also described a "very flexible workplace," allowing for different work styles and schedules. In addition to holding staff parties, picnics and sports outings to encourage teamwork and a sense of family, the agency shows compassion when employees encounter a difficult situation in their home lives.

"We have a lot of long-term employees, and they know we care about them," he said.

The policy seems to pay dividends. Revenue-per-employee at the firm has gone up for the past three years, and last year stood at $222,000.