Filed Under:Agent Broker, Commercial Business

R&O MGAs, Wholesalers and Program Administrators: Strategic Management

The continued soft market and economic changes are still forcing wholesalers to shift their business strategies. Read our panel’s insights on how to maintain stability, through industry specialization, training and development, investing and customer service.

What emerging opportunities is your company taking advantage of in 2012?

Jeremy Hitzig: The soft market has made it challenging for many companies to make investments in their businesses in recent years. We have reinvested in training and development as well as systems and technology. I am confident that these investments will pay dividends as the market begins to change in the next year or so.

James Drinkwater: Specialization. We see a continued move of the industry toward specialization and we are finding that our clients and markets increasingly want to deal with people that specialize in a certain area or industry class. Over the past 3 years, we have built out 14 risk and industry practices and will continue to develop those practices in 2012 to build even stronger expertise, techniques and unique products and services.

Next we are taking advantage of the market opportunities. While there are differing opinions of where the market goes in 2012, there has been some change in underwriting appetite, pricing and program structure, especially in certain market niches and on more difficult or loss-exposed accounts. This is an area of strength for us and we will be work to identify those segments, create new solutions, and be in a position to deliver on the insurance needs of those niches and accounts.

Chris Zoidis: We have made significant investments in growing our specialty product areas and our personal insurance business and we continue to have strong growth in those areas. We see growth opportunities in healthcare, professional liability, and environmental liability, which we will continue to capitalize on in 2012. We also have plans to expand our personal insurance business and are looking at opportunities to expand our platform outside the U.S.

Joel D. Cavaness: We have focused a lot of effort in developing tools and programs that can be accessed on a regular basis. Our brokers are then able to quickly and easily obtain quotes on accounts for certain lines of business in as little as 5 minutes from quote to bind. We plan on expanding this technology to additional lines in 2012 to make getting access to our products easier for our retail brokers. Along the lines of technology, we continue to see emerging needs in the way of technology E&O or cyber liability. Many firms do not understand the need for this coverage and how it needs to be tailored to fit the specific need of the business depending on the exposures that they may face. We have spent time and effort in this line to write papers and provide seminars and one on one service to help our retails help their clients.

 

What are your business goals for 2012?

Hitzig: We expect to complete one or two more acquisitions in 2012 to continue to diversify our product lines. We have spent the last couple of years investing in a new technology platform which we hope to bring fully online in 2012. We have been able to grow the business over the last few years, and I am hopeful that our new technology will make us more efficient and customer friendly—which we hope increases both our top and bottom lines.

Drinkwater: More specialization. From expertise and techniques to new products and services, this has been and will continue to be a key strategy for AmWINS. We also have started making investments in training and development about 3 years ago. We are starting to see our development program pay dividends. In 2012, we will expand the program to more of our employees.

We plan to launch a customer service practice. This practice will help us share knowledge, ideas and best practices across our service platform and in all of our offices. Over time, this also will help us with career development, employee satisfaction and retention. We have built a broad array of products (property-casualty, underwriting programs and group benefits). We will continue to keep a focus on cross selling and internal product knowledge so we can become even more effective at getting our clients to these solutions when they need them. Our risk and industry practices have proven to be a great platform to highlight our products in a more effective manner across multiple product lines.

Zoidis: We are focused on growing profitability in 2012. Given that we do not expect much growth in the E&S market in 2012, we will achieve growth by taking market share from our competitors. We will be increasing our advertising and marketing efforts, as well as increasing our investments in technology and hiring to achieve this growth. We also are looking at opportunities to expand through acquisition—which we will actively pursue in 2012.

Cavaness: Our business goals for RPS will always have organic growth along with merger and acquisition growth for 2012. We like to look at our business each year and devise plans for a 10 percent to 15 percent growth rate in each of our offices and specialties. Growth in the past few years has been difficult but we have managed to grow every year since we were founded. If you are not growing, you are actually going backward; if you go backward long enough, you will be out of business.

 

Read on for the panel's take on business strategies, insurers and competition.

Have you shifted your business strategy to accommodate economic changes?

Hitzig: We have focused more on “value” products rather than upselling. And we have developed products that thrive in challenging economic times (e.g., vacant property coverage). At the same time, we also have invested in new products that we think are well positioned for success when the economy recovers (e.g., builder’s risk). In short, we like to have a balanced portfolio that can ride through economic and insurance cycles.

Drinkwater: Our diversification strategy has also been a key part of our financial success. In 2012, we will continue to drive that financial conservatism through the company, investing where we should to drive returns and build the company.

Zoidis: We have focused our efforts on products where we see growth opportunities despite the current economy. These areas include personal insurance, healthcare, professional liability, and environmental liability. We are also focusing on middle market brokerage business where we are seeing growth opportunities in some classes of business.

Cavaness: We were fortunate that we had plans in place for each of our offices to be proactive instead of reactive to the economy and made adjustments where needed ahead of the curve. We all made sacrifices. We looked at every single spend in our business and looked for ways to save money. This included everything from office supplies to rent to staffing levels.

 

Are you and your insurers on the same page with business goals?

Hitzig: We have enjoyed long-term relationships with Chartis and Great American, our two principal insurance company partners. We regularly discuss our goals and strategies with them and are confident that we our aligned from both a short-term and long-term perspective.

Drinkwater: Everyone wants growth and profit. How we do it takes more time as we work to align the needs of our clients and our firm with the capabilities and strategies of our markets. Our job is to get our clients into the right markets, so a great deal of our success results from communication, market knowledge and some level of consistency and patience.

Zoidis: Yes. We are all looking for profitable growth—with an emphasis on profitable. We respect their desire to hold their pricing and underwriting standards while also being flexible in letting us approach the market in unique ways.

Cavaness: We strategically plan with most all of our main insurance carrier partners each year. I believe that we are all on the same page as respects the long-term plans for our respective business models. Although at some points in time we may be unable to support their needs for certain changes, just as at times they can’t support our needs, in a long-term view I think we are all on the same page.

 

Are you still seeing significant competition from the standard insurance market?

Hitzig: In some lines and territories, we have seen the beginnings of a retreat for some of the standard insurance companies. Not necessarily a total retreat, but rather a tightening of guidelines and less flexibility on price. This has led to a firming of rates—which we anticipate will continue, if not accelerate in the coming year.

Drinkwater: The standard market will always be a competitor in our space, but the level of competition just depends on the market cycle. Despite the competition we currently see from the standard markets, 2011 has been a positive year, with double-digit organic growth in a number of different areas. Insureds and retailers value the E&S marketplace because of the value we can bring with respect to pricing, terms and the ability to craft alternate program structures. Now we are seeing the rate environment flatten, and we get the sense that they are beginning to back out of our space because of the deterioration in their underwriting results and the potential impact of RMS 11.0 in 2012. We believe that regardless of the competition from the standard markets, there is always going to be opportunity in the E&S market because of our ability to solve our clients’ most difficult issues by offering creative solutions at competitive terms.

Zoidis: Yes, in certain areas, such as from regional carriers in the Midwest. We also are seeing the standard carriers pull back on a sporadic basis. We have seen some underwriting tightening and rate increases in commercial property and homeowners from the standard carriers across the country, but not on a consistent basis.

Cavaness: The standard markets were strong competitors a few years ago but in the last year this seems to have slowed down significantly. The standard markets seem to have left what has been considered E&S business and now operate somewhat on the fringe of this segment.  We love to see them out of this business, but they creep in and out depending on the market.

 

The panel also discusses professional designations, technology investments and the captive market.

How important are professional designations to your company's professionals?

Hitzig: We traditionally have not placed a heavy emphasis on professional designations as much of the educational content just is not applicable to our business and approach. That being said, we expect to strongly encourage our colleagues to participate in the recently launched Target University courses and ultimately complete their CPL designation as we feel that the content is tailored to the specific needs of our industry and business. 

Drinkwater: Designations are an important element of our overall focus on professional development. We have always supported this area, and will continue to emphasize the importance of these accreditations going forward. We have also been using other resources to help our employees with their professional development, including collaborating with carriers who have done some great things around training.

Zoidis: They are very important. We actively encourage and enable our producers to obtain their state agent’s license and CIC designation. In addition, our underwriters are active in CPCU and RPLU designations.

Cavaness: Education is the foundation of this industry.  Without this foundation the future of a business will not hold up in the long term. We hire many new college graduates each year and also have an internal training program for these new hires.  As part of this training we require that each new hire begin the ASLI program and as part of their agreement, they will work toward this designation until completed.  I worked to get both my CPCU and ARM, so I am personally committed to have people continue to grow and development themselves.

 

What technology investments will you make in 2012?

Hitzig: We will continue to make a significant investment in the development and rollout of our new system with a particular emphasis on providing the full range of online functionality to our broker network. 

Drinkwater: Like many firms, we are making increased investments in technology. We view technology as a key differentiator for us today, but we also realize that you must continue to make significant investments to stay ahead of the curve.

Zoidis: We have invested heavily in technology over the last 5 years and we will continue those investments in 2012.  We believe that a soft market is the right time to be investing in technology so we are fully prepared for market changes.  We are actively upgrading our systems to improve the speed and accuracy with which we serve our brokers and retail agents.  We also continue to update our systems to make it easier for our brokers and agents to interact with us.

Cavaness: RPS has made significant investments in technology in systems, software and people.  We brought in a new CIO midyear with Mike Roy and Mike has already made significant headway in helping us be better in our use and selection of systems.  You can buy the best systems available but if you don't use them properly, you have just wasted your money.  Mike has brought a new level of training to RPS to get us to use our systems in a better and more efficient way.  In addition, we have made a significant investment in imaging and workflow that is now being rolled out across all offices in RPS.

 

With coverage readily available, how important is the captive market to your business?

Drinkwater:  While marketplace interest comes and goes on captives, the truth is they play a role, and they take time to build and sell. We have done more on captives in our group benefit and underwriting divisions. While it is not a huge part of our business, we will always stay close to close to it.

Zoidis: The captive market has not been important to our business, given the current state of the market and availability of coverage for a majority of exposures. In fact, we have seen some insureds moving from captives back to the E&S market.

Cavaness: The captive market serves a very important segment of the industry today.  This particular segment grows or slows based on the market cycles that we operate in.  I do not believe that if an insured is committed to this vehicle that they generally will get in and get out.  These clients as a rule once they commit seem to stay with this strategy for a long period of time.  Although RPS does not have a captive specialty,  it may be one that we would like to explore in the future.

Top Story

The 5 rules for winning over millennial customers

You know you'll have to master selling to millennials sooner or later. Here are the keys to this growing market.

CE & Training

One Low Price for Complete Access to All Courses

Choose from National Underwriter's complete library of courses available in your state to get the credits you need quickly and affordably. Take advantage of the Open Pass Package for only $49. Click here to start your training today!

More Resources

Comments

eNewsletter Sign Up

Agent & Broker Insider eNewsletter

Proven success tips and essential information to help agents and brokers grow their practice – FREE. Sign Up Now!

Mobile Phone
         
Close

Advertisement. Closing in 15 seconds.