Program Managers Try To Muscle Out Competitors

MGAs use innovation, technology tools

Given the wide variety of specialty programs and managing general agencies, perhaps the only consistent theme voiced by program managers is the belief that the program business market is ripe for expansion.

Agencies are charting different courses to deal with the potential increase in competition in the expanding market. Some are increasing their focus on a core target, while others taking a broader view stress their adaptability. Still others are simply putting pressure on rivals to keep their business on the cutting edge.

Kathy Henderson, marketing director for Abram Interstate Insurance Services Inc., a Rocklin, California-based MGA, said that the company has found its piece of the market in underwriting high-risk homes for dwelling and fire coverage in California.

High risk, she said, “doesn’t mean that they have to be old or cruddy.” Instead, many of the homes in the Abrams program are considered high value, but they are potentially vulnerable to the brush fires that are not uncommon in California during the summer. Seasonal and vacation rental properties also are included in the program, she said.

“It is a problem in certain areas where low brush grows around the homes,” she said. Most companies, Ms. Henderson explained, require that brush be cleared back to 500 or 1,000 feet from a home, and sometimes further. “I’ve even seen some go to one mile back,” she said.

Even with these limitations, she said, many primary insurance companies still will not cover homes in areas with brush or other vegetation, which is where Abrams comes in. Abrams can offer coverage with fewer restrictions, allowing old or new homes as close as 200 feet from the brush provided the home is maintained.

Ben Francavilla is a senior managing director for Americana Program Underwriters in Camp Hill, Pa., which has maintained programs since the early 1980s and continues to find new areas for program development. Americana, which offers programs for trash haulers, underground storage tanks, pizza franchises and public entities, last year added additional programs for welding supply distributors and broadcasters. The new programs are going well, according to Mr. Francavilla, and Americana brings in approximately $90 million in premium.

“You’ll get a lot of interest from carriers as long as you have a good reputation for returning an underwriting profit,” he said. He noted, however, that as the program market heats up, MGAs will need to remain flexible to identify new program areas. “If we see a need, we’ll design a program for it.”

Al Eskanazy, co-chief executive officer of Morstan General Agency in Manhasset, N.Y., is trying to drive the competition the old-fashioned way–by making them keep up with him.

Morstan, which operates in five states and expects to have premiums approaching $300 million by the year’s end, maintains programs for restaurants and grocery stores, as well as more exotic programs for kidnapping and ransom. What drives the company, however, is its focus on improving how it does business through technology.

“We’re very IT, very technology oriented,” Mr. Eskanazy said, adding that the company will make online image storing programs available to its brokers so that all of their offices can go paperless, or at least what he called, “paper-light.”

Ultimately, Mr. Eskanazy explained that program managers will have to start making more use of Internet-based technology. “I don’t believe anybody will be able to be in the program business in two years if they aren’t online,” he said.

Part of the reason for that may be Morstan itself. “I am, truthfully, a driving force for my competition,” Mr. Eskanazy said. The company is investing heavily in modernizing itself, including moving into a new, tech-ready corporate headquarters in April of this year.

“We’re trying to go to a 21st Century system without any legacy systems,” he said.

Mr. Eskanzy also said that while the market for programs is growing, the competition seems to be falling off as competitors have to exit their programs.

He said that the “churning” in the market showed the importance for program managers to truly realize their responsibility and underwrite risks, “rather than just being production houses.”

“I don’t believe anybody will be able to be in the program business in two years if they aren’t online.”

Al Eskanazy

Co-Chief Executive Officer

Morstan General Agency