Haake Companies Repositions Itself As Client's Risk ManagementAdviser

'Best Practices' agency also bolsters capabilities with Assurexpartnership

For the Haake Companies, the path toward being named the"National Underwriter Commercial Insurance Agency Of The Year" for2005 began with a decision at the start of this decade that itcould do more to serve clients than merely peddle policies.

Since its founding in 1926, Haake has been a respectedindependent agency based in Overland Park, near Kansas City, Kan.However, as it entered the 21st century, Haake decided it was timefor the firm to grow into more than just an insurance agency, andhas since focused on developing its risk managementcapabilities.

"We take a more holistic approach," said Steve Schill, chiefoperating officer for the Haake Companies. He said that in additionto selling insurance, Haake also looks at the exposures its clientsare facing, assessing the need for safety programs and assuringcompliance with Occupational Safety and Health Administrationregulations.

"We want to become their risk managers," said Mr. Schill, addingthat by doing so, Haake has set itself apart from other, morecommodity-driven agencies in the area.

Although it can still provide its clients with standardinsurance coverage, Mr. Schill said Haake has worked to grow beyondthe role of a typical insurance agency--into a full-fledged riskmanagement consulting service. "We're not just sellinginsurance"--which means tapping alternative markets when necessary,he emphasized.

On its Web site (www.haakeins.com), the agency notesthat "sometimes the traditional tools of risk transfer are not thebest tools for businesses that have the ability to retain morerisk." Haake goes on to offer a host of alternative risk-transfersolutions, including self-funding, large deductible programs,retrospective rating plans, offshore captives, rent-a-captives,multiline pools and risk retention groups.

Haake also makes use of the consultative approach in helpingcommercial clients meet employees' personal insurance needs, havingspecialists available to advise clients on human resources andbenefits management.

When confronted with their comprehensive risk management-focusedapproach, while most other agencies pitch policies based on priceof coverage, Mr. Schill observed that many of Haake's corporateclients seem somewhat dazzled at first as they hear the firm'sexposure-based presentation.

"A lot of people said, 'No one's ever talked to us like that,'"he explained. As a result, Mr. Schill said that the consultativeapproach has been "very successful, and has helped us attaingrowth." Indeed, the firm has seen its commercial lines premiumvolume rise from $66.2 million in 2002 to $109.6 million lastyear.

The commercial insurance market is softening, however, promptingmore price competition to retain accounts. Although some might beconcerned that making a full review of a client's potential lossexposure and bringing in expert consultants could leave an agencyvulnerable to a competitor pushing no-questions-asked lowerinsurance premiums, Mr. Schill is not worried about losing businessto commodity-type pitches.

"Price," he said, "is relative."

Essentially, according to Mr. Schill, the cost of insurancecoverage will be directly related to the value a client perceivesthey are getting in terms of overall service and credibility.Therefore, even when outside factors contribute to changes inpricing, Mr. Schill believes that Haake Companies can still offer agreater value. "You can't control prices," he said. "But one thingwe can help control is the cost of risk."

Additionally, he said, Haake seeks to maintain a strongrelationship with clients by providing additional expertise inareas other than just what coverage it can offer. "Knowledge iswhat really counts," Mr. Schill said, adding that Haake "brings asolid portfolio of expertise to help control potential risks."

That knowledge, he said, relates back to Haake's broader,consultative approach. By identifying risks that can be reduced,such as areas where additional safety precautions could be taken,Mr. Schill said Haake can help clients settle into a lower-riskclass when seeking coverage, which ultimately impacts premiumcosts.

"One year's premium is a short-term cost," he said, noting thatHaake prefers to focus on the long-term view. The agency offers theability to evaluate a client's operations, then set up an actionplan to reduce exposures and cut the frequency and severity ofclaims. The game plan is to cut the cost of risk over the long haulby reducing the number and cost of losses, and thus earn morereasonable premium quotes from carriers.

"If we're doing what we need to [from a risk managementperspective], we can produce lower overall costs," Mr. Schilladded.

Still, there is always the risk that a competing agency couldtry to lure a client away by simply offering a lower price forcoverage. Mr. Schill, however, insists that while Haake does notshy away from such challenges, the agency is confident pure policypeddlers pose little threat. The agency maintains relationshipswith a large number of carriers, he said, and can generally offer"better than average pricing" in terms of total costs.

"Somebody could come in and blow you away on price, but chancesare that we're going to have something close," he said, while alsoadding value with the firm's loss control approach. Any agency canplay the price game for at least one year, but few offer thecomprehensive risk management services that Haake provides,according to Mr. Schill.

Help From Addis

Haake was not the first agency to come up with the idea oftaking a broader, longer-term view of a client's risks, Mr. Schillacknowledged. Indeed, he credited a previous "NU CommercialInsurance Agency Of The Year" winner with playing at least apartial role in helping Haake make the transition from a typical,price-driven agency to one capable of acting as a full-service riskmanagement consultant.

"We wanted to change to a more consultative approach," he said,noting that the decision to make the change had already been madeand implementation begun about five years ago. However, he added, aconversation with Scott Addis, principal of the Addis Group in Kingof Prussia, Pa.--the 2003 "NU Commercial Insurance Agency of theYear"--helped galvanize and propel Haake's bold move into riskmanagement.

Beyond reading all about the Addis consultative approach in NU,Haake agents spent about an hour on the phone in a conference callwith Mr. Addis himself.

While Mr. Addis didn't provide a blueprint for making thechange, or offer any trade secrets, according to Mr. Schill, theconversation helped Haake understand exactly what they were gettinginto and reinforced their belief in the new approach.

"It crystallized the whole thing," he said. "You coulddefinitely see a difference."

The Spitzer Factor

Being a client's risk manager, rather than merely a seller ofinsurance, helps Haake establish credibility with clients at a timewhen the industry's reputation has been damaged by revelations ofbid-rigging and contingency fee abuse against the nation's biggestbrokers as part of probes into industry practices by New YorkAttorney General Eliot Spitzer and other state and federalofficials.

Indeed, the theme of this year's award program essay--"How MyAgency Earns The Trust & Loyalty Of Clients"--was prompted bythe Spitzer probes and its aftermath.

Although located over 1,000 miles from Mr. Spitzer's Manhattanoffices, Mr. Schill said the impact of the attorney general'sinvestigation was felt by the Haake Companies. He noted that asnews coverage of Mr. Spitzer's findings grew more widespread, someof Haake's customers began asking questions.

"A lot of them just wanted to know, 'What's this all about?'"Mr. Schill recalled.

In response, he said, Haake would simply explain theinvestigations and the wrongdoing that Mr. Spitzer uncovered. Hesaid the agency would also lay out to clients how itoperated--including details on how Haake agents earn theirmoney.

"Our clients should have an idea how we're compensated," hesaid, adding that most understood how the system worked and had noproblem with it.

Demands for transparency will not cause any problems for Haake,according to Mr. Schill, because the agency has always been openwith its clients.

"We have had disclosures in our proposals," Mr. Schill said,adding that when there is compensation from a carrier, "we wouldhave disclosed that to our client and negotiated that in the totalprice."

In fact, according to Mr. Schill, Haake reacted to thetransparency issue even more swiftly than did the NationalAssociation of Insurance Commissioners. Just prior to the NAICproposing a model act on regulations to govern producercompensation disclosure, Mr. Schill said that Haake went back andexamined its own records to seek out any problems in pasttransactions.

"We have not double-dipped," he said, referring to complaintsabout some producers taking payments from carriers and clients onthe same risk, creating a potential conflict.

Global Partnership

Being named NU's "Commercial Insurance Agency Of The Year" isnot the first distinction the Haake Companies can claim. Thecompany was selected as a "Best Practices Agency" in the state ofKansas by the Independent Insurance Agents & Brokers of Americain 2004.

However, an even bigger development was being named the KansasCity partner for Assurex Global a few years ago.

Based in Columbus, Ohio, Assurex is a privately-held firmfounded in 1954 that has exclusive territorial partnerships with130 independent agencies on six continents, generating over $21billion in premiums. Haake became a part of Assurex about fiveyears ago--just as the agency was beginning its transition to amore consultative approach, Mr. Schill recalled.

Assurex had a previous partnership in Kansas City but ended therelationship after that agency was sold. In selecting a new partnerfor the area, Mr. Schill said Assurex looked at virtually allfactors large and small, including past performance andreputation--"all the way down to your letterhead."

"We have to live by a certain standard" to remain a part of theAssurex universe, he noted. If Haake is going to work with apartner agency based in California, for example, Mr. Schill saidthat both agencies need to be certain the other has the sameAssurex operational standards in place.

The partnership has already brought benefits to Haake, he added."We get to see the practices and share information on marketing"with other Assurex partners, he noted, adding that Assurex also hasestablished practice groups for specific types of coverage such ascommercial real estate.

Additionally, Haake has received business from Assurex partnerselsewhere in the world, Mr. Schill stated--specifically mentioningreferrals for Canadian companies seeking to expand into the UnitedStates. "It's been a great resource for us," he said.

Like any other business in the 21st century, Mr. Schill said theHaake Companies is also making use of online resources to helpclients. Through a Milwaukee-based company known as Zywave, Haakehas established a system called "MyWave" that Mr. Schill saidserves as an "online library," with almost 1,000 templates andother files to help a client stay connected to Haake and managetheir risks.

"It's very important on the consultation side," Mr. Schill said,adding that a Haake consultant can post new information--such asOSHA procedures or workers' compensation guidelines--on a client'spersonal "MyWave" site and have that information availableinstantly.

Flag:: The Winner's Advice

Head: Haake Credits Success

To Consultative Approach

Text:

The Haake Companies positions its producers not merely asinsurance agents but as risk managers for clients. "With ourconsultative approach, we take the time to understand businessoperations and work with a team to identify the risks facing theclient," wrote Haake in its award essay.

Haake investigates several areas to "identify activities thatdrive claim frequency and severity, and implement an action plan tocontain losses."

"We make sure we don't just 'talk the talk,'" says Haake, notingthat to "walk the walk," the agency:

o Sets objectives and establishes a timetable for theproject.

o Requests claims data from current carriers by location.

o Calculates experience modification history and loss picks.

o Discusses ongoing and large-claims information.

o Prepares a summary of current policies and coverages.

o Identifies gaps in coverage and recommends solutions--some ofwhich might lie in the alternative risk-transfer markets.

o Determines satisfaction levels with current serviceproviders.

o Reviews and evaluates carriers by experience, financialstability and services.

o Defines strategies to handle risk--going beyond traditionalinsurance coverage, if necessary.

o Reviews workplace procedures and safety controls to lower thepotential for losses.

Infobox: (with agency logo)

Flag: Agency At A Glance

Head: Haake Companies Profile

o Headquarters: Overland Park, Kan.

o Commercial Premium Volume:

2002: $66.1 million

2003: $75.1 million

2004: $109.6 million

o Principals: 7

o Employees: 61

Group photo Caption (crowd shot):

Besides being named NU's "Commercial Insurance Agency Of TheYear," the Haake Companies was selected as a "Best PracticesAgency" by the IIABA in 2004 and is the Kansas City partner forAssurex Global.

Caption for Haake shot of seven guys:

"We take a more holistic approach," says Steve Schill, chiefoperating officer at Haake (far left), shown here with fellowowners (l-r) Executive V.Ps. Gerald and Martin Haake, ChairmanHenry Haake, President & CEO Charlie Haake, and Executive V.Ps.Scott Dunnum and Frank Zima.

Caption for board room Haake shot:

President and CEO Charlie Haake helped lead his agency into amore consultative approach, in which agents serve as risk managersfor their clients, such as Carl Long, president of Frosty TreatsInc. (pictured to the right of Mr. Haake).