While a growing number of independent agencies are moving beyond the sale of insurance to become true risk managers for their clients, the road to implement a consultative brokerage approach can be a bumpy one, as Universal Insurance Services can testify first hand.

Indeed, it was the effort to overcome internal resistance and integrate risk management fully into its standard operating procedure that helped earn the Grand Rapids, Mich.-based Universal an Honorable Mention in the 2006 National Underwriter Commercial Insurance Agency of the Year award program.

Universal recognized early on in its history that "resting on our laurels or the whims of the pricing cycle would not guarantee any long-term or lasting success," according to William Rothwell, the firm's president and managing partner. "We realized that we needed to move beyond the transaction-based commercial insurance marketplace."

"From day one," he said, "the focus of the company has been to differentiate ourselves from the competition by offering value to the middle market." To accomplish this, Universal embraced risk management, according to Mr. Rothwell, who joined the firm just a few years after it was founded in 1982.

A cost-of-risk focus was how Universal opted to service middle-market accounts that were under the radar of the national brokerages, he explained.

"There were some fairly sizeable risks that were not getting any attention from the brokerage community," he said, referring to the larger national brokerage houses. "We wanted to come in right under that."

But while risk management has ended up being a key selling point for Universal, the transition wasn't necessarily smooth.

Indeed, the "assimilation" of a 10-person middle-market group from the local office of a large, national brokerage "presented a cultural challenge which, while not without any pain early on, turned out to be a very positive influence on all members of the firm," Mr. Rothwell noted in his award essay.

The problem was essentially a culture clash, according to Mr. Rothwell. "They had the big broker culture," he said, "while we had the regional mindset."

Another aspect of the problem was simply that each side had developed its own way of operating and was unsure of how they would work with each other, said Nathan Steffen, Universal's director of risk control solutions--who was part of the brokerage group that joined Universal.

"There were egos," he said. "We were all used to doing business a certain way."

Joan Ditmar, Universal's commercial services manager, said those working at Universal at the time were also concerned about losing the agency's identity.

"It was a situation where there were concerns we were becoming [like the national brokerages]," she explained. "We had to explain that was not the case and they were coming over to help us move to the next level."

The problem was important enough that Universal decided to bring in an outside consultant to help ease the transition and create common ground between the two groups. "We rely on outside advisers a lot," Mr. Rothwell noted, using the situation as an example of how Universal puts more of an emphasis on doing what is needed to find a solution and adapting to solve a problem.

By the end of the transition, Mr. Rothwell said the outside adviser helped create a unified agency from the two disparate groups. "We rebuilt our organization from the bottom up to integrate our service team and our sales team," he said.

Indeed, he noted in his essay, the firm's risk control department is heavily involved in the renewal process of major commercial accounts--which drive nearly 80 percent of commercial lines revenue--as well as in soliciting new accounts. The department has "become an integral part of the renewal and new business processes of the agency," he said.

That process, according to Mr. Rothwell, has been "very successful," with the company's revenue per employee increasing by 50 percent since the brokerage group joined the fold.

Mr. Steffen also praised the integration efforts. "We've taken the best of the two cultures," he said.

What Universal offered, he noted, was a smaller organization without all the red tape, allowing individuals to think "outside the box"--whereas he felt the process was more "limited' by the bureaucratic national brokerage.

One of the benefits of having a unified structure, according to Mr. Rothwell, is that every employee is part of Universal's sales force, complete with a sales pitch the firm refers to as the "30-second elevator speech."

There is no formal version of the speech--with every individual wording it to their own way of speaking--but the purpose is to relay Universal's goal of helping clients reduce their losses and costs, and therefore boost their profitability, by focusing on risk management.

Risk management is so heavily integrated into Universal's DNA at this point, according to Mr. Rothwell, that the agency has asked "very successful sales people to leave" because they could not fit in with the overall cost-of-risk philosophy.

The willingness to focus on risk management is also key for new hires at the firm, he added--often more important than their knowledge of the insurance process.

"Our best hires in the past few years have had no industry experience," he said, noting that such employees have the benefit of not having any of what he called "head trash" or the "typical broker mindset."

Part of the commitment to risk management is working with accounts that buy into the concept, said Mr. Rothwell. "We are going out and selecting clients," he explained. "We don't want to deal with someone who is not going to embrace the culture of safety and risk management."

In his essay, he added that "our clients understand our approach isn't just about quick fixes, but often requires their organization to embrace a change in culture and attitude."

"Once a firm buys into the Universal risk management model, they will begin to see substantive, effective and long-term solutions," he added. "Only then will they experience a company culture that allows them to make choices regarding their risk exposures and to minimize the vulnerability of the often cyclical insurance marketplace."

If a prospect doesn't seem willing to make such a commitment, Mr. Rothwell said Universal "politely passes" and refers them elsewhere.

"If it doesn't make sense, we're okay with that," Mr. Steffen added. "If they don't [commit to Universal's mindset of focusing on risk control], then they're going to jeopardize our reputation."

When they find a client willing to commit, the results can be remarkable, Universal contends. Mr. Steffen recalled one client--a construction company with a bad record and reputation regarding worker safety, including deaths on the job.

"They were a bunch of cowboys" at the outset, he said, but were willing to commit to making changes. Once they began to work with Universal, he said, "we helped them make the turn" and put in place a risk management program to seriously reduce their losses.

Like any risk manager worth their salt, Universal does not limit its options to insurance, offering clients a variety of alternative risk-transfer solutions--including high-deductible programs, captives and other self-insurance vehicles.

"Obviously, our larger clients tend to have more [ART] options, but even in a soft market we are seeing more businesses choose alternative financing, such as group captives," Mr. Rothwell noted in his essay.

Universal's success has not been missed by its competitors. Noting that other firms in the area have begun establishing their own risk control departments, Mr. Steffen said Universal is confident its history and proven results will keep the agency well ahead of its competitors.

"All of this would mean nothing if we didn't have the track record that we do," he said.

Bottom line, Mr. Steffen noted, the focus on controlling risk has been the key to Universal's success and is what sets Universal apart. "At the end of the day," he said, "we're in the business of risk management."

Special Reports /

Universal Overcomes Culture Clash In Adopting Risk Management Approach

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