American Marketing: Wholesaler 'Ramps Up'

"For a wholesaler, you just cant take every profit and put it into your pocket. To be successful, an independent wholesaler has to learn how to reinvest" in technology, in talent, and in ways to raise the image of the firm, he said.

"You can write this down," he coaches. "Ed Levine is thinking so far out of the box that hes looking for his replacement," he said, noting that he is interviewing someone who, in addition to coordinating the health care and professional liability sides of his business, may one day grow into the role of president.

He also revealed that he hopes the minority shareholders of his company will be able to internally buy the balance of the company in five years. "Thats what creates a culture here. Instead of me just selling out, I want it to be customized for them," he said.

With four specialty segments–real estate, transportation, professional liability for directors and officers, and health care–Mr. Levine reported that 25 percent of the business is MGA driven, while 75 percent is brokerage driven.

While underwriters that have between 20 and 30 years of experience do the MGA-driven piece, he said, "in 1990, I took a position of hiring young people and creating a culture of youth."

"Theres been a labor shortage for the last 12 years in our industry," he said, noting that the technology industry and other financial services players have taken young talent. "Its been very hard to attract young people to our industry, becausewere not making it exciting."

Boasting 25 percent growth in employees from the ages of 23-30, he said that specialties in D&O and health care attract young people. "They can relate easily to the health care problems in the country. [A]nd because of the chaos of the stock market, D&O is an exciting class," he said.

Data mining projects are keeping the young NYU graduate busy, he said, describing data mining as "ways to get more familiar with what the customer wants and to see what lines of business that were successful in."

"I will keep this young lady by paying her tuition for her Masters degree," he said, adding that if she elects not to stay after two or three years, "I had a good run." He noted that his downtown location and proximity to New York University are an edge in finding new talent.

Returning to the benefits of the data-mining initiative, he said the NYU graduates spreadsheets reveal that health care has been a major success story for the agency. "Thats been our biggest percentage gainer this year, because of the social pressures of the nursing homes/home health care industry," he said, noting that hes acted on the information by setting up an office in Florida to focus on professional liability and home health care.

Mr. Levine also said hes hired an experienced D&O underwriter to head up a professional liability unit in New Jersey, presenting the move as an example of "out-of-the-box" thinking. "Theres a turmoil in the stock market andtheres going to be some kind of reaction in the insurance industry," he said, predicting that certain companies might get out of D&O. "Why shouldnt I be jumping on that?" he asked.

More "out-of-box" thinking–"Im also exploring working with a [major D&O] carrier thats going to provide a loan to us to expand in our D&O area," he said. "This is prompted because they might see that we have good distribution and would like to become a strategic partner for us," he said, revealing some rather unique details of the arrangement that are not yet ready for publication.

Mr. Levine said hes also seriously reviewing whether to reactivate a captive he set up in the Cayman Islands some years ago. With premises liability as a potential target–because the firm has built enough critical mass there–he said putting that in a captive will show companies that "were willing to put skin in the game" as the market changes.

While Mr. Levine will tell you that his personal work style is 24/7 and that he expects his people to stretch beyond their limits, words like patience, empathy, compassion, and respect creep into descriptions of his business philosophy and relationships with employees and customers. Such values, he said, are the product of small-town roots.

In spite of stories he shares painting a picture of an authoritarian leader–like one where he pulls an older producer aside to reprimand him for setting a poor example by not buttoning the top button of his shirt– others suggest a warm and fuzzy father-figure.

"If someone is having a divorce problem, I ship them to my house in the Hamptons," he said. "I make it a point to walk through the office everyday to offer personal touches–to show them the leader is not 10 miles away. [It] also shows to young kids that theres a human skill set" thats critical in the E&S world.

Patience and empathy are components of the "human skill set" that are needed in relationships with insurers and customers during the hard market, he said. He said that his employees have to understand the stresses of insurers, including labor problems they have.

"You just cant get angry, because [insurance company underwriters] are having issues from their upper management that they have to contend with," he said. "You cant demand that underwriters write an account the same way they did six months ago. Theyre going to ask for more detail. Theyre going to negotiate a little more sternly."

On the customer side, he said, "in a hard market, stress for retail brokers grows because theyre talking to the insured more so than wholesalers do.

"The wholesaler has to have that empathybecause that frustration, from that insured, knowing that his price was set so many years on a decline and then hes getting a rate increase, will upset him. That pressure mounts into the retailer and the wholesaler gets the brunt of it," he said.

The descendant of a line of clothing salesmen, Mr. Levine moves the cuff of his shirt between his thumb and forefinger as he describes another human skilla "feeling"that he and other experienced salesman try to pass on to young recruits during lunchtime meetings. He refers to it as "the sensitivity of knowing and qualifying a piece of business."

"I believe there has to be a tug of a line between a [retail] broker and a wholesaler. And when that tug occurs, thats when you know theres electricity working," he said, trying to put into words a sense that the youngsters will learn over time.

Mr. Levine is also investing in his own continuing education, he said, revealing that he has hired outside consultants–including retired Crump Insurance Services executives, Marcus Payne and Orville Jones–to teach him the finer points of the business.

In seeking a person that may someday be president of American Marketing Center, Mr. Levine says hes giving himself more time to devote to watching industry trends and providing "a view from the top."

Among the trends he discussed with National Underwriter were consolidation and technology.

On consolidation, he is comforted by a growing trend for companies to seek strategic add-ons. He gave the example of the recently announced a $165 million deal in which Menlo Park, Calif.-based Argonaut will buy Front Royal (including Richmond, Va.-based E&S insurer, Colony).

"Argonaut may not have wanted to go into the wholesale side themselves, so they purchased a strategic partner. Instead of having companies start to beat up the market and lower the rates, theyre acquiring and making strategic fits," he said.

On the other hand, he called the presence of major A-XV carriers with surplus lines subsidiaries part of "a major problem in surplus lines." (A-XV is a reference to carriers with surplus of at least $2 billion and rated "A" or better by A.M. Best.) In particular, he referred to "management cruelty," explaining the corporate parents "have drilled down to their surplus market" creating a current wave of turbulence thats manifested in stiffer underwriting guidelines.

On the topic of stiffer underwriting, he highlighted the Florida property market. "I believe the Florida wind market is as hard as the market was in 1985-86 for general liability and umbrellas," he said.

As for technology, its every wholesalers nightmare, he said. "We, as wholesalers, are praying that the insurance companies solve [the] problem of standardization," he said.

Noting that he had made a major personal investment in a now-defunct "rate, quote, bind and issue system" a few years back–"it became a dead deal because of the dot-com market drying up–I wont make an investment of that magnitude again," he said. "I will wait to see if we get support from our insurers."

He said his 105-member firm employs three IT people who are constantly busy on projects such as customizing an affidavit process or setting up better follow-ups for inspections.

(Next weeks wholesaler profile: Agency Resources of Wayne, N.J.)

Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, June 4, 2001. Copyright 2001 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.

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