Scottsdale's Leader Builds On The Work Of His Predecessors

If you ask Scottsdale's current president to list his company's significant events, he'll tell you that the 25th anniversary celebration this year is more than just a milestone.

“It's a stepping stone,” Michael Miller will say, after recounting some details of the company's history under founder Rollie Wiegers, and Mr. Miller's predecessor, Max Williamson, and respectfully describing the dedication of the two men who built a $2 billion company around the “core value of trust” for agency partners and associates.

Looking to the future, Mr. Miller (who took over the presidency in 2005, after serving five years as chief financial officer and another as executive vice president) isn't about to tamper with Scottsdale's strength–its binding authority business.

But he does plan to expand the business and react to opportunities, he said during a recent interview, highlighting the opening of a New York office to entertain professional liability business as one example.

“We have about 120 binding authority operations with roughly 400 offices across the United States. We do business in every state including Hawaii. We cover the entire United States with our network of relationships,” Mr. Miller said, noting that binding authority business represents roughly two-thirds of the company's writings, with the other third falling in the wholesale brokerage arena.

The New York office that Scottsdale is currently opening–the company's first-ever office outside of its Arizona home–will focus on directors and officers liability and errors and omissions coverage that will be placed through brokers.

“When the opportunity came, we believed we were positioned to take advantage of it,” he said. “We were able to attract some people that were experts in that [professional liability] marketplace.”

While Scottsdale has written a little bit of D&O and E&O business over the years, it was “not to the level we think we should or could,” he said, adding that the focus in the past has been on smaller, not-for-profit D&O risks. “This would be for-profit D&O marketplaces across the country,” he said, explaining the D&O side of the new venture.

As for what the E&O business might encompass, “we haven't honed that too much,” he said, speculating that writings might potentially include agents and architects and engineers.

Explaining the location, he said, “if you're going to be in that market, you need to be where the market predominately exists, and New York's the place to be.”

Mr. Miller said a current goal–to create “a culture of innovation”–is part of a journey that began two years ago.

“Historically, when the market got soft and tough, we would ramp up–looking at new ideas on the products side and trying to generate additional relationships or programs. And then when the hard markets would come, we would slack up,” he said.

“We believe we should be doing that all the time,” he added, referring to soft-market activities and explaining that the company built an “intake area” to consider and act on new ideas and programs presented by its general agents and others a few years ago.

He also said Scottsdale restructured its entire organization two years ago–changing it from a product structure to a territory structure. Under the new territory structure, Scottsdale commits separate teams to groups of producers in each region. “Instead of producers having to call four or five different areas to get different answers for different products, we now have one area that takes care of their entire book,” he said.

Robert Schacher, president of Continental Special Risks in Roswell, Ga., identified other benefits of the change, noting, among other things, that the regional teams help smaller agents gain comfort that Scottsdale will always be responsive to their needs, even as the insurer grows.

“They're getting so big now that you wonder if they'll be able to maintain their flexibility in the marketplace,” said Mr. Schacher. “We worry that when they become more reliant on the large E&S shops–the Swetts, the CRCs–then will the little guys have as much clout and can we get as much done as we used to be able to?”

“So far the answer is yes,” he said. “They go out of their way to reassure us [smaller agents]. 'You're our bread and butter. We understand where we came from,'” he added, giving a sample of reassurances that he said are reinforced by the regional teams.

“It used to be I'd go to a property underwriter and maybe I'd have a questionable risk. I'd say, 'I've got a 10 loss ratio with Scottsdale. I need a favor,'” but he might respond, “'Your loss ratio on property is 50 and I can't do you a favor.'”

Now that they've combined the underwriting, he believes one Scottsdale person can have a more complete picture of an agent's entire book, allowing for that favor as long as the overall loss ratio remains at 10 percent.

Another positive outcome of the internal restructuring by region, Mr. Schacher said, is the company can respond with different rate structures in different states for a single line–when they recognize, for example, that a certain book of business is profitable in Georgia but not Texas, or vice versa.

As the market softens, Mr. Miller said Scottsdale will continue to be a disciplined underwriting company. “There are prices at which we just won't write the risk, because we just don't believe it's in our best interest or anybody else's to write it that low.”

Identifying these price levels will continue to be the job of “a seasoned group of people that has been through many different types of markets”–who are also experienced enough, he said, to identify opportunities that pop up.

“The great part about the E&S business is that while it goes through the cycles, there are always needs that need to be met. There are always some areas of our economy–whether it be a new startup business or some other area that might have a tough risk profile–that needs insurance,” Mr. Miller said. “We'll continue to be open-minded about what's out there and what we should be looking at.”