Stability Trust People=Winning Formula For Scottsdale In Its 25th Anniversary Year

Mr. Wiegers recalled how rapidly the speed of that ride accelerated just a few years down the road.

In 1982, a soft market was in full swing–"pretty much like the one we have today," said Mr. Wiegers, who is now chairman of Colonial General Agency in Scottsdale. At the time, he was gearing up to start his new surplus lines company with the modest goal for writing $50 million in five years time.

"We got into the real hard market that started in 1984 and 1985, and we did 10 times that amount–$550 million–by the end of 1986," Mr. Wiegers reported.

On the strength of relationships formed at a prior employer–Great Southwest Fire, an E&S unit of Stevens Point, Wis.-based Sentry Insurance Group back then–Mr. Wiegers was able to coax some general agency friends to sign on when he opened Scottsdale's doors on March 31, 1982.

"'We'll do what we can,'" these GAs said, Mr. Wiegers recalled, noting that while there wasn't even really enough business around to feed existing specialty companies, roughly 35 general agents partnered with him in that first year.

"I started with one other employee who was going to be the office manager. We rented about 600 square feet of office space [in downtown Scottsdale] and then just started buying pencils and calculators as we needed them," he recalled.

"We just kept adding people over time," he said, noting that Scottsdale had a total of 12 employees by the end of 1982–mainly folks that came from Great Southwest Fire to join him–and together they managed to put $1.8 million in premiums on the books.

Mr. Wiegers said financial backing from Nationwide Insurance–which remains the owner of Scottsdale today–was instrumental in helping him staff up his new company.

"Looking back on it, if Sentry Insurance had given me the same latitude that Nationwide did, Scottsdale Insurance wouldn't exist today. Great Southwest Fire would," he said, explaining that he headed up Sentry's E&S operation at a time when E&S insurance was just getting started in the United States. "The parent [Sentry] really didn't understand what E&S was in those days, and frankly was very leery of what we were writing."

Mr. Wiegers said he left when organizational changes at Sentry would have seen the E&S business divided up and lumped together with preferred standard business under four separate divisional vice presidents–at just about the same time that Nationwide developed an interest in the E&S segment.

Fast forward to 2007, and Mr. Miller highlights the stability of Scottsdale Insurance as one characteristic that sets it apart from E&S competitors–many of which have "come and gone" in two-and-a-half decades.

"We have always been there. We don't jump in and out of markets. We've been a very stable company for 25 years under three presidents," he said, noting that the continued ownership by a property-casualty leader with an "A-plus" rating is a "combination that rarely exists in our marketplace."

"We pride ourselves on hanging in there during the tough times, [and] I think that's appreciated by our partners out in the field," he said.

Back when Mr. Wiegers' office manager was out buying that first batch of pencils, Mr. Miller was still a few years away from balancing the books in the financial department of Nationwide, while Max Williamson (Mr. Wiegers' successor) was working for an E&S competitor called Bellefonte Insurance Company in Columbus, Ohio–a unit of a captive of a steel company that's no longer in business.

Three different paths led to a single place, and 25 years later each man uses the same three words to define the history of the organization–stability, trust and people.

According to Mr. Williamson, "there is just a fondness of the company from the agents because of its fairness, its integrity–its trust of the general agent, which isn't always true in that world."

"Trust is what we stressed then, and that's what's still going on," said Mr. Wiegers. "Back then, a handshake was golden. If you agreed in handshake, you might follow up in writing with a contract in three or four months."

"It's very much a partnership," Mr. Miller said. "We rely on the expertise and the quality of our relationships [with GAs] because that's what makes or breaks that very first frontline underwriting decision that's key to our business."

Mutual trust has meant enduring relationships, according to the Scottsdale executives and to GA partners contacted by NU. "Most of our producers have been here from the early 1980s on," Mr. Miller said.

Preston H. Gough Jr., president of Southern Cross Underwriters (the MGA division of CRC Insurance Services in Jackson, Miss.), who was in that original group of agents signed up in 1982, summarizes his thoughts on the long-term partnership by noting that Scottsdale is "extremely focused on relationships."

Whether it's relationships between Scottsdale and MGA management teams or "all the way down to underwriters having the relationships with our underwriters," he said, "that is their strong suit."

He noted, for example, that one underwriter at Scottsdale became such good friends with one of his underwriters in Mississippi "that she actually vacationed here. She had a week or two off and spent it with the folks here."

Robert Schacher, president of Continental Special Risks in Roswell, Ga., whose general agency has been open for 23 years, said Scottsdale was his first market and remains his largest. "Actually, the problem I find is that you have to be careful that too much of your book doesn't end up with them," he said of his continuing partnership. "Their underwriters generally are easy to work with. Our underwriters just like dealing with them."

Mr. Miller said the firm gets similar responses whenever it asks agents what makes Scottsdale unique. "They'll say every time, it's the people. That's number one. Our people are very talented and committed."

Mr. Williamson agreed. "Even though employees don't have shares in the company, they act like owners. They are very proud of their company," he said.

"It takes a lot of good work to make sure people feel that way," he said, referring to work that started with Mr. Wiegers, continued through his 10-year tenure and survives today. "We tried to hire great people and give them tools to succeed–and not to manage them to a fault. We tried to have an environment of friendliness, openness–of hard work, but enjoy what you do."

"It's a little folksy to say it's like a family environment, but it is a lot that way," said Mr. Miller, noting that one of the company's best recruiting methods over the years has been referrals. "It would not be unusual to find a grandmother, a mother and a daughter, or some other combination where we might have three generations from the same family working here," he said.

Scottsdale has won several awards that demonstrate the insurer's commitment to its "associates"–the term executives use to refer to employees–including Phoenix Business Journal's "Best Places To Work in the Valley," awarded based on employee surveys, and a ranking in the "Training Top 125," determined by Training magazine.

"We really do believe growing our own talent is important–and training them appropriately," Mr. Miller said, describing a training program for 10-to-12 people who want to work in the claims area, and a comparable program for potential underwriters. After a year-long indoctrination, "they are assigned out into the units to run a frontline desk," he said.

In addition, an internal "learning resources group" arranges a broad spectrum of training programs, bringing in outside instructors to offer technical training and leadership training, he said, noting that employees are also encouraged to work toward designations like CPCU and ASLI.

Worker dedication to Scottsdale started well before the company was an award-winning employer, according to Mr. Wiegers, who recalled the commitment of his team during the mid-80s hard market.

"We worked day and night to control [the business]. We had night shifts going to process it and get it on the books," he said, recalling that just a few years earlier, a staff party for his struggling startup celebrated the company's first milestone of writing $1 million of premium in a single month.

Although Scottsdale's companies–Scottsdale Insurance, Scottsdale Indemnity and National Casualty–wrote more than $900 million in direct premiums in 1995, according to Highline Data (a National Underwriter affiliate), the soft market was back by the time Mr. Williamson came on board. With the ramp-up phase over, the tasks at hand were different, he remembers.

"What I like to say is we changed the company from a strictly entrepreneurial company to one that became more professionally managed. Because of its size, we had to institute more management techniques–and it worked. We didn't lose the entrepreneurial spirit," he said.

Following the principles of a book called "Good To Great," by Jim Collins, Mr. Williamson described initiatives designed to focus on the company's core strength–its partnerships with general agents–noting, for example, that he started an agents advisory board during his tenure.

"That was a feedback mechanism for the agents to tell the company what they liked and disliked," he said, adding that ideas arising from that included product modifications and advances in technology.

Mr. Gough, who chaired the advisory board a few years ago, lists "great listeners" among the words of praise he uses to describe Scottsdale. Recalling that a lot of the agents were asking for rates and forms to be put online instead of having paper manuals during the year he chaired the board, he said Scottsdale was one of the first to do it. "They listen to their agents. They take every question or comment" submitted autonomously, "and they respond to every single one, whether it makes sense or not."

Mr. Schacher also gives high marks to the advisory council–and a technology committee that arose from that, on which his daughter participates. "They bring in a small group of GAs and talk about what they're doing with automation and what we're doing, and then try to mesh the two."

As part of its technology initiative, Mr. Schacher said Scottsdale annually arranges a meeting for GAs and a group of vendors that most of them deal with, along with Scottsdale's representatives. "I don't think anyone else does that," he said.

"They have all different-sized GAs there and the major vendors. You can say, 'I need an interface to that,' or, 'I need better rating systems.'" The vendors are "hearing from a customer base–and where it makes sense, Scottsdale will chip in" and make these things happen, he said.

According to Mr. Williamson, Scottsdale introduced a lot of technology in the years he led the company. "We went paperless during that time. We converted 600,000 files to paperless, and the company operates nearly paperless today," he said.

Although Mr. Williamson had a glimpse of a hard market at the end of his tenure in 2005, posting $1.8 billion in premiums during each of his last two years, he recalls the lessons of a soft market that are still applicable today.

"Doing what you do best is primary. In a soft market, try not to do something for volume's sake that you have no skills in and no history or credibility in," he said, recalling that he made that mistake on one book of property business. "Trying to do something new in a soft market where you don't have any expertise is a mistake a lot of companies make."

He continued, "I think service of all kinds–whether it be underwriting, quoting, policy issuance, claims service, accounting, whatever–is critical in a soft market."

"And then maintaining that customer relationship–get as close to that general agent as you can be," he said, echoing nearly identical words shared by his predecessor and successor.

"At Scottsdale, we always define the customer as the general agent. The insured was the insured, but the customer in our minds was always the GA," he said.