How Can Brokers Navigate Soft Market?

o Frank Mastowski, president of Jimcor Agencies in Montvale, N.J.

In 2008, Jimcor has increased its marketing presence, added select programs and expanded online capabilities to its producers, according to Mr. Mastowski.

"Next year, we see expansion into additional product lines and are considering expanding our regional presence, especially with our ability to use the online products effectively," he said. Jimcor now serves the Northeast through offices in New Jersey, New York, Pennsylvania and Massachusetts.

o William H. Newton, president of Lemac & Associates in Los Angeles.

"There is today a certain expectation that business needs to be turned around much more quickly," he said. "There is a growing need for technology," and more of a requirement "to have good support staff than there ever was in the past."

"Our goal will be to get all submissions completed within 24 hours. We need to make it easier to do business for both carriers and brokers," he added. "The emphasis for the future will be to get out and hustle up business."

o Arthur Seifert, president and CEO of Lighthouse Underwriters LLC, a Dallas-based program underwriter and subsidiary of U.S. Risk Underwriters.

"We have been busy trying to rationalize expense to revenue, and that is a trend that is not unique. Everyone is wrestling with that," he said, noting that this is a typical response to a 2008 market in which pricing dropped faster than most everyone predicted.

"The drop-off has been severe," he said. "Those that figure that out will be well positioned to take advantage of the market when it begins to turn in 2009."

Mr. Seifert also noted that Lighthouse is moving smaller books–under $20,000 in premium–onto an Internet platform to make it easier to access and service that business.

o James A. Roe, president of Arlington/Roe & Company in Indianapolis.

Noting the dramatic impact of price competition and expanded carrier appetites, he said that "we can't control the market, so we try to control those things we can have an impact on"–eyeing expenses, for example, as a natural target.

"We have cut back on staff about 12 percent and have consolidated more of our back office and service functions," he said. "I suspect in 2009 we will continue to see more of the same in terms of competition so we will continue with these initiatives."

Asked how they distinguish their firms in the marketplace, most wholesalers echoed the sentiments of Mr. Mastowski, who said the trick is to do it "the old-fashioned way, [with] service, seasoned experienced staff and training.

Alan Jay Kaufman, chairman, president and CEO of Burns & Wilcox in Farmington Hills, and Mr. Newton, however, pointed to their very different ownership structures as competitive advantages.

Burns & Wilcox's Mr. Kaufman said that "most of our competitors have to answer to shareholders, banks or private equity groups. As a private company, however, we are devoted only to the wholesale-specialty insurance industry."

"With our complete independence, our agents are assured that decisions are made in their best interests," he added.

Mr. Newton of Lemac said: "Our market access is different because we are not only sizable, but being part of RPS, we can get to every market out there." He was referring to the fact that Lemac is a division of Risk Placement Services, which is the wholesale arm of Itasca, Ill.-based insurance broker Arthur J. Gallagher & Company.

"Our people know how to make deals, and at the end of day we make the best deals," he said. "We have superior knowledge of the competition and the product."

At Arlington/Roe, Mr. Roe said: "We consider ourselves to be a one-stop shop for specialty products. Most of our underwriters and brokers have long backgrounds in the standard lines underwriting area" as well.

"Because of this expertise, we have been able to obtain extended underwriting authorities from most of our binding markets," which enables the firm to place business that competitors would have to submit, which speeds up service, he said.

With the wholesalers eyeing expenses, NU asked their views on the prospect of outsourcing to potentially increase efficiency and lower costs.

Mr. Kaufman said, "We believe in career paths for all employees and nurturing our in-house talent. Outsourcing does not support this strategy."

"Our strategy is to recruit the best insurance talent and make investments in technology to create a leaner, more efficient business model so we can provide the smartest, quickest insurance solutions to our agents."

Mr. Mastowski described his attitude toward outsourcing as a neutral one.

"One size doesn't fit all," he said. For firms that have issues finding staff to do repetitive work, or face an immediate, pressing problem, such as a loss of a key employee, he said, outsourcing might be the solution.

"Others may believe that because of the complexity of the insurance product, hands-on is a better solution for them."

"We have staff that work from remote locations without major issues, so outsourcing wouldn't create a problem for us," he said.

Mr. Newton believes outsourcing "is a good idea," adding, "I think there is a lot outsourcing in our firm."

"Particularly in this soft market, when everyone is looking at expenses," he said, outsourcing allows everyone to process work on a much a lower cost basis."

"The accuracy rate is probably higher than when we do it ourselves because there is not the distraction of other business," he continued. "Outsourcing enables support staff to spend more time with clients and less time spent with paperwork than a less trained person can do. Without technology, however, it doesn't happen," he added.

Mr. Seifert also supports outsourcing. "We have been doing it actively for five years. We use a company called Resource Pro. First, we determine if it is a process that can be done using technology. If it can't, then we look at whether an outsource company can do it cheaper than we can. If they can, then that it is the way it should be done. That way you are getting the most out of your intellectual capital as possible."

Mr. Roe said his managing general agency is an outsource provider for its underwriting companies. Although that's the case, "we tend to want to control operations internally, so we don't outsource functions like policy issuance," he said.

"We are pushing more for direct data entry into our companies' systems to allow single entry even by our producers so we can eliminate redundancies."

"We feel like partnerships with other services like claims, premium financing, and inspections, makes more sense than simply outsourcing," he said.