Battered by a hard and unpredictable market, property and casualty insurance premiums have propelled to new heights, accounting for as much as 33% of premium growth. But many industry leaders recognize snowballing rates are not a guarantee for increased business.
Quite often the best way to ensure a successful brokerage is to care for existing clients with good service, explains Jeff Brandham, President of The CG&B Group Inc. from his Markham, Ontario office. “I think one of the keys is we got out early and explained to our (commercial) clients what had happened (to the market).”
Providing up-to-date news about rate increases goes hand in hand with starting the renewal process earlier. A part of this practice, achieving growth through the proper maintenance and care of existing clientele at CG&B involved the hiring of supplementary personnel, mostly for commercial operations.
In 2002, with just over 25 thousand clients, CG&B accumulated 73% of its total property and casualty (P&C) premiums ($110 million) from commercial lines, the bulk of which are mid-market firms says Mr. Brandham. Nonetheless, the majority of its clientele, 75%, come from personal lines.
Targeting the mid-market
Mid-market businesses, in general, can consist of varied segments: manufacturing, construction, realty, condominiums, high-tech, distribution and hospitality, for example. This market is also the focus of almost all of the brokerages that The Insurance Journal spoke with.
“We’re focusing on commercial mid-market accounts in the $20 to $250 thousand premium range and our goal is to be at $75 million in premiums by March 1, 2008,” says Peter Rogers, President of Rogers Insurance. The Calgary, Alberta brokerage amassed nearly $39 million in premiums in 2002, an increase of 28% over 2001 at around $30 million. Mr. Rogers estimates that 33% of growth in 2002 was because of rate increases.
Dan Lawrie, President of Dan Lawrie Insurance Brokers speaks in unison, labelling mid-market accounts in the $20 to $250 thousand range as his company’s “sweet spot.”
Mr. Lawrie says renewals are no longer processed 30 to 45 days in advance but 90. This has become an essential business practice because it is becoming more difficult to find coverage, he continues. Insurers are specializing, closing their doors and leaving certain markets.
But rate increases in 2002 have not played as dominant a role on Mr. Lawrie’s P&C premium growth. “Maybe the net amount might be eight percent to 10%,” he says.
The same can be said at Lloyd Sadd Insurance, the brokerage holding the distinction of having the highest P&C premium growth in 2002. At a whopping 74.5% increase over 2001 and an even more impressive combined 166.5% rise since 2000, only 15% is attributable to rate escalations, says Marshall Sadd, President of Lloyd Sadd.
“It’s a two edged sword,” declares Mr. Lawrie. Insurers are focused and tell us exactly what they want, “which we’ve asked them to do for years…but there’s less selection. Now you’ve got to work harder to find what you need for the client.”
Cross-border sales hit
More strikingly, many mid-market companies with sales to the United States appear to be particularly influenced by the hard market, failing to find adequate coverage, say both Mr. Lawrie and Mr. Rogers.
“We’ve only had one instance where we have not been able to get coverage,” continues Mr. Rogers. “But we’ve had several instances where the coverage we’ve got really does not suit what the client requires, but it’s the best we can do and it’s simply because of the restricted market.”
Overworking an array of insurers has not been a problem for The Safety Group either. Stephen Palmer, President and shareholder says the specialty brokerage is “probably the largest broker in Canada doing trucking insurance. … We have 25 of the top 100 (trucking) fleets in Canada,” he adds with pride. Having grown up in a trucking family and been in operation since 1974, Mr. Palmer comments that supply for trucking insurance has deteriorated.
Three years ago 10 carriers were offering trucking insurance and now there are merely two (Markel Insurance Company of Canada and Kingsway General Insurance) who’s “doors are wide open,” he says. “And of course Royal & SunAlliance; they were the number two market in Canada and left the market completely, in regards to trucking insurance.”
In no way has reduced supply prevented the expansion of The Safety Group. Most of its near $72 million in premiums last year, a jump of 18.4% from around $60.1 million in 2001 can be attributed to the Ontario market, an area the brokerage was not a part of in 2000, says Mr. Palmer. On January 1, 2001 we bought Safety Insurance Services in Markham, Ontario and this accounts for approximately 65% of our business he adds. The Safety Group also writes in the four Atlantic provinces, accounting for the other 35%.
Growing by acquisition can be a standard practice for many, but it’s not simply a matter of gobbling up the competition with big cash offers. “We are always looking for acquisitions,” says Jean-Louis Renders, Corporate Controller at B.F. Lorenzetti & Associates (BFL), which increased its 2002 P&C premiums by almost 40% from 2001. “But we don’t want to acquire just for the pleasure of acquiring. BFL specializes in niches.”
One of those niches is in real estate insurance. At the beginning of 2002, BFL purchased Stewarts Insurance Services, a Vancouver brokerage with a taste for condominiums. The acquisition added approximately $20 million in volume to the growing BFL empire, and made up 50% of the brokerage’s P&C premium growth in 2002, Mr. Renders adds.
Dan Lawrie Insurance Brokers is also very careful about acquiring competitors. “You might take a great leap in terms of growth but you are then faced with all kinds of challenges to integrate that (acquisition) into your philosophy and culture,” Says Mr. Lawrie.
Acquisition’s are one reason for the tremendous growth at Lloyd Sadd Insurance as well. In June 2002, the brokerage bought Stevenson’s Insurance, which added close to $3 million in P&C premium volume. This amount, however, is dwarfed when compared to the main catalyst for growth – new business in the form of public entity accounts.
“We moved into public entities practice,” says Mr. Sadd, noting the Alberta Urban Municipalities Association (AUMA) and the Alberta School Board’s Association (ASBA) as accounts he was able to pry away from tier one multinational brokers. Worth around $10 million in premiums, the AUMA and the ASBA were looking for a less bureaucratic, smaller and quicker brokerage, he continues.
“There’s a real opportunity for us to bring in the high level of service to those accounts that are being under serviced by the tier one or multinational brokers,” states Mr. Sadd.
From time to time business just comes to those who are not even in search mode. That’s the case at CG&B, leading to strong internal growth without any acquisitions over the last 18 months states Mr. Brandham. “We’ve written an awful lot of new business that has just floated to us because I guess the existing broker could not find any market what so ever.”
With access to 83 insurance companies, the lion’s share of CG&B’s business is channelled to 19 insurers, each handling at least $1 million in transactions. “Fortunately we have them all. That’s why we’re able to find some markets for some clients where nobody else could. And that’s been a large part of making us successful,” adds Mr. Brandham.
Rogers Insurance takes the idea of growing organically and internally to an entirely distinct realm. “We are the only broker I’m aware of that has the employee-ownership plan in Canada,” says Mr. Rogers.
Having employees rather than insurance companies as shareholders is one of the reasons for Rogers Insurance’s success, professes its President. “It means that the employees take more interest, take more ownership and care about what we do.”
What’s more, in 2005, Rogers Insurance will allow any employee serving four or more years with the company to acquire shares. “We believe it helps us attract new people because they see that we’re a growing firm,” says Mr. Rogers. “And if they do well with us down the road they have a chance to buy in and have some ownership.”