Diversity Initiatives

Managing Diversity

The American Association of Managing General Agents focuses on diversity.
By: | May 6, 2015 • 5 min read
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The American Association of Managing General Agents is gearing up a diversity and inclusiveness initiative to help its membership respond to the shifting demographic profile of insurance buyers. The U.S. Census Bureau projects that what we now call minority groups will become the majority of the U.S. population by 2042.

The AAMGA’s first step in establishing the program was to publish a diversity mission statement acknowledging that the insurance industry and its customer base are increasingly diverse. It urged all AAMGA members to treat all people equally, with dignity and respect.

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The AAMGA backed up its words by extending reciprocal membership to leaders of ethnically and culturally diverse insurance associations including the Latin American Association of Insurance Agencies, the Chinese American Insurance Association, the National African American Insurance Association and others.

Delegates at the AAMGA’s May annual meeting were scheduled to make plans to educate the broader AAMGA membership base about the role diversity plays in business today.

“This is a working statement. It isn’t a business plan that sits on a desk that nobody looks at,” said Roger Ware, the incoming president of the AAMGA and CEO of Genesee General, who is making the diversity program a top priority of his presidency.

“Whatever your ethnicity, religion or location, as long as you have good business ethics, we want you in our association … it helps perpetuate the industry.”
An insurance association rooted in Latin American culture was one of the first organizations targeted.

Javier Naranjo, president of the Latin American Association of Insurance Agencies, said his association expanded its scope beyond the original mission of opening doors for Latino agents in the 1960s and 1970s. Today, agents and insurance companies of all backgrounds look to the LAAIA for guidance on how to appeal to buyers of different cultural backgrounds and to tailor products to meet their needs.

Javier Naranjo Principal Security Underwriting

Javier Naranjo
Principal
Security Underwriting

Naranjo, a principal with Security Underwriting in Miami, said that working with the AAMGA underscores the importance of diverse business practices and agent associations to the independent agent system and business model. In fact, he sees diversity as a business imperative.

“The stronger we become, the stronger the business model becomes. Diversity helps protect against other companies coming into the insurance space. We’re looking to protect and strengthen our business model,” said Naranjo, who noted the trend of increased competition from other sectors including the banking industry.

The LAAIA, which is established in Florida and other parts of the South, hopes to leverage the AAMGA’s national footprint to establish new chapters in AAMGA markets with strong Latin communities.
As an example of what the AAMGA hopes to achieve with its diversity efforts, Executive Director Bernie Heinze points to its successful track record of bringing students and younger insurance professionals into the fold.

“Our demographics show that 57 percent of AAMGA members are under the age of 40,” said Heinze.

“Ten years ago it was the exact opposite. We are so encouraged.”

Bernie Heinze Executive Director American Association of Managing General Agents

Bernie Heinze
Executive Director
American Association of Managing General Agents

The AAMGA’s Under 40 Organization boasts about 400 active members and its college outreach program is engaged with universities, professors and students at risk management programs throughout the U.S. A six-year-old insurance white paper contest for college students received more than 60 entries this year, and the winning student authors are awarded scholarships and VIP passes to the AAMGA’s annual meeting.

The students are paired with a senior member of AAMGA to mentor them during the conference, and these introductions often result in job offers for the students.
Heinze identified the expansion of diverse hiring practices and industry education as two important pillars of the AAMGA’s inclusiveness efforts.

“We want to educate our members about the benefits to be gained by employing a more diverse workforce, including better business ideas,” said Heinze.

“We’ll also focus on wholesale insurance education. It’s an opportunity to introduce those insurance agents with a unique constituency on how to access our solutions. What do diverse communities require to access the wholesale market? And how do we help them become wholesalers?”

Heinze said that clients today want to do business with people who are more like them and that business referrals are likely to come from a church or a rotary meeting or among other groups where individuals of the same background or culture already have an established trust.

The AAMGA doesn’t view diversity as something based just on race, gender or sexual orientation. Heinze said that it also means challenging its membership to embrace more progressive and diverse business ideas that will make the industry more successful.

He said the organization has also increased its efforts to recruit more women members as AAMGA leaders and officers with the ultimate goal of electing women presidents.

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Naranjo said that while many larger insurance companies might have the resources to cultivate in-house diversity initiatives, smaller agencies with other focuses will look for partners to help them integrate diversity into their business models and form deeper connections with the communities they serve.

“I tip my hat off to the AAMGA for initiating the conversation and I think it’s very progressive in terms of thinking long-term and bringing value to the AAMGA membership,” said Naranjo.

With its initial round of planning and outreach complete, AAMGA members can expect more communication about diversity during the coming year as concrete programs and educational opportunities take shape.

“The insurance industry has got to be there for all people who have risks,” said Heinze.

Meme Moore is a freelance writer based in Denver. She has nearly two decades of communications and writing experience. She can be reached at riskletters@lrp.com
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Specialty Brokers

Pros and Cons of Specialty Consolidation

Insurers are increasingly focused on streamlining distribution.
By: | May 6, 2015 • 8 min read
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Merger and acquisition activity is rife in the insurance space and in the specialty brokering market in particular. According to M&A advisory firm MarshBerry, there were 220 acquisitions in the U.S. broker sector in 2014, and 49 of them involved wholesale brokers and managing general agents and underwriters (MGAs and MGUs).

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“Making this surprising is that specialty distributors are significantly outnumbered by retail insurance agencies,” the firm said, noting that there are approximately 1,250 specialty distributors in the U.S. compared to 25,000 retail agencies. In other words, specialty M&A accounted for 22 percent of all broker M&As despite specialty players being outnumbered 20 to 1.

According to Julie Herman, associate director of financial services ratings at Standard & Poor’s, consolidation in the specialty brokering space mirrors M&A activity among insurers, many of whom have been buying specialty teams as a way of managing their underwriting cycle in a low rate environment.

Julie Herman Associate Director of Financial Services Ratings, Standard & Poor's

Julie Herman
Associate Director of
Financial Services Ratings,
Standard & Poor’s

“Brokers follow the trends of insurers, so it makes sense they would follow them into specialty,” she said.

“Cheap debt, low interest rates and private equity capital entering the space, combined with competition driving up multiples, makes a plentiful M&A environment. And there are so many opportunities out there, especially in the U.S. broker markets — there are thousands of brokers and the market is very fragmented.”

Herman added that insurers are increasingly focusing on streamlining the number of distribution partners they do business with, exacerbating the broker consolidation trend.

“It is becoming harder for small brokers to compete against bigger players in a softening market in which there is a need to be more sophisticated. Most small players don’t have the resources to invest in big data and technology, so it often makes sense to sell,” she said.

“The losers are the specialty wholesalers who don’t want to sell but might not to be able to adapt to the marketplace and get left behind.”

RIMS board director Gordon Adams is chief risk officer for Tri-Marine International, a fishing company with specialty marine risks. He said he’s seen little evidence of contraction in the marine broking space, but in other areas such as credit insurance there are very few specialist brokers and there is consolidation.

“That is a concern as there are less competitors and therefore we have less ability to do an RFP. Insurance is a personal relationships industry. Companies may miss out on developing personal relationships with boutique brokers in favor of using the big brokers. The larger brokers try to be all things to all people, and that’s certainly not always successful.”

In September 2014, JLT — the world’s largest specialty brokerage — began a concerted push into the U.S. According to Doug Turk, chief marketing officer for JLT Specialty in the U.S., the broker may consider joining the M&A party.

“We’re very open and interested in seeing what’s out there, but we are going to be very selective to make sure any acquisition target fits within our specialty strategy and also with the culture of JLT,” he said.

Impact on Clients

However, Turk challenged the view that broker consolidation leads to less choice for the client. Large clients have had limited choice for some time, he said, while JLT’s move into the U.S. as a retail specialty broker has helped meet demand for more choice when it comes to specialty risk.

“[Consolidation] doesn’t change the markets we go to or the solutions we offer. Underwriting consolidation is something we have to deal with, but with most consolidations, teams remain largely intact. It’s a good time for clients because they can get more out of their relationships with brokers,” he said.

There is no doubt that if a small broker is bought out by a more sophisticated buyer, its clients should benefit from an array of value-adding services.

“There are always two sides to every coin but right now the positives outweigh the negatives for the insurance buyer, if successful operational and financial execution is in place,” said Herman.

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Scott Burton, a partner with Sutherland, Asbill & Brennan in Atlanta, agreed.

“Ultimately, the effects of consolidation on resulting scale and the continued gains in efficiency and expertise should result in better rates and terms for many clients,” he said.

Larger brokers absorb the specialist expertise of small wholesalers but can then use their superior infrastructure to scale up these operations, bringing specialty capability to a wider audience. The key is of course to ensure the acquired teams are not dismantled, diluted or commoditized by the merger.

Specialist Focus

Companies that don’t sell up must capitalize on their ability to offer bespoke service.

“Smaller brokers can compete by differentiating and having a product,” said Herman.

“If they are able to maintain key relationships and use their niche expertise to design specialty programs, carriers will still want to do business with them.”

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Turk agreed that while many of the largest brokers look at business in terms of yield and commodification, specialists use their industry expertise to create unique and innovative products for their chosen client bases. This is, he said, what makes specialty-focused JLT different than the likes of Marsh, Aon and Willis.

“There is an increasing role for true specialty brokers who have industry knowledge — an ability to understand business first and risk second, and the ability to translate that understanding into customized solutions,” he said.

Tri-Marine’s Adams is a strong believer in the value of working with the most specialized brokers out there.

“Having a department that is able to service a specialty area is not the same as specializing in a specialty area,” he said, contending that boutique brokers are more likely to have a closer relationship with the client and offer dedicated, individualized service than broad-brush broking houses.

“We want our broker to have expertise and a predilection to our areas of business. The broker we selected at our last RFP said ‘we are heavily focused on marine, and because of that we don’t offer the same abilities in property/casualty or workers’ compensation, so we’d like to partner with a very strong regional broker who can provide these areas.’ That’s the direction we went in, and together they provide what we need.”

For many companies, choosing a one-stop-shop broker may be equally, if not more appealing than using a patchwork of specialists. One area the large buyers have a clear advantage over their smaller target firms is in their ability to service a rapidly internationalizing corporate sector.

“Globalization is fundamentally changing the expectations of our clients. International clients today demand seamless global coverage,” said Turk. “There’s a growing requirement to comply with local regulations in international locations. The world is becoming so much more complex, and companies demand that the brokers they work with have the knowledge to make sure they are in compliance with local regulations when placing policies.

“I’ve been in the industry 44 years and I’ve seen expansion and contraction a number of times during my career.” — Doug Turk, chief marketing officer, JLT Specialty in the U.S.

“Smaller brokers don’t have a global umbrella capability. The problem for them is that virtually all large clients now require it. Even if you are a very niche specialty broker you have got to have that global capability,” he added.

Adams said that as long as a broker can access major insurance markets, the carriers can take care of the global program.

“We have offices across the globe, and buy insurance on a global basis through our corporate risk management program. What is important is to have a global insurance carrier that can address those needs, and a broker that can access the resources of that carrier,” he said.

“I don’t find it limiting to use a specialty broker with only two or three offices because they deal with the likes of Lloyd’s, ACE and AIG, who have boots on the ground all around the world. One call to the local broker means we can access those boots on the ground pretty much any place we have a need.”

Global brokers are, however, more likely to be able to access increasingly popular alternative risk transfer channels such as insurance-linked securities (ILS), as well as being able to offer far superior analytics than small independents.

According to Turk, “data analysis and insight is increasingly driving how insurance is procured and how companies assess their risk.”

Adams, however, said that there are still pockets of industry for which data is not yet a necessity.

He also said that while consolidation is rife among specialty brokers right now, it’s nothing new.

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“I’ve been in the industry 44 years and I’ve seen expansion and contraction a number of times during my career. Every time there is a consolidation and the big brokers gobble up the specialty brokers, it’s not long before you see people peeling off and starting again, and the cycle starts over.”

For now, according to Herman, specialty M&A is set to continue.

“All the ingredients that made for an active M&A market in 2014 are still there and I don’t see why it would slow,” she said.

“The opportunities are still there and there are so many brokers that are ripe for being acquired.”

This could mean less choice for insurance buyers in an increasingly commoditized market. For those whose glasses are half full, the trend may mean specialty expertise is available to a wider audience.

Antony Ireland is a London-based financial journalist. He can be reached at riskletters@lrp.com.
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Sponsored: Liberty International Underwriters

Making the Marine Industry SAFE

A new initiative to help marine clients address safety risks leverages a customized, expertised approach.
By: | May 8, 2015 • 5 min read
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When it comes to marine based businesses there is no one-size-fits-all safety approach. The challenges faced by operators are much more complex than land based businesses.

The most successful marine operators understand that success is dependent on developing custom safety programs and then continually monitoring, training and adapting.

After all, it’s not just dollars at stake but the lives of dedicated crew and employees.

The LIU SAFE Program: Flexible, Pragmatic and Results Driven

Given these high stakes, LIU Marine is launching a new initiative to help clients proactively identify and address potential safety risks. The LIU SAFE Program is offered to clients as a value added service.

Richard Falcinelli, vice president, LIU Marine Risk Engineering

Richard Falcinelli, vice president, LIU Marine Risk Engineering

“The LIU SAFE program goes beyond traditional loss control. Using specialized risk assessment tools, our risk engineers function as consultants who gather and analyze information to identify potential opportunities for improvement. We then make recommendations customized for the client’s business but that also leverage our knowledge of industry best practices,” said Richard Falcinelli, vice president, LIU Marine Risk Engineering.

It’s the combination of deep expertise, extensive industry knowledge and a global perspective that enables LIU Marine to uniquely address their client’s safety challenges. Long experience has shown the LIU Risk Engineering team that a rigid process will not be successful. The wide variety of operations and safety challenges faced by marine companies simply cannot be addressed with a one-size-fits-all approach.

Therefore, the LIU SAFE program is defined by five core principles that form the basis of each project.

“Our underwriters, risk engineers and claims professionals leverage their years spent as master mariners, surveyors and attorneys to utilize the best project approach to address each client’s unique challenges,” said Falcinelli.

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The LIU SAFE Program in Action

When your primary business is transporting dry and liquid bulk cargo throughout the nation’s complex inland river system, safety is always a top concern.

The risks to crew, vessels and cargo are myriad and constantly changing due to weather, water conditions and many other factors.

SCF Marine, a St. Louis-based inland river tug and barge transportation company and part of the Inland River Services business unit of SEACOR Holdings Inc., understands what it takes to operate successfully in these conditions. The company strives for a zero incident operating environment and invests significant time and money in pursuit of that goal.

SponsoredContent_LIUBut when it comes to marine safety, all experienced mariners know that no one person or company has all the answers. So in an effort to continually find ways to improve, SCF management approached McGriff, Seibels & Williams, its marine broker, to see if LIU Marine would be willing to provide their input through an operational review and risk assessment.

The goal of the engagement was clear: SCF wanted to confirm that it was getting the best return possible on its significant investment in safety management.

Using the LIU SAFE framework, LIU’s Risk Engineers began by sending SCF a detailed document request. The requested information covered many aspects of the SCF operation, including recruiting and hiring practices, navigation standards, watch standing procedures, vessel maintenance standards and more.

Following several weeks of document review the LIU team drafted its preliminary report. Next, LIU organized a collaborative meeting at SCF’s headquarters with all of the latter’s senior staff, along with McGriff brokers and LIU underwriters. Each SCF manager gave an overview of their area of responsibility and LIU’s preliminary findings were reviewed in depth. The day ended with a site visit and vessel tour.

“We sent our follow-up report after the meeting and McGriff let us know that it was well received by SCF,” Falcinelli said. “SCF is so focused on safety; we are confident that they will use the information gained from this exercise to further benefit their employees and stakeholders.”

“It was probably one of the most comprehensive efforts that I’ve ever seen undertaken by a carrier’s loss control team,” said Baxter Southern, executive vice president at McGriff, which also is based in St. Louis. “Through the collaborative efforts of all three parties, it was determined that SCF had the right approach and implementation. The process generated some excellent new concepts for implementation as the company grows.”

In addition to the benefits of these new concepts, LIU gained a much deeper understanding of SCF’s operations and is better positioned to provide ongoing loss control support.

“Effective safety management is about being focused and continuously improving, which requires complete commitment from top management,” Falcinelli added. “SCF obviously is on a quest for safety excellence with zero incidents as the goal, and has passed that philosophy down to its entire workforce.”

“SCF’s commitment to the process along with LIU’s expertise was certainly impressive and a key reason for the successful outcome,” Southern concluded.

There are many other ways that the SAFE program can help clients address safety risks. To learn more about how your company could benefit, contact your broker or LIU Marine.

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This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with Liberty International Underwriters. The editorial staff of Risk & Insurance had no role in its preparation.




LIU is part of the Global Specialty Division of Liberty Mutual Insurance.
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