To merge or not to merge? That is the question.
The wholesale insurance industry like other sectors is experiencing a soft market, though certainly not for the first time. One by-product is increasing merger-and-acquisition activity, which has a profound impact on a sector of the industry that's largely comprised of smaller, regional businesses--in many cases, also family owned and operated.
"There's a great cluster of baby boomers running family businesses trying to decide whether to stay as is or merge," said Euclid Black, president of the American Association of Managing General Agents. Black is also president of Black/White Associates Inc. of Henderson, Nev., a national wholesaler, program administrator and managing general agent.
Tom Albrecht, immediate past president of the AAMGA, noted that mergers are partly a product of the soft market. "There's more competition," he said.
In addition, AAMGA President-Elect Curtis Anderson said most wholesale business is done in multiple states now, so there are more alliances being created, as well as more possibilities for mergers. "It's made our industry stronger," he added.
Anderson, area chairman for specialty wholesaler Risk Placement Services Inc. in Scottsdale, Ariz., said some of the more seasoned MGAs are merging because retiring owners may not have a younger generation to pass the agency on to. It's difficult for a mom-and-pop to continue to operate as a mom-and-pop when there aren't any children stepping up to take the reins.
The issue is closely related to recruitment and retention.
Albrecht, out of the Montgomery, Ala., office of managing general agent Southern Insurance Underwriters Inc., said the AAMGA feels an increasing responsibility to help its members address the issue of filling employment gaps as baby boomers retire.
"We're focusing on it more now because the need wasn't there before," Albrecht said. "Family members used to rise up and take over the company."
Bernd Heinze, AAMGA executive director, said the association's members are more concerned than ever before with how to recruit new, young employees.
The association's internship program is one way to tackle the issue. Heinze said AAMGA has revamped its program and is working with Lloyd's to find young people that would be interested in interning at MGAs and insurance companies in the United States. Creating a welcoming environment for potential interns is important, said Heinze, and that is why the AAMGA will find a member company that will accept an intern no matter how difficult the student's schedule might be to accommodate.
In addition to the internship program, AAMGA University is a major resource. Not only does the association offer continuing education courses and credits toward achieving the Certified Insurance Wholesaler and Certified MGA designations, but Jeff Henry, director of education, said the AAMGA is receiving feedback about a need for human resources training. An HR subcommittee could be in the association's future, an outlet to provide members with guidance on recruiting, compensation studies and HR handbooks.
And Henry is trying something new at the 21st Annual University West Conference in August in Scottsdale, Ariz., by creating a discussion led by members of the AAMGA's Under Forty Organization, a twist on the traditional executive expert panel.
"The CEOs say they want to hear from the UFOs," said Henry. "They want to hear what the younger generation thinks the future will be."
The UFO has grown immensely in recent years to 380 members under the age of 40. Not only does it encourage networking at an early age, which can help the wholesale insurance industry retain its employees, but it provides an outlet for feedback to reach the very top.
"That's where all the new ideas are coming from," said Heinze. "They funnel ideas all the way up to the board level."
Frank Mastowski, president of Jimcor Agencies, a large regional MGA based in New Jersey, knows the benefits of involving a younger generation in his business. He started the company in 1986 with his wife Ellen, naming it after their son and daughter, Jim and Coryn. Sticking with a name significant to the family was a good choice, as all four family members work for the company today. Mastowski said Jimcor has family values but is not a family-run business because it is simply too large.
Mastowski said Jimcor began attracting young employees, like his children, a long time ago.
"They revitalized everything in a way and changed my way of thinking," he said. "That enthusiasm is pushing us forward."
July 1, 2008
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