Talent and Intensity in Beantown: A Regional Tale on a Global Scale
Editor's note: Phil Edmundson is chairman, CEO and co-founder of William Gallagher & Associates in Boston, one of the leading independent insurance brokerages in New England. He recently discussed the challenges facing the regional brokerage community, especially the battle for talent, in a conversation with Risk & Insurance®
contributing editor Tom Slattery. Here are edited portions of that interview.
Tom Slattery: Describe your business for us.
Phil Edmundson: We're an insurance broker and benefits consultant for companies' high-severity risk exposures, with more complicated risk problems than the average business.
For example, the life sciences, where companies are exposed to mass torts for product liability. They need a greater level of risk-control advice, ranging from how they write their contracts with distributors to how they conduct trials of new drugs, around the world, to how to they structure their insurance programs.
Our clients tend to be in sectors of the economy where there's not a big insurance market for their major risks, so the need to be candid with underwriters is much more important. If you are, for example, a software company--high technology is a big area for us--there are really only three or four insurers in the world for your software errors and omissions coverage, so it becomes very important to prepare and limit to get favorable terms for insurance coverage.
For each sector we focus on, there tends to be one or two coverage areas that have a high-severity aspect. In health care, it's medical malpractice. In aviation, it's liability and hull exposures. In the energy sector, business interruption and property damage losses can easily end up in the tens and hundreds of millions of dollars for even small power plants.
TS: Was that your approach from the beginning?
PE: When Bill Gallagher and I started the business 23 years ago, we both enjoyed working with companies like this. It was also a good business proposition. We provide a lot more value than insurance brokers provide to a typical client, so it's likely you're going to get more in return. It's also much easier for us to attract a new client because we have something different to offer.
My background is in neuroscience. I used to do horrible things to rats, and at the end of the day, I got allergic to them, which ended my career as a scientist. So I loved working with the science sector. It was also a great growth opportunity for us because it's an area of the economy that's growing much faster than others.
TS: Are you a regional brokerage?
PE: We certainly refer to ourselves that way, but we do have clients all around the world. The majority of our staff are in Boston. We have smaller offices in New Jersey, Maryland, New York, Atlanta and over in Paris.
TS: What are the top challenges and trends for regional brokers?
PE: We all share a hunger for talented people. We've dealt with that a little differently than some of our competitors. We look for people who specialize in the given industry sectors that are our focus. We do try to find talent from traditional sources, but we've also had success adding talented people from outside the industry who know something about one of these sectors. Not the traditional places to go to find your new broker.
TS: What else?
PE: To sustain growth, you need to find different ways to add value. As an example, many of our clients are involved in very complex litigation. We've developed litigation support services to help them manage and oversee the complex relationships between their many insurers in, let's say, a securities litigation lawsuit.
A client may be the subject of securities litigation and have eight or 10 D&O companies on different layers. We've developed both an external support system after hiring lawyers in our claims department to oversee that function and internal tools to help coordinate and manage it. If you're not a national player, you need to find ways to differentiate yourself.
We've also built a mergers-and-acquisitions team. Our clients are very dynamic companies. They are oftentimes very involved in acquisitions. We have developed a number of tools to help them. We provide a due-diligence system for a variety of risk management concerns. That typically means working with a client when they have a target or when they have signed a preliminary deal.
TS: What are today's key challenges for your risk management clients and how do you address them?
PE: We've already talked about litigation management. Another is managing increasingly complex international risk management programs. In the past, moderate-sized global companies allowed their foreign subsidiaries to purchase much of their own insurance. The trend is running against that. More and more control is being exerted at the corporate office in areas of global risk management, so clients need better tools.
For example, we use a series of Internet-based global insurance tracking so our clients can maintain up-to-date information on insurance programs, insurance policies that are placed around the world, oftentimes through a variety of different brokers, coordinated perhaps by multiple people in their organizations working in different time zones and on different continents. It's very important to manage that, much more so than 10 or 20 years ago.
Our clients are also very concerned about changes in the insurance marketplace with catastrophic risk exposures. There is a lot of pressure on insurers to provide reinsurance and to be able to withstand a higher level of catastrophic loss.
TS: Any tips for those clients?
PE: Yes. Make sure you have a broker who understands your industry well and keeps up with the problem. Also, spend more time reading your contracts, because companies are too willing to enter into contracts that have significant liability provisions and too willing to accept risk contractually. A well-run organization needs to be much more offensive about managing those risks.
TS: How do regional brokers compete with national brokers?
PE: On the international side, we belong to the Worldwide Broker Network. There are about 10 U.S. members and 40 non-U.S. members. That ensures we have insurance professionals on the ground in all major locations. It provides us, as well, with a series of electronic, Internet-based tools that tie our efforts together and enable us to share information on insurance and risk management programs.
Another thing we're seeing is the intensity with which we have to respond to our clients these days. There are a lot more conference calls on weekends and interruptions at night. There's no such thing as a weeklong vacation anymore. Yes, we're all very connected, but it's more than that. There's an expectation not only that you'll be available at short notice, but that you are very knowledgeable in the industry of your client.
A related trend is we work much more with general counsel than in the past. Ten years ago, we talked to a treasurer or a risk manager or a CFO. Today, concerns about liability-related risks (have brought in) the office of the general counsel at publicly traded firms. It's an interesting development.
It says the work we do is all the more important. It's an even greater challenge for us to rise to the expectations that will be put upon us by still another key part of management of large American businesses.
October 15, 2006
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