By CYRIL TUOHY, managing editor
Marsh is taking yet another crack at the small business segment of the industry, that $8 billion dollar pie that has driven big brokers crazy because it's so fragmented and so diverse that it's nearly impossible to achieve any kind of economies of scale.
It's not the first time Marsh has announced it would target the small business market. The broker's been doing that in one form or another for years. But this time around, Marsh executives say they will dedicate themselves to the segment in a way that they have not done so in the past.
But what makes Marsh confident it can take it on this time around, particularly with the competition heating up in the chase for small commercial accounts?
John C. "Jack" Butcher, for one, who was recently appointed CEO of Marsh & McLennan Agency LLC, the new unit formed to tackle the segment. Butcher, a Marsh veteran who joined the firm in 1988, said his broad-based background in the segment will help.
Butcher said that he's been an underwriter and a customer in this space, and he's also sold to buyers of small commercial coverage. He joined Marsh in the broker's middle-market practice, serving there for a decade with clients located in mid-Atlantic states and the Midwest before leaving to become chief operating officer of an 800-employee transportation consulting and outsourcing company.
As COO, he was responsible for raising funds, co-authoring the company's business plan, performing due diligence on mergers and acquisitions, and leading the field operations across 25 offices around the country.
Butcher, who has participated in several Marsh-sponsored leadership programs and headed Marsh's Chicago office with duties over the staff in Milwaukee and Minneapolis from 2006 to 2008, said he was "thrilled by the opportunity" to head MMC Agency LLC.
And by the looks of it, Marsh is going to need all the talent it can get its hands on. Hundreds of existing insurance agencies, well known for their attention to service, are already competing for the millions in premiums of small businesses across the country.
Marsh's chief competitors, Aon and Willis, have also been active in trying to represent buyers of small commercial accounts. Willis' purchase of InsuranceNoodle and the acquisition of Hilb, Rogal & Hobbs earlier this year signaled to the marketplace that it was serious about penetrating the small business marketplace.
Aon, according to Spokesman David Prosperi quoted in news reports, has been chasing small commercial accounts through its Private Risk Management group for the past three years.
Butcher admitted the competition was tough.
"We've just entered a segment that has an awful lot of competitors, and it's very fragmented out there," said Butcher. "It's a big world with a lot of competitors, small, medium and large."
In a conference call Nov. 7, Glaser said MMC Agency would grow organically and through the acquisition of agencies with $5 million or less in revenue.
Marsh, which has built a reputation on serving the risk management needs of the Fortune 500 for decades, has volumes of information and "market intelligence," all of which can help buyers of policies in the small commercial segment.
In the past, Marsh would simply scale down or repackage that information for a different audience, with limited success.
"What we've tried to do in the past is move that model down market to serve small emerging growth companies," Butcher said. "Well, that doesn't work."
But now things have changed, said Butcher. The most important of which, according to Butcher, is the alignment among his bosses.
From Brian Duperreault, president and CEO of MMC, down through Daniel S. Glaser, chairman and CEO of Marsh, down through Joe McSweeney, president of Marsh's U.S./Canada Division, the chiefs at Marsh have agreed that the small business segment deserves to be served by a separate entity under the Marsh umbrella, said Butcher.
"It's the first time we've seen this level of unified focus and willingness to invest in this segment all the way up to the top of the enterprise," said Butcher. MMC Agency will begin operations in the first quarter of next year.
Butcher, who's already on the record saying MMC Agency would not accept contingent commissions, said Marsh would purchase new technology platforms because buyers of small commercial policies want programs tailored to their needs, not policies originally structured for larger accounts and scaled down to fit a smaller segment.
"We're adding new technology here, not integrating existing brokerage platforms," he said. "We are purchasing technology for this. That's one of the investments we're making."
In a press release issued in October, McSweeney said MMC Agency would develop into a "positive development for insurance buyers" and that the agency would offer customers "favorable coverage at competitive rates, as well as differentiated insurance solutions."
(Read the rest of the Nov. 12 People on the Move e-newsletter.)
November 12, 2008
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