By CYRIL TUOHY, managing editor of Risk & Insurance®
Who in his or her right mind launches a new insurance brokerage company in the middle of a soft market, and in the midst of this soft market in particular?
With thinning margins, slowing top-line growth, commissions at an all-time low and banks leery of lending, some analysts caution that it's not the best time for anyone in the insurance industry to be starting a new venture.
That's not the way Mark Freitas sees it. The markets, he said, could use a little bit of new blood. Commercial insurance buyers, he said, are ready for their brokers to do business the old-fashioned way: by pushing the service angle.
"It's the old way of doing business," he said in a phone interview on Sept. 27 with Risk & Insurance®.
Freitas, the former president and chief operating officer of Frank Crystal & Co., on Sept. 21 announced the launch of Mark Edward Partners LLC, a full-service retail broker that is going to serve the needs of large, midsize and small businesses in a number of insurance lines.
Joining him is Craig de Gruchy, who will serve as chief operating officer. Both Freitas and de Gruchy began their careers at AIG before moving to Frank Crystal.
Freitas insisted that his firm is going to fill the void left by the big brokerage houses, which are coming up short in terms of the level and quality of service they provide to buyers, he said.
Many of the largest brokerages have left buyers "underserved, frustrated and vulnerable to potentially catastrophic losses due to inattentive and, in some cases, poorly qualified insurance brokers who have an insufficient knowledge of their clients' businesses or true insurance needs," Freitas said.
Large brokers one could imagine would reject those criticisms, pointing to the percentage of clients who renew their programs, the panoply of services they provide, and the global reach and access they offer.
A survey of insurance buyers published earlier this year by Greenwich Associates, however, found a "disconnect" between insurance buyers and their brokers. That same survey also revealed a rift among buyers with regard to publicly traded and privately held brokers.
DICTATE YOUR COMMISSION
So, what are the two veterans Freitas and de Gruchy going to offer the marketplace that the dozens of other large and midsize brokers aren't already offering?
For one, Mark Edward Partners is going to let their clients dictate the commission structure, at least for the time being.
"Our main focus is on how the client wants to compensate us," Freitas said. "The way we're compensated is not the primary focus right now--whether it be through traditional commissions or through a fee-based model."
Asked--somewhat tongue in cheek--if Mark Edward Partners brokers might even work for free, Freitas replied, "The short answer is 'no.' However, we will be providing counseling that we won't be charging fees for."
Underscoring the full-service aspect of the new company, Freitas added that his brokers would "heavily get involved" with claims-handling and that senior management, as well, would be involved in the negotiations pertaining to complex claims.
It helps, of course, to know exactly when and where to get involved when the time comes to help clients with what matters most: claims, policy administration and technology, for example.
"If you don't know what you're doing, you're a fool and you shouldn't be in the market, but if you have experience and ability, it's a fruitful time to get into the business," Freitas said. "It is a service business, and we believe that our model will give buyers the service that has been lacking in the last several years."
Freitas declined to say who his financial backers were and what kind of growth targets he has set for Mark Edward Partners. The company, though, is "very, very well capitalized," he said.
Mark Edward Partners' new technology platform will be unveiled "shortly," Freitas also said.
September 28, 2010
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