H.H. "Red" Nelson (left), founder of the agency and chairman of the Executive Committee for SilverStone Group, meets with Redland & Associates officers John H. Nelson (center), vice president and Gary Hurley, president.
By Dennis Pillsbury
One of the most interesting things about the Rough Notes Marketing Agencies of the Month is that each one has found a different route to success. And this diversity has accelerated in recent times as fluctuating market conditions have led many agencies to look at ways to grow that certainly would not have been considered traditional years ago. And, while you can't draw any firm conclusions about the direction the independent agency system is taking from the experiences of a few successful agencies, the fact that nearly every one has "stepped outside the box" would appear to indicate that the future will depend on creativity and a willingness to change and adapt.
Redland & Associates, with offices in Council Bluffs, Iowa, and Omaha, Nebraska, is another example of an agency that found its own way to grow by responding to the needs of its clients.
As Gary Hurley, president, explains: "One of the things we have done is diversify and try to anticipate the needs of our customers. The answer for us was to provide many different services." These include a complete array of employee benefits products and human resources consulting, in addition to all lines of property/casualty insurance.
Redland was founded in 1945 by H.H. "Red" Nelson under the name of H.H. "Red" Nelson Insurance Agency and later known as Insurance Agents, Inc., and for its first 30 years was a typical property/casualty agency. By 1976, with the addition of Red's son, John P. Nelson, the agency had grown from a one-room office with three employees to a good-sized agency with 13 employees.
That same year John, realizing the opportunities in the farm insurance business, started American Agrisurance, now the nation's second largest writer of crop insurance. John also recruited Gary to lead the growth of the commercial insurance area. Gary had extensive experience in the brokerage industry and had spent eight years on the company side with The Travelers.
"In 1977, we set up Redland Insurance Co. and formed the Redland Group as a holding company for the insurer and the agency," says Hurley. The agency became Redland & Associates. Redland Insurance Co. grew to become one of the major markets for farm and related insurance coverages. By the early '90s, the Group employed some 500 people. In addition to farm and crop/hail insurance, the company also was offering trucking, blood stock and other coverages needed by the farming community. In fact, at a recent meeting that included a number of former Rough Notes cover agents, one of them mentioned Redland Insurance Co. as an important market for farm and crop/hail coverage, which, he added, continues to be a difficult market. It also remains a profitable market with good loss ratios.
Meanwhile, the retail side of the Redland Group also was enjoying significant growth. By 1991, it employed some 35 employees. "We had reached a size where we were able to attract a number of large commercial clients and business trade groups," Gary continues. "But it was becoming clear to us that we weren't the only insurance entity providing services to those clients. We made a key decision to diversify into all insurance and insurance-related areas so we could become the one financial services provider for our clients."
That year (1991), Redland purchased a large benefits group and then two years ago started a human resources consulting group (SilverStone Consulting, Inc.) and a new holding company, SilverStone Group, Inc., was set up. "It was always the result of client needs," Gary says. "Our commercial clients needed employee benefits and, once we started working with them in that area, we began hearing about their human resources problems like handling potential discrimination problems, so we set up the consulting group. We're constantly trying to anticipate and stay ahead of the curve." Today the SilverStone Group employs 150 people.
In July of 1993, the wholesale part of the Redland Group, including the insurance company, merged with Acceptance Insurance Co. in Omaha. "It was a matter of focus," Gary explains. "We decided that our focus would be on the retail side and service to our commercial and personal lines customers." As noted above, however, Redland Insurance Co. continues to be an important market for farm coverages, a tribute to its founders.
Developments on the P-C side
Of course, Redland did not only expand into areas outside the traditional property/casualty field to serve its clients. The services it offered from the P/C group also continued to grow. This growth was the result of two decisions--1) that Redland would focus on packaging accounts, rather than writing monoline business, and 2) that the agency needed to provide those services that would make it competitive with the national brokers.
"We do a lot of cross selling," Gary says. One of the tools that has been very effective in this effort is the computer. "We use the PS4 computerized checklist on every account. It helps to identify areas that have not been thought about. It's been a great sales tool. It's really a lot easier and less expensive to increase business with current clients than to write new business and this helps us do that. It also helps retention. Our retention rate is right around 95% for our commercial accounts and maybe a point lower for the personal lines."
The effect of this emphasis is most evident in the personal lines area where "we had decided that the revenue per account was too small," Gary says. "We had a lot of monoline accounts with revenues around $65 to $70 per account. It's now about $200 per account. All of our personal lines and small commercial business is handled by in-office account managers. This means that all our new business comes to us through referrals. Pam McCawley manages our personal lines unit."
Extra services
provided to clients
The other important decision was to increase the services being provided by the agency. "We have loss control and claims management departments. We started about 10 years ago when we brought a loss control person on board," Gary explains. "We really felt that the companies weren't helping our clients reduce losses. We wanted to be proactive and achieve the very best loss ratios." The same proactive emphasis led to the hiring of Steve Cockrell, a top claims manager from USF&G.
"Steve also heads up the third-party administrator we set up for a workers comp program for manufacturers," Gary explains. "That program is sponsored by the Nebraska Chamber of Commerce." The Chamber program is a fully insured program. Redland has its own underwriter on that program and, not surprisingly, expects it to grow to include other lines of coverage.
"We use the SmartComp system to track losses and work with our account execs to really manage the losses. We work with each of our clients to identify problem areas and tailor a program that will help them prevent losses and, where losses occur, help to contain claims costs. We've been able to put together cost containment programs for clients that include prizes and other incentives. We even offer guarantees. Since the implementation of the claims management department, we have obtained savings and refunds of hundreds of thousands of dollars by reducing workers comp reserves, verifying experience mods and closing files. We have one account where claims were in the $250,000 range. That went to $35,000. And most of the changes didn't involve expensive revamping of the physical plant. The most significant changes were behavioral, a change in emphasis. That's really been the key to success in claims management."
Today, the agency has one full-time safety person (about to be two), two adjusters and five office people in the claims area. "We've been able to expand that whole area to a fee-based service organization operating as American Risk Consultants. We're about half and half fee and free. It really depends on the number of hours we spend and the size of the account. But we're starting to reevaluate how much we can offer free. Companies are lowering commissions and we may not be able to continue to provide those services at no cost."
Gary concludes by pointing out that the real success is the result of people. "I hate to sound cliched, but the fact is that a good firm is good because it can find good people, because it has people at the top who have been entrepreneurial. There really is no one way to success. Those people will decide the route that is best for them. We were fortunate to always have the kind of people who were willing to step outside the box, starting with H.H. "Red" Nelson, who founded the firm in 1945, and his son John P. Nelson. Two years ago, John H. Nelson, Red's grandson, joined the firm and was our salesperson of the year in 1996. Our executive vice president and commercial lines sales manager is Jeff Barrett, who was one of the top sales people for Liberty Mutual. Jeff has been instrumental in upgrading our entire sales effort by recruiting young talent and establishing a sales center. Jeff was responsible for hiring several of our young producers. He also is a top producer. Vince Politte is our quality coordinator and makes certain that we stay on track. He also serves as our safety manager.
"We've really built a management team that helps us maintain our focus even as we go through so many changes, and that teamwork is reflected in the way that everyone at our agency operates. Our clients are handled by teams that let us analyze each client's needs from various perspectives. Our perspectives combine expertise in many industries to thoroughly and objectively address the issues unique to each case. And that's been the secret to our success."
Today, the SilverStone Group has total revenues in excess of $11.7 million, with more than $3.7 million coming from the property/casualty operations. It was ranked the 72nd largest broker in the U.S. by Business Insurance and is the largest independently owned broker with offices in Iowa and Nebraska.
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The author
Dennis Pillsbury has more than 20 years' experience in insurance journalism.