Aon Specialty Product Network links agents
and brokers to a host of products, programs, and services
By Elisabeth Boone, CPCU
Mike Rice (left), chairman and chief executive officer of Aon Services Group, and Jerry Tegan, president and chief executive officer of Aon Specialty Product Network.
After a decade and a half of riotous excess, the property/casualty market is now well into the second year of a definite firming trend. Independent agents aren't exactly having doors slammed in their faces, but the carriers who gobbled up every piece of business like a kid eats Oreos are now scrupulously counting their calories.
A host of powerful forces has dramatically reshaped the market since the 1980s. Mergers and attrition have significantly reduced the number of independent agencies. Consolidation has erased a host of old-line insurers and rendered obsolete the term "alphabet house." Business is done at warp speed, and savvy producers know that to win and keep top commercial accounts, they must go beyond merely selling insurance to offer a full menu of products and services, from specialty programs to captive management, from premium financing to risk securitization.
Few if any independent agents and brokers can meet these sophisticated needs using in-house resources. They need access to experienced providers that can deliver workable solutions to clients' problems.
That's exactly why Aon Corporation created Aon Specialty Product Network (ASPN), which offers one-call access to more than 30 provider companies--all wholly owned Aon subsidiaries--that work with independent producers throughout the country to identify and address their clients' needs. Now in its third year of operation, ASPN is delivering on its promise to serve as a conduit between the independent agent and the products, programs, services, and technology of Aon provider companies.
Mike Rice (left) and Jerry Tegan discuss new offerings available to independent agents and brokers through Aon Specialty Product Network.
80-20 rule
Was Aon Specialty Product Network an idea whose time had come? As a first step in making that determination, Aon analyzed its base of independent agency customers. Of the approximately 40,000 independent agencies in the United States, close to half already were Aon customers, says Mike Rice, chairman and chief executive officer of Aon Services Group. "Of those, about 8,500 were consistently active in producing business through our provider companies. Further analysis indicated that 80% of the business was produced by about 20% of those agents, and they were generating close to $2 billion in premium," Rice explains. "That substantiated our belief that there was a core group of agencies that like doing business with our companies; we obviously were giving them the products, the service, and the pricing they wanted, and they continued to do business with us. We saw Aon Specialty Product Network as a way to give these agents a market advantage, and to get new products in their hands quickly."
Aon viewed the network as a way to create a win both for itself and for the agents who would use the facility. "We have more than 30 stand-alone companies within Aon that depend almost exclusively on the independent agency system for their livelihood," Rice says. "We wanted to get more business from our preferred agents, and we wanted to make those agencies more efficient by giving them easy access to our facilities. We saw Aon Specialty Product Network as a mutual benefit and a way to enhance our relationships with these agencies."
Lavish menu
In a hit tune of the 1970s, Arlo Guthrie sang, "You can get anything you want from Alice's Restaurant." That's an accurate description of the menu offered to independent agents and brokers via Aon Specialty Product Network by Aon's 30-plus provider companies.
"I can't name anyone right now who offers the array of products, services, and programs we're able to provide," says Jerry Tegan, president and chief executive officer of Aon Specialty Product Network. "We have specialty-driven managing general underwriters. We have the largest wholesalers in the world, including Swett & Crawford, and there's not much they can't do. And equally as important as MGUs and wholesalers are the providers in our insurance services group. For example, Cananwill offers premium funding products worldwide; Cambridge Integrated Services Group specializes in loss cost management nationwide; and Spectrum Captive Services handles all aspects of captive program design and administration." (For a complete listing of Aon's provider companies, see the sidebar on page 52.)
So far as insurance products are concerned, the Aon Specialty Product Network menu is equally as full and varied. A visit to ASPN's Web site (www.askaspn) introduces agents to the array of traditional and nontraditional products available from Aon provider companies; these include, to name a few, excess workers compensation, flood programs, surety bonds, voluntary benefits, and Medicare coverages. All in all, Tegan comments, "There's very little Aon provicer companies can't do for the independent agent and broker."
"To have a sound insurance economy, we think it's mandatory to have a strong independent agency system. We're trying to do our part by providing agents the highest quality products and services."
--Mike Rice
Open door for quality business
Although understandably Aon wants to give special treatment to its preferred producers, most of Aon Specialty Product Network's more than 450 products, programs, and services are available to virtually any independent agent or broker. "Our goal is to grow both segments of the business--not just the business we get from the 8,500 preferred agents, but from our other agent customers as well," Rice asserts.
By way of clarification, Tegan adds, "Our 30-plus provider companies are not immune to market forces, and they may have some capacity and underwriting restrictions; but for the most part, our offerings are available to the independent agent and broker network." At the same time, Rice notes: "I'd like to emphasize that this is not a home for bottom-drawer submissions. We're looking for quality business. We bring tremendous products, great service, and good pricing to the table, and the risk has to match that."
Likewise, Tegan says, Aon Specialty Product Network is willing to entertain a single risk--but ideally that will open the door into expanded use of Aon products and services. "Our goal is to partner and grow with independent agents and brokers who want to grow their agencies," he explains. "Ultimately we want the producer to do business with not just one Aon provider company but ideally 10 or more, and to work with us not just on one risk but on perhaps 50 in a year's time."
To encourage the growth of quality business, and to enhance relationships with independent agents, ASPN functions as an educational resource. "We show agents how to get into lines of business they're not in right now," Rice says. "A lot of our offerings are highly specialized products, and it's difficult for producers who don't understand the product line to make a market for it. We work with them and teach them how to get into new market segments."
Strong field support
How does Aon Specialty Product Network function? One call to a toll-free number can connect an agent with the resources he or she needs. Marketing associates at Aon's home office in Chicago take agents' calls and match their needs with the appropriate Aon provider company.
What's more, a network of seven regional vice presidents, all seasoned industry professionals, is strategically positioned to provide support and access to providers at the local level. "These are very senior people; they've all been in the industry for 20 years or more," Tegan says. "They understand the industry, they understand the independent agency system, and they're thoroughly familiar with Aon's provider companies. On any given day, each regional vice president is out calling on anywhere from three to five independent agents, going through the education process, introducing new Aon provider companies. The RVPs develop relationships with the agents in their territory and help them grow by entering new markets. They're able to direct the agent's business to the right provider and help build a relationship between that provider and the agent." RVPs also are available to accompany agents on calls to clients and prospects, and to explain the resources available through Aon Specialty Product Network.
A market in flux
Has the hardening market caused an increase in the demand for specialty products, particularly risks that may not have been hard to place a year or two ago but now are having difficulty finding a home?
"There's a significant change in the marketplace that is fueling a greater need for the products and services of our provider companies," Tegan responds. "Many insurance carriers right now are making decisions to exit particular classes or books of business that they have determined are no longer part of their business strategy. We're seeing this trend in workers comp, in trucking, and in construction." Some carriers, he adds, are looking at their distribution networks and deciding to cut back on the number of agents they do business with. "There's certainly a need for products, programs, and services in areas that are really tightening up," Tegan observes. "With our 30-plus provider companies, we can't be all things to all people, but we attempt to help with the placement of good risks. The changing market is driving more opportunities in our direction, and ASPN's ability to answer questions and provide easier access to resources is making a difference for agents."
Asked how he views current market conditions and what he expects to see in the near-term future, Rice says: "This market turn is unique in that it was led by property; normally, casualty leads the market. Because it's unique, I think people are still trying to sort out what that means. Having said that," he continues, "we believe that this hardening market is going to be with us for a much longer period of time than some people think. Our view is that there's probably less capital waiting to enter the business than generally is available when rates firm. We think the unknowns that are attached to asbestos and mold, among other things, are giving investors considerable pause.
"Therefore we think that agents and brokers who choose their partners carefully are likely to do well in this market," Rice comments. "Those who tend to look for the best deal and move business around frequently may have some difficulties. A key part of the ASPN strategy is to say to agents, 'Let's become working partners, and you can ride Aon's strength in the marketplace,' because we're working diligently to make sure products, programs, and capacity are available to them."
The ASPN-agent partnership, Rice emphasizes, is intended to endure through any and all turns in the market. "We've been in the underwriting management business for 22 years," he points out. "We've been in the wholesale brokerage business for 13 years. We're experienced in dealing with all market conditions. We don't talk about hard or soft markets; we talk about where the market is now, and we respond accordingly. Our intention is to be a very stable force for our independent agency partners."
Challenges and opportunities
It's easy to think that an organization like Aon, with its worldwide reach and vast network of resources, might be less vulnerable to market trends than a smaller entity. Tegan firmly debunks this notion. "We face the same challenges as everyone in this marketplace: making sure we're able to meet the needs and demands of the independent agency network and their clients," he declares. "With our regional vice presidents and their firsthand knowledge of local market conditions, and with our access to a variety of specialty resources, we believe we're well positioned to capitalize on growth opportunities by building long-term relationships with our agent partners."
Adds Rice: "We work diligently to develop the best products and services for our agents and their customers. To have a sound insurance economy, we think it's mandatory to have a strong independent agency system. At Aon Specialty Product Network, we're trying to do our part by providing agencies the highest quality products and services to make them more efficient. When we talk about our relationships with agents as partnerships, we mean it. We can't survive without them, and we think they can do considerably better with us as a partner." *
* Aon Association Services: Insurance products for nonprofit entities
* Aon Limited: Traditional and nontraditional products for aviation, marine, global property and liability, sports and contingency, agricultural risks, financial institutions and professional risks including D&O and E&O, construction, political risk, kidnap and ransom, crime, energy-related risks, and trade credit
* AUSCO: D&O and EPLI for nonprofit and small for-profit entities
* Bankers Insurance Service: Insurance and bonds for mortgage bankers; endorsed by the Mortgage Bankers Association of America
* The Berkely Group: Professional and general liability products for the travel industry
* Cambridge Integrated Services Group: Loss cost management services
* Cananwill, Inc.: Premium funding products for commercial property/casualty accounts
* Combined Insurance Special Risks: Accident and health products for insurance companies, managed care organizations, health care systems, hospitals, medical groups, and employers
* Construction Program Group: Construction wrap-ups; contractors and artisans programs
* FLOODWATCH(TM): Flood insurance coverage and flood-related services that address federal flood laws
* Huntington T. Block: Fine arts coverage for institutions, professionals, and individuals; personal lines products
* Ian H. Graham: Insurance products for community associations
* Insurance Brokers Service: Wholesale surplus lines broker specializing in the placement of complex, nonstandard commercial property and casualty risks
* Insurmark: Insurance coverage for mortgage lenders
* K&K Insurance Group: Programs for sports, entertainment, and leisure risks throughout North America
* M&A Risk Solutions: Representations and warranties and tax indemnity/options coverage for mergers and acquisitions
* Media/Professional Insurance Agency: Underwriting and claims manager for media liability insurance; cyberspace liability and miscellaneous E&O for service-oriented businesses; E&O Professionals, a division of M/PI, provides E&O for insurance industry professionals such as insurance agents and brokers, loss adjusters, and claims investigators
* Midway Underwriting Services: Binding and brokering facility for small to medium-sized surplus lines businesses; binding authority for carriers that offer general liability, property, multi-peril, inland marine, umbrella, and E&O
* Muirfield Underwriters: Managing general underwriter for workers compensation and employers liability programs on behalf of Virginia Surety Company
* New Dimensions Underwriting Group: Develops and manages programs for Rural Electric Utilities Underwriting Managers, Huntington T. Block, and Strategic Underwriters International
* Olandis: An affiliate of Bankers Insurance Service that provides fidelity and E&O coverage for mortgage lenders
* Professional Risk Company: A division of Wexford Underwriting Managers that operates as an underwriting manager for Fireman's Fund's employment practices liability program
* Rural Electric Utilities Underwriting Managers: A division of New Dimension Underwriting Managers that works through affiliated insurance agents nationwide to offer a comprehensive program for electric cooperatives
* Scarborough: Underwriting manager for property/casualty and employee benefits coverages for the financial services industry, with emphasis on commercial banks, savings and loans, and credit unions
* Sherwood Insurance Services: Specialty market wholesale broker for property/casualty insurance, including professional liability, E&O, D&O, mergers and acquisitions, and program business
* Spectrum Captive Services: Coordinates the design, sale, and management of alternative risk programs using Aon-owned and/or managed rent-a-captives for independent agents, MGUs and MGAs, and individual, upper middle market, corporate insureds
* Sterling Life Insurance Company: Medicare supplement programs
* Strategic Underwriters International: A division of New Dimensions Underwriting Group that underwrites kidnap and ransom, political risk, and trade credit insurance and reinsurance
* Surety Underwriters' Risk Facility (SURF): Managing general underwriter for commercial surety bonds
* Swett & Crawford: Wholesale broker that uses open market and in-house facilities to place D&O and professional liability, property risks, products liability, general and umbrella liability, packages, and commercial auto
* Underwriters Marine Services: Marine general agent and London cover holder with authority to underwrite a variety of marine insurance risks
* Wexford Underwriting Managers: Managing general underwriter for excess workers compensation (direct, facultative, and treaty reinsurance for converted self-insurance groups) and employers liability for individual and group self-funded organizations
* Worksite Solutions: Provides voluntary employee benefits to businesses and organizations via payroll deduction
For more information:
Aon Specialty Product Network
Phone: (877) 275-2776
Web site: www.askaspn.com