World's fifth-largest insurance broker is committed
to niche marketing within a broad scope
By Phil Zinkewicz
Acordia Specialty executives are (standing, left to right) Becky Parsley, customer account manager; Tonya Westfall, customer account manager; Lee Jordan, managing senior vice president; Sandy Walker, customer account manager; Rebecca Shamblin, customer account manager; and (seated) Diane Brown, community accounts manager.
Managing general agencies often are known to boast that they are "niche" marketers, that they capitalize on their particular area or areas of expertise in terms of selling insurance products and services rather than trying to write all lines and be all things to all people. For example, one MGA may choose to target security guards, another pest control services and yet another landscaping professionals. In addition, most MGAs concentrate on particular regions of the country rather than writing business nationally. Because of this type of niche marketing, these MGAs tend to be smaller than some of their producer colleagues in the marketplace--the large brokers such as Marsh & McLennan or Aon--and their products and services tend to be offered on a regional basis.
But niche marketing need not necessarily mean product or geographic limitations. Sam Yerrid, managing director of industry groups for Chicago-based Acordia Insurance, says that Acordia is a niche marketer and yet is ranked as the fifth largest insurance broker in the world. By being selective in a series of acquisitions that began in 1989 when the company was based in Indianapolis, Yerrid says, Acordia managed to retain its commitment to regional and local service to manufacturers of specific niche industries while growing both domestically and internationally into a major global player. In other words, Acordia enjoys both size and clout, while at the same time zeroing in on regional market gaps that need to be filled. The best of both worlds.
Acordia provides insurance brokers and agents with property/casualty markets and a wide range of financial and consulting services. It has more than 100 offices across the nation and boasts more than
$3 billion in risk premium. Acordia's acquisitions that have taken place in the last dozen years read like a "Who's Who" in the insurance industry. In 1989, The Associated Group, Acordia's parent company, purchased American Group Insurance from American General Corp. of Houston. American General's health and life insurance marketing operations were transferred into Acordia operating companies, providing the first Acordia presence outside of Indiana. In 1991, Acordia purchased Robinson-Connor, the 21st largest property/casualty insurance company in the United States, with offices in 10 states. This greatly expanded Acordia's geographic reach. In 1993, Acordia acquired American Business Insurance, Inc., a property/casualty insurance broker with offices in 15 states, again adding geographic reach.
"We try to develop programs that are industry specific but that can be marketed on a national basis."
--Lee Jordan
Managing Senior Vice President Lee Jordan leads Acordia Specialty in meeting the unique needs of niche markets.
In the ensuing years, other acquisitions followed, but one in particular demonstrates Acordia's ongoing commitment to niche marketing, yet in a broad scope. In 1996, Acordia procured the West Virginia-based Flat Top Insurance Agency, well known for being the leading writer of coal industry accounts in the country. Flat Top was then renamed Acordia Specialty and its president, Lee Jordan, came along with the deal.
"Acordia has grown dramatically since its inception in 1989," says Yerrid. "Our approach to acquisition has been to combine our national clout and expertise with the finest local and regional firms across the nation. Over the years, we have integrated many significant acquisitions, including Flat Top, which were among the top brokerage firms in the nation. When we started Acordia Specialty, Lee was naturally the man to take the helm."
Jordan discusses the philosophy of Acordia Specialty. "We were created to take advantage of the opportunities of specific niche markets, to try to develop programs that were industry specific but that could be marketed on a national basis. These were markets where brokers were finding it difficult to obtain coverages. We have always been niche-driven. We believe that is our strong point. We have on our staff people who are transportation specialists and contractor specialists. My particular area of expertise is the energy sector, so the coal industry was a natural fit for Flat Top as it is now for Acordia Specialty."
To satisfy the needs of the coal industry, one of the relatively new niche products Acordia Specialty offers, according to Jordan, is its employer's liability program, not to be confused with Employment Practices Liability Insurance (EPLI). "There is a trend taking place in the workers compensation arena, which has had an effect on employers of all kinds, not just the coal industry, although that's where the problem began," says Jordan. "It started in West Virginia and then moved into Ohio. In West Virginia and Ohio, up until the 1970s, the sole remedy for injured employees was the monopolistic Workers' Compensation Fund. Then in a court case involving the coal mining industry, it was decided that, if an employer 'willfully and wantonly' caused an injury to an employee, that employee could sue the employer and collect an award above the employee's workers compensation benefits. Our employer's liability program, which is designed to meet various state dictates, provides coverage for employers who are sued by their workers outside the workers compensation system."
Jordan says that this trend of a worker being permitted to sue outside of workers comp is moving into states across the country. Therefore, a program established to satisfy the needs of a particular niche in a particular region has the potential for being a national product. "Different state statutes describe the degree of care that an employee owes a worker," says Jordan. "But more and more, we're seeing workers compensation as the sole source of remedy being eroded. In New York, for example, there are claims being submitted that fall outside the purview of the workers compensation system. Our employers liability product is intended to address that problem as a stand-alone coverage."
Jordan says that this product is doing particularly well and could do even better as the market tightens. "During the soft market, carriers addressed this issue as part of the standard general liability (GL) policy. The marketplace was soft from 1985 until about 1998. During that time, premium levels were down and terms and conditions were liberal.
"But in the last few years, carriers have come to realize that they were taking a beating, and since then we have seen premium rises of 10%, to as much as 45% or 50%," Jordan continues. "They have also been restricting coverages, especially in the area of employers liability. So the product we offer is intended to fill the void that is coming about because of the new hardening market. Acordia plans to branch out into other such niches and design new products, using its more than 2,000 agent and broker producers."
Other programs offered through Acordia Specialty include United States Longshoremen & Harborworkers coverage and equipment maintenance insurance. "USL&H, a federal workers compensation program, is critical to maritime employers and has become increasingly difficult to obtain," says Jordan. "We offer this coverage through an A+ carrier. Through Acordia Specialty's Equipment Maintenance Program, a company can reduce their equipment maintenance costs by 15%-25% of what they are currently paying through service contracts. The program functions as a master maintenance contract underwritten by an insurance company."
But Acordia Specialty is only one of Acordia's expansion plans. Two fairly recent developments speak to Acordia's intentions to branch out into other areas nationally--as well as internationally. One is the takeover of Acordia by Wells Fargo Bank and the other is an alliance with Heath Lambert, one of London's most prestigious brokers.
"The alliance we formed with Heath Lambert provides us with tremendous opportunity to be a global player," says Yerrid. "Heath Lambert assists us in helping our clients with their overseas operations. In turn, we provide assistance to Heath Lambert clients that operate in the United States. We have called the alliance HLA Gobal."
As for the acquisition of Acordia by Wells Fargo Bank, Yerrid says that the partnership is a natural one, considering the breakdown in barriers between banks and insurance that came about because of the financial services deregulation act of 1999. "Wells Fargo wants to increase its non-interest revenues by between 16%-25%, and insurance is certainly one area in which they can do that. The synergy can also help us increase our revenues by providing insurance products and services to Wells Fargo clients."
It's clear, then, that the traditional view of the smaller, niche-driven MGA is changing. Acordia has created a blend of big-broker clout and local broker services. Says Yerrid: "We are able to offer clients exactly the coverages they need, the intimate knowledge of their business and the flexibility of meeting future needs." *