MARKETING AGENCY OF THE MONTH
Aloha
Ownership restructuring boosts Hawaii agency's success
By Dennis H. Pillsbury
Tad Nottage had always been in sales, including selling power tools and building supplies. But when he got into the insurance business, he found what he really loved doing.
Tad first entered the insurance business in 1990 as a captive agent in Kona with Hawaii’s largest insurer, First Insurance Company of Hawaii. When Hurricane Iniki struck the islands in 1992, First Insurance decided to reduce its exposure and downsize its workforce, which included Tad. The downsized branch manager, along with Tad’s cousin Jim, formed Insurance Resources in Kona. Tad went to work for them.
“I loved what I was doing and was continuing to grow in the industry. By 1998, Insurance Resources started to fall apart and I decided to go out on my own. I found a partner and together we started Aloha Insurance. We were able purchase the assets of Insurance Resources and opened Aloha Insurance Services on June 1, 2000.
A new dynamic
“My partner was a life and health guy, so we were able to get appointments from three of the four major health insurance carriers on the islands,” Tad points out. “This allowed us to round out commercial accounts with employee benefits plans. In the first year, we had $551,000 in commission income and were in a position where business was coming in almost faster than we could write it.
“We were aggressive so we actually had to slow down so we could make certain that our service could keep pace with our writings. I had to rein in some aggressive young agents, and our philosophy became: Grow slow until you can handle the flow.”
Of course, the best way to keep up with increased business is to bring in new people, but that isn’t as easy as it sounds in Hawaii, where there is a limited talent pool and a system of rewarding producers that doesn’t lend itself to stability within an agency. Because First Insurance is the largest writer on the islands, its system of allowing agents to own their books of business spilled over to agencies. It became the standard way of doing business. However, when one producer decided to leave Aloha, that turned into a “two-year nightmare.” Tad decided that no producers were going to own their book after that. Instead, he offered ownership in the agency.
The result was that the agency grew to more than $3 million in revenue and the number of employees rose from five in 2000 to 27 today, with seven stockholders. This all occurred despite the fact that the agency stuck to the philosophy of not biting off more than it could chew. “We also upgraded our computer system and hired our outside consultant to be our full-time IT person,” Tad remarks. “We knew that technology would be a key component in supporting growth while maintaining superior service. By April 1, 2003, we were paperless.”
Getting the house in order
“Unfortunately,” Tad continues, “last year, things started getting a little weird. We were still running the place like it was a five-person shop. The Peter Principle reared its ugly head and I was a prime example. I recognized that we needed help. One of my friends from First Insurance had been through a similar situation, and he recommended Emily Huling, CIC, CMC, of Selling Strategies, Inc. We did everything with Emily over the phone or by e-mail since I wanted to make changes right away and her schedule didn’t allow for an immediate trip to Hawaii. She was always available even though there is a six-hour time difference. We spent more than a month developing a plan.”
“The first step was to assess the management strengths and effectiveness,” Emily says. This included testing everyone at the agency using the Omnia Profile. “We were then able to recommend changes in the agency’s organizational and management responsibilities to have more people share responsibilities,” Emily continues.
Tad along with Laura Jennison, vice president, general manager, basically ran the agency so that the other stockholders were owners in name only. (Tad had bought out his partner two years earlier.) “They weren’t really involved in the agency,” Tad remembers. “They were busy producing business and didn’t understand how it fit into the overall success of the agency. We operated out of individual silos.”
One change was to increase the involvement of the shareholders so that all seven became members of the executive committee. Christopher Smith, account executive, and Laura Jennison became the overseers of finances for the shareholder meetings. Mark Piersel, account executive, was moved to management from production, although he continues to maintain a book of business and write in-house business. He and Mark Greenleaf are working together to create workable processes and procedures. Tad added sales manager to his dossier, as there had been no formal sales management function before.
At the same time, the work was redistributed “to maximize each position for productivity and technical ability,” Emily adds, “with the goal being to achieve better customer service, less stress, improved workflow and greater profits.” Part of this change resulted in some producers increasing outside sales efforts as people inside took on more responsibility for call-in business and account service. One result of this change was that Frank Smith, general manager of the Oahu office, became one of the agency’s most effective rainmakers.
“We also addressed the need to find people who wanted to work,” Tad says. “We set up a service center/central processing unit. That unit has been very helpful in backing up our producers and service people, but it also serves as a place where we can put new hires to see if they have a good work ethic. This allows us to find that out without incurring large costs if we lose the person. It’s working out really well.”
“We depend heavily on our technology,” Tad says. “A lot of our carriers do not download. Most are still e-mailing policies. Some do download and then send us a foot-thick stack of policies. We scan those that weren’t downloaded and shred them. We e-mail policies to our clients now. That’s been a huge savings. We were spending about $600 a month in postage and then there was the labor involved.”
A difficult market
“There are probably 8 to 10 property/casualty companies that write something in Hawaii in the admitted market,” Tad says, “and we represent most of them. However, most will not write shoreline or wood frame, and that’s pretty much all of Hawaii. So, we work extensively with the excess and surplus lines market. We have access to nearly every wholesaler and work hard to maintain those relationships.
“We also have bonding relationships with a number of mainland carriers since we write a large amount of construction business,” he adds. “We do a lot of wrap-ups, and other complex construction risks. We’ve developed strong relationships with that community and with the companies that provide the coverage.
“Our average premium on the commercial side is around $100,000 with a few million-dollar accounts,” Tad continues. “Construction has been the big thing for the past four or five years. Projects are moving ahead out here, particularly for second homes for wealthy individuals.
“We also insure a lot of properties including condominium associations. The property market became difficult after Hurricane Iniki,” he recalls. “However, most companies continued to provide coverage although there was a mandatory contribution of 3% on every policy written that went into a reinsurance pool. The state did away with that a few years ago and transferred that money to the general fund, so we’ll never see any help from that sector. It was after Hurricane Katrina, however, that things really got difficult. We saw rates rise drastically and many insurance carriers drop out of the market. In the past two years rates have settled back down.”
Tad notes, “We write a lot of restaurants, boats, a little bit of everything. This is a relatively small market, so we have to be somewhat of a generalist. We write about 40% commercial, 40% personal lines and 20% employee benefits.”
A simple, but effective strategy
“Our marketing philosophy is quite simple,” Tad concludes. “Return phone calls and do what you say you are going to do. We were starting to fall behind as we got bigger, but we’ve taken steps to correct that. We are very customer-service oriented and don’t want to turn anyone away. Because of our reputation for service, we are inundated with phone calls. We try to return them on the same day and usually succeed. It’s all very basic.
“By embracing technology, we really have been able to stay ahead of the competition,” he says. “I’m a fisherman. I can be out on my boat fishing and still returning phone calls. And I do that. That’s where we are excelling. We have one account manager in Austin, Texas, and an office on Oahu. They are able to communicate seamlessly with our main office in Kona.”
Aloha Insurance is to be commended for its willingness to deal with change and for adopting a customer-service orientation that has allowed it to outstrip its competition and become one of the preeminent agencies in Hawaii. We are pleased to recognize Aloha as the Rough Notes Marketing Agency of the Month. *