Special Section sponsored by TMPAA

Program Administrators

“The competition is pretty fierce.” That’s how John McCaffery, marketing vice president at Conshohocken, Pennsylvania-based, NSM Insurance Group describes the state of affairs in the program business arena. “We’re competing like everybody else in the soft market.”

The firm is watching renewals and being aggressive on new business, with one caveat: “We’re dedicated to our carrier partners in returning an underwriting profit,” McCaffery explains. “We’ve always made an underwriting profit for all of our carriers on all of our programs and, soft market be damned, we’re going to continue to do that.”

In the midst of competition, John Paulk, president of Britt/Paulk Insurance Underwriters, headquartered just outside of Atlanta, Georgia, is optimistic. “In my eyes, there are some tremendous opportunities in our business.” A 20-year program business veteran, Paulk has seen the ups and downs. “We’re going to have cycles. We need to work harder during these times and sharpen our service skills. I’ve always sold the highest priced product in the marketplace. With that, I’ve had to give the best service.” That said, he admits his firm won’t grow as quickly now as it has in the past.

Part of the struggle administrators face could be described as an “inside the box” mentality. “The industry is becoming commodity driven, where nobody wants to even know about individual risk selection,” notes Ken Robinette, president of Bellingham Underwriters in Bellingham, Washington. “Everything is being put into a box so computers can make decisions.”

That’s not entirely bad news. “From an underwriting management firm standpoint, that is both a pain and an opportunity,” Robinette explains. “For a true program administrator, someone who really knows what they’re doing, that creates our reason for existing, it creates our niche.”

Program administrators are responding in a number of ways. “We’re hiring marketing people, we’re out at conferences and we’re working harder to secure good business,” Paulk says. “There’s an excellent opportunity to get good people if you’re a dynamic organization. If you’re status quo, hiring is tough.”

McCaffery’s organization is busy, too. “The constant challenge for any good program administrator is continuing to uncover the industry niches that have pain,” he says. “Boring down into what insurance solutions can help soothe the pain is something we believe we do very well.” His firm is busy on two fronts: developing programs in those niches that are difficult in any market, and boosting market share around the country with a few acquisitions.

For Robinette, underwriting is key. “A good program administrator will go in and analyze his class of business and determine causation factors of risk, to separate within a class the individual risks,” he explains. From there, it’s possible to price them as individual risks and to ultimately create a targeted loss ratio based on the premiums and accounts they’re selecting.

Despite competition, program administrators are confident. “The good, solid program administrators are going to make it through the soft market,” says McCaffery.

Robinette sees some market changes as cause for optimism. “There’s a new group of insurance companies focused on the MGA business,” he notes. “This is what they do for a living—program administrators.” These firms are zeroing in on risk selection and pricing and, Robinette suspects, “would be amenable to giving out authority if they viewed the underwriting management firm as able to do something with it.”

In Georgia, Paulk takes the discussion back to service. “Those of us who work hard, give good service and represent all the things we talk about—something a lot of organizations don’t do—will be tremendously supported when the market turns.”