Consultative Broker Briefing - V. VI, No. 2 - 2003 Year-End Readership Survey

The Consultative Broker™ Briefing
Volume VI, Number 2
A Free Publication of C.R. Ekern & Company
888.670.1177
www.crekern.com
Copyright, C. R. Ekern & Company, 2004

Consultative Brokerage
2003 Year-End Readership Survey Results

The results of the recent C.R. Ekern & Company Consultative Brokerage Year-End Survey are in and have been tabulated. Wow! What interesting responses! Thanks to all of you that took the time to share with us the things that are on your minds. We will be using these responses throughout the year to tell your story to carriers and the marketplace.

This year we did something interesting. We segregated the responses by firm size. We were looking to learn how firms of different sizes see our industry. Therefore, we separated them by those under $10 million, between $10 and $20 million, and over $20 million in revenues. You will be interested to note that 25 of the Top 100 brokerages as identified by Business Insurance were represented in our survey.

Here are some of the more interesting facts:

The Marketplace is loosening. Of course we all seem to agree on that one. But, here is the interesting thing - Our survey shows that the number of carriers for year-end renewals did not increase! In fact, the number of carriers that had an appetite for any given deal stayed about the same as last year. How can that be? Simple, there are fewer carriers.

TCOR is the King! The overwhelming majority of brokers of all sizes indicated that the ability to demonstrate Total Cost of Risk (TCOR) was critically important as a tool of differentiation. This is a huge movement versus the mentality of client differentiation that existed several years ago. We surmise that this understanding of TCOR differentiation is due in large part to the shrinking number of national carriers that brokers have to draw from. Frankly, many of you represent the same carriers and can’t use them as a point of differentiation.

Internal Resources are critical to large account production. We are now able to contrast the capabilities of one size firm against the next. It comes as no surprise that the larger firms have internalized their loss prevention and claims management capabilities. This fact parallels precisely these firms’ confidence and targets in size of accounts. This raises the question: Which comes first, the chicken or the egg? Are these firms able to go after larger accounts because of their resources, or do they have resources because the write larger accounts? Hmm….?

Regional carriers have filled the vacuum. We heard the rumors, and now we have the facts. During the height of the hard market, a number of national carriers restricted their writings in certain classes and locations. The regional carriers that operated in those areas filled the void and came to the rescue of many brokers. In accounts of under $100,000 in premium, regional carriers have virtually overwhelmed the nationals. However, in accounts of over $100,000, the situation is completely reversed with the nationals maintaining dominance.

Stewardship Reports are still important. Over 60% of you considered stewardship reports to be critical/very important. The overwhelming majority thought that the ability to demonstrate TCOR in the stewardship report is the most important issue. Yet, only 36% said that the carriers are providing quality information that assists in the development of a stewardship report. This is a complete disconnect between brokers and their carriers. We will try to do something about that in 2004!

So, as a former broker, and the developer of Consultative Brokerage, here are some observations:

As the marketplace continues to loosen, we probably won’t see the crazy freefall of past market cycles (yet, that is!) The reason is that there is a very limited number of carriers for every deal. Some of us can remember the days in the early 90’s when we had literally a dozen. However, this does not mean that you shouldn’t expect some competition from the carriers that exist, because their appetites have increased.
An awareness and understanding of TCOR will be critical for your survival. With the smaller number of carriers, and the competitive understanding of TCOR, those that do not incorporate it into their business model and sales style will be obsolete (substitute “out of business” here!)
There will be a huge separation between the “have” and “have not” brokerages. The firms that are investing in the development of internal resource capabilities are improving their chances of retaining and creating large account revenues. This is very important, as these will continue to be the most profitable accounts. The firms that have these resources will be able to continue a substantial growth cycle even as the marketplace softens.
The regional carriers will continue to evolve. In the past several years they have picked up a number of accounts that have traditionally been outside of their shot pattern in size. As their book continues to mature with these larger accounts, they will become much more sophisticated. They will need to, or risk losing their market share when the bigger fish decide to get back into the game.
The carriers must become more involved in TCOR and stewardship report information. This is entirely different than the traditional claims and loss data arena. It must be formatted in a way that allows a broker to help quantify value, rather than simply spew data. This will even become more important as the marketplace changes.

For a printable review of all the graphs and data from this year's survey, please click here.

So, there you have it. This survey has given us some great meat for our 2004 efforts. We will be busy telling your story to anyone that will listen. And, as always, if you keep reading . . .we will keep writing! Thanks again for your participation.

Best regards to all Consultative Brokers,

Rob Ekern
President
C.R. Ekern & Company

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Thank you.
C.R. Ekern & Company