Tightening Market Conditions Set Tone at AAMGA 75th Anniversary

At the 2001 AAMGA Annual Meeting, held May 20-24 in Indian Wells, Calif., at least one topic of discussion was as intense as the desert sun—all current indications clearly reflect a tightening of the market. There are some major differences from the last such transition more than a decade ago, to be sure. But at the association’s Diamond Jubilee, this most recent onset was palpable—especially in a renewed sense of participants ready to get down to business.

According to those who have seen it all happen before, increasing profitability and building customer relationships will pose special challenges to the younger members of the industry during these evolving conditions.

Take, for example, one of the offerings for the meeting’s University Day, a panel discussion entitled “Underwriting in the Hard Market.” During the panel discussion, moderated by Letha Heaton, vice president, sales and marketing for Shand Morahan & Co., an informal poll of the audience revealed that about 25 percent of them had not yet entered the industry at the time of the last hard market.

There was more advice on how to cope to the changes in the marketplace from the panelists, which included 2000-20001 AAMGA President Leonard T. LoVullo, president of LoVullo Associates; Colony Insurance Co. President and CEO John Latham; Scottsdale Insurance Co. President R. Max Williamson; Johnson & Johnson Inc. Mgrs. Vice President Francis Johnson; Markel North America President Paul Springman; and Bell & Clements Ltd. Chairman John Clements.

Some of those recommendations were to evaluate the profitability of certain lines, embrace technology, pay attention to deregulation and expect that a return to the next soft market might happen sooner than later.

“You think about the last 10 plus years, and it’s been a marketplace where we’re selling stuff for the lowest price,” 2001-2002 AAMGA President Baron Garcia told Insurance Journal. “A lot of people…in our distribution system weren’t around when we were in the last hard market. So they need to understand…when the companies say ‘no’ now, there’s a little difference to that. They haven’t said ‘no’ very often in the past…The industry is now starting to come around and see that we’ve got to have better rates and profitable business on the books.

“This [“Underwriting in the Hard Market”] course is just the beginning of what we hope to continue in the future with our University, and that’s make our courses more in tune with the times,” Garcia added.

During a press conference, several AAMGA leaders also offered some suggestions to help retailers better understand the best way to work with a wholesaler. “Number one—don’t flood the market,” LoVullo advised. “Number two—build a relationship with two or three wholesalers, and stick with them.”

LoVullo also warned that there has been a shift with MGAs towards “zero tolerance” for an incomplete submission. He emphasized the importance for retailers, when asked for additional information, “to get it back to us—[to provide] the courtesy of an answer so we can provide the quote.”

Garcia remarked that this was, in part, due to the fact that, “We created our own monster when the market was real cheap, and anybody would write everything …We’ve got to turn the tide now…We can’t expect our carriers to give us binding authority if you don’t give us accurate and complete information.”

But Garcia also noted that he is “starting to see some really professionally run retail agents…asking me, ‘Who are your companies and what are their Best ratings? What classes of business do you think you’re good at? What do you see that your people are best trained to sell?’…That’s how you go about personal relationships.”

That latter sentiment was also expressed earlier in the day when Saxon Riley, who became chairman of Lloyd’s of London earlier this year, addressed attendees at the annual AAMGA Awards Breakfast meeting.

“Security is crucial for a successful insurance business in the 21st century,” Riley said. “In this competitive market, financial security is of the utmost importance…But it is not only financial security that is necessary. The security of a long-term relationship counts too. Lloyd’s was, is and will always be about partnerships.”

In fact, “security” was just one of three “S”s, along with “sense” and “service,” that Riley outlined to explain what is going on at Lloyd’s these days. “If the industry is to survive long-term, we must stop underwriting for market share,” he said. “We must all stop clinging on to business at any price. The soft market has gone on for so long, and we are now at the stage in the cycle where we need to let dynamic market forces act.”

Riley also noted a number of projects underway during 2001 “to change the Lloyd’s environment…The purpose of all this work? We want to bring the market into line with the best insurers in the world, allowing Lloyd’s to function at the speed of the fastest rather than the present situation where we are sometimes dragged back by the slowest.”

During the meeting, Garcia accepted the president’s gavel from LoVullo and expressed his excitement about the opportunities and challenges that lie ahead.

“In my wildest dreams as a kid growing up, I never thought I would be in a place in my life at a time and position to serve as a member of an honored and respected association like the AAMGA,” Garcia said. He acknowledged the debt he owed to those who had helped him achieve that goal, adding “this position is something you work towards…You have to serve your time in the trenches.”

Garcia also lauded positive changes that had occurred within the association during LoVullo’s tenure, saying that the AAMGA board had really taken upon itself to make sure that the trade association is not stagnant.

In addition to now Past President LoVullo and President Garcia, AAMGA’s 10 2001-2002 board members include President-Elect Robert S. Giles, president and CEO of R.W. Scobie Inc./Midwest General Agency, Eau Claire, Wis.; Vice President, East Region Joseph P. Hutelmyer, president and CEO of Seaboard Underwriters Inc. CMGA, Burlington, N.C.; Vice President, West Region Milton O. Johnston, president, Milton O. Johnston & Co., Houston; Director for the Eastern Region Francis Johnson; and Director for the Western Region Roger Lott, vice president of Graham-Rogers Inc., Bartlesville, Okla.

Ascending from offices of 2000-2001 zone directors to positions as senior vice presidents are: Anthony R. Glotzbach, president, United Brokers, New Albany, Ind.; Ronnie Moore, president, Southern General Agency Inc., Bowling Green, Ky.; and William A. Fink, president, Delta General Agency Corp, Houston.

Looking towards the future, Garcia noted that he sees two major goals for the association to accomplish internally. This first will be to finalize the request for proposal process AAMGA is currently undertaking in its search for a new management firm. Helping to streamline that process will be Bernd G. Heinze, president and CEO of Beacon Management Group Inc. in Wayne, Pa., who was retained by the AAMGA board to serve as interim executive director.

The second item will be to revise AAMGA’s standard operating procedure (SOP). “Our association has obviously changed over the 75 years, and I think it’s about time that we actually look at how we’re operating and make our SOP more realistic,” Garcia said.

Externally, Garcia said he would like to see a continuation of what LoVullo had done so well—that is making the voice of AAMGA heard throughout the industry.

“It’s not that simple to, at every opportunity, tell our story to everyone that will listen,” Garcia concluded. “That can be promoted through magazines, advertisements. It can also be accomplished through our AAMGA University, which is something we’re all quite proud of.”

Topics Excess Surplus Market Lloyd's