A Philosophy – and Practice – of Sharing

Shows How Sharing Success With Producers Keeps the Agency and Its Clients Happy

Top 100 Agency Profile

Ranking: No. 8

Insurance Office of America

Headquarters: Longwood, Fla.
Year Founded: 1988
Additional Locations: 22 branch offices
2007 Total P/C Premium Volume: $662.5 million
2007 Other Than P/C Premium Volume: $99.6 million
2007 P/C Revenues: $66.3 million
Principals: John Ritenour, CEO; Wes Scovanner, chief financial officer; Dave Maki, president, Bruce Berthelsen, chief operating officer.
Number of Employees: 534

Share the wealth consistently with producers and staff year-after-year. Make it easy for clients to take care of all their insurance and human resources-related needs by providing one-stop shopping. Finally, offer sophisticated information technology and other services as part of the package, potentially saving clients the tens of thousands of dollars they would need to buy these through outside vendors.

Welcome to the world according to John Ritenour, CEO and founder of the Insurance Office of America (IOA), a Longwood, Fla., insurance agency he launched in 1988. It’s a world that challenges the usual notions of sales success. IOA “eliminates greed” so typical in the brokerage business, Ritenour insists.

“Twenty years ago, when we started IOA, we set out to change the sales philosophy faced by producers at most brokerage houses,” says Ritenour, 56, who today employs 178 sales executives and runs his business out of what was once a well-known department store.

His business model, which is based on a surprising commission formula, ensures that customers receive the same high level of service from their IOA account executives year-after-year. It also enhances the chance that customers stay with the agency and won’t escape to a competitor.

Ritenour claims the client retention rate for the industry as a whole is rather good, standing between 83 and 85 percent. But, he boasts, IOA has earned an excellent client retention rate, above 90 percent. “We’ve had that rate for years,” says Ritenour. “Some people have been with us from the get-go,” he says.

One of those longtime IOA customers is Frank Lubinkas, chief financial officer at Longwood, Fla.-based Nanak’s Landscaping. “We put our business out to bid in 1989 and we haven’t stopped dealing with them since,” Lubinkas said. “They’ve grown a lot faster than we have but we’ve grown together.

“I’ve heard John’s business philosophy, and he really knows how to make IOA grow,” says Lubinkas, who runs a debt-free business (he credits IOA in part for that), with $35 million in annual sales and who handles his workers’ compensation, auto and general liability needs through IOA. “We continue doing competitive bidding periodically, which IOA welcomes, and so far, nobody has been able to touch their pricing.”

That the strategy is working well is supported by the numbers. The agency ranks eighth on Insurance Journal‘s Top 100 list of privately-held independent insurance agencies with property/casualty premium volume alone of more than $660 million and 22 branches in eight states.

Ritenour’s model does more than keep business. It also keeps employees from looking for work elsewhere.

“We don’t lose people unless we want to lose them,” Ritenour admits. “We keep the ones that are top notch. If they don’t live up to our expectations, there are other places we refer them to.”

Commission Structure

Ritenour and his wife, Valli (also 56 and a childhood sweetheart), have been dedicated to treating both employees and the community well from the beginning.

“Before we started IOA, my wife and I were working for the same local agency but doing separate jobs,” Ritenour said. “I was doing everything at one office, she was running another from a customer service standpoint, and neither of us thought things were going right. We just didn’t feel comfortable with the direction of that firm.”

Ritenour said the agency changed its commission structure twice a year. “Unfortunately, it was a tough market at the time, hard to get appointed by carriers, so we decided to wait for things to loosen up before we could go out on our own.”

That opportunity came in January 1988. Ritenour said he secured carrier appointments and purchased his own book of business from his current broker.

One of the first things Ritenour and his wife did when they opened IOA was create an entirely new commission structure.

“We wanted to build an agency where it wouldn’t change every two years,” he says. “That decision was key to our original mission.

“When I was working for the other agency I was getting 60 percent commission the first year and 35 percent thereafter,” he says. “That sounds pretty high today, with sales execs now making just 20 to 25 percent commissions after the first year — and it looks good historically, where sales executives have gotten 40 percent the first year, 20 percent thereafter.”

But Ritenour says that even in the late ’80s he thought producers should be doing a lot better, and he and his wife never abandoned that belief.

“So what we did immediately was design our commissions so the individual sales executive would receive a 60 percent commission, the house 40 (percent), both the first year and with renewal business, and that hasn’t changed,” Ritenour said. “I don’t know of anyone else who’s doing what we’re doing.”

Diversified Products

IOA’s creativity extends beyond its producer compensation structure. As with other Top 100 agencies, the firm’s core business consists of selling property/casualty insurance and risk management services to corporate clients — mostly small to mid-sized firms. Today, roughly 70 percent of its business comes from P/C sales, but that’s down from 85 percent just six years ago.

The reduction is according to a plan. In 2002, IOA decided to pursue additional business from existing clients beyond the P/C and risk arenas. “We’ve become much more diversified than other firms,” says Ritenour. “Renewing an account is much cheaper than getting new customers, so several years ago, we started thinking about ways we could solidify and increase our retention rates by adding additional value.”

Ritenour says the company decided to provide additional products and services to become more of a one-stop shop for clients in more ways than IOA had done in the past.

“If we’re getting $25,000 for products and services related to property/casualty insurance and risk, why let someone else down the street get another $25,000 for other things we could sell just as well?”

The newer offerings fall into two categories.

First, IOA assists its P/C clients with anything related to their firms’ payroll, human resources and insurance needs of their employees, as well as the technology needed to support those endeavors.

Second, IOA offers a suite of other products and services more tangentially related to its core businesses — everything from real estate brokerage and mortgage financing to Web design, and service and support for computer hardware and software systems.

“We realized there’s just a lot of opportunity to mine further our current book of business, identifying opportunities easily within our reach,” says Ritenour. “Let’s say we had a construction firm with 100 employees where we were already offering property/casualty insurance. We thought: When talking with them, why not expand the conversation to include things like HR software and employee benefits and health insurance?”

Ritemour says he knew IOA had the capability to provide these products and services even though it wasn’t its core mission. “Ten years ago we started offering employee benefits and though these (products) are relatively new for us, we’re already meeting success.”

Customer Requests

IOA entered into its new businesses initially because customers requested it. “Our own customers came to us, asking if we could do things like 401(k) and life insurance,” he says. “I was a little surprised; I knew we were good at what we did traditionally, but hadn’t realized that there might be other things where they would want us to take care of them.”

After those requests started coming in, IOA began a step-by-step approach to building its new business. While its core business remains property/casualty insurance, worker’s compensation and other risk management services, it first expanded into benefits about six years ago, adding supplemental health insurance and disability insurance. Then, four years ago IOA added 401(k) products to its portfolio.

Each of those decisions made sense for any well-rounded insurance agency today, but then Ritenour went beyond the traditional to create a number of “side businesses” that may seem less of a fit.

Three years ago he established Web Solutions of America, which designs Web sites for clients, including all the coding needed to make them robust and accessible to consumers. Some $750,000 in annual revenue comes from the Web area today, Ritenour reports. About the same time, he started marketing HR software to clients as well.

From Payroll to Promotion

About two and a half years ago Ritenour launched Payroll Office of America and created separate real estate and mortgage companies.

Most recently, he entered the third-party computer hardware and software servicing arena, just a year ago when IOA created Technology Solutions of America, buying the business that had been providing maintenance and service support to IOA all along.

Today health insurance and personal lines each make up roughly 12 percent of revenue. “These are the two areas that have expanded the most,” Ritenour notes.

In its most unrelated line of business, launched seven years ago, IOA makes promotional items, including statues and other memorabilia, for corporate accounts like the Orlando Magic. “We sell and offer promotional products to commercial clientele that we do business with,” Ritemour says. The customers includes about 400 to 500 commercial clients and sports teams throughout the country.

The company’s sales force — including those that have sold traditional insurance risk services — are encouraged to market IOA’s other products and services and receive a commission. “Right now it’s the old 80-20 rule,” Ritenour says. “About 20 percent of them actively sell; the rest will do so if the customer brings it up or they see something about the company that suggests it may be interested in talking with us about our products.

“We all benefit when we let customers know about our greater range of products and services because we’re all stockholders,” he adds.

There could be even more in the future. Ritenour says he’s still open to further expansion as the right ideas come along.

Internal Resources

To grow the businesses to where they are today, Ritenour built the wherewithal internally rather than by relying on outside vendors to do the job, he said. “We want to have direct control over everything, so we don’t have to worry about whether vendors are handling things the right way,” he says. “If we refer our clients to others and they do things poorly that would reflect poorly on us. Meanwhile, we’re finding our clients do like one point of contact for all of the products and services we’re offering today.”

Building a robust in-house technology ability to support its new business — and tie it into its traditional P/C insurance and risk capabilities — has been imperative. That effort started in 2003 and today IOA boasts an IT staff of 18, including four programmers.

“Our programmers have helped us establish a link between the payroll company we own and our property/casualty customers, for instance, so that online today customers can get certificates of insurance, order motor vehicle reports, those kinds of things, while their individual employees can also get online to check the status of their individual life and health accounts,” Ritenour says.

Ritenour admits IOA found numerous efficiencies through its IT investments. “We only have to enter payroll one time and it populates our HR databases for insurance policies at the same time,” he says.

Ritenour recognizes that some customers may be worried about whether they’ll continue receiving the same level of customer service they have come to expect if IOA’s expansion continues.

“We run into that issue on occasion,” he says. “They say, ‘Are you going to forget us? Are we going to be too small for you?’ But it hasn’t been a problem,” he says. “We don’t force feed anyone; we simply bring these new capabilities to the table and say, ‘If you like what we’re already doing for you, why don’t you give us a try on this other stuff?’ And they kind of laugh and ask, ‘What are you going to do next?'”

Customers say IOA is extremely aggressive in representing their interests with insurance companies. One IOA customer — Forest River Inc., a privately-held manufacturer of leisure vehicles (including RVs, buses and boats) and the owner of a charter airplane company in Elkhart, Ind. — applauds IOA for being more than a typical middleman in the insurance process. ,

“I would say the primary difference between IOA and other brokers is that it isn’t just another agent for a big insurance company or companies; it’s a true advocate, the best advocate I have,” says Bill Coddens, insurance risk manager, who works with two other brokers and who uses IOA to insure a fleet of 20 jets River Forest owns.

“IOA has been absolutely successful in saving us money,” says Coddens, who has been in corporate risk management for 24 years. “They may not start out as our lowest bidder but they often end up there. There’s no question that, over time, through IOA we’ve received the best coverage and service.”

Lubinkas of Nanak’s Landscaping says his business has saved $4.5 million in insurance premiums, the result of a “basket” approach to all of its exposures. “Because of all of their servicing capabilities,” says Lubinkas, “they handle all our claims and send us a single bill every quarter that we pay. The relationship and processes behind it have become almost seamless.”

Ritenour’s clearly pleased with his ability to build his business on the principle of taking care of his employees first and foremost. IOA also runs a day care center on the premises and a fitness center as well.

“As a private agency, we’re able to invest a lot of our profits back into the company, creating value for our customers and employees that I don’t think a lot of banks and public companies can match. We all come out ahead in the process.”

Topics Agencies Property Property Casualty Risk Management Casualty