A strategy aimed at insuring the future
by Glenn RittRick Black is visiting his new employees in Orleans. He’s there to calm nerves and talk about a bright new future – one aimed at merging local tradition with corporate vision. First, though, he must cope with the resignation of a longtime agent with deep roots in the community and the installation of a new manager coming from off-Cape.
“One step back for two steps forward,” he explains.
That’s also a good way to describe Black’s own career. As recently as this spring, he was a managing director for the nation’s largest insurance brokerage company, Marsh. At one time, he was the chief operating officer responsible for $750 million. Now, he is a regional president for TD Banknorth Insurance Group, overseeing $50 million in emerging business.
The transition to a smaller geography and tinier portfolio is entirely voluntary. Black, a 50-something DePaul University MBA with an undergraduate background in geography and economics from Dartmouth College, is betting that the combination of banking and insurance will prove a powerful and winning formula in an increasingly competitive, fast-changing and complex world.
If he’s right, Black should benefit mightily. It also will mean tough new challenges both for independent brokers that can’t match TD Banknorth’s international resources and for local banks cautious about entering the insurance field in search of deeper customer relationships.
But before changing the world, Black finds himself traveling from his Springfield headquarters to Dennis, Brewster and Orleans, where the former offices of Drake, Swan & Crocker are transforming into part of the fast-expanding TDBanknorth Insurance Group.
In short order, TD Banknorth Insurance has become the largest independent insurance agency network in New England and the 44th biggest in the country, with approximately $550 million in premiums per year. It constantly is on the lookout for smaller agencies either without sufficient resources to compete or facing succession challenges.
Drake, Swan & Crocker, with 10,000 local customers, fit that description precisely. “Becoming part of TD Banknorth Insurance Group will allow us to further expand the products and services we provide to our current customers and give us the capacity to better attract new customers,” said Drake, Swan & Crocker’s chief operating officer Michael Walther at the time of the purchase.
“Other than a name change and becoming part of a larger company with an expanded network of products, the day-to-day services we provide to our customers will not change,” he vowed. “We’ll have the same offices, same staff and same dedication to customer service.”
Make that two name changes.
Almost as fast as it could replace the Drake, Swan & Crocker signs with Banknorth Insurance, it had to add “TD” to the title after a majority share of the Portland, Maine-based bank was acquired by Toronto Dominion.
Meanwhile, Drake, Swan & Crocker’s most visible manager in the Orleans area resigned to join another insurance company because he was not happy with the change of ownership. Other employees were upset about seeing their life insurance business turned over to TD Banknorth.
“We gave up revenue through a bumpy transition,” conceded Black. “We are not without some unhappy people, but our resolve is to enhance our service to our customers and create additional value.”
Trading a down-home brand for multinational scope
The question now is: Will the huge sweep and resources of an international banking company outweigh the loss of a local brand that traces its history to 1854 when Ensign Joseph Rogers founded the original firm? Black is confident the answer is ‘yes.’
For one, local roots may go back a century and half, but the company has experienced numerous mergers and name changes since then. The Drake, Swan & Crocker name can be traced back only to 1982. Much more importantly, said Black, tradition can go only so far in today’s marketplace. In 2005, insurance customers are demanding more products, greater service and better pricing.
For Black, all this makes size and scale critical. This is especially so at a time when property casualty providers are cutting off coastal customers entirely or, at best, dramatically increasing premiums. Meanwhile, thousands of small businesses can’t afford health insurance for their employees because they are not big enough to demand the same rates available to large companies.
Brokers must have the market power to negotiate the best prices from insurance providers, he said. To do this well in an era when insurance providers are increasingly risk-intolerant, agencies must become full-service providers, mastering a wide spectrum of expertise – property and casualty, employment benefits, self-insurance, health insurance, and creating captive and self-captive programs.
Beyond that, customers will demand 24-hour-a-day, seven-day-a-week service, which will require sophisticated computer systems and databases.
Small agencies like Drake, Crocker & Swan simply can’t compete in this way, he believes. Bigger and successful regional companies such as Rogers & Gray Insurance will become acquirers to assure sufficient leverage in the marketplace.
Black already is looking to purchase other agencies, especially those lacking succession plans. “We’re always looking for acquisitions.”
Size alone, however, doesn’t guarantee success. The challenge is how to leverage global resources while remaining local and accessible. A key reason Black joined TD Banknorth Insurance Group is to develop new pools of individual and local insurance customers that can be organized around affinities, such as specific businesses like landscaping.
“Imagine, for example, if we create an umbrella group policy for all the independent landscapers on Cape Cod?” said Black. “At the heart of the strategy is to think globally while acting locally,” emphasized Black.
Not just selling policies, but consulting services
“We no longer can be only about selling products,” said Black, who believes that remains the dominant image for many smaller agencies. He wants the TD Banknorth brand to mean the same thing for insurance as it does for banking. “We want to be seen in the same light as a lawyer, accountant and wealth manager – as a strategic consultant.”
With that in mind, he believes that eventually the TD Banknorth identity will prove a more effective way to get that image implanted in the marketplace. “We will lose some business, but we will gain some too,” he said.
What does Black mean when he talks about consulting?
It’s connecting the pieces for a potential client. When he sits with landscapers, for example, Black expects to help them cope with many business issues, such as rising fuel prices, which take a huge piece out of profits. If he succeeds there, landscapers might have more money to consider purchasing insurance. “I might recommend they establish a fuel surcharge and market it in a way that tells their customers it is temporary and will be withdrawn when and if fuel prices drop,” he explained.
Black also believes that as a single company – and not lots of small brands – TD Banknorth Insurance Group will have the leverage to obtain policies for its more risky customers. He points especially to property insurance for businesses and second-home owners along the coast.
“We’re engaged right now in conversations with both traditional and emerging carriers to develop the capability to take on greater risks,” he said. “Because of our size and knowledge, we can do so. Drake, Swan & Crocker could not have done that.”
Helping businesses aggregate and self-insure
Black identifies two very promising strategies for his company, and, by inference, for the entire brokerage industry. One is pooling small businesses within similar industries such as landscaping and roofing so they have greater market power. The other is helping companies self-insure themselves – and in some cases actually provide coverage directly to other firms and their employees.
This latter strategy applies mainly to larger companies that can establish a virtual subsidiary as its own captive insurance business to take on favorable layers of insurance risk and administer its own claims – as well as those of other businesses.
On the Cape, however, there are not many enterprises large enough to self-insure or become a captive insurance company, other than a Cape Cod Healthcare or some town governments. But the same principle works if a brokerage such as TD Banknorth Insurance Group can pool scores of small businesses to insure themselves and, by sheer numbers, reduce their risk.
That’s Black’s intention, beginning with growing industries of independent businesses and contractors like landscapers and homebuilders, who are facing higher and higher premiums, especially in the area of worker’s compensation.
This aggregation model also transforms the traditional insurance agency into more of a full-service consulting business, Black noted.
He draws a four-squared box featuring the different but related services he sees for his company: Hazard. Strategy. Finance. Operations.
“Insurance agencies have to struggle to get out of the hazard box,” he said, and provide the other three related services to businesses. This is much more possible, of course, when there are 20 related companies under one umbrella instead of a single landscaper here and a homebuilder there.
“When you build groups, you create a unique exposure in the market and greatly enhance your ability to negotiate the best rates,” he said.
Which brings Black back to why he is so willing to take one step back for two steps forward. While the loss of Drake, Swan & Crocker’s identity may hurt in the short run, tying its insurance business to the TD Banknorth brand will help Black develop a consultative approach to the Cape market.
As the year wound down, Black was able to introduce his Cape agents to new leadership with strong local roots. His choice is a former Nauset Regional High School graduate, David Lofstom, with 10 years of experience in risk management as well as developing alternative risk and captive market programs – just the formula Black believes is the competitive edge agencies must have to survive and thrive in coming years.
Glenn Ritt Glenn Ritt is editor and co-publisher of Cape Business Publishing LLC. He is the former publisher of Cape Cod Community Newspapers and editor of The Bergen Record in New Jersey. 
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