Taking on the "big boys"

Rough Notes, Sep 2000 by Boone, Elisabeth

Assurex partners bring skill, determination, and flexibility to the mid-market playing field

In the story of David and Goliath, the advantage first appears to be entirely Goliath's: he's huge, feared by all, and has no acquaintance with the notion of defeat. As his opponent, young David--armed with only a slingshot--seems hopelessly overmatched. The unlikely ending of this ancient tale not only surprises and gratifies us but also teaches us a valuable lesson: ingenuity and daring often trump size and reputation.

Amid the rough and tumble that characterize today's commercial lines marketplace, the legend of David and Goliath takes on a startlingly contemporary hue. At first glance, the power and influence seem to be the exclusive sphere of the undisputed giants: Aon, Marsh, Willis, and the like. With their tremendous size, sophisticated communication networks, and global reach, these titans have ready access to capital, can negotiate impressive concessions from insurers, and are able to deploy significant in-house resources for the creation of appealing new products.

Game, set, and match to the "big boys"? Not quite. Striding from the wings to play David to this Goliath is an entity that may lack bulk and instant name recognition but that offers some key advantages in the competition for a growing market stronghold: emerging and mid-market risks. In this article we'll talk with Tom Harvey, president and chief executive officer of Assurex International, to learn how this group of large regional brokers is becoming a formidable contender for dominance in the middle market.

The Assurex legend

What exactly is Assurex? When was it formed? What does it do? And what can it offer to the commercial insurance marketplace of the new millennium?

Established in 1954, Assurex was born out of the idea that today remains its guiding principle: By sharing information with trusted colleagues, each partner grows stronger, and their collective strength becomes a powerful force in the insurance marketplace.

"The legend of Assurex is that a trio of independent property/casualty brokers, each from a different part of the country, were meeting to develop strategies for landing a multi-location account," Tom Harvey says. "The account, I'm sure, was in the hands of an alphabet house that's since been acquired by a mega-broker. After two or three meetings, these brokers realized that they had a lot in common, that a lot of the problems each was trying to solve independently, the others either had solved or were working on strategies for solving: automation, finding producers, dealing with carriers, and so on."

In addition to discovering the power of sharing ideas and solutions with peers, Harvey continues, the brokers recognized another home truth: "Humans often tend to learn more from their defeats than from their successes. In particular, bright, intelligent, reflective people tend to look back on their mistakes and ask, `How could I have done that better?'" It was the desire to learn, grow, and support each other that led those three original brokers to form what today is known as Assurex International, bringing together the top independent brokers across North America.

The willingness to share mistakes, solutions, and successes, Harvey observes, is limited by brokers' understandable reluctance to discuss such matters with direct competitors in their local marketplace. To dispel that reluctance and promote the candid exchange of information, the founders of Assurex agreed to select only one broker from each market area. "The mission of Assurex back in 1954--and the essence of what we do today--is to bring together the best and the brightest commercial insurance agencies to learn from each other and to win and serve multi-location clients," Harvey explains.

Suiting up for the game

Playing David to the megabrokers' Goliath takes all the skill, cunning, and dexterity a daring competitor can muster. A look at Assurex International's structure and operating philosophy sheds light on the advantages it brings to the hotly contested middle market playing field. Many of these advantages can best be appreciated by contrasting Assurex with the "big boys" of the commercial insurance marketplace: Aon, Marsh, Willis, and other powerhouses.

Unlike these titans, whose stock is publicly traded, Assurex International is privately owned by its 68 North American partners. "Everyone who joins Assurex buys 20 shares of our stock, and if they leave, Assurex buys it back," Harvey explains. "We're a private company, and we will always be a private company; we have no plans to take Assurex public." Joining Assurex, he points out, is in no way comparable to being acquired by a major brokerage and giving up ownership and self-determination. Each Assurex partner operates autonomously, exchanging information with noncompeting colleagues and retaining all the benefits of independence.

Advantages of autonomy

This independent status, Harvey observes, gives Assurex partners some key advantages over the megabrokers. First, they can attract talented people with the promise of equity ownership, an appealing "carrot" for professionals who value the opportunity to own equity in a growing small company. What's more, he comments, "A small firm led by its owners tends to have much more grit and determination when faced with challenges" than does a huge corporation whose executives often are protected from the consequences of their decisions by lucrative "golden parachutes." Further, he says, "Given their flexibility and relatively small size, regional brokers can make key decisions faster. These days, with clients demanding speedy responses, the swift often beat the slow-just as, in the old days, the big beat the small." Another advantage Assurex partners offer is stability. "Our Assurex partner in Columbus, Ohio, is not pushing to get promoted to the Chicago or New York office," Harvey points out. "He's deeply involved in his local market. He sees his clients all the time at the country club, restaurants, church; these are long-term, stable relationships, and he's not going to let his customers down."