White Took a Chance and Built Alliance Insurance Services

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In our continuing series on Agency Insights, we look at Bill White, president of California-based Alliance Insurance Services, who took quite a chance back in the mid-80s by putting his home up for sale when he went to purchase an agency. White purchased California-based Alliance Insurance Services and has grown the business into a company today with $42,000,000 in premiums.

Dave Thomas: Tell us how you got started and the risks you took.

Bill White: Prior to getting into the agency side of the business, I was president of Insurance Co. of the West in San Diego. In 1985, I decided in the heart of the hard market to strike out on my own, thinking this was the time of the opportunity because prices were soaring through the roof and people that ordinarily wouldn’t talk to you would be willing to get bids from competing agents. My wife and I started this business in a little strip center and sold our house to do this. We started in 1985 and took all the proceeds from the house and I acquired an agency—Alliance Agency Insurance Services—and that was the basis of the agency. We opened in July and the agency had three carriers they were dealing with. Within 90 days, all three companies terminated us, so we had to start off from scratch. It was more a function of the market than anything else.

Dave Thomas: What has been the focus of the agency and how have you grown it?

Bill White: Our focus has always been on workers’ comp as the door opening line of business. My background has been heavily on the workers’ comp side. The greatest challenge when we started was lack of markets. In 1985, insurance was being rationed and even the brokers in it for many years were told they couldn’t write more than a given amount of business. That created enormous problems. I had probably 16 years worth of experience looking at a variety of agencies from the company perspective and workers’ comp is a big chunk of the whole California insurance premium volume, so I knew workers’ comp would be a great way of getting in to talk to customers. While there are many agencies in the country, each one is unique because it is run by someone who brings a little different slant to what they’re doing. Our focus has always been trying to aid the customer in terms of both the workers’ comp situation and their employment-related issues. For the last 14 years, we’ve had our own in-house telemarketing and we go after folks that we think we can help get their costs down. Things though have been bumpy at times. When we entered into the open rating in 1995, we were about 76 percent workers’ comp and that’s now about 50 percent. What we did was write a lot of business and each time we renewed an account, the cost went down for the customer anywhere from 15 percent to 50 percent. We’ve just really run in place. We’ve always focused heavily on new business and our annual premiums (new and renewal) are about $42 million. I think we’re the sixth largest agency in the San Fernando Valley.

Dave Thomas: What is the challenge or challenges you’ve had to face in growing the agency?

Bill White: If you were to ask what are the three biggest problems people face today, the first would be personnel. That is attracting, keeping and developing good people. The second is the workers’ comp situation. The third challenge is an understanding on the part of the legislators to really understand and then do something about correcting business conditions in California so the employer can survive and maybe prosper. I think the third item is maybe the biggest issue today. I think it will be very difficult for employers because it looks like we have another 9 to 11 percent workers’ compensation rate increase scheduled for July. How can employers pay not only the workers’ comp bills, but also the bills for all insurance, the cost of health care and daily operating expenses? Health insurance is just skyrocketing. Many employers are being hard-hit by the cost of power. It is just an assault from all quarters on these poor people. There will be no quick fix for the workers’ comp problem here in California because it is so politically intertwined and I don’t think our Commissioner either has the will or political ability to get legislators on his side.

Dave Thomas: What can be done to address the workers’ comp situation in California?

Bill White: First, I think the so-called contingency fee for attorneys needs to be addressed. The only thing “contingent” is how high can you run up the bill. It is well known that clinics, medical providers and attorneys work hand-in-glove. The object on the part of the attorney is to increase the cost to the employer because they’re getting a fixed amount of 12 to 15 percent and the more you drive the costs up, the better off you’re going to be. When you have 17 percent in total costs of injuries being treated by chiropractors, you have to wonder what is the system doing, why is so much money being spent on these soft tissue injuries? Two of my other pet issues are unrelated to claims. One is the employer has to come up with a huge amount of money or a deposit on a new or renewal policy. He has to come up with a deposit premium, various fees, fraud fees, etc. and the CIGA fee (2 percent on the front end) which is an enormous amount that is absolutely wrong. It’s being done either because CIGA is so threatened with its solvency or out of ignorance. I have customers paying $15,000 to $25,000 in CIGA fees at the inception of the policy—it’s an absolute killer. The second issue is the State Fund. I love them and don’t know what I’d have done without them, but the rollover of the deposit has a psychological effect of preventing the movement of some business out of the State Fund into other markets. This will be particularly true when the price increases again. I’d like to see the State Fund stop rolling deposits on a going-forward basis. I think we are finally coming to grips with the fact that workers’ comp in California is a huge problem that needs to be fixed and we need insurers coming into California. We need some good legislation addressed at controlling skyrocketing insurance costs. The various tasks forces and committees should come up with a list of recommendations which will have a significant impact on the system and will persuade legislators and the Commissioner to vigorously pursue immediate solutions I think there are a lot of good minds focused on fixing the problem however; I feel the Commissioner really doesn’t understand what the problem is. Simply cutting broker commissions isn’t going to open up the marketplace to carriers who may be interested in doing business in California. It will take the promise of actually making a little bit of money from the product line and that doesn’t exist. Workers’ compensation is riddled with issues that could be addressed by the legislature, but attorneys control our legislature. You’ve got all these vested interests, none of whom seem really to care about California or the employers.

Dave Thomas: Can someone go out and successfully start an agency today and what have been the biggest changes in the industry?

Bill White: It is difficult, but this is America and if you have the energy and the desire you can do it. It is tough though getting company appointments. There are, however, a lot of managing general agencies and other facilities that represent companies that you can access. If a young person wants to get in and knows the business thoroughly enough they can do it. One change I’ve seen over the years is the exclusivity of markets has pretty much gone away. You can darn near reach any company. One big change has been the reduction in commissions overall. In being an agent 20 or 30 years ago, you could go out and golf on a Wednesday, but I don’t think you’d do that now. The competency of the agency and broker is so much better than it was 10 or 15 years ago. To compete today, you really have to know your stuff. I think the policyholder has become much more discerning and they know how to buy insurance and they know the brokers who have talent and ability. It is a much tougher environment to compete against than it was 10 or 15 years ago. From the days we opened our doors, we ran with a business plan and made our projections. Sometimes we fell short, as when the market opened up to open rating that hit us a heck of a lot harder than we had thought. By and large, we’ve operated with a one and a five-year plan. We’ve also never lost money in the shop, something we’re very proud of. Another important thing for people today is networking. Information now flows so much more rapidly. In observing the last 20 years, the flow of information has really changed. You know today what went on today.

Dave Thomas: Talk a little about differences in the one and five year plans.

Bill White: A five-year plan is relatively easy to do and has the additional benefit most people forget, your projections. Nonetheless you need to look out as far as possible. One-year plans are difficult, more from the ability to execute than anything else. The more detail you have, the better your chance of success. You need to monitor and measure how you are doing against your plan goals. We say, “the numbers set you free,” they clarify and ease decision-making. Another point we use at the agency is “what gets measured, gets done.”

Dave Thomas: What are your plans for your agency and talk a little about your employees?

Bill White: Our big goal is to take the agency within the next three years to $50 million in premiums. We have 28 employees and we’re adding as we can find good people. One of the issues we face is bringing highly qualified people aboard. We also run these Omnia profiles. We never hire without interviewing three to five times. About 60 percent of our people have been with us for over five years. We’d have to go outside (when asked about someone taking over some day) and that’s something we’re looking at to perpetuate the agency. I’m not interested in selling the agency at this at this point and time. We’d be very interested in finding some young people who would come in and eventually take the business over. Our employee benefits package is quite impressive for an agency of our size. We offer health and life benefits, a defined benefit plan, a 401k plan, continuing education reimbursement and we have paid performance bonuses for the last 15 years in a row. We also offer education for our employees and we do a training session in-house every two weeks. My position on education is that “if you don’t want to learn, there’s not a fit here for you”. I think this is a very exciting business and you never stop learning. It is a great dynamic business. The opportunities are limitless for someone who is really dedicated to learning and working hard.