From a small- to mid-sized agency’s perspective, producing public-entity business can seem like a Herculean task. The risks are often large and complex, and the political circumstances in which public entities are embedded present two additional challenges above and beyond the mere underwriting.
The first is that public-entity risks are often bid out on a request-for-proposal (RFP) basis, a process which requires a great deal of paperwork and bureaucratic maneuvering for an uncertain return. The second is that political considerations can and will interfere with a public entity’s insurance decision, and the best proposal does not always win out. Add to the stew the typical bureaucrats’ aversion to risk, and it can be difficult for a smaller agency or brokerage to compete with the mega brokerages like Marsh, Aon and the rest.
And yet it is not impossible. Insurance Journal here examines two Midwest agencies—one from a major metropolitan area, the other from a medium-sized city—who took the time to share their insights into how they broke down the public-entity barrier and finally got a piece of the pie.
Their kind of town
The Chicago Public Schools (CPS) is the second-largest school district in the country after New York City’s, with 600 locations and more than 52,000 employees. Make no mistake: it’s a big contract. So it was no small feat when a relatively small player—actually a partnership of two smaller agencies—won the bid against four others to operate CPS’ voluntary universal life, long-term care and disability benefits in 1992.
The partnership known as RFS/IRSI—Rolei Financial Services Corp. and Insurers Review Services Inc.—is headed by Jaime M. Rojkind and Alvin J. Robinson, who teamed up to broker the package of benefits insured by Lake Forest, Ill.-based Trustmark Cos.
“It was a pretty unusual situation,” Rojkind (pronounced “Row-kind”) told IJ of RFS/IRSI’s bidding success. “It was the first time little guys got such a big contract.” The contract totals $6 million in annual premium volume and just over a third of CPS employees take advantage of the $385 annual premium benefit, according to Rojkind. RFS/IRSI qualifies as a minority-owned business enterprise under Chicago’s contracting guidelines (Robinson is black, Rojkind is Hispanic), which Robinson said can be a tiebreaker come decision time but is by no means enough to be a sole factor in winning a bid.
“The biggest cost of the program is the cost of enrollment,” Rojkind said, noting that their partnership’s expertise in worksite management and payroll gave them an edge over the competition. “We bring a product that costs the employer nothing. Premiums are locked in for the life of the policy.”
Though the CPS life and LTC group benefit was the partnership’s breakthrough, it was not their first foray into public-entity business. Both had experience as minority subcontractors for earlier deals won by Aon and Marsh, and Robinson’s IRSI brokered a group life product for the Chicago Park District in the late 1980s.
“When we got that large deal,” Rojkind noted, “we were already running our own little operations. We were already established, and you have to be established for at least five years and develop the relationships with carriers. It’s a much more professional era than when I started out in 1977. The era of just peddling the product no longer exists. It takes lots of patience and lots of persistence, especially with RFPs where the process is not really transparent.”
Robinson said one of the advantages smaller players have on the alphabet houses is a higher level of service.
“One of the problems the big brokers are having is fee-for-service,” he told IJ. “With a smaller broker you can have a boutique-type relationship. You’re talking to a decision maker, as opposed to just an account executive. I handled the Park District account better than Marsh [the previous broker] did because of that. The risk manager wants you to come in and do what they want, listen to their needs.”
Still, he said that sometimes a higher level of service is not enough to win or keep the job. “Professional services—accounting, legal, insurance—fall into a different category for public entities,” he said. “They’re not tangible, so the decisions are intangible—more subjective in nature. Professional services is one area where politicians still get away with rewarding their friends and punishing their enemies.”
Which is why it makes sense, both men agreed, to develop the right friends.
Big fish in a smaller pond
That’s exactly what Roosevelt Haywood, CEO of Haywood and Fleming Associates, has been working on for years in the town of Gary, Ind., whose population of just more than 100,000 makes having the right relationships an absolute necessity.
Hawyood estimates that his firm has about 80 percent of the market share for Gary public-entity insurance services, including much of the property/casualty segment for the city’s schools, waste water treatment plant, airport, mental health center, parks and the Department of Redevelopment. The latest piece of business the firm won was the $45 million minor-league stadium being constructed for the South Shore Railcats. Hawyood and Fleming is helping to insure the structure and the builders’ risk.
The property value of the schools alone approaches $400 million, according to Haywood, while the firm’s annual premium volume is $5.5 million.
“Our strategy is to provide one-stop shopping for all our public entities,” Haywood said. He said he tries to keep his firm out of RFPs, which are apparently not as strictly required as in Chicago, which is noted for its history of insider deals.
“You really don’t want to go through a bid process because as the broker you lose control of the account because you don’t know what the outcome is going to be,” Haywood said. “If you are a true broker in the sense of representing several markets then why not market the account for your client? If there’s any particular co they want to see then you go get that market. Instead of going through a lot of trials and tribulations of RFP, let the broker consult and do the job for you.
“What people don’t understand,” he added, “is that professional services don’t have to be bid out. If I came back with high rates and poor service, they’ll say, ‘OK, I guess it’s time for an RFP.’ If they utilize that option, I have to evaluate—maybe I didn’t communicate something right. We pride ourselves in the fact that our clients come to us and they ask us, ‘What do we need to do on this?’ So far we’ve been successful.”
Haywood, who is black, said building up a positive presence in the community is crucial in order put your firm in the position of being the go-to-guy.
“With approaching boards, there’s politics involved,” he said. “You have to stay visible in the community by giving back, such as supporting city basketball, little league baseball, Pop Warner football, things like that. Then your name becomes enmeshed in the community.”
Then, he said, you can sell yourself as the local alternative to the bigger players.
“Our school system is a classic example,” he said. “My good friends at Marsh at that time were doing the fleet out of a St. Louis office. The property was being done in suburbs. Now our approach to the board is: If we can provide the same policy, the same service, if we are professional, if we have the resources, if we’re local and the last thing that we mention is we’re African-American, then why shouldn’t the city that’s 90 percent African-American be doing business with those in their community?”
Most important, Haywood said, is developing strong relationships with the finance executives and risk managers who recommend purchasing decisions to public-entity boards. If that relationship is sound and they feel comfortable about the firm’s proposal, then chances are good the rest is just a formality.
The money question
When it comes to political contributions, it’s a necessity whether it’s Gary or Chicago, according to the men interviewed for this story.
Haywood said he contributes to make the matter “a non-issue … almost a form of insurance. That doesn’t mean if you don’t contribute, you lose the account,” he added.
“It’s very difficult to say in this climate,” RFS’ Rojkind said of the relationship between political donations and public-entity contracts. “Many times you do political contributions as a favor to friends who support certain candidates. By being so visible in the community through charitable activities and other things, you’re constantly solicited.”
Still, an agent probably does not need to be a political rainmaker in order to land business. It takes dedication, persistence and the right skills.
“Smaller agents and brokers should pursue [public-entity business],” according to IRSI’s Robinson. “First you should try to develop a reputation in a small suburb and then work your way up. But this is only if the person can do the job. In the end, that matters more than anything else.”
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