In continued efforts to provide access for small to medium-sized agencies to insurance carriers who traditionally do not work though wholesalers, Grass Valley, Calif.-based Networked Insurance Agents has teamed up with Strongwood Insurance Holdings Corp. to expand its breadth of business and better serve the needs of its member agencies.
Networked was established in 1994 by Mike Lewis, Lee Johnson and Paul McKee, who identified the need to form an organization to provide support to small premium volume independent agents in need of products traditionally only available with direct agency appointments. “We are an aggregator, which may appear on the surface to be a wholesale or an underwriting management distribution model, but our carriers recognize us as a unique extension of their own marketing and underwriting efforts, providing products of preferred insurance carriers for commercial and personal lines, to small to medium-size independent agencies in the United States,” Lewis said.
Primarily focused on serving the needs of 530+ dues-paying affiliates in the state of California, Networked is working its way throughout the Western states, with membership expanding rapidly in Oregon and Washington, and has recently entered the marketplace in Arizona and Nevada.
Networked’s recent partnership with Strongwood Insurance Holdings Corp. allows the company to continue its expansion throughout the United States. “We’ll be in Colorado, Utah and New Mexico by the fourth quarter of 2003,” Lewis said. “Our goal is to be in 15-20 states, having 2,200 to 2,500 appointed, affiliated agents flowing business through Networked with a goal of writing in excess of a billion in premium at the end of the fifth or sixth year.”
Strongwood approached Networked in early 2002, and finalized the purchase in Dec. 2002. Lewis and Johnson became owners in Strongwood in the exchange, and continue to manage, and shape the Networked of the future, with Strongwood partner Brent Humes. Capitalized by an investment fund of New York-based J.P. Morgan Investment Partners, Strongwood purchased Networked after close scrutiny of the model, including conducting an extensive study with Bain & Co. to identify where the needs and opportunities were in the marketplace. The study identified an underserved group of agencies that can sell to a local clientele on service and relationship issues, and that their clientele is a source of profitable business to insurance carriers. However, these agencies have difficulty producing enough volume to satisfy and get appointments from the number of carriers necessary to compete in today’s marketplace.
“[Strongwood] determined that what Networked Insurance Agents was doing added significant value to the proposition and an opportunity to produce substantial profits for the insurance carriers that they were contracted with. In essence, Strongwood validated the whole premise of what Networked Insurance Agents was formed on,” Lewis said. “They committed to provide the capital to grow us out into those 15 to 20 states and add the infrastructure to process applications coming in daily and weekly from ultimately 2,000+ agencies with a diverse clientele.”
Johnson added, “The Strongwood investment also provides IT solutions for expense reduction, as well as the answer to funding staff expansion, that will not be an issue to plague the service of the fast growing company.”
Networked provides a unique opportunity for small to medium-sized agencies to access carriers’ products without significant upfront costs associated with clusters and policy fees often charged by wholesalers. “What’s neat about our concept is that we allow them [Networked’s affiliates] to remain independent, continue to own their book unencumbered and they can have their own direct appointments, yet we add our carrier relationship with the agent’s own carriers to fill out their menu of products offered,” Humes, Networked’s new partner, said.
“We have a centralized staff of underwriters that touch the relationship, not only with the carrier, but with the agent. In other words, we assume partial roles for both the carrier as well as the agent. So it’s like a central marketing department and accounting service for the agency; and for the carrier, it’s an extended underwriting, accounting and sales/marketing team. We do work on behalf of the carrier and agent that they don’t have to duplicate. It’s a dual role, designed to create a value-added touch that can reduce the cost of doing business, both to the agent as well as the carrier,” Lewis continued.
“Considering the challenges facing agents in the current marketplace, with carriers limiting what classes and coverage they may write or just plain financially failing, we are now also going out into the marketplace to find carriers to write lines and types of business that otherwise would be very difficult to obtain,” Johnson said. “We are building out our program division and offering unique classes and types of business and carriers, for our affiliated agents,” Lewis added.
The partnership with Strongwood has already allowed for the hiring of six territorial sales vice presidents who recruit agencies and assist agents in writing new business. Lewis plans to add at least five more through the first quarter of 2004, as the expansion into the Western States continues. “This is significant, because Networked’s past success in appointing new affiliated agents, was mostly dependent on referrals,” he said. “It’s another unique characteristic of Networked, that for agents requesting to join us. We require an extensive application process to determine if there is a match up for our carriers, as well as for us.”
Lewis continued, “We’re selecting an agency that really fits our model. Traditionally, we’re aiming at an agency that has $5 million in premium volume or less. That’s our focus, though the profiling goes much deeper, and now includes commitments we make to each other. We will do business with agencies that are bigger than that, but they have to have a specific reason of why they would want to join us and we can determine there is a match up. It shows that we’re selecting an agent on behalf of our carriers.”
Networked has come a long way since its 1994 inception. “When we really started the concept of working with small premium volume agencies, we had fewer than 20 affiliated agencies, and we were doing less than $2 million in premium,” Lewis said. “When we sold to the Strongwood Insurance Holding Corp., we had $85 million in written premium, and had in excess of 500 affiliated agencies.
“We want our carriers and affiliated agents to see the difference between us and other aggregator models, and recognize our value proposition,” Lewis added. “Our success testifies to the fact that our model is working.”
Lewis, Johnson and Humes agreed, “Our future in the industry is to be a low-cost provider, and we place emphasis on adding value to both the agency as well as the carrier, producing profitable results for both.”
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