Bolton & Co: Providing resources for customers produces profits

December 10, 2006

Developing a Web presence is not the primary focus at Bolton & Co. Insurance Brokers — developing the skills of employees and building relationships with customers is the chief concern. After all, when employees have the knowledge to help customers and customers know they can rely on their agents as a resource, then everyone, including employees, profits.

In this exclusive interview, Bolton & Co. President Steve Brockmeyer shares with Insurance Journal Publisher Mark Wells how rewarding employees has led to 75 years of success, particularly in the middle market arena.

Best Practices is an Insurance Journal column that highlights how some of the nation’s top-performing agencies run their operations. To listen to the entire interview or subscribe to Well’s regular “On the Street” podcasts through Apple iTunes, visit www.insurance journal.com/podcasts.

Insurance Journal hopes that these Best Practices snapshots bring retail agencies a new perspective on steps to success.

Insurance Journal: Give us a snapshot of Bolton & Co.

Brockmeyer: Bolton & Co. is an independent agent and broker headquartered in Pasadena, Calif. We have been around exactly 75 years, starting in 1931. On a premium side, we have about $250 million in premium. This year, we are going to close about $22 million in revenue. Currently, we have 128 employees, with 90 percent of those people in our headquarters in Pasadena, and the balance in a satellite office in Oxnard, Calif.

How many markets do you normally deal with?

Brockmeyer: Generally, our wheelhouse, if you will, is in the commercial middle-market arena. Our clients are generally firms with $10 million in revenue on up to a couple hundred million dollars. Being that’s the case, we really deal with virtually every carrier that plays in that arena. To be honest, on the commercial side when we are talking about property/casualty, workers’ comp and all ancillary lines, there’s really not a carrier out there that we want access to that we are not already doing business with.

We are trying to do as much direct business and as little through the surplus marketplace as we can so that we have better control over the relationships. But certainly, with special lines of coverage and programs, there is a need to work in the surplus marketplace. That being the case, we try hard to consolidate who we do business with on the wholesale side. I would say 90 percent of our business in the surplus/ wholesale marketplace is with about six different wholesale brokers.

On the direct side, the number of markets that we have appointments with is difficult to say because there are a number of regional markets that we use for workers’ comp. Overall, there are probably 30 or so markets that we have direct appointments with, where we are doing the majority of our business.

Does Bolton & Co. also provide employee benefits and HR services?

Brockmeyer: We do. Currently, about 70 percent of our income is from the commercial and personal property/casualty side, about 10 percent is personal lines, and the balance is in employee benefits and benefits consulting.

That has been the fastest growing area. We are growing probably about 20 percent this year in the employee benefits arena.

Are human resources included in employee benefits counseling?

Brockmeyer: Yes, because of the marketplace we are in on the employee benefit side, in which we focus on groups that usually have 50 to 1,000 lives and often don’t have very deep internal human resource departments. Also, a lot of our competition is either smaller — one- or two-person operations that really don’t have a lot of services to bring to the table — or large national public brokers that really don’t deliver services to those size clients.

A lot of our sales efforts on P/C and especially on benefits are on a consultative approach. Beyond just working with the six or seven medical carriers to design the best program and negotiate the best terms, we work with our clients on ancillary benefits-related issues — COBRA administration, FMLA requirements, online enrollments, employee communications, wellness programs, etc. We differentiate ourselves through the service and knowledge we bring, in addition to the standard negotiation and design of a benefits program.

Of your commercial lines, P/C business, do you specialize in any type of commercial account?

Brockmeyer: We have a number of industry niches, and those are growing fast. Our biggest one at this point is in private schools, primarily grades K through 12. We have an education practice group built here that is headed by Ron Wanglin. In that group, we have about 60 private school clients throughout California and a number of other states.

In each of our niches, we are trying to develop unparalleled intellectual capital, instead of just a one-market solution that so many are focused on. Ron has done an amazing job in this area, and I would submit is the foremost authority in this niche.

In addition to private schools, we have specialties in construction, real estate, health care, agriculture and a few others. [We have] 27 producers and are asking that each of them have a specialty that they are truly an expert in.

Does the focus on certain industries and niches contribute to success?

Brockmeyer: I would say that the biggest thing that has led to success is that the agency, over the 75-year history, really delivers hands-on service and is very personal in the way we do business. The people that we have here — the producers, account managers, the entire staff and crew — are really focused on working with the client on a personal basis.

One of the major factors that we look at is retention. We’re running about 95 percent retention in our P/C operation right now, and almost 97 percent in employee benefits, which we are extremely proud of. There has been a tremendous amount of change in our marketplace where most of our competitors in that middle market space have gone through major ownership transitions in the past year; they’ve been acquired by other brokers or banks. We keep taking advantage of turmoil in the industry and continue to drive to pickup new business.

Bolton & Co. is employee owned. What are the advantages?

Brockmeyer: It’s a huge advantage for us for a couple of reasons. All of the stock is held by current employees that are active in the company; 65 percent of it is owned through an ESOP (employee stock ownership program). In the past five years, we’ve made sure employees understand that value. We hold quarterly meetings where employees come in and we share detailed financial information about the company, where we’re growing, where we’re struggling, and what our strategic plans are.

We try to make sure that all the employees from top to bottom have input and understand that they are the owners of this company, and that our growth and success is beneficial for them financially. A lot of their retirement and financial future is based on how well we execute — and people have really bought into that. There’s a sense of that around here — the team atmosphere — and that’s a big part of it.

The other advantage is that because our ownership is well-diversified, we’re in a great position for continued perpetuation. We don’t have to look at the need to sell the firm or a large interest in the firm at any time in the near future. Again, a lot of our competitors haven’t had that luxury, and it has created turmoil in their culture when the ownership turns over.

I assume your profit sharing plan is part of the benefits you offer to your employees?

Brockmeyer: We have a traditional 401K, then again, the big advantage has been in our ESOP. The stock price in the past eight years has doubled within the firm, so what we’re seeing is incredible jumps, and we keep [growing] each year. Employees have been able to realize some very good increases in our ESOP portfolio.

Last year, in addition to our normal ESOP contributions, we made an additional $1 million contribution to the ESOP, as well as about $350,000 in quarterly bonuses paid directly to employees based on performance.

What are some other reasons why Bolton is successful?

Brockmeyer: Part of it is what we looked at a number of years ago on the commercial P/C side — we saw a void in the marketplace for middle market firms and, to be honest, Southern California probably has more middle market companies than any other area in the country. We saw that the large brokers could not deliver their resources to those firms because they were more focused on the Fortune 1,000 type firms, and the small brokers didn’t have the resources to deliver.

We decided to build out what we call a Risk Services Department, focusing on claims management, loss prevention and risk management. A number of years ago it was just kind of a concept. Since that time, we have been able to bring in a couple of key people that have really picked up that ball and run with it — to the point where they built the best team of safety and claims people out there.

Because of that, we’ve been able to continue to grow in the middle market arena and compete daily against brokers larger than us. The difference is that we’re actually delivering those services. From our end, at the senior management level, we didn’t have a master plan; just let’s see if we can find some good people and let them decide how to build it. With all of our larger clients, we are now executing very detailed stewardship reports, service plans and delivering some services that the carriers aren’t doing and our competition just hasn’t been able to do. That’s had a direct impact on our retention and our new business growth.

Where do you normally find your new employees?

Brockmeyer: Traditionally, it’s been from somewhere in the insurance industry. In the past few years, we’ve expanded this. We looked in the marketplace and could find people with insurance knowledge, but when we were looking for producers, we needed people with a strong achievement drive, work ethic and the people skills as the primary skill sets. We have decided that we can teach the insurance knowledge but we have to find people that have all of the skills.

We use an industrial psychologist in addition to Omnia Profile testing and at least a couple in-house interviews for every person that we look at hiring at the producer and manager level. The key is to see how they’re wired.

We have six producers right now that are in their 20s. A couple of them came basically straight out of college. We know that they have all the skills and are wired to be successful. We just started to put together a very detailed education plan, where we have a full-time education coordinator that coordinates their training to make sure we get them up and running on the industry as quick as we can.

We’re finding some of our best people from the real estate industry, the technology industry, out of college. We’ve opened our minds to say that we need to find the best people, then we can teach them about our business.

Bolton & Co. operates primarily in Southern California.

Brockmeyer: Absolutely. I would say that 95 percent of our clients are Southern California-based. However, being a member of Assurex Global has allowed us to not only pick up clients outside of the Southern California area, but clients that are based in this area and have operations around the world. That’s been a huge advantage.

Tell us a little bit about how Assurex works.

Brockmeyer: Assurex is a partnership of privately held independent regional brokers from around the world. The organization has been around 50 years and allows its partners to access resources worldwide. Although we’re licensed to do business in every state, we don’t have people on the ground everywhere … with Assurex we do.

When our clients have needs, or we need to know what’s going on in those markets, to be able to pickup the phone and work with the people there that are experts has been fantastic.

It’s not only being able to do placements, find out about local laws or competitive markets, but a big advantage has been the sharing of information.

We get together a number of times a year with owners and senior managers of firms not unlike ourselves from around the world and have a completely open and honest sharing of financial information, best practices and the like. It’s something you just can’t do with your direct competitors.

That’s just been an incredible value to our firm, whether it’s IT solutions, financial solutions, compensation issues, etc. It has enabled us to learn from the people that have the best practices in each area and not have to recreate the wheel everyday.

How is Bolton and Co. using the Internet?

Brockmeyer: We have a traditional Web Site, which we have content on, but we’re not doing a lot of advertising, driving people to our site and doing a lot of business electronically.

At one time a number of years ago, we did look at and invest quite a bit of time and effort in some online insurance solutions, but in the marketplace that we’re in, we found very quickly that people want to deal with people, not a Web site. No matter how you do it, it’s still intensely a relationship business. We need to have faces in front of the clients.

This is Bolton’s 75th anniversary.

Brockmeyer: Right. The company was started by Dorance Bolton in 1931. His sons, Jim and Bill Bolton, took over the business in the ’70s, and we are actually very fortunate and thankful to be the first non-Boltons to be running the firm, as of about three years ago. This past summer we had a big 75th celebration and tied it in with a charity. We had a great event and were able to present a $25,000 donation to one of our local charities.

If there were one thing you could share with your fellow brokers around the country, what would it be?

Brockmeyer: The biggest thing for us and the realization that hits me every day is, no matter how much we talk about trying to be more efficient in operations and procedures and finding different ways of doing business in unique markets, electronic solutions, etc. … It is completely a people business. I don’t see a change anytime in the future.

The better you are at finding, training and retaining the best people available, the sooner you can reach your goals.

So, basically it’s back to the basics of blocking and tackling.

Brockmeyer: Absolutely, we’ve seen that again and again with our clients. Almost 50 percent of our business is currently written via broker of record basis. Often, the reason is that prospective clients say, ‘You know what, I really don’t ever see my agent and broker. When I do, they show up at the last minute and give us a quote. And I really don’t look at them as a resource.’

We wouldn’t be doing nearly the business or having the success we do now if it weren’t for having good people working directly with clients on a daily basis. That’s why our retention is where it is, and that’s why most of our business doesn’t come from the quoting of insurance. It’s having intelligent people providing solutions for the client.

Bolton & Co. Insurance Brokers

Agency President: Steve Brockmeyer

Founded: 1931

Headquarters: Pasadena, Calif.

No. of Employees: 128

Phone: 626-799-7000

2006 Premium: $250 million

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