CEO of New Marsh Retail Agency Sees Lean, Nimble Operation

New Nationwide Entity to Target Smaller U.S.-Based Companies with Less Complex Needs, Says CEO Butcher

Global insurance broker Marsh, accustomed to handling large and complex insurance accounts, has its eye on the $80 billion in insurance premium paid by smaller and emerging growth companies in the United States. The broker announced in mid-October that it is setting up a separate retail agency to go after this business.

The new entity, Marsh & McLennan Agency LLC, will be hiring producers as it opens in selected cities across the country starting in the first quarter of 2009.

According to Jack Butcher, president and CEO of the newly formed agency, the agency will conduct its business separately from Marsh’s insurance brokerage operations.

Butcher sees the new agency as scaled-back and simpler compared to big Marsh as it will be offering products that meet less complex needs than those handled by the big brokerage house.

“Structurally, we are probably going to be more lean in the retail offices, which is to say that the agency will be providing obviously competitive products and local insurance counseling to customers. But that’s really about it. We’re not going to staff up a robust risk consulting infrastructure like Marsh has,” Butcher told Insurance Journal.

The agency will offer commercial property and casualty, directors and officers liability, surety, employee benefits and personal lines products to U.S. customers from carriers Butcher is still lining up.

“[I]f you think in terms of many of the customers — many of the clients rather — that Marsh the broker tend to serve, they have very complex needs. The kinds of solutions they require are more complex. What we’re focused on in the agency is what we have not served. We haven’t pursued the segment of the market which the agency will pursue, which tends to be served most effectively by carrier product inventory that’s available today,” Butcher said.

“It doesn’t tend to require a lot of customization, so what we hope to achieve here is to deliver cost effective and appropriate products to these customers through a more simple and streamlined distribution channel in a way that’s probably a little more nimble and doesn’t have quite as many consulting resources in it.”

The target market will be small business and emerging growth companies, which Butcher considers firms with revenues less than $75 million. He said Marsh does not now have a large customer base in this range, although it does have some customers this size and some of these now with the brokerage division could end up becoming customers of the agency in the future.

Butcher joined Marsh in 1988 from Johnson & Higgins when that company and Marsh & McLennan merged. He’s been a broker, a client executive, sales manager and branch manager, mostly in the mid-Atlantic and Washington, D.C., area. Prior to his new role, Butcher ran Marsh’s Chicago office. In his new position, he will be based in New York. He has also been a commercial insurance buyer for a middle market transportation logistics firm, when Marsh was his broker.

As for the target market, the former insurance buyer suggested there would be some elasticity in the revenue guidelines for the size of companies the agency will go after.

“[I]f we take this back to buying style, back to my days as a customer, I didn’t want to be jammed based on my size. I wanted to be served based on my needs,” Butcher said.

Any specific industries where the new agency might focus will depend upon carriers’ appetites and, to some extent, Marsh’s existing expertise and business.

“I think what we want is to be able to pursue growth in industries where the carriers that we will ultimately work with have differentiated product for,” he said. ” So … until we have the carrier equation finalized, it’s probably premature to suggest that we have the industry finalized. But I don’t think it would be a tremendous shock. This is not going to be a sort of monocular industry play.”

While he would not disclose the specific industries, he believes Marsh already has “embedded industry expertise” that the new agency’s producers will be able to access to win over smaller firms in certain industries.

“It’s intellectual capital. It’s white papers. It’s data. It’s risk information that, again as a former buyer in this space, I would have found very, very useful to me, as a COO of a middle market company, of a growing emerging growth company,” said Butcher.

While cautious about revealing what specific industries the new agency will pursue, Butcher made it clear that Marsh & McLennan Agency will strictly focus on U.S. companies. He stressed that it will not be serving global companies.

But just because it’s not going after global companies doesn’t mean global issues won’t be addressed.

“As the world gets flatter, global risk issues aren’t just limited to the global companies anymore,” he said. “They really do start to impinge on small and emerging growth companies and entrepreneurs. I see a marvelous opportunity to use that kind of market intelligence and technical ability to help buyers in this segment be ahead of the headlights, if you like.

“It’s not just about the U.S. anymore. The factors that affect the economy, risks that might involve and affect many local businesses, aren’t necessarily just evolving out of the U.S. anymore.”

Butcher said Marsh’s decision to launch this agency now is part of its growth strategy. “We’ve identified the market. We’re looking for our growth opportunities as a firm overall,” he said.

Butcher’s words echoed those of top management.

“This is a very exciting step in the growth of our United States operations,” said Dan Glaser, chairman and CEO of Marsh.

“We recognize that large and small organizations expect distinctly different insurance buying experiences,” said Joe McSweeny, president of the United States/Canada Division of Marsh.