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Global insurance broker Marsh, known for handling large and complex accounts, is out to win a share of the $80 billion in insurance premium paid by smaller and emerging growth companies in the U.S. The firm announced last week that it is setting up a separate retail agency to go after this segment.
The new entity, Marsh & McLennan Agency LLC, will be hiring producers as it opens in select cities across the country starting in the first quarter of 2009.
According to Jack Butcher, president and CEO of the new venture, the retail agency will conduct its business separately from Marsh’s insurance brokerage operations, although the launch is part of Marsh’s overall growth strategy. “We’re looking for our growth opportunities as a firm overall,” he said.
Butcher already has specific cities in mind where he wants to launch the new retail operation but he isn’t going public with that information yet. “When we do operationalize, when we do go live, this will be a national agency, meaning, I do expect to have a footprint that will be attractive to carriers who are looking for an effective distribution model,” he told Insurance Journal.
He said he will “almost certainly” be looking to hire producers to staff these locations, in addition to using current employees.
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.
“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 product 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 customers in the U.S. from a roster of carriers that Butcher is still building.
“[I]f you think in terms of many of the customers – many of the clients rather – that Marsh the broker tends 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,” the CEO 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 to be firms with revenues from about $75 million down to $50 million and some below that. 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. areas. Before taking the helm of the new retail venture, he was running Marsh’s Chicago office. In his new position, he will be based in New York. Butcher has also been a commercial insurance buyer for a middle market transportation logistics firm, when Marsh was his broker.
As for the target market for the new national agency, the former insurance buyer suggested there would be some elasticity in the revenue guidelines for the size customers 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,” Butcher 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.
He stressed that the agency will not be serving global companies— Marsh already has resources dedicated to global companies.