Kronenberg Touts Innovation in Partnerships, Program Manager Role

By | November 6, 2009

Tony Campisi and Bill Kronenberg used to tease each other about merging their two Pennsylvania brokerage organizations. Just about a year ago, they started talking for real. On the last day of December, 2008, the deal was struck. Campisi’s York-based insurance broker Glatfelter Insurance Group acquired Kronenberg’s national program administrator Professional Underwriters Co. of Exton for an undisclosed sum.

Professional Underwriters’ President John Solari became executive vice president and chief underwriting officer of Glatfelter’s Public Practice division.

Kronenberg, who started in the insurance business with AIG in 1975 and was working on the program side at AIG within nine months, has now stepped out of a day to day operating role, and stepped onto the Glatfelter board.

Kronenberg says the merger promises to be a “classic win-win” for both companies.

“Glatfelter really did not have a very strong presence in the school business, which Professional Underwriters had a very strong presence. And we had a fairly modest presence in the municipal, a market which they had a very strong presence in,” says Kronenberg.

“We just felt we had a problem growing organically, and each was having trouble growing organically in the opposing market. And it made sense from and economies of scale situation, especially in the economic times where those two entities, who had known each other for a long time. We live less than an hour away from each other.”

Kronenberg discusses the merger and the state of the program business and profession in this interview with Insurance Journal’s Andrew Simpson.

Is there anything about the merger process that’s surprised you? Have you learned anything about either the difficulty or the advantages of merging?

Kronenberg: The best advantage, if you can do it, if you have the luxury as I did in this situation… of doing it with somebody you know, you trust, and you like. Tony and I were able to do the entire negotiation between ourselves. Clearly we had lawyers to draw up the paperwork. But 100 percent of the negotiations were done by myself and Tony. I might have to ask him to see if his memory is any different, but maybe three or perhaps four negotiating sessions face to face, and maybe two on the telephone. So if you ever have that luxury, that’s the best way to go.

Short of that, the best way is to know your book, know your own business, know what you want out of the deal, and know that you’re going to have to be honest about where that book is going to take you and your partner into the future. Because if you’re not aware of where that’s going to happen, it’s going to be hard to come to terms with it, whether you’re a buyer or a seller, as to where that’s going to go into the future. Really, the projections have to work for both parties into the future.

So that’s the best advice that I could put forward at this time.

Is it helping you in your respective markets?

Kronenberg: I think it’s helping. I think it’s too early to state whether it’s a true financial success. But I think it’s clearly helping because it’s broadened out each other’s offerings. So in that respect, it creates that one stop shopping. There’s clearly been some economies of scale in administrative expenses. But absolutely it’s a little bit too early to tell what the impact of the economy has been on the market.

It’s very, very hard to measure those situations. What’s the impact of the AIG situation been on the market, which was one of PUC’s carriers? We lost some business because of that situation. That’s a hard one, how do you measure? Would it have been different had AIG not suffered its troubles?

We respect the people at AIG and we wish them the best, but clearly that had an impact on Professional Underwriter’s book of business, where we had AIG representing us. So it’s very hard to measure at this point. It’ll be measured more in years than in a one year period.

You anticipated a question about the effect of AIG’s trouble. Has this led to a lot of competition?

Kronenberg: Oh, it sure has, if AIG was your market. It clearly varied by your niche. If you did not have a lot of competition, then it wasn’t as big a problem. If there was a lot of competition than the other carries, rightfully so, represented themselves as potentially more stable, more secure. And brokers and insurers were more willing to explore alternative to AIG than perhaps they had in the past.

Brokers had an obligation to explore alternatives, right?

Kronenberg: Absolutely, absolutely. I think the AIG folks did an absolute at least the ones we dealt with that came out of the old Lexington side it. They did an excellent job of communication, of crisis management. I think they did a classic, textbook management in how to deal with crisis. But it still didn’t take away from every evening the barrage of negative news that was out there. And the experience, I’m sure, of many a broker that had only AIG in their portfolio was they lost business.

Are there any positives out of the AIG situation?

Kronenberg: I think one of the things that’ll be good is having AIG as a stand alone company and not part of that big financial conglomerate. I might be better for AIG. It might be better in that situation, in that there was a lack of transparency. I’m not saying that in a nefarious way, but it was hard to understand who they were, what were their ratings and how they got there. And it was always a bit of a leap of faith that they were solid as a rock. Now you’ll be able to track them like you track other carriers. I think you’ll be able to compare apples to apple, so I think it will be better for AIG.

I think it is a little bit better for some of the other companies. It gives them a little bit more time for light to shine down. It’s sort of like the big Sequoia got taken down and a little bit more light shines on some of the other trees, and a little bit of a chance for others to grow up and sprout.

The theme of this year’s Target Markets program is innovation. As someone who’s been in the field since 1975, what innovations do you see as being important?

Kronenberg: I think you clearly look at the blending of technology to give efficiency, but that’s almost too easy. It’s there. We how have a fully integrated single entry in almost every agency, large and small. Many are fully paperless. But that’s almost routine, that’s almost passeé.

… I think innovation comes more from creativity in alliances and partnerships and marketing. I think that ones that are really being innovative are the ones that have found ways to work with their carriers in unique fashions. So that it’s not business as old, where Carrier A gives a pen for this limited program to Program Administrator B and he marches it through X, Y, and Z and that’s all there is.

There are all sorts of twists and turns on that relationship. There’s multiple agents, there’s multiple carriers, there’s multiple geographic spins on it. There’s risk sharing in the elements. There’s marketing shares in the situation where the carrier may be doing some of the marketing or the agency may be doing some of the marketing for programs where it’s not even involved in the situation.

So there are all sorts of blending and partnership arrangements throughout. That’s where I think the innovation and creativity is coming to the forefront.

Of course, it’s always coming on the product end of the game. There are new exposures out there every day that are coming from a technology end, or coming from life sciences or biosciences.

…I can’t keep up. I have no idea what they talk about when they really talk about life science hazards, except for being able to say that buzzword. But it’s out there.

What about the role of the program manager? How has this role evolved?

Kronenberg: Well, it’s just gone up through the roof. It always was what excited me about the program administrator was that it required you to wear many hats. As you advanced in a carrier until you got way up there, you were sometimes pigeonholed. You were an underwriter, or you were in marketing, or you were claims person, or you were an HR. You didn’t get to do too many different things until you got into a pretty good management position. In a program administrator shop, even a small one, one minute you’re underwriting and the next minute you’re marketing. You’re dealing with claims problems, you’re dealing with a loss control situation. So you’re required to wear many hats across the board.

Well, it had evolved from that, just wearing and juggling many hats, to brining professionalism to every single one of those aspects, including actuarial. It’s a rare agency today that doesn’t have true expertise in every one of those areas.

What’s the best training for someone wanting to get into program administration?

Kronenberg: Funny you should ask. One of the things Target Markets is working on right now is the creation of Target University. The basic knowledge and the basic education is of course a business degree. You come into the overall industry with a solid business degree, with a concentration in whatever, whether it’s marketing, accounting or business as a strong solid. But there is no real strong degree that focuses on leadership and the issues that are unique to the elements of a program administrator. Right now Target Market Association is creating Target University. This will be the first certification specifically designed by program administrators for program administrators. The goal is to raise industry standards for program administrators and assist them in managing their operations.

We will provide … we haven’t fully settled on the name, yet… but it will most likely be a certified program leader certificate. It will be 10 or 12 courses completed online. There will 10 or 12 different modules that we will build with educators that we’re seeking out in the marketplace, along with some of our members, who will help build the content, deliver it through the web to members and help them develop these various expertises. Again, in all these same areas that we’ve mentioned before, but focus on program administration.

Last year about this time there was talk about carriers becoming more interested in program business. Have you found that to be the case?

Kronenberg: Yeah, we absolutely have. I think it’s been evolving over years. Many say it’s just a part of the continuing soft market cycle, which has continued to be soft. There’s no question about it. And I’m sure some of the growth in markets’ interest in program administrators is because the market is soft, and they’re looking for additional sources of distribution. However, I would argue that there is a growing interest in program administrators because of what we talked about previously, the recognition that the program administrative marketplace is not your father’s marketplace. It is a much more professional marketplace.

It’s a marketplace that’s filled with folks who understand the niche you want to operate in, that can underwrite the business, that have the systems, that have the actuarial claims and marketing staff to support it, that do have the capital strength to partner with you in securing a long term relationship. And I think the carriers, especially the newer carriers, are recognizing this and are reaching out to the growth.

What do you think carriers are looking for in the program business today?

Kronenberg: It varies. It really varies by every single carrier. Everyone comes with a slightly different appetite. I would say that most of the carriers come looking for programs of certain size and gravitas, simply because there is a certain built in fixed costs. Most want programs of $10 million, $15 million or higher. So we struggle sometimes to bring into our membership carriers that will look at programs of $5 million or $10 million for our membership. But once you’re past that hump, it is a really wide range. You have carriers that love single, state, or regional programs. You have carriers that want nothing but national programs. You have carriers that want single line programs, like just architects and engineers. You have other carriers that want multi line programs for supermarkets. They want to write every single line of business for supermarkets. You have those that want excess coverage. You have those that want primary coverage. It is a wide variety of tastes and appetites…

What’s it like to lose a carrier?

Kronenberg: Well, it’s very tough, and you can lose a carrier for many, many reasons. You can lose because of loss experience. You could lose it because they’ve lost their rating. You could lose it because there’s been a change in management and they no longer desire to be there. So depending on the reason drives your ability to find another market. But every program administrator who’s worth their snuff knows that you’ve always got to be prepared for that. You have to have your data in the best possible format. I’m not saying that you’ve always got to be looking over the shoulder of your carrier for your next dating partner. That doesn’t work out too well, either. But you’ve got to be prepared and have your data scrubbed. You’ve got to have your materials ready. You’ve got to be aware of who’s out there in the marketplace. You’ve got to be going to things like Target Markets and know who the other carriers are. And then you’ve got to be prepared at a moment’s notice when you smell the smoke.

Fires don’t just happen. There’s got to be smoke, and when you smell that smoke you’ve got to launch. And you’ve got to get out there, because you may only have six months, if you’re lucky, under the cancellation. I mean in some of the old, tough, hard, hard markets cancellations you have even less. And I don’t know how you move a market in less than six months.

Topics Insurtech

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