No two farmers are alike. Whether it’s how they work their fields or pay for the land or grow their crops, farming is a uniquely specialized business venture.
Illustrator: Mick Wiggins
In an industry dominated by mergers and acquisitions, organic growth remains a top goal for most of the key players.
For many leading businesses, organic growth remains Job One.
Experts say growing organically requires a willingness to innovate.
Lockton uses analytics to pore through customer data that will identify trends and save customers.
“Each farmer has a little bit different structure as far as their debt loads,” explains James Korin, president of NAU Country, which offers crop insurance through QBE. “Whether they own it outright, whether they are buying new land or need equipment, everybody needs a little bit different coverage to get their operating loans from the bank.
“It’s a complicated program, but that’s what makes it successful because there is a choice for everybody. There’s not one policy that every farmer must fit into. There’s more than 100 different crops and literally hundreds of different options on coverage they can take.”
The ability to effectively serve such a diverse group requires deep expertise in the industry itself, and as the third largest crop insurer in the country, QBE takes this quite seriously.
“In our crop business the team lives and breathes the American farmer, and, in most cases, our people are farmers themselves or grew up on a farm,” says Russell Johnston, CEO of QBE North America.
Korin echoes the sentiment. “We’ve got close to 800 employees working in our crop unit. They’re either part-time farmers, farmers themselves or people who grew up on a farm and are looking to stay in agriculture,” he says. “The crop program is unique. It requires knowledge of crops when you’re going out to talk to the farmers. That even includes our programmers, where we design and develop all our computer systems. We get a lot of those folks out of either ag colleges or right off the farm, and they come in and do the programming. They understand the crops and the cycle. That’s important because, if you’re trying to build a system that works for the American farmer, you have to know what you’re building.”
QBE’s approach to farming is indicative of its overall strategy of limiting partnerships to agents and brokers it knows are compatible with its focus. This strategy allows QBE to get to know its brokers on a deeper level and gives its partners access to products and services that are distinctive and exclusive.
QBE North America, part of QBE Insurance Group, is an integrated specialist insurer offering specialty, property and casualty, crop and reinsurance products.
“We set out to create a company that would offer integrated specialized solutions for a limited and preferred network of brokers. That approach allows us to build the strongest partnerships with our brokers and customers so we can better understand their needs,” says Johnston. “At the end of the day, if we are doing our jobs, our brokers and customers won’t feel like they are dealing with an insurance company. They will feel like they are dealing with an extension of their company.”
QBE North America is sharpening its focus on industry solutions, and the brokers it chooses to work with emphasize specialization as well.
“We see our partners making tangible investments to shift from generalization to specialization,” says Mark Cantin, president of QBE North America’s field operations. “They are looking for carriers that can match the specialization on their side, and at the same time, they’re looking to do more with carriers that are willing to customize products to help them grow organically.
“What that goal leads to is brokers’ needing to rationalize their book of business and conduct more business with fewer carriers. They want carrier partners who are going to provide them with bespoke solutions rather than simply quoting product.”
QBE North America believes that shifting from generalization to specialization can help brokers better serve their clients—farmers being a case in point.
Moving forward, QBE is innovating and investing in technology that will drill down even further into the specifics of farmers’ needs. “There clearly has been an explosion of data,” Korin says. “We’re using that data just as farmers are using it in their planting and harvesting equipment. Five to 10 years ago, the geospatial industry was just taking off. Our innovation in mapping goes back to the time Google maps was just taking off. Up until that time, farmers needed to use the old legal description—township, range and section—in order to complete their yearly acreage report. The process was very complicated, especially if fields were split in between multiple crops.”
Now, new mapping technology allows NAU Country to put each farmer’s information into a visual map so farmers can identify precisely which fields to insure based on actual planting data. “If you are a farmer with multiple fields, you can easily make mistakes regarding township, range descriptions, what you are reporting,” Korin says. “There is a lot of 600-acre farms that are split—half corn and half soybeans, for example. To legally describe a split farm was not only tough; it was inaccurate. Using these geospatial tools, we can now know exactly what has been planted down to the tenth of an acre.”
NAU Country is using field insights to help with risk management. “We’re taking all this weather data, soil temperatures, soil moistures, soil conditions, and we’re putting it into a model to help our farmers determine when they should be planting, when they should be harvesting or spraying chemicals,” Korin says. Adjusters also use drones to survey damaged fields much more efficiently, helping to service claims more quickly.
“We are making great progress on our journey to provide distinctive value to the market through applied expertise, an experience of excellence and our global strength,” Johnston says. “I want us to be known for these values. And the idea behind that is simple. It’s not just having expertise or offering an experience of excellence. It is leveraging those core values in a way that our brokers and customers will feel it. That is how we will be successful.”
“There’s really only two ways to grow in this business: You can acquire new business or you can grow new clients,” says IMA President Bob Reiter. “I think it’s fairly simple that acquiring clients has a much lower acquisition cost than acquiring agencies—not to mention the cultural issues that can be associated with M&As. It’s fairly obvious to us that growth through organic means is the lifeblood to a successful agency or brokerage these days.”
It’s also a key factor in a firm’s ability to hire more workers.
“Organic growth is the primary means by which we grow,” says Lockton COO Glenn Spencer. “If we’re not growing 8% to 10% a year, at least, we’re not going to be able to reward our people with opportunity and compensation. We’re not going to be able to bring new people into the organization.”
So even as the industry consolidates through mergers and acquisitions, organic growth remains a concern for most.
“Firms like ours need to grow organically because it’s the only way we’re going to stay vital and relevant,” says Renae Flanders, CFO of Aon Risk Solutions U.S. Retail Operations. “We certainly look to M&A to help, but we need to grow organically. We need to invest in areas that provide the greatest return for our money. We need to cross-sell our property and casualty business with our health business and vice versa and really bring any new expertise we can to help our firm grow.”
J. Patrick Gallagher Jr., chairman and CEO of Arthur J. Gallagher & Co., calls organic growth the number one pillar of the company’s business strategy.
“We’re trying to do four things every day: organic growth; mergers and acquisitions; a higher level of productivity; and maintain and continue to build on our culture,” Gallagher says. “We haven’t changed this in 20 years. Number one is organic growth.”
Organic growth is described as the increase in output, sales and production that excludes profits or growth acquired from takeovers, acquisitions or mergers. It’s a simple enough definition, but a devilish proposition. Scott Addis, president and CEO of The Addis Group and Addis Intellectual Capital, says customers have become adept at what he calls commodity shopping—turning the broker or agent into just a set of numbers.
“It’s frustrating how life can be out there for a producer,” Addis says.
If you’re not innovating, you are probably behind already.Tweet
So everyone agrees they want to increase organic growth, but how do you do it? Many experts say it requires a core commitment—a culture that encourages whatever it takes to grow organically and a willingness to innovate.
“If you stay stagnant, you die in this business,” Reiter says. “If you’re not innovating, you are probably behind already. Our competitors are amazing.”
But there are things a broker or agency can do to prompt organic growth.
“From a compensation perspective, for producers it’s not that complicated,” Reiter says. “You provide incentive to them for what you want them to do. We have a big spread between our new business and our renewals. We pay much higher for new business than we do on a renewal. Our model is somewhat different. We separate the servicing from the sales so that those folks can concentrate on building their book of business and obviously retaining that book; although, it’s important to note that every salesperson has a very important role with that client. We will provide lots of service to make sure that once we secure a client we have them forever.”
Retention is key strategy. Gallagher says the first step in his company’s strategy behind organic growth is to never lose an account.
“We hate losing an account, and we think our retention, at 93% to 94%, is pretty damn good,” Gallagher says. “Once someone gives us the order, man, we don’t ever want to lose them. We swarm problems. We run to problems, not away from them.
“Second to that is we are an aggressive sales company. I started as a p-c producer. We get it. Every single day, every chance you get, you are looking to bring in new clients. That is the lifeblood of the organization. When we do an acquisition, that’s wonderful growth for us, and we do want to buy a sustainable revenue and earnings stream. But what we also remind people we are getting is additional new brainpower, new resources into the company.”
“Risk is constantly evolving, and at Aon, we need to ensure we are nimble enough to adapt to the constantly changing landscape,” Flanders says. “We look to innovate. We look to improve our processes. We look for creating new products and new deliverables and understanding our clients’ needs. If we do and we do it well, we will differentiate ourselves from our competitors.”
Reiter says that at IMA, the desire to innovate outweighs a fear of failure.
“We do lots of R&D, and we try to incubate ideas from the folks who are placing business and are handling business,” Reiter says. “They’ve got their ear to the ground. You can’t create a successful product without having some that don’t work or you have the wrong distribution methodology or you didn’t get to the market quickly enough, but I think one of our hallmarks has been our ability to find those gaps in the need base of customers and fill them as quickly as we can.”
Intimate Client Relationships
Lockton uses analytics to pore through mountains of customer data to identify trends that can help customers.
“That’s where we are winning,” Spencer says. “We are taking a lot of data, a lot of information, culling through it and understanding our clients’ business and getting to a really simple issue that you don’t see on the surface.”
Addis has a formula he preaches to brokers across the country. It requires producers to get involved with potential clients earlier in the process and to be an active listener.
Once someone gives us the order, man, we don’t ever want to lose them.Tweet
“Discover the customer,” Addis says. “Know the business inside out. It is so cool to go into a business and ask them what keeps you up at night. That is also fun for the customer. They love to talk about their business.
“Step two is strategies to manage their risk. I really believe that the better agents and brokers are strategists; they have moved beyond price and product and are truly strategically thinking on behalf of the client.”
Only then should the producer move to implementing a program and monitoring its success.
“If we ask 100 customers, ‘Where do you see the agent or broker starting? Do they start in step one, two or three?’ Every single one is going to say, ‘They all come in throwing up numbers in step three,’” Addis says. “How in God’s name do you put a program in if you are not a strategist? That’s like a physician who doesn’t consult and diagnose and is trying to treat the patient. Their plan of treatment is only as good as the diagnosis. What’s happening today is a lot of brokers are starting the treatment phase without getting a diagnosis.
“The process will certainly drive emotion within the customer when they can talk about themselves. It really becomes a customer experience journey. I would say the value proposition people have is that their primary fundamental job, whether they are in benefits or p-c or commercial lines or personal, is discovery, strategy, plan and monitoring.”
Spencer says Lockton does something similar.
“Historically, brokers and consultants have focused first on their area of expertise,” Spencer says. “In talking to our clients and in looking at our most valuable relationships, the feedback we got back was, ‘What we really appreciate is that your solutions help make our businesses better.’ We’ve really gotten our people focused over the last few years on starting with, ‘What’s your client’s business? What’s their business objective? What strategies can we implement that will help them achieve their business objectives?’ That’s been a game changer for us—approaching it from our client’s perspective versus our perspective.”
A common practice among agencies today is to develop producers who are experts in their industry niche.
“If we look at our top performers, 85% of them had industry or product expertise,” Spencer says. “We took a step up, studying those people and what it takes to develop expertise. We spent hours interviewing these people. When you talk to them, the patterns were that they understood the client’s business in general. They understood that industry. They understood how their specific clients related to that industry. They understood the risk and benefit issues associated with that industry. They developed unique solutions to those issues. They had deep relationships outside of their clients with attorneys, consultants, other business advisors. There are 10 or 12 strategies that are pretty consistent around people who have a name in a space, and that’s actually teachable, so we teach from our best performers.”
For many businesses, the Affordable Care Act has provided a stepping stone to organic growth, with the results evident in many brokers’ bottom lines.
“It’s been a real boon for us,” Spencer says. “Before the law was passed, as it really began getting a lot of traction politically, rather than turn inward and get concerned, we took an approach of: If we give our clients the best advice we can, we’ll be in the best position regardless of the outcome. It’s actually been good for our business.”
Discover the customer.Tweet
IMA is another company that profited from healthcare reform.
“A few years ago, I think brokers had to decide whether they were in or out on employee benefits when we started hearing about the changes in healthcare and all the things associated with Obamacare,” Reiter says. “Whether there would even be a model that would keep the agent or broker in the deal. I think there were a lot of people who went on the sideline, and we did the opposite. We started investing in products and technology and service and people so that we could respond to what we thought would be mayhem as people tried to figure out what in the world was going on with healthcare reform. That has paid off. I would say our employee benefits operation is growing faster than any of our operations.”
Aon was an early adopter of healthcare exchanges. “For us, healthcare is so important,” Flanders says. “With healthcare making up 17% of GDP, firms like ours need to come up with a better mousetrap to help our clients address specifically the rising cost of healthcare. It’s one of the most important issues facing our clients.
We definitely view our health and benefits practice as a big growth area for our firm.”
In the end, it may all come down to relationships.
Says Spencer: “The second you can convince a company that their business is going to be better because they are engaged with you, you’re going to win that business.”