Be accountable and you'll succeed

By Stan Sauerwein

As the market begins to show more signs of softening in the coming year, a laconic Pat Anderson says insurance companies ought to prepare for a backlash. Customers, he thinks, have lost their faith in the industry. And, brokers have slid towards a more suspicious frame of mind. He doesn't think brokers believe insurance companies care like they once may have about the bread and butter of every independent broker operation - the clients.

With a touch of frustration in his voice, Anderson says the insurance business has been taken over by "actuaries and bean counters."

The hard market was a "very demeaning period of time for the broker," he says. "The industry just doesn't realize how much credibility they have lost."

While the co-owner of Pat Anderson Agencies Ltd. recognizes why carriers needed a fast change in fortune, the stocky visionary of the five-branch business on Vancouver's Lower Mainland says the swift method companies chose for recovery was ill-advised.

But, that wasn't surprising in his opinion. "We're dealing with an industry that really doesn't' know what it is, doesn't know what it really is there for and doesn't know how to run its business."

"If it wasn't for the insurance broker, this industry would be done. I have a helluva lot of empathy for the brokers who've had to go out and face their clients in the last couple of years. They've earned every bloody nickel they've made."

A broker for 34 years, Anderson has weathered three major hard markets in his career. Because of the way the companies operate, his business instincts tell him history is bound to repeat itself. Brokers ought to prepare for the next swing right now by focusing on service. When the market softens, insurance companies "segment the market, write the classes they feel make money and then start competing with those classes like heck until they drive the price down to the point they can no longer make money doing it. Nothing has been indicated to me that it is ever going to be any different." Except for one thing. Companies seem to be ignoring customer needs, and are driven only by corporate bottom-line.

But, he thinks astute brokers can take advantage of an attitude shift that now treats insurance products as a commodity. In the years to come, he says, "if you are selling your expertise and service you will prosper," because insurance companies are striving to take the business in a more automated and impersonal direction.

"Insurance companies are segmenting and taking what they all consider to be the consumer side with the products they can box and package and sell over a website." B2B will create the kind of business climate where insurance companies can reduce commissions, much like airlines did to travel agencies, he blieves. "That's where they are going with it. It's easy to see. But where the hell is the service?" Whether insurance companies mean to or not, they are creating a bigger void between themselves and clients by B2B, he thinks. That will make the service and expertise offered by brokers to uninformed consumers ever more important. As a fierce competitor, Anderson says that is where his focus will be. It's the same place it has always been, right at the heart of his business.

Pat Anderson Agencies (PAI) has been a successful concern since Anderson left his first job in the business, with a small broker, to strike out on his own. Once Paul Towriss joined him as a partner in the early 1970s, the two men have never looked back.

They share guidance of their brokerage with Anderson's wife Sharon Hardy as general manager. Pat sets the direction of the company, Paul deftly handles relations between carriers and clients and Sharon makes sure operational targets are met. Sharon started with the company as a CSR 24 years ago and married Pat 12 years afterward. Pat says he must have been doing something right as a boss.

The brokerage has grown from humble storefront beginnings on Burnaby's Kingsway in 1969, to three PAI offices and two locations of Giffin Insurance. In 2000, PAI bought the insurance operations of Richmond Savings Credit Union and then sold it again a year and a half later to Coast Capital Insurance Services Ltd.

Through that purchase, Anderson was reminded just how important teamwork and individual commitment can be to the success of a brokerage. At that time the average employee at PAI had 10-plus years on the job. He says the new staff team of 47 people averaged only three years with the credit union agency, and though they were earning 10-15% higher base wages, they weren't as satisfied in their jobs as the PAI group, who had commission incentives.

"Insurance was not their primary business at the credit union. It was just an add-on service they were offering to their clients. For the people working for credit union agencies that is very difficult because they basically know they are not main stream" in their organization.

The PAI team did their best to turn that around, but when the chance to sell at profit presented itself, Anderson says the decision to return to a more intimate group of co-workers was not difficult. "Here it's a big family. The owners are in here every day doing the work. If there is a problem, we are on it. The support is there."

Anderson has always had a competitive, sometimes combative business style. After contracting rheumatic fever at the age of 13, he defied doctor's orders and took up the aggressive, physical sport of rugby. It's a game with lessons he's used all his life. Anderson played first division rugby for 20 years, most with the Kats Rugby Club and has been coaching since he gave up the scrum. The Fraser Valley Venom team he directs has won the national rugby Super League championship twice and provincial championships four times.

In 1997, along with Conrad Spiers, he showed his willingness to face off on issues he believes in wholeheartedly no matter how big the opposition might appear. ICBC wanted to reduce the number of Autoplan brokers they had, based on production volume, and to do it without compensation as an economizing move. It would likely have resulted in 350 small brokers closing shop. Anderson and Spiers were incensed. They objected to the ICBC strategy which they considered unethical, even though it was supported by IBABC at the time, and launched a legal fight to kaybosh the plan. The action took a heavy toll on both men's time and pocketbooks, but eventually resulted in withdrawal of the proposal.

He still sees winning that battle on behalf of small brokers as a career highlight.

Anderson works with his current complement of 47 staff using the same coaching style he employs with champion athletes. That boils down to being personally involved in staff training, which forms a big part of the business dynamic in his brokerage.

"We're definitely a team. Expectations are there," he says cryptically. Pat gives a lot of credit to the open communication in his operation to partner Towriss. "Paul is excellent. He knows how to explain things very simply and the staff all know what his expectations are."

Anderson is visibly proud of the accomplishments of his staff and uses the recent transition to RCT as an example. "The mandate here is that before our people were allowed to do a homeowner policy, they had to be internally validated." Anderson hired a trainer for the RCT system and put the staff through a course that culminated with an exam. He took the brokerage through the intensive training regimen because he didn't want errors replicated as they might be without instruction.

"In the past, if you gave it (evaluation) the good college try and made a mistake, the insurance companies would back you up. I am not convinced that today they would do that."

"As individuals we all take responsibility for customer service," he adds. "Everyone contributes to getting the best for our clients."

One of the secrets of running a successful brokerage is to be approachable, he says. "Our policy is to identify what the problem is and to make sure the client is taken care of first. Then, if there has been a mistake, we analyze what happened and make sure we don't do it again."

PAI makes sure each office manager is accountable for keeping their staff knowledgeable. "I like to have a superstar in every office that is knowledgable about all the products they are specializing in and then the rest of the people use that person as a resource."

Over the last few years the agency has seen premium values skyrocket by 25 per cent in personal lines and commercial, due in the most part to rate increases. "The number of policies have gone up eight to 10 per cent a year though and we have a 95 per cent retention rate," he says, and it's the number of policies that brokers should concern themselves with these days in his opinion.

"Judging your success on premium value alone gives a false reading. It's the policy count that matters. Policies could have dropped in this market by 10 per cent but premiums can have gone up by 15 per cent. That's okay for now, but what happens down the road? When the market softens what happens?"

Anderson says he's satisfied with a 10 per cent growth per year and expanding with more offices is not in the cards.

"Right now we have all the outlets we want. I may add one more but the thing is, I'm very careful. I want to be there," he says, visiting and training staff in each office.

Like a coach, you have to be on the field with the players, Pat says, "making sure everyone gets the right message."

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