Rough Notes Magazine
A Disciplined Subcontractor Risk management Strategy will Help Protect Your Business.
By: Brian Pratt – Insurance Advisor at Frank H. Furman, Inc.
Retaining clients in tough times
Florida agency focuses on protecting insureds’ balance sheets
By Dennis H. Pillsbury
”The ultimate measure of a man is not where he
stands in moments of comfort and convenience,
but where he stands at times of challenge and controversy.”
—The Reverend Dr. Martin Luther King, Jr.
These are certainly times of challenge. And that is especially true in Florida, where the insurance market has been buffeted by the winds of change — both figuratively and literally. The literal winds came in the form of a spate of hurricanes a few years ago that left the homeowners market in shambles, with a concomitant impact on residential construction.
Homes became difficult to sell and then the mortgage crisis added to the woes. As credit tightened and the economy worsened, construction of all types slowly ground to a halt.
At the same time, thanks to reforms in the system, workers comp rates in Florida fell by nearly 60% over the last five years—good news for insureds, but not so great for agents who were already experiencing lower revenue from comp, thanks to declining payrolls.
For an agency whose largest specialty is construction throughout Florida, these were definitely challenging times.
And that’s just when the construction companies that are doing business with the independent agency, Frank H. Furman, Inc., in Pompano Beach, Florida, confirmed what a strong business partner they have in the Furman Agency.
We hear about relationships all the time, but we don’t often see just how important they are until times of testing are upon us. True to their philosophy, as expressed by Executive Vice President Rob Foote, CPCU, ARM, AIM, CRIS, to “proactively develop and manage risk management strategies and disciplines to protect our clients’ balance sheet,” the agency has been working assiduously with its large book of construction clients, helping them to enhance their bottom line in a very brutal construction market.
“The number three annual expense for a typical contractor is their cost of risk,” Rob points out. “So we are helping a number of our clients reduce variables that may cause already thin profit margins to fade further. We are re-evaluating our clients’ risk tolerance and often adjust client retention levels with the goal of increasing their predictability of job costs so our clients can further tighten up their project bids.
“The focus here is to illustrate our consultative approach to our clients to help them enhance profitability and to assist them with capturing additional projects.
“Residential contracting has almost completely dried up,” Rob continues, “so we’re working to help many of our residential contractors transfer into the commercial and industrial contracting area. This allows us to showcase our construction market expertise by guiding them through the risk issues in this new marketplace. We help them with contract reviews, suggest ways to expand surety credit, identify where risk may be allocated to them unfairly, make certain they understand the impact of delay penalties, offset payment clauses, etc. Given that risk increases when constructors deviate from their core disciplines, we can share with our clients’ many proven risk-reduction strategies that will help them protect their balance sheet. When we interact with them at the ‘peer level,’ it pushes us away from being a service provider and pushes us towards that trusted risk advisor status we so desire.
“We work closely with many of our clients’ management teams on ways to increase backlog so they are in a better position to cherry pick those jobs that offer the greatest profit margin. A healthy client is capable of withstanding tough market conditions and they have the capital equipment that needs to be protected.”
Dirk DeJong, president, notes: “We have a strong portfolio of clients that are well-run companies and we are very capable of being able to survive one of the most severe construction downturns in a long time. Unfortunately, this has resulted in significant employee reductions for our clients.”
Dirk adds, “Combined with the sharp reduction in workers comp rates, this has resulted in a decline in the revenues produced by our construction niche. The retention of our existing client base is incredible, which confirms that the agency is delivering the value our clients expect of us. We are postured to take advantage of the turnaround when the economy begins to improve, including projects that will be created by the stimulus package from Washington. We hope that federal funds will soon be released into infrastructure and other heavy construction projects, which will help fuel multiple specialty trades and the feeder industries as well.
Dirk goes on to point out that “the most successful agencies are not generalists. We are a highly specialized agency and that approach is not going to change. We may be impacted by the downturn in the construction industry, but we are not going to abandon our industry-focused service model. And, it’s important to note that, while construction is our largest niche, the agency has substantial expertise in other areas such as automotive, hospitality, property management, manufacturing, and life science.
“We live on referrals and high client retentions which can only be achieved by making a meaningful impact on our clients,” Dirk states. “We are actively replicating the service model we developed for the construction industry for industry groups that see value in more than just an insurance placement. It may take a little longer to reach our revenue goals but, in the end, we will acquire long-term, committed clients that rely on us and recommend us to their friends and business associates.”
Dirk continues, “We are focused on those classes of business that will benefit from our risk management service model. In many cases, these are businesses that have high severity exposure. We provide high-level risk management services that will help enhance their risk profile to the underwriters and, over time, reduce their risk transfer costs.
“The life sciences industry is a great opportunity in Florida because of the state’s demographics. We started developing an expertise in the exposures and risk concerns that are important to this industry group. This is beginning to pay off. In December, we landed four major accounts in the life science field,” Dirk points out proudly. “The clients are impressed by our knowledge of their industry and our ability to qualify them for any industry-specific programs. We are convinced that this is just the start of what will be another growing, profitable niche for our agency.”
Frank Furman, chairman and founder, adds, “We are an agency that continually expands its horizons. When my wife and I started the agency 46 years ago, our philosophy was simple: We would do what we do in the most professional way in support of our insureds, while responding to the underwriting directions of our companies. I’m very proud of how the agency has responded over the years to the challenges that have faced our insureds and our insurance company partners. And in the process, we have grown into an agency that offers financial services, employee benefits, surety, as well as property/casualty and boasts in the range of $100 million in annual billings.
“We have been challenged by just about everything an agency can be faced with. The agency continues to emerge stronger and better prepared to overcome challenges for the future. I’ve been through a number of cycles,” Frank adds, pointing out that he had 13 years of experience prior to starting the agency. “I was a special agent for the Home Insurance Company and got to know many agents throughout Florida.” After that, Frank was the manager of operations for a Miami agency for three years, then managed an agency in Pompano Beach for six years.
“Although we started out as a small community agency, we recognized early on that specialization was going to be the key to our ability, to successfully serve our clients and differentiate our agency. We needed to become experts not just in insurance, but in the risk management needs of the customers we serve. To accomplish that, we had to understand their business as well as they did—maybe better. You can’t possibly do that for every class of commercial business. So we concentrated on those underserved markets that have experienced severity and that represent above average accounts in our marketing area. For example, we insure well in excess of 100 roofing contractors and over 35 fire suppression firms.
“What has made this possible are the people who work here,” Frank continues. “We have a great staff. Several have been with me more than 30 years, and there are many that have been with the agency more than 20 years. They’re the reason we are able to provide the kind of service that sets us apart from the competition.”
Dirk, who has been with the agency 22 years, notes that many years ago, Roger Sitkins provided the foundation of the sales process, which has kept the agency sales efforts flourishing. “When we stick to the disciplines of the process, we win. When we stray from maintaining control of the sales process, our success falls off. We work hard to create a meaningful impact on our clients which allows us to earn referrals, gather testimonials, and they, in turn, help us transform prospects into clients,” Dirk says. “We provide stewardship reports for our clients and thoroughly review the resources we invest in them. We must provide a constant reminder to our clients (and us) of why they selected us as their trusted advisor.”
Rob explains, “The stewardship reports go into great detail, delineating the specific deliverables we have provided to our clients, including claims management, employee training, human resource seminars, risk control initiatives, etc. We track all of those areas where we impact the client and we try to tie those value-added resources to hard dollars that, over time, allow us to illustrate that we have enhanced our client’s profitability.
“These reports serve a dual purpose,” Rob admits. “Sometimes even we forget all the resources that are invested in the client throughout the year. This stewardship report serves as a reminder to us and, most importantly to the client, of what we have accomplished and what still needs to be accomplished in the agreed-upon timeframe for the future. The stewardship report holds us accountable to honor the commitments that we make and is our report card that measures the impact on our clients.
“To further build relationships,” Rob continues, “we serve on the boards and committees of our target industry trade associations and regularly contribute articles for their magazine, provide continuing education programs, all with the goal of being recognized as a trusted source. We actively research industry trends and potential threats so we can predict our clients’ needs before the client is even aware of them. We also work closely with other professionals that also service our typical customer base. Building a team with other professionals is important, and in a way, it allows us to hold each other accountable. We encourage our CSRs and account managers to take ownership of our client relationships. We have so much confidence in our support staff and encourage them to make high level decisions and solve our clients’ problems.
“We have our tentacles out with mutual centers of influence so we are prepared to help the client whenever a problem emerges,” Rob says. “Often, our clients encounter issues with legal, human resources, accounting, or other challenges. We quarterback the resources needed to help alleviate any problem they encounter so our clients can focus on their core production-related activities. Creating an ease of doing business is how we retain many of our clients and our goal is for every department and staff member within the agency to be absolutely engaged with our clients. That’s why our retention rate is generally over 90%.”
To achieve the superlative industry expertise that is the hallmark of Frank H. Furman, Inc., you need an accomplished, educated staff and the agency supports the educational aspirations of every individual in the agency. “We have a number of CPCUs on staff,” Frank points out. “And we provide an opportunity for all employees to participate in whatever educational platform they choose. We support education as a company expense. Some great educational opportunities come from the Florida Association of Insurance Agents (FAIA), which has always been strong in the agency educational area.”
It also is important to retain employees and, as already mentioned, many of them have been with the agency for 20 and 30 years or more. “We’re very generous with benefits, including days off and vacation time,” Dirk says. We have a very liberal bonus structure for any staff member who helps other departments within the agency cross-sell, round existing accounts, etc.
“We also are building for the future,” Dirk continues. “We have been successfully recruiting new producers from Florida State University. We look for individuals from the university’s risk management program who are interested in sales. We spend a great deal of time hand-selecting the strongest players available to join us. We view every new hire as a potential future equity owner of the agency. For that reason, we are willing to make the two-year investment it takes to train a new producer. We put them through the FAIA training program and have one of our seasoned producers serve as a mentor for the first few years. We realize that mentoring is the key in developing a strong and profitable producer.”
Frank H. Furman, Inc., is a perfect example of what an agency can become when it strives to become a trusted adviser for its clients. Through good times and bad, the agency has continually supported its clients and insurance company partners, which has enabled Furman to enjoy strong client loyalty and success. We are pleased to recognize Frank H. Furman, Inc., as our Marketing Agency of the Month.