Haake Companies Repositions Itself As Client's Risk Management Adviser

'Best Practices' agency also bolsters capabilities with Assurex partnership

For the Haake Companies, the path toward being named the "National Underwriter Commercial Insurance Agency Of The Year" for 2005 began with a decision at the start of this decade that it could do more to serve clients than merely peddle policies.

Since its founding in 1926, Haake has been a respected independent agency based in Overland Park, near Kansas City, Kan. However, as it entered the 21st century, Haake decided it was time for the firm to grow into more than just an insurance agency, and has since focused on developing its risk management capabilities.

"We take a more holistic approach," said Steve Schill, chief operating officer for the Haake Companies. He said that in addition to selling insurance, Haake also looks at the exposures its clients are facing, assessing the need for safety programs and assuring compliance with Occupational Safety and Health Administration regulations.

"We want to become their risk managers," said Mr. Schill, adding that by doing so, Haake has set itself apart from other, more commodity-driven agencies in the area.

Although it can still provide its clients with standard insurance coverage, Mr. Schill said Haake has worked to grow beyond the role of a typical insurance agency--into a full-fledged risk management consulting service. "We're not just selling insurance"--which means tapping alternative markets when necessary, he emphasized.

On its Web site (www.haakeins.com), the agency notes that "sometimes the traditional tools of risk transfer are not the best tools for businesses that have the ability to retain more risk." Haake goes on to offer a host of alternative risk-transfer solutions, including self-funding, large deductible programs, retrospective rating plans, offshore captives, rent-a-captives, multiline pools and risk retention groups.

Haake also makes use of the consultative approach in helping commercial clients meet employees' personal insurance needs, having specialists available to advise clients on human resources and benefits management.

When confronted with their comprehensive risk management-focused approach, while most other agencies pitch policies based on price of coverage, Mr. Schill observed that many of Haake's corporate clients seem somewhat dazzled at first as they hear the firm's exposure-based presentation.

"A lot of people said, 'No one's ever talked to us like that,'" he explained. As a result, Mr. Schill said that the consultative approach has been "very successful, and has helped us attain growth." Indeed, the firm has seen its commercial lines premium volume rise from $66.2 million in 2002 to $109.6 million last year.

The commercial insurance market is softening, however, prompting more price competition to retain accounts. Although some might be concerned that making a full review of a client's potential loss exposure and bringing in expert consultants could leave an agency vulnerable to a competitor pushing no-questions-asked lower insurance premiums, Mr. Schill is not worried about losing business to commodity-type pitches.

"Price," he said, "is relative."

Essentially, according to Mr. Schill, the cost of insurance coverage will be directly related to the value a client perceives they are getting in terms of overall service and credibility. Therefore, even when outside factors contribute to changes in pricing, Mr. Schill believes that Haake Companies can still offer a greater value. "You can't control prices," he said. "But one thing we can help control is the cost of risk."

Additionally, he said, Haake seeks to maintain a strong relationship with clients by providing additional expertise in areas other than just what coverage it can offer. "Knowledge is what really counts," Mr. Schill said, adding that Haake "brings a solid portfolio of expertise to help control potential risks."

That knowledge, he said, relates back to Haake's broader, consultative approach. By identifying risks that can be reduced, such as areas where additional safety precautions could be taken, Mr. Schill said Haake can help clients settle into a lower-risk class when seeking coverage, which ultimately impacts premium costs.

"One year's premium is a short-term cost," he said, noting that Haake prefers to focus on the long-term view. The agency offers the ability to evaluate a client's operations, then set up an action plan to reduce exposures and cut the frequency and severity of claims. The game plan is to cut the cost of risk over the long haul by reducing the number and cost of losses, and thus earn more reasonable premium quotes from carriers.

"If we're doing what we need to [from a risk management perspective], we can produce lower overall costs," Mr. Schill added.

Still, there is always the risk that a competing agency could try to lure a client away by simply offering a lower price for coverage. Mr. Schill, however, insists that while Haake does not shy away from such challenges, the agency is confident pure policy peddlers pose little threat. The agency maintains relationships with a large number of carriers, he said, and can generally offer "better than average pricing" in terms of total costs.

"Somebody could come in and blow you away on price, but chances are that we're going to have something close," he said, while also adding value with the firm's loss control approach. Any agency can play the price game for at least one year, but few offer the comprehensive risk management services that Haake provides, according to Mr. Schill.

Help From Addis

Haake was not the first agency to come up with the idea of taking a broader, longer-term view of a client's risks, Mr. Schill acknowledged. Indeed, he credited a previous "NU Commercial Insurance Agency Of The Year" winner with playing at least a partial role in helping Haake make the transition from a typical, price-driven agency to one capable of acting as a full-service risk management consultant.

"We wanted to change to a more consultative approach," he said, noting that the decision to make the change had already been made and implementation begun about five years ago. However, he added, a conversation with Scott Addis, principal of the Addis Group in King of Prussia, Pa.--the 2003 "NU Commercial Insurance Agency of the Year"--helped galvanize and propel Haake's bold move into risk management.

Beyond reading all about the Addis consultative approach in NU, Haake agents spent about an hour on the phone in a conference call with Mr. Addis himself.

While Mr. Addis didn't provide a blueprint for making the change, or offer any trade secrets, according to Mr. Schill, the conversation helped Haake understand exactly what they were getting into and reinforced their belief in the new approach.

"It crystallized the whole thing," he said. "You could definitely see a difference."

The Spitzer Factor

Being a client's risk manager, rather than merely a seller of insurance, helps Haake establish credibility with clients at a time when the industry's reputation has been damaged by revelations of bid-rigging and contingency fee abuse against the nation's biggest brokers as part of probes into industry practices by New York Attorney General Eliot Spitzer and other state and federal officials.

Indeed, the theme of this year's award program essay--"How My Agency Earns The Trust & Loyalty Of Clients"--was prompted by the Spitzer probes and its aftermath.

Although located over 1,000 miles from Mr. Spitzer's Manhattan offices, Mr. Schill said the impact of the attorney general's investigation was felt by the Haake Companies. He noted that as news coverage of Mr. Spitzer's findings grew more widespread, some of Haake's customers began asking questions.

"A lot of them just wanted to know, 'What's this all about?'" Mr. Schill recalled.

In response, he said, Haake would simply explain the investigations and the wrongdoing that Mr. Spitzer uncovered. He said the agency would also lay out to clients how it operated--including details on how Haake agents earn their money.

"Our clients should have an idea how we're compensated," he said, adding that most understood how the system worked and had no problem with it.

Demands for transparency will not cause any problems for Haake, according to Mr. Schill, because the agency has always been open with its clients.

"We have had disclosures in our proposals," Mr. Schill said, adding that when there is compensation from a carrier, "we would have disclosed that to our client and negotiated that in the total price."

In fact, according to Mr. Schill, Haake reacted to the transparency issue even more swiftly than did the National Association of Insurance Commissioners. Just prior to the NAIC proposing a model act on regulations to govern producer compensation disclosure, Mr. Schill said that Haake went back and examined its own records to seek out any problems in past transactions.

"We have not double-dipped," he said, referring to complaints about some producers taking payments from carriers and clients on the same risk, creating a potential conflict.

Global Partnership

Being named NU's "Commercial Insurance Agency Of The Year" is not the first distinction the Haake Companies can claim. The company was selected as a "Best Practices Agency" in the state of Kansas by the Independent Insurance Agents & Brokers of America in 2004.

However, an even bigger development was being named the Kansas City partner for Assurex Global a few years ago.

Based in Columbus, Ohio, Assurex is a privately-held firm founded in 1954 that has exclusive territorial partnerships with 130 independent agencies on six continents, generating over $21 billion in premiums. Haake became a part of Assurex about five years ago--just as the agency was beginning its transition to a more consultative approach, Mr. Schill recalled.

Assurex had a previous partnership in Kansas City but ended the relationship after that agency was sold. In selecting a new partner for the area, Mr. Schill said Assurex looked at virtually all factors large and small, including past performance and reputation--"all the way down to your letterhead."

"We have to live by a certain standard" to remain a part of the Assurex universe, he noted. If Haake is going to work with a partner agency based in California, for example, Mr. Schill said that both agencies need to be certain the other has the same Assurex operational standards in place.

The partnership has already brought benefits to Haake, he added. "We get to see the practices and share information on marketing" with other Assurex partners, he noted, adding that Assurex also has established practice groups for specific types of coverage such as commercial real estate.

Additionally, Haake has received business from Assurex partners elsewhere in the world, Mr. Schill stated--specifically mentioning referrals for Canadian companies seeking to expand into the United States. "It's been a great resource for us," he said.

Like any other business in the 21st century, Mr. Schill said the Haake Companies is also making use of online resources to help clients. Through a Milwaukee-based company known as Zywave, Haake has established a system called "MyWave" that Mr. Schill said serves as an "online library," with almost 1,000 templates and other files to help a client stay connected to Haake and manage their risks.

"It's very important on the consultation side," Mr. Schill said, adding that a Haake consultant can post new information--such as OSHA procedures or workers' compensation guidelines--on a client's personal "MyWave" site and have that information available instantly.

Flag:: The Winner's Advice

Head: Haake Credits Success

To Consultative Approach

Text:

The Haake Companies positions its producers not merely as insurance agents but as risk managers for clients. "With our consultative approach, we take the time to understand business operations and work with a team to identify the risks facing the client," wrote Haake in its award essay.

Haake investigates several areas to "identify activities that drive claim frequency and severity, and implement an action plan to contain losses."

"We make sure we don't just 'talk the talk,'" says Haake, noting that to "walk the walk," the agency:

o Sets objectives and establishes a timetable for the project.

o Requests claims data from current carriers by location.

o Calculates experience modification history and loss picks.

o Discusses ongoing and large-claims information.

o Prepares a summary of current policies and coverages.

o Identifies gaps in coverage and recommends solutions--some of which might lie in the alternative risk-transfer markets.

o Determines satisfaction levels with current service providers.

o Reviews and evaluates carriers by experience, financial stability and services.

o Defines strategies to handle risk--going beyond traditional insurance coverage, if necessary.

o Reviews workplace procedures and safety controls to lower the potential for losses.

Infobox: (with agency logo)

Flag: Agency At A Glance

Head: Haake Companies Profile

o Headquarters: Overland Park, Kan.

o Commercial Premium Volume:

2002: $66.1 million

2003: $75.1 million

2004: $109.6 million

o Principals: 7

o Employees: 61

Group photo Caption (crowd shot):

Besides being named NU's "Commercial Insurance Agency Of The Year," the Haake Companies was selected as a "Best Practices Agency" by the IIABA in 2004 and is the Kansas City partner for Assurex Global.

Caption for Haake shot of seven guys:

"We take a more holistic approach," says Steve Schill, chief operating officer at Haake (far left), shown here with fellow owners (l-r) Executive V.Ps. Gerald and Martin Haake, Chairman Henry Haake, President & CEO Charlie Haake, and Executive V.Ps. Scott Dunnum and Frank Zima.

Caption for board room Haake shot:

President and CEO Charlie Haake helped lead his agency into a more consultative approach, in which agents serve as risk managers for their clients, such as Carl Long, president of Frosty Treats Inc. (pictured to the right of Mr. Haake).