But when Rockwood was practically the only game in town, the firm carved out its niche with an innovative fax-on-demand system for agents serving small employers and a software application, TINA Q (standing for “this is not a quote”), to provide a range of possible EPL quotes at different limit and deductible options.

“We developed the form. We developed things like HR [human resources] hotlines,” he said. In addition, because “EPLI was a voluntary sale, what we brought to the marketplace was the ability to create a buzz at the consumer level and at the same time, teach agents how to sell,” noted Mr. Clark, whose prior insurance experience had been in marketing.

Agents could call fax-on-demand and TINA Q answered, taking them through a menu of documents to be faxed on request, such as a list of 10 reasons to buy EPLI, or 10 claim examples, and even 10 common objections and how to overcome them–all tools for the agent, he said.

In short, Mr. Clark said “a program can be differentiated by product, market segment, distribution methodology and sometimes even service.”

With the definition out of the way, Mr. Clark spent some time with NU recently sharing his thoughts on what it takes to be a successful program administrator, the history of his firm, and lessons he's learned during his years in the business.

Q: What qualities make someone a successful program administrator?

A: “First of all, honesty. You have the pen. If you're not honest, they [the carriers] don't need you.”

To Mr. Clark honesty ranks above all other things program administrators may do to bring value to a carrier.

The value proposition may be that “you have a distribution list of agents that are loyal to you, you have a process that's better, cheaper, or they don't have to build a back office because you have the back office. All those economic reasons are easy to define. But the core quality is honesty.”

“If you're scrupulously honest and you have a loss,” that will be accepted by carrier partners. “It's going to happen. They're going to have losses at some point,” he said. But having a loss on an account you shouldn't have written will damage the relationship, he warned.

“We're paid a commission, and the yin and yang of it is, the more premium you write, the more commission you get. So if you have a proclivity to live in the gray areas, your temptation to write what you shouldn't write is going to be great,” he said.

In addition to honesty, Mr. Clark believes that to be in the company of the best program administrators, you have to have a mentality that you're not afraid to make a mistake. “At Rockwood, we've made more mistakes than we've ever had successes,” he said. “I'd hate to see my batting average. But we have the ability to make a lot of small mistakes and capitalize on successes in a bigger way.”

As an example, he said Rockwood has fallen into some of its niches fortuitously, pointing specifically to an errors and omissions product that started when he was given an opportunity to do life agents E&O that was sponsored by a large life insurer.

“It all went swimmingly until [the life insurer] tried to bully my [E&O] carrier around to do some things the carrier didn't want to do,” he said.

Even though the carrier nonrenewed the program, “we learned a lot about life agents” in the process, he said. “So we went open brokerage. Fast-forward to today, and I have 3,500 life agents with the same product.”

“Did I get in the business because I was good at it? No. I got in that business because I had one sponsor, I sold a whole bunch of stuff, I lost them [and had to] attack it another way,” he said.

Q: What are some of the lessons you've learned over the years?

A: The first lesson is that you've got to have a very good contract, he said.

If you're an MGA, you've spent a lot of money to build up your client base. If you don't have a very clear contract with an insurance company about who owns that business, the company might lay claim to it.

In addition, he said, “I can almost guarantee you the people you sign your contract with won't be the people you deal with in five years…If someone is a good program person within a company, the person will get promoted or move to another company.”

“A lot of this is relationship business,” he said, noting that his tendency to be a “handshake-look-you-in-the-eye” person has resulted in some negative experiences when the folks he thought he had a solid handshake deal with weren't around at the time a disagreement over deal terms came up years later.

Q: When you started Rockwood, you were one of the few writers of EPLI. How does Rockwood distinguish itself today when so many other carriers and program specialists are in that business?

A: “Even today, 80 percent of people who should buy EPLI haven't bought it. So those challenges are there. But if I stayed in the same venue that I was in, [targeting] under 200-employee [firms for] EPLI, the competition would kill me with reduced pricing and other things,” he said.

“So I looked for other iterations to take advantage of our knowledge,” he noted, explaining that one such iteration is selling EPLI add-ons for regional insurers of businessowner packages.

“I have an insurance company client now that does nothing but general liability and BOP,” he said, noting that it's a Southern regional company that does business in three states in lines that are very competitive.

“Why should somebody buy their GL and BOP? I sell them $100,000 worth of EPLI for their entire portfolio,” he said, referring to the policy limit on the EPLI add-on, “and now they can go out and say they've got a product no one else has.”

Another iteration is “franchise EPLI,” he noted, giving the example of the Subway sandwich shop franchise as a potential target for the product. “The average Subway store has eight employees. They don't buy EPLI” individually, he said, noting that individual policy premiums could be $500-to-$1,000.

A different sales approach is to attempt to make a deal with Subway's management corporation, offering to attach EPLI to GL policies for all their franchisees for roughly $100 a unit, he said.

A third iteration, Mr. Clark said, was cross-selling not-for-profit directors and officers liability to all his EPLI retailers.

“Once an agent shows that they're going to sell EPLI, I know that agent can be trained to sell not-for-profit D&O. It's almost the same product,” he said, noting that 87 percent of not-for-profit D&O claims are EPLI claims.

Going one step further, he said, the end-buyer of an EPLI policy “usually has some sort of proclivity to an HR function–because somebody had to think I need this.”

As a result, the retailer probably has a relationship with an HR person, who might also administer a 401(k) plan, making fiduciary liability a great companion product, he suggested.

Q: A few years back there was an announcement that Rockwood was being acquired by HCC Holdings. Is Rockwood owned by the Houston-based insurer?

A: Mr. Clark said HCC has a 25 percent ownership stake in Rockwood, recalling that he pulled out of the deal to sell out completely to the carrier before the ink on the deal was dry back in 2003.

He explained that he ultimately became concerned his freedom to pursue activities that might not always line up exactly with a carrier's business plans would be constrained. “I got chicken [and] at the last minute I told them, 'I can't do it,'” Mr. Clark told NU. “'I like what I do, and you can't give me enough money to give that up,'” he added, recalling his conversation with the former chairman of HCC.

He explained that he was offered an “unbelievable” sum of money to sell out, noting one impetus from the carrier's perspective may have been to protect an EPLI book he had moved to the company, to ensure he wouldn't move it in the future.

For Mr. Clark–who had bought Rockwood from its original owner, E.W. Blanch, in 2000–one motivation for the deal was to get rid of all the debt he had taken on to acquire the firm. In addition, he believed he was getting a good partner in HCC.

“But then I thought about it. What would my job be when I got done [with the deal]? Fly here for them. Fly there for them. Do this report. Do that report,” he speculated.

“I love the business,” he said, referring to the process of creating new programs, employing innovative marketing techniques and taking existing opportunities in new directions. “It's just fun,” he noted, describing his enthusiasm for a new program for title agents professional liability that he launched in another program company he owns–Fox Point Programs.

“You'll hear me talk about [the] title agents [program] like it's a new toy, but I've only got about 10 policies,” he said, imagining some chief marketing officer at a carrier scolding him for wasting his time on a $10,000 policy.

Still, Mr. Clark and other Target Markets' members are bombarded with requests to sell out.

“It's a disease right now,” he said, because in the soft market, there's more money out there than there is business to be had. “I would say that every single program manager in Target Markets probably gets approached twice a month,” he added, noting it's easier for some carriers to grow through acquisition than it is to grow organically.

Q: Are acquisitions of other program administrators on the agenda for Rockwood?

A: Mr. Clark said they are not, adding he takes pride in the fact that Rockwood has never bought another agency. “We started from scratch and built it up. Every premium dollar we have, we created,” he said.

Q: In addition to outright acquisitions, some carriers are buying teams of program specialists from competitors.

A: That can be an issue for program administrators, Mr. Clark agreed, noting that once the team starts up with a new carrier, they may ask an administrator partner to move a program.

“Would you do it if you were me?” he asked. “I'm loyal to the guys [the companies] that got me to the dance even though they're not the same people, because I signed my name [to a contract].”

He added that “if they call, I may say, let's do something different,” noting other program administrators view the situation differently and will let their existing programs move with the individuals they've been doing business with at the new company.