IS BIGGER BETTER?
Enclosed with this issue of our Perspectives is an interesting
article by Joe Petrelli from Demotech (Demotech is a rating organization
competitor of A.M. BEST).
As Joe’s study indicates, bigger doesn’t necessarily translate
to better financial stability. We’ve seen stunning examples in
recent years, and not just in the insurance industry, where size and
complexity can be used to facilitate financial deception and mis-management.
In our business, selling a promise, financial transparency should be
at the forefront.
Beyond financial considerations, I have an on-going debate with myself
(no smart remarks about age!) as to the direction Patrons should take
for the future. I’m often asked, “When are you going to get
into commercial lines?” My initial reaction is “why”?
Do you as agents need one more ‘Main Street BOP’ policy in
your portfolio?
What market need could we fill (profitably!) that’s not saturated
now? What is the potential payback on the infrastructure cost to establish
a commercial operation? And perhaps the key question – will a personal-
lines- only franchise continue to add value to the agency stable of companies
in the future?
Personally, I feel a niche company – which we are – that
focuses on a segment of the market and serves that segment in a superior
manner – which I hope and believe we do – will have a strong
future.
We certainly don’t need to be bigger to be stronger financially,
with $650,000,000 in surplus (and a 500 year storm catastrophe reinsurance
portfolio) on hand for whatever unforeseen disasters may strike.
Does our size limit our ability to provide good service? It’s
been my experience that with size, often comes deterioration in service.
Certainly, bigger would mean more opportunity for more people in our
organization. Is that a sufficient reason to move beyond our specialty?
We could have a grander building were we a big company. Actually we’re
pretty proud of where we are now – especially with our fresh paint,
carpet, and lighting!
…
..and maybe I could get to fly the company plane! Now
we’re talking!!
Seriously, my debate continues, and if any of you want to weigh in,
I’d be pleased to have someone besides myself to argue with!
Walter C. Smythe, CPCU, AAI, CIC
psmythe@patrons.com
President
