People, partnerships lead to nearly a century of success

Good people can make or break a company. In San Diego-based Barney & Barney’s case, it’s clearly made it; the company has been in business for nearly a century, thanks to people who have invested their time, knowledge and resources building the business. In this exclusive interview, Paul Hering, managing principal/CEO shared some of his company’s best practices with Insurance Journal Publisher Mark Wells.

Best Practices is an Insurance Journal column that highlights how some of the nation’s top-performing agencies run their operations. To listen to the entire interview or subscribe to Well’s regular “On the Street” podcasts through Apple iTunes, visit www.insurancejournal.com/podcasts.

Insurance Journal hopes that these regularly featured Best Practices snapshots bring retail agencies a new perspective on how to run an agency more successfully.

Insurance Journal: Give us a little snapshot of Barney and Barney.

Paul Hering: You can think of us as a super-regional insurance brokerage firm. We currently have about $43 million in total annual revenues. We are a full service firm. Our largest area is our property-casualty division, but we have a very significant employee benefits operation. We do personal lines, retirement services and just about anything else you can imagine that relates to insurance.

Our primary office is in San Diego, and we have a branch office up in Orange County, Calif., in the Aliso Viejo area. We have about 230 employees. We’ve been around since 1909, so we’re pretty excited about the fact that we’re approaching our 100-year anniversary.

That’s amazing. There aren’t that many independent agencies that date back to 1909.
Hering: The firm was founded by two brothers, Philip and Lorenz Barney, hence the name, back in 1909. I believe it was about the 1940s that we no longer had any Barney family members involved in the company, but we are very proud of the fact that we’re nearly 100 years old. We think it speaks volumes about our reputation and the way we do business. We’re just delighted about the fact that we’re about to celebrate 100 years.

What do you think is the reason Barney and Barney has achieved such phenomenal growth over the years?
Hering: At our core is our commitment to private ownership. That, in my mind, is a real differentiator. We are, again, very committed to being a privately held company. Frankly, I’m approached all the time about selling the company or doing something like that, and our commitment is to remain privately held. We’re big believers in giving those people that really make a significant contribution in the organization and add to the value to the company an opportunity to become owners. That’s a very significant differentiator for us. Currently, we have an ownership group that’s made up of 21 individuals, each that own a stake in the company. That helps us achieve what we’ve achieved over that extended period of time. For the past 10 years, we have also been investing in young talent and that has contributed significantly to our growth.

Obviously people are always key to any brokerage operation. How do you attract and keep key people?
Hering: That’s a question that could generate a very long answer because I am very passionate about this. First of all, we’re very committed to having a great work environment. We want to be a place where people want to come to work. One of my mantras is that I’m very big on people having balance in their life. What I tell virtually every new associate that joins our organization is that while we want them to work hard and do their job well, we also want them to have a life outside of Barney and Barney, whatever that means to them. Whether that’s family or their physical health, social life, spirituality, or whatever that might be. We want them to work hard, but I tell people that I don’t want to see them working late on weeknights, and I certainly don’t want to see them in here on the weekends. So we’re very big on trying to achieve an environment where there’s great balance, where the people can come in and do a great job and enjoy the work environment. But we don’t expect that Barney and Barney is the most important thing in their world.

In addition to people, what else has contributed to your success?
Hering: We are very proud of our affiliation with Assurex Global. We currently have 125 partner firms located around the world. They represent the best of the best in their respective markets, with more than 500 locations, more than 20,000 employees and more than $22 billion in premiums. I am very proud to be serving a two-year term as Chairman of Assurex Global. Our participation in Assurex Global, which goes back some 25 years, gives us the ability to serve the needs of our multi-national clients and also provides us with a terrific forum for best practices idea exchange. Many of the great things we are doing at Barney & Barney can be linked back to an idea or concept that was born out of our participation in Assurex Global.

A little more than 50 percent of your premium volume is property-casualty premium, and then there is some employee benefits.
Hering: That’s correct. We’re about 55 to 60 percent in property-casualty related businesses, and about 40 to 45 percent of our revenues come from employee benefits.

Let’s talk about the property-casualty side of the house for a second. How many markets do you normally use? Is there any one number? Or does it vary by the type of account you’re working on?
Hering: It really varies. Because of our size, we can access virtually any insurance market in the world. When I see, every year, the list of carriers with whom we do business, I’m always astonished at the breadth of our marketing capability. Frankly though, from a property-casualty standpoint, I would say that we probably have a dozen carriers with whom we probably have about 80 percent of our business placed. And those are largely the household names, the big, national carrier organizations. But we can access virtually any market.

What about the surplus lines industry? Do you use a lot of surplus line brokers, or just a few?
Hering: We work with a number of different surplus line brokers, although we’ve been trying to concentrate our volume. We want to partner with the best surplus lines companies that we can, and we certainly do place a fair amount through surplus lines placements. But, on standard placements, we may work with as many as 100 or more different insurance carriers. We would really like to concentrate our surplus lines relationships to no more than six or eight.

What about goal-setting? Are there general goals for the overall firm?
Hering: Absolutely. We engage in an annual strategic planning process. The ownership group goes off-site every year, and we work with an outside facilitator to help us on the big picture goals. There is certainly a significant amount of investment in strategic planning at a high level on behalf of the whole organization. But then we really drill down, in particular with our account executives, our producer staff, everybody does individual goal-setting, and it’s all vetted through the department managers and others, sales managers and so-forth who come in and evaluate the goals that are being established. We absolutely do a lot of planning as an organization. We feel that that’s certainly key to our success.

Let’s talk a little bit about the types of accounts that you have. Do you specialize in any one niche, or is it across the board?
Hering: As you might imagine, we probably have just about every type of client in our organization. But we have developed some areas of expertise — some practice groups, if you will — where we believe we’ve got critical mass and, frankly, a tremendous amount of expertise. We have practice groups in the areas of construction, hospitality, technology and life science, health care, international business, executive risk, and retirement services and wealth management. Those are our principle areas of focus. We are also forming new practice groups in the areas of education and financial institutions.

Let’s talk a little bit now about some industry issues, one of which is broker compensation and the whole outcome from the Spitzer investigation of Marsh. Do you tell your clients how you’re compensated?
Hering: I’m happy to comment on broker compensation. First of all, we believe in full disclosure to our clients. If our clients are interested in knowing exactly how much money we make on their account, we are more than happy to provide it.

Certainly in the industry there’s been a lot of scrutiny on broker compensation, stemming from the Spitzer investigations of some of the national brokerage firms. Frankly, it is a little disappointing that some of the things that the national brokers have either admitted or were alleged to have been part of were illegal acts — bid-rigging, steering business and so forth. I believe that the fact that those issues were revealed caused all broker compensation to come under scrutiny, and that’s a little disappointing.

But be that as it may, those events happened; it is the world that we’re living in now. And again, as I say, we embrace full disclosure to our clients. We disclose to our clients on our Web site and on all proposals that we may be compensated in addition to commissions through contingency agreements that we have with some insurance carriers. We think that those are important agreements for us that generate income to the organization, that we’re able to reinvest in value-added services that we make available to our clients.

So we believe that they are a very legitimate and acceptable form of compensation. Again, we fully believe in disclosure and have no problem whatsoever in describing for our clients all forms of compensation.

What are you telling your clients to expect in the short term — one year — and in the long term about the future of the insurance industry?
Hering: I wish I could predict exactly where we’re headed here. Obviously, from a property-casualty standpoint, we’re in the throes of a continued soft market.

I think there was a lot of speculation about the catastrophe losses that were suffered having a significant impact. Other than some impact in the reinsurance arena, we’re still not seeing any hardening of the market in the property-casualty side of the business, with the possible exception being property lines and certainly anything that’s wind-exposed.

So we expect from a market standpoint on the property-casualty side that the soft market will continue. We probably will not see the significant rate reductions that we’ve seen in workers’ comp. I’ve got to believe that we’re near the floor there.

On the employee benefits side of the business, of course, we continue to deal with escalating medical costs and rising premiums. I think what we expect to see is more creativity in terms of how plans are put together on behalf of our clients, perhaps higher deductible plans, more consumer-directed health care plans. We want to be on the cutting edge in working with our clients in that area.

What is your advice to your fellow agents?
Hering: I think as much as this business evolves, it still gets down to being all about people. You’ve got to invest in the right talent if you want to drive success within your agency. That means hiring the right people, making investments in training and education, and looking for ways to differentiate yourself from your competitors through the talent level that you have, in terms of people in your organization.

It also includes giving people career paths. They need a track to run on, and they need to feel like they’ve got a future in the organization. So in my view, it’s a complicated business and it’s about a lot of things, but ultimately, it’s always all about the people.