From the top down, client advocacy is the new religion
for this once-staid British brokerage
By Elisabeth Boone, CPCU
Joe Plumeri is Executive Chairman and Chief Executive of Willis Group Holdings, Ltd.
Fine brandy and Cuban cigars ... hand-tailored pinstripe suits with old school ties ... the discreet murmur of well-bred voices ... all of these images call to mind the ambience of an exclusive London gentlemen's club where the centuries-old proprieties are scrupulously observed. Until just a few years ago, this also was a tellingly accurate portrait of the old-line British brokerage firm known today as Willis Group Holdings, Ltd.
That was then; this is now. Today, thanks to energetic and focused new leadership, Willis is undergoing a dramatic transformation from quaint anachronism to power player on the world insurance scene.
Enter Joe Plumeri, dynamic, driven, and determined to excel, who since becoming executive chairman and chief executive in 2000 has been invigorating Willis's staid 19th century culture with his passion for top-down client advocacy. As the first American and the first non-insurance executive to lead Willis, Plumeri is breaking molds and making headlines as he deftly weaves a new vision for an old behemoth.
Under Plumeri's leadership, Willis has been turning the brokerage industry on its head with dazzling performance on a variety of key indicators. Between its June 12, 2001, initial public offering and June 30, 2003, Willis's stock significantly outperformed the stocks of other top brokerages as well as outpacing the Dow, the S&P 500, and the S&P 500 insurance index. Since launching its IPO, Willis has seen its share price increase by a whopping 128% to stand at $30.75 as of June 30, 2003. For the first six months of 2003, Willis posted a 44% gain in adjusted net income over the first six months of 2002, while total revenue was up 21% over the year-ago period.
Today Willis Group Holdings is the world's third largest broker, with annual revenue of $1.7 billion. With more than 300 offices in more than 100 countries, its global team of 13,000 associates serves clients in 180 countries. For partial lists of services provided and industries served, see the sidebars on pages 102 and 104.
Working with passion
When Plumeri joined Willis three years ago as executive chairman and chief executive, the company was described in such unflattering terms as "languishing" and "undynamic." What motivated Plumeri, who could have retired in ease after a successful 32-year career with Citigroup, to take on the challenges of running "the broker that time forgot"?
"I took the job with Willis because it was languishing and undynamic," Plumeri responds. "I think when you have a business that's driven by people, the most exciting thing is to give them a sense of energy and excitement about going in one direction and about working together to create a vision for the future. Once people understand the vision and buy into it, it's amazing what they can do. That was my whole motivation for joining Willis."
Plainspoken, passionate, and down to earth, Plumeri is the very antithesis of the buttoned-down, image-obsessed top executive. "I don't think most bureaucracies engage in the passionate elements of running a business," he observes. "They don't spend enough time getting people excited about the future and what's possible. As long as you keep the vision out there, it gives people a sense of where they're going. And as long as people know where they're going, and they appreciate that where they're going is better than where they are today, it's amazing what they will endure to get there. I don't think leaders in corporate America spend enough time doing those kinds of things."
As noted earlier, Plumeri has the distinction of being both the first non-Briton and the first non-insurance industry executive to lead Willis. In what ways has his "outsider" status given Plumeri an advantage? "At first, they all thought I was Fonzi," he says with a laugh. In a more serious vein, he comments, "I don't think any of that mattered. I think when people see that you're passionate and sincere, and have their best interests at heart, that's more important than what you're not. A lot of people ask me, 'Joe, how do you find working with the British?' because the British have the reputation of being unexciting, dispassionate, and not very energetic. I haven't found that to be the case at all; I've found the British to be just the opposite of all those things. I'm a very enthusiastic person, and I think if you're enthusiastic, it permeates the whole organization. I also believe that if you pat somebody on the back in Cleveland and tell him he's done a good job, and you do the same thing in London, the reaction's the same. I don't know anyone who doesn't like to be thanked," he says matter-of-factly. "People want to be exhorted, and they want to be part of something great. I think the people at Willis like the fact that they're part of something great."
Going public
A key factor in Willis's impressive results over the last few years was its shift from private to public ownership two and a half years ago--a scant eight months after Plumeri joined the company. In 1998 the company, then known as Willis Corroon, was taken private by Kohlberg Kravis Roberts (KKR) in a leveraged buyout worth $1.7 billion. The stock at that time was valued at $3 per share. When the brokerage was listed on the New York Stock Exchange in June 2001, its stock was offered at $13.50 per share, and the opening share price was $16.50. KKR today holds a 23% interest in Willis; 72% of the stock is publicly held, and the remaining 5% is owned by Willis employees. As of June 30 of this year, Willis's market capitalization was $4.6 billion.
"My reason for taking the company public was to unify our people," Plumeri explains. "I wanted everybody to own our stock so they would have a shared stake in what we do. Taking Willis public and then offering employees a stock interest was a big consolidator. One of the ways a company gets noticed is when its stock goes up. People start to realize that something terrific is going on."
Willis's success since going public, Plumeri emphasizes, "is less attributable to me and more attributable to my colleagues. The people at Willis are great. They're the ones who do all the work. If our company is an orchestra, I'm the conductor, and my colleagues play all the instruments--horns, strings, percussion--every day, and they've been absolutely magnificent. When companies do as well as we have done, no one person can take the credit. You have to have a team, and as I like to say, Willis is a team sport. We were successful with the IPO because our people worked hard to make it happen."
Bucking the trend
With just an 8% share of the worldwide market, Willis is a distant third among mega-brokers. Under Plumeri's leadership, however, the company has achieved impressive gains in operating earnings, revenue, and share price at a time when its competitors are struggling. What factors account for Willis's ability to buck the trend?
"If you asked me what makes Willis different from our competitors and I said, 'Not much,' you'd say, 'Why would anybody be motivated to do business with Willis and not Marsh or Aon?'" Plumeri responds. "The difference is in the way we run our company and what it does. If we did what everybody else does, we'd expect the same results as everybody else. That's not what we do. We're very strongly oriented toward building a sales culture, servicing our clients, and doing things to get our clients' attention that other brokers don't do. I believe we have to be consistent about the way we operate, and that has been our mantra over the last three years. If we focus consistently on growing our revenue and watch the way we spend our money so we can enhance our value, we'll do very well, and so far that has happened," he says.
"I could give almost the same speech today that I gave when we took Willis public," Plumeri asserts. "We've been that consistent and that steadfast in our focus. We said we were going to be a pure broker; we were going to grow our revenue and watch our expenses; and when we had money and it made sense, we were going to make acquisitions. We have done just that," he says.
"I don't think great companies are flashy," Plumeri remarks. "I think great companies are consistent and do all the fundamental things in a sound way."
Building a sales culture
Willis's three-pronged growth strategy focuses on (1) organic growth, (2) recruiting new producers, and (3) acquisition of additional brokerages and books of business. A linchpin of the strategic plan is a strong sales culture. "I think we have to understand what business we're in," he says. "I don't think we're in the insurance business. We're in the sales business, and we happen to sell insurance. At Willis, we've created mechanisms so that up and down the line, people are accountable for what they sell and how much they sell. That has a great deal to do with how well we understand our clients and the way we go about doing our business. Our organic growth has been much better than everybody else's," Plumeri observes, "because we spend a lot of time concentrating on it. We still have a long way to go; we're not perfect by any means--but again, there's consistency in our direction. If you're going to change your culture, you can't do it by changing your plan every month. You have to be willing to stick with it and not get distracted, and that's what we do."
"I don't think great companies are flashy. I think great companies are consistent and do all the fundamental things in a sound way."
--Joe Plumeri
A key element of Willis's sales culture, Plumeri says, is client advocacy. "A client advocate is a person who demonstrates understanding of the client's needs and advocates what's in the best interest of the client," he says. "At Willis, our aim is to have a local person who understands the client's business and its problems as well as what the client does, and then offers solutions to those problems using the entire global network and resources of Willis. To do that, we need a portal: someone who represents a link between the client and his needs and the vast resources of Willis. That person is the client advocate--the client portal into all of the resources of Willis, and also the way we can deliver Willis resources to the client. That makes us unique," Plumeri declares. "For all the time I've been in this business, I've never seen anyone else use the concept of client advocates, and that's a major differentiator between Willis and other brokers."
Bold initiative
Strongly supporting Plumeri's vision for Willis, and equally as energetic and committed, is Mario Vitale, who became chief executive officer of Willis North America in February of this year. Vitale joined Willis in November 2000 as group executive vice president of global sales and marketing. Before being named CEO, he served as chairman of the global large account practice. In his sales and marketing capacity, Vitale and his team laid the foundation for the creation of Willis's strong sales culture.
Willis, as Plumeri pointed out, is the third largest broker. "We're not satisfied with that," Vitale declares. "We want to be number one. Not long ago people might have laughed at us for that, but based on the tremendous progress we've made in just the last couple of years, nobody's laughing at us today. If we want to be number one," he continues, "we can't do things like everybody else. We have to wake up differently and act differently. We have to be more adventurous; we have to dream big; we have to be more aggressive in the way we approach situations. At Willis North America, we're inspiring all of our associates to dream big and deliver on those dreams."
Shortly after Vitale accepted his new position, he and Plumeri took a bold step in the reinvention of Willis: integrating all North American operations, including the large account and middle market units as well as various practice groups that specialize in particular industries. The alignment of these operations, Vitale and Plumeri say, is creating a more aggressive company driven by a single, unified sales strategy. "We can now service our clients and present ourselves to prospects in a consistent manner without regard for the size, geography, or industry of the audience," Plumeri explains.
"Before the consolidation, we took the same 'silo' approach to the business as other brokers, where middle market and large account business were treated separately," Vitale says. "Having these operations all under one roof allows us to coordinate our strategies and resources. By combining these functions into one business unit called Willis North America, with a single profit and loss statement, we can pursue each of those markets--large accounts and middle market accounts--simultaneously and aggressively. At Willis, a producer can work in both markets and be confident of having the necessary resources, whether it be technical analysis, placement, or service. Already this new initiative is proving successful in helping us win and keep clients," he says. "It's definitely the right direction, and we're staying with it."
Myriad of challenges
When Vitale became CEO of Willis North America in February of this year, he, like Plumeri, faced a myriad of challenges. "Some of the challenges I anticipated; some have been even greater than I anticipated," he says. "We've chosen to focus on three major areas: aggressive sales, terrific service, and great client retention." By succeeding in these areas, Vitale believes, Willis North America can achieve a key objective of its strategic plan: growing organically. This, he observes, is not a challenge for his company alone but one that confronts the entire insurance industry. "For the most part, our industry doesn't have a strong sales culture," he remarks. "If you look at how most of the major brokers have grown over the last two decades, it's mainly been through consolidation. There isn't a strong organic growth component, so certainly one of Willis's greatest challenges is to blaze a different path and to establish a foundation for strong organic growth as well as growth through acquisitions."
To achieve organic growth, Vitale explains, "first and foremost, we have to keep the clients we have. Second, we have to sell more to our current clients. That's good for clients and it's good for Willis, because we're expanding our relationship with our clients and improving retention. Because we're global and have an extensive group of experts in virtually every area, we see almost endless possibilities for growing with existing clients by solving their problems." What's more, Vitale says, "Organic growth also means writing new business: getting our producers out there to talk with more prospects about the great things we can do for them, winning their business, and representing them as their broker."
As part of this initiative, Willis North America is acting to increase its producer ranks significantly. "Over the last two years we've had a good track record in this area, and this year we expect a net increase of 75 to 100 new producers," Vitale says.
Providing outstanding service will lead to outstanding retention, Vitale notes. "We're the only global broker that's building a highly client-centered model, where we don't just talk about client service but organize our whole company around the client advocacy approach," he says. "The client has a single point of entry into Willis, and we have the ability to deliver all of our global resources to the client."
The word Willis coined to describe this client-centric service delivery is "glocal": delivering global services locally. "Doing this day to day makes a big difference," Vitale asserts. "One of our competitors pursues global broking from a few central locations, often far from the client. Business is being almost mass produced from this large central structure that was set up to make placements. The problem with that approach, particularly in difficult markets like this, is that the client doesn't even know the broker or know how his account is being presented in the market."
At Willis North America, Vitale says, "We take the opposite approach. Our marketers are very close to the client. They are part of the service team, and the client always knows who's representing him and differentiating him in the marketplace. Our clients love it and our associates love it," he says. "Our client advocates are highly trained professionals," he adds. "We've made some substantial investments in IT that allow our client advocates to perform services more efficiently and effectively. We've replaced a lot of legacy systems, and we've been able to get technology working for us instead of against us. This allows our service people to spend less time on their computers and frees them to be great client advocates. The report card on how well we're doing is client retention," he observes. "We have a good client retention rate, but I want an even better one. My goal is zero clients lost, and I won't be happy until we achieve that."
Checking vital signs
Having implemented some major initiatives at Willis North America in a relatively short period of time, management constantly monitors progress toward achieving the organization's goals in sales, service, retention, and growth. "We've established a set of vital signs, similar to those your doctor checks during an office visit," Vitale explains. "The doctor takes your blood pressure and your temperature and pulse to ascertain your state of health and decide whether you need to be examined further. The vital signs we check routinely include retention rate, new business to replace lost accounts, how much of our growth is organic versus rate related. At the end of the day, these statistics let us know the health of our business and whether we're headed in the right direction or need to alter course. A good sales culture has embedded in it an inspections program that's constantly telling you how you're doing," he asserts. "It allows you to redouble your efforts if necessary, or direct them in different areas."
Tracking vital signs is essential for Willis's drive to be the market leader, Vitale points out. "Part of our sales culture is never being satisfied with yesterday's results or last year's results," he declares. "It means always recognizing that we need to do better, and inspiring everyone to join us in the task of seeking greatness. At the end of the day, we're a sales and service organization, so we have to get that right if we want to be successful."
Program power
Given the popularity and success of niche marketing, it's no surprise that Willis Group Holdings has a unit dedicated to developing programs for selected market segments. Serving as an MGA since 1962, Willis Programs is based in Portsmouth, New Hampshire, and also has offices in Nashville, Detroit, and Salt Lake City. The unit employs a regional structure to distribute products for eight niche markets through some 400 independent agents and brokers nationwide. Willis Programs is an underwriting partner with eight leading North American insurers and also has relationships in the London market.
Heading up Willis Programs is David Hampson, regional executive officer, whose 28-year career encompasses 15 years with the Willis organization and a predecessor company. Offering his perspective on market trends for program business, Hampson says, "Certainly there are ups and downs in the market cycle, and carriers go in and out of program business. If you did an overall analysis, I think you'd see a downward trend over the last 40 years in terms of the number of insurers willing to go into the program market with MGAs. In the late 1960s and early 1970s there were more MGAs than there are today. In the 'go-go' days of the 1990s," Hampson continues, "we saw an upward trend, with more MGAs entering the business or expanding with additional programs. That's come to a screeching halt since about the midpoint of 2002, and now we're back to a downward bias, with fewer carriers willing to do program business."
After the competitive excesses of the 1990s, Hampson observes, insurers today are less willing to outsource program business. "I think the number one reason is control. In the prolonged soft market, insurers lost a lot of money, but on a relative basis I think they lost even more on program business," he says. "They gave out underwriting authority too freely, and they gave it to people who had no experience in running programs. If you analyze most programs that failed, you'd find a typical scenario where an independent agency or a national brokerage established itself in a certain industry. They built a book of business with a number of companies in this industry. They visited the local office of one of their carriers and persuaded the manager to turn the book into a program. The carriers were willing to do that, so suddenly underwriting authority was in the hands of someone who had spent his whole life prospecting for opportunities to quote business. It isn't any wonder that the carriers did everything possible to quote everything that was submitted. This is how companies got into trouble with a lot of the programs they established," Hampson comments, "because they didn't look first at whether this producer or entity had experience running programs and making profits for the insurer. Now they want to take back that control because they were burned by their desire to put business on the books the quick and easy way."
Today, as always, the keys to writing successful, profitable program business are a high degree of expertise in the chosen classes, unwavering commitment to underwriting discipline and consistency, and a strong focus on claims management and loss control. Those are the qualities Willis Programs brings to its eight specialized programs, which are described below.
RecycleGuardSMProgram:Designed for businesses with primary operations in recycling, including scrap metal, paper, plastic, glass, rubber, and textiles. Named exclusive sponsored property/casualty insurance program for The Institute of Scrap Recycling Industries. Available in all states. Coverages offered are property, inland marine, equipment breakdown, crime, general liability, automobile (except Hawaii and Massachusetts), umbrella (except West Virginia), workers compensation, limited pollution liability, for-profit D&O, employment practices liability, and ocean cargo.
ResortGuardSMProgram: Designed for businesses engaged in the operation of destination resorts, master-planned community associations, large-scale leisure-style communities, resort hotels with multiple leisure and recreation activities, resort development condominiums, interval ownership/timeshare condominiums, upscale sportsman's lodges, boutique hotels, and destination spa hotels. Useful for difficult resort casualty exposures such as saddle animals, water sports, marinas, snowmobiling, skeet shooting, mountain biking, and aerial lifts. Available in all states. Coverages offered are property, general liability, crime and enhanced crime, inland marine, boiler and machinery, automobile (except Massachusetts and Hawaii), electronic data processing equipment, for-profit and nonprofit D&O, umbrella (except West Virginia), workers compensation (minimum premium $75,000), and employment practices liability.
MountainGuardSMProgram: Designed for entities whose primary business is ski resort operations. Established in 1962, this is the longest running insurance program of its kind. Provides in-house claims, loss control, and policy issuance. Available in all states. Coverages offered are property, general liability, umbrella/excess (except West Virginia), crime, boiler and machinery, automobile (except Massachusetts and Hawaii), for-profit and nonprofit D&O, and employment practices liability.
LawyerGuardSMProgram: Offers multiple options for firms of all sizes, addressing lawyers professional liability market dilemmas. Consists of a program for defense attorneys, a standard lawyers professional liability product, and a hard-to-place program using a London market. Available in all states.
WellGuardSM Program: Designed for the ground water industry. Endorsed by the National Ground Water Association to administer an insurance program for contractors, manufacturers, and suppliers. Available in all states except Indiana, Hawaii, and Alaska. Coverages offered are property, general liability, automobile, workers compensation, inland marine, boiler and machinery, and umbrella.
DealerGuardSMProgram: Provides open lot (physical damage) protection for dealers of new and used automobiles, recreational vehicles, motorcycles, trucks, and mobile equipment. Available in all states on a nonadmitted basis, and on an admitted basis in Connecticut, Florida, Massachusetts, Michigan, Minnesota, New Jersey, New Mexico, Oklahoma, and Rhode Island. In-house claims handling. Covers comprehensive, collision, and false pretense (theft by fraud). Limits up to $10 million per location. May be written on a stand-alone basis or in conjunction with any of the manufacturer's floor plan insurance programs. Premium payable on a monthly self-reporting basis subject to a $400 monthly minimum.
A companion product is the HailExchangeSMProgram, designed for new and used automobile dealers with a history of chronic or unusually severe hail loss. Provides monoline auto physical damage protection against the single peril of hail. Available on an admitted basis in Alabama, Arizona, Arkansas, Colorado, Illinois, Iowa, Kansas, Louisiana, Minnesota, Montana, Nebraska, North Dakota, Oklahoma, South Dakota, Texas, Wisconsin, and Wyoming. Deductibles start at $3,500 per occurrence; minimum premium is $1,000. May be written on a stand-alone basis or in conjunction with any of the manufacturer's floor plan programs. In-house claims handling.
EquipGuardSMProgram: Designed to address the exposures of the truck equipment industry that manufactures, distributes, and installs truck equipment and truck bodies, and manufactures trailers. At least 75% of revenue must be generated from truck equipment operations. Endorsed by the National Truck Equipment Association. Open to both members and non-members of NTEA. Available in all states except Hawaii and Alaska. Coverages offered are property, general liability, automobile, inland marine, boiler and machinery, and umbrella.
In addition to the programs described above, Willis Programs provides policies for directors and officers liability (both for-profit and nonprofit), enhanced crime, and employment practices liability exposures.
Working with agents
As noted earlier, Willis Programs currently has relationships with some 400 carefully selected agents and brokers who specialize in one of Willis's target markets. "Our programs, with the exception of MountainGuard for ski resorts, are open to qualified retailers," Hampson says. "We work toward building key relationships within each program. We're looking to do multiple placements with agents or brokers who are familiar with the industry, have technical knowledge of the insurance product needed for the industry, have a stable, profitable history, and have a good reputation in the marketplace. We sit down with these agents or brokers and develop a plan to support them and help them develop that faith in us so that we are their go-to market for this particular type of placement," he explains.
For each of its open programs, Willis follows a rigorous procedure to identify retailers with whom it can form strategic partnerships. The first step is to select specific agencies within prequalifed states. Using a detailed profile, each agency is then evaluated to determine its qualifications. Also examined are key agent needs and what the agent requires to produce profitable business. When an agent's book of business is being considered for transfer to the Willis program, the book is audited by Willis and carrier personnel; they also analyze a representative sampling of the book, based on predetermined acceptance criteria.
A Willis representative visits each selected agency to ensure the completion of a business plan that institutes benchmarks for the quality and quantity of submissions and that allows the carrier and Willis to design agency-specific expense and revenue budgets that ultimately will roll into a cumulative program. This "road map" becomes the monthly performance measure for the agency and is a working document for all parties. It also can provide the foundation for future contingency incentives. To enhance mutual understanding, an action worksheet in the business plan specifies accountability and identifies responsible parties. A communication plan formalizes the promotional expectations of the parties and concretizes the reporting process. The plan includes a schedule of local advertising, if any is contemplated, and/or specific trade-related press releases. A monthly status report is provided to all parties.
The retailers who meet Willis Programs' high standards, Hampson says, can be assured of ongoing and focused support in the production of profitable business. "Our number one objective is making a profit for our carriers," he says. "We achieve that by offering solid programs that meet specific market needs, and by forming strong partnerships with leading agents in those markets."
Top-down transformation
From the smallest regional office to the executive suite, Willis Group Holdings is experiencing a power surge that's unprecedented in its nearly 175-year history. Under Plumeri's leadership, the entire organization is embracing the new gospel of client advocacy. When visiting the headquarters of this focused broker, don't expect hushed voices and striped school ties. Just listen to the energy crackling through the air and realize that it's the sound of Willis reinvigorating itself. *
Willis Service Offerings
(partial list)
* Advanced technology
* Alternative risk transfer
* Insurance archaeology
* Risk management-business risks
* Risk management-operational risks
* Captive management
* Claims advocacy
* Certificates
* Commercial network of independent brokers
* Corporate governance
* Directors and officers liability
* Employee benefits
* Environmental
* Financial risks
* Insolvency
* Loss management
* Market security
* Mergers and acquisitions
* Political risks
* Premium allocation
* Private clients UK
* Private finance initiative
* Project financing
* Professional indemnity
* Revenue enhancement
* Structured financial solutions
* Weather risk financing
Industries Served
(partial list)
* Aerospace
* Bloodstock
* Chemical
* Construction
* Defense manufacturing
* Energy
* Finance
* Fine art, jewelry, specie, and luxury goods
* Food and drink
* Health care
* Leisure
* Marine
* Mining
* Pulp and paper
* Recycling
* Reinsurance
* Sports and entertainment
* Utilities
For more information:
Willis Group Holdings
Web site: www.willis.com