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MARKETING AGENCY OF THE MONTH An intriguing business model Careful selection of personnel, niches, and clients leads to success for this San Diego agency By Dennis H. Pillsbury How would you like to start your own agency in the middle of a soft market? That doesn’t sound attractive. Well, let’s add to the mix the fact that you can’t solicit the people you know because of a non-piracy agreement with your former employer. Now it sounds a whole lot better, doesn’t it? Well, apparently it did to Jeff Cavignac, who started Cavignac & Associates in San Diego, California, on February 11, 1992. Jeff’s insurance career started off in a much more propitious manner. He graduated from UCLA in 1980 and went to work as a casualty underwriter for Industrial Indemnity Insurance Company. He hadn’t really planned to go into the insurance business, despite the fact that his father was a partner in an agency, Robson, Cavignac, but after a successful interview with Industrial Indemnity, that’s where he wound up. It turned out to be a great move. “I learned how complex the insurance business is, and that I really liked it,” Jeff remembers. “Industrial Indemnity paid for education, so I got my CPCU while I was there. I found that I enjoyed all the intricacies of coverage requirements. It turned out that I was an insurance geek.” After three years with Industrial Indemnity, Jeff decided to join his father at Robson, Cavignac. At this time, his father was nearing retirement age and looking for income to use to enjoy retirement. Meanwhile, Jeff was doing quite well. He was the leading producer with the agency and wasn’t worried when his father sold it to The Lawrence Group and retired in 1987. It proved to be an unhappy coupling. Al Lawrence was an East Coast multimillionaire who believed that there was one way to do things—his way. Lawrence’s management style didn’t work for Jeff, so, in 1992, he resigned and asked to purchase his book of business, which amounted to about $800,000 in commissions. In addition to being shown the door immediately, his request to purchase his business was denied. Jeff started his own business on February 11, 1992, with an IT person and a comprehensive business plan in a subleased 800-square-foot office. He also had a heavy debt load and a wife and three young children. Fortunately, Cavignac had a strong relationship with Design Professionals Insurance Company (DPIC). DPIC, however, worked exclusively with one broker in each geographical area. In the San Diego area, the choice was between Cavignac and The Lawrence Group. The two agencies each provided DPIC with almost the same amount of business, but Cavignac was bringing in new business and growing that business faster. Cavignac had also demonstrated the expertise and commitment to continue to deliver the difference to design professionals, so DPIC chose Cavignac. A happy situation, except for the fact that The Lawrence Group wasn’t happy. Lawrence sued Jeff for violating his employment contract. Ouch! After much wrangling and substantial legal fees, a settlement was reached on February 11, 1993, exactly one year after Jeff opened his doors, and he was able to concentrate on growing his business without the distraction of a legal battle. He immediately went to work to create an agency that matched the mission statement “to be a service-intensive, risk management-oriented insurance brokerage that puts our clients’ interests before our own.” Using expertise In order to achieve that mission, Cavignac & Associates focuses on improving every client’s risk profile in order to reduce their cost of risk. The agency does so by concentrating on certain key industries and learning everything about those industries and the risks they face. Not surprisingly, among those industries are design professionals, construction development and real property. It also writes lawyers, accountants and other professional service corporations as well as select commercial accounts and nonprofit companies. It is strictly a commercial lines agency, with 80% of its business being commercial property and casualty, and the balance coming from surety and employee benefits. Right from the start, Jeff realized that providing the kind of service to clients that was to be the hallmark of the agency could not be done alone, no matter how much time he spent learning about insurance and about his clients. In 1996, Jeff brought in two young men with backgrounds that complemented his own expertise to round out the construction, design professional and development specialty. “Jim Schabarum, CPCU, AFSB, brought a strong surety background to the agency as well as overall construction expertise,” Jeff recalls. “Scott Bedingfield, CIC, AAI, was a property insurance expert—his background was finance and lending. And I’m an overall insurance geek,” Jeff notes, adding that in addition to the CPCU designation, he also holds the RPLU and CRIS designations. “Collectively, we complement each other. Each of us has expertise in an area where the others don’t. As a result, the three of us offer a unique skills set for our clientele.” Jeff offered both Jim and Scott opportunities to become owners in the agency. “It’s always been my philosophy that people should own shares based on their contribution,” Jeff notes. “We determined certain benchmarks that would allow each of them to earn certain amounts of stock and they achieved those. I heard from a number of other agency owners that I was crazy to give away stock, but the results speak for themselves. When Jim and Scott joined the agency, I owned 85% of a $1 million agency. When they got their stock three years later, I owned 60% of a $3 million agency. “Their addition to the firm allowed us to cover all three legs of the construction stool,” Jeff continues. “We can sit down and discuss all aspects of risk transfer, not just insurance and surety, but contractual risk transfer as well. It really differentiates us from the competition. We’re not viewed as insurance sales people, but as risk management professionals who are there to help our clients succeed.” As the agency has grown, the partners have continued to emphasize education. “Everyone in the agency is heavily incentivized to learn more. We spend a lot of time and money on the education piece,” Jeff says. But bringing on Jim and Scott was only part of the equation. Although the risk transfer experts were in place, Jeff, Jim, and Scott recognized the need for people who could work with the clients on risk mitigation, loss control, and, in the event there was a loss, on claims management. Enter Stuart Nakutin, a risk management, loss control, and claims management specialist, with 15 years of experience on the company side. “This provided a huge value-added to our clients,” Jeff says. “The beauty of it is that we’re way ahead of our competition. I’m convinced that there is no one in our marketing territory who can help clients reduce the cost of risk better than we can.” To support that belief, Cavignac & Associates sits down with clients and develops a specific agency schedule of services that it will provide during the year. “We emphasize that safety starts at the top. Some clients never understand that and they usually don’t remain clients very long,” Jeff explains. “At the same time, if Cavignac & Associates doesn’t deliver what we promised, we would expect to be fired.” He continues, “Stuart also helps coordinate the efforts of our carriers to provide information to insureds. A lot of carriers have awesome Web sites, but don’t necessarily promote them to insureds. Stuart has researched our carriers’ Web sites and meets individually with key clients to walk them through the value-added services that are available at their fingertips.” Cavignac & Associates provides a number of in-house seminars for clients. A recent seminar covered contractual risk transfer—additional insureds and indemnity. It was co-sponsored by ConfirmNet, and their representatives discussed one way to track certificates. “That was only part of the seminar, but we reviewed what ConfirmNet had to say and thought it was a process that needed to be considered by our clients,” Jeff points out. “We charge a fee for the seminars so that people realize they have value. All the proceeds from the seminar with ConfirmNet went to the San Diego Humane Society.” Other seminar topics include post-accident response training, sexual harassment prevention training, and the OSHA 10-hour construction industry outreach training program. Good corporate citizens The donation to the Humane Society mentioned above is only one of the ways in which Cavignac & Associates strives to be a good corporate citizen. “We always go out of our way to contribute to the community,” Jeff says. “We have a charitable fund and nearly every one of our 38 employees has chosen to donate to it through payroll deductions. A committee of staff members selects the recipients of our charitable donations.” The fund raised approximately $7,500 in 2005. Last year, donations went to the Child Abuse Prevention Foundation, the Downtown San Diego Senior Center, the Monarch School for the Homeless, and the San Pasqual Academy (a boarding school for high school age students in foster care). When Hurricane Katrina hit, Cavignac & Associates’ employees raised an additional $2,500 for hurricane victims. The three principals matched that donation, as did the agency, for a total of $7,500. In addition to the charitable fund, Cavignac & Associates supports a number of other causes. “We’re committed to donating 5% of profits to various civic and charitable organizations,” Jeff says. The three principals are actively involved in a number of civic organizations including the Downtown YMCA, the San Diego Downtown Partnership, and the San Diego Architectural Foundation. Employees are also encouraged to donate their time. Constant improvement “About three-and-a-half years ago, we joined the Sitkins 100 Group,” Jeff says, admitting that: “It was a real eye-opener. We thought we were pretty good. We had $135,000 revenue per employee, but we met a lot of people who were better than we were. This raised the bar for us, and gave us the tools necessary to achieve significantly better results. “One of the first actions we took was to stop quoting,” he continues. “When we left Roger Sitkins’ seminar, we went back to the office, and looked at what it was costing us to quote. It amounted to more than $500,000 a year for very little return. We’ve taken that money and poured it into value-added services for our clients. The addition of Stuart Nakutin was one result. We also added Sandee Rugg, a human resources expert, who is running HR seminars for our clients. A lot of smaller clients have little or no HR support and we’ve been able to provide it for them. “We’ve also started a mentoring program for new producers. It’s a six-month scripted program that includes Sitkins sales training, the Chubb producer school, and shadowing every position in the agency,” Jeff explains. “We want every producer to understand what each person in the agency does and how important each one is to his or her success, especially the account managers.” Cavignac & Associates is also a member of several other insurance organizations including the Greenwich Group and the Professional Liability Agents Network (PLAN). Jeff notes: “The interchange of information and ideas has been critical to achieving our goals and objectives.” He concludes: “It’s really the people here who have made us successful. Every one of them is a key component in our success. We have 38 people and they are the reason we have been able to bring our revenue per employee above $200,000. They are the reason we have 800 clients and $65 million in premium. They are the reason we have a retention rate around 97% or 98%. We celebrate the accolades we have received from clients at our monthly meetings, and we always have plenty to talk about.” It is for their adherence to knowledge, service and professionalism that we at Rough Notes are proud to name Cavignac & Associates our Marketing Agency of the Month. * |
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