BW Online--Think of It As an HMO of Insurance Brokers, January 28, 1999

[an error occurred while processing this directive] [an error occurred while processing this directive] [an error occurred while processing this directive]

[an error occurred while processing this directive] [an error occurred while processing this directive]

[an error occurred while processing this directive]

NEWS FLASH
BY DIANE BRADY IN NEW HAVEN

JANUARY 28, 1999

Think of It As an HMO of Insurance Brokers

The "managed agency organization" is an attempt to give small brokers big clout

Insurance brokers are a sad lot these days. Rates are so low and competition is so brutal that businesses are folding at record rates. But a group of New York investors claims to have a solution: the managed agency organization.

Called Metro Partners, the agency wants to provide the back-office savings and bullying power of a large broker without actually owning its partners outright. "The smaller agent has two choices to survive, be acquired or merge," says Sharon Emek, a former broker and president of the new agency.

She estimates that in the past three years, the industry has shrunk from 70,000 players to 40,000, with even more of a bloodbath to come. Some blame insurers for insisting on higher volumes from brokers, while others blame firms that have been on a acquisition binge. Says Emek: "The national brokers are buying up so much of the marketplace that we're seeing a real shrinking of the middle tier."

"GETTING CHOKED." So far, though, the New York agency is off to a modest start. Four Independent brokers have signed on to the so-called MAO, announced today. Ira Zapin of Zapin, Emlich & Lombardo Inc. says he wants the benefits of a bigger business without selling out. "The cost of doing business is so high that I'm getting choked," says Zapin. "But everyone else wants to buy the business or absorb it. This way, it's still mine."

Tom Faulhaber, a New Jersey-based broker of so-called equine insurance for race horses, thinks his clients will be impressed. "I like the metropolitan address," he says. "Let's face it: Being based on Wall Street is not bad."

Meanwhile, Emek herself admits that the challenge is to make sure the new agency can compete with larger players. Her goal is to sign on 20 agents within the next three years, and start cross-selling product lines. But competition is so tough that even her new clients already contemplate cashing out. Says Zapin: Ultimately, if I'm ready to sell this, it's good to know that someone would be ready to buy."

MARKET INFO