It is often an ironic circumstance when an attorney gets sued, a doctor gets sick, or a cobbler needs a set of shoes.  Professionals sometimes need the services of their own profession.  Such was the case last week when my own car got hit in the parking lot of a local watering hole.  I came out after a night with some friends to see my driver-side door smashed in.  Not surprisingly, none of the bouncers had seen a thing and the owner, while pleasant, wasn’t very forthcoming.

It was fortunate that the damage was comparatively minor…the repair shop ended up charging a minor $400 to unbend the metal (or whatever composites they use in this day and age) and repaint it.

But, it did leave me a bit annoyed at the idea that I’d be out any money (and could have been out much more).  I would have loved to argue that the bar’s GL policy should have kicked in, but the reality of pursuing that for a small dollar amount at a bar I actually want to go back to in the future was not in the cards.  Regardless of their culpability in having a dark parking lot, dangerous parking lot, or any other argument really gets outweighed by the basic social premise that I didn’t want to destroy my relationship with the bar owner over $400.  I think many of our clients sometimes miss this bigger picture that there is a cost to just ‘existing’ in life and maintaining relationships we want to hold.  There is a gap between the “paper legal & financial” instruments we put in place and the reality of how we use them.

Isn’t that what life ends up being about?

We’ve all been talking about it for more than 2 years now:  the market is “going to harden.”  We are finally seeing some evidence of it and now we’ll see which agents have been coasting along.  First, for those less familiar with the hard market / soft market concept, it goes something like this.  Pricing of insurance goes in cycles.  The market is stable and some new entrants want to come in and grab a share of the market, so they start offering products at cheaper rates.  Pretty soon, other markets have to start dropping prices to match (so they can hold onto their business).  It cascades, and all prices start to fall.  This is a classic “SOFT MARKET.”  However, at some point, there will be a big disruption.  It could be an earthquake, hurricane, or other natural or man made disaster that forces insurance carriers (and the reinsurance market) to pay out big bucks.  Pretty soon carriers recognize they have to start raising prices to make a profit and the entire market starts moving towards higher price levels.  This is a classic “HARD MARKET.”

Historically, it the hard market / soft market is cyclical and every “x years” we see a shift.  However, the last 8 years (depending how you count) or so has been soft.  We’ve all been waiting for it to turn, but with the economy in the basement, markets were soft, and prices stayed low.  We are finally starting to see it turn.  Travelers and Hartford have both significantly tightened pricing in the last 6 months and they’ve simply started non-renewing more than usual.  Even the captives are getting in the mix.  Look at this comment from Farmers where they will be jacking rates up 10% or more in Texas.  So, with this impending hard market, what can you as a consumer (individual or business) do???

Unfortunately, it is the same answer as most of us preach:  you have to find a “skilled” broker.  Hard market turns are where ‘sloppy’ brokers are outed because they can’t just run a quote and know it will be cheaper than a quote run last year.  This is where finesse, relationships, and market access actually start to matter.  If you are with a Captive Agent (Farmers, State Farm, Allstate, and similar), once they start to increase rates, you are stuck because your captive agent can’t shop other markets.

This is the time, more than ever, to go seek out a well qualified, experienced, and knowledgeable independent broker.  When times get hard, you’ll be thankful you built a solid relationship with someone that will fundamentally care about you because he/she knows that you will work with them when the market one day softens again (and not run to an agent that is 72 cents cheaper).  In soft markets, shopping matters, but in hard markets relationships matter.  Make sure you build a relationship with someone that will go out and fight for you.

We are pleased to announce that as of December 1, 2011, Mt. Franklin acquired Luna Insurance Group.  This marks the third acquisition we have made since our inception and Luna adds so much to our agency.  Luna was a premier agency focused largely on personal lines clients on the West side of El Paso.  It also provides us our third office and excellent geographic diversity in El Paso.  From our standpoint, we’ll be able to leverage our best-in-class back office to service Luna’s former clients in ways they hadn’t previously.  Additionally, Mt. Franklin’s capabilities in major commercial insurance lines will provide customers with one-stop shopping for both their commercial and personal insurance needs.  We invite you to come visit us at our new office located on Executive Center.

As any experienced operations person will tell you, after the deal is signed, the hard work actually begins.  The success of post merger integration (PMI) ends up defining whether the deal was a good one or not.  We are in the midst of converting computer systems, phone systems, carrier systems, and most importantly branding.  It got me thinking a bit this weekend about professional service acquisitions.  Whether it is a medical practice, dental practice, financial service house, insurance practice, or anything similar, what’s really being purchased is the access to an existing client base and the will of the clients to accept a new company (even if it is the same employees) servicing them.  It’s all about the messaging and branding to these clients to keep them more comfortable staying than shopping for another broker.  Unlike a physical asset that you can touch, the purchase of an agency depends so much on our ability to quickly communicate with and make customers feel good about doing business with us.

We’ll have a joint letter go out to clients, press releases, and similar.  However aside from those and stuff we do to take care of our customers on a daily basis… are there any special thoughts, techniques, or practices others of you have successfully used?