Insurance Brokerage

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Insurance Brokerage

• Review of the insurance distribution system
• The brokerage business
• Background
• Recent events
• View of a broker
• Scott Strickland
• Senior Vice President
• Brown Brown of Washington, Inc.
• Thoughts for the future

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Insurance Distribution System - Background

• Independent agents and brokers
• Agents
• Brokers
• Exclusive agency system
• Direct marketing sales

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Insurance Distribution System Background - 2

• Role of insurance producers
• Some stats
• How many producers in the U.S.
• Is it changing
• Personal lines v commercial lines
• Agents
• Brokers

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Insurance Distribution System Background - 3

• Insurance distribution
• Agent v broker
• The distinction
• Real v theoretical
• What do customers think
• Agent v broker
• What do companies think
• Agent v broker

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Insurance Distribution System Background - 4

• Who are insurance brokers
• There are national and regional firms
• Names in the news
• Marsh
• AON
• Willis
• May others large and small

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Top 10 U.S. Insurance Brokers and Revenues 2003 (generated by U.S. clients) Top 10 U.S. Insurance Brokers and Revenues 2003 (generated by U.S. clients) Top 10 U.S. Insurance Brokers and Revenues 2003 (generated by U.S. clients)
Rank Company 2003 Revenues ( millions)
1 Marsh McLennan Cos Inc 5,250.6
2 Aon Corp. 3,232.5
3 Arthur J. Gallagher Co. 1,082.2
4 Willis Group Holdings Ltd. 1,022.0
5 Wells Fargo Co 800.5
6 BBT Insurance Services Inc. 604.7
7 Hilb, Rogal Hobbs Co. 551.3
8 Brown Brown Inc. 545.3
9 USI Holdings Corp. 352.3
10 Lockton Cos. Inc. 289.1
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Insurance Distribution System Background - 5

• What is the role of an insurance intermediary
• Traditional
• Changing role of the intermediary
• Responding to changing customer needs
• Value added services

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Insurance Distribution System Background - 6

• How are insurance intermediaries compensated
• Who pays for all this
• Commissions
• Fees
• Special arrangements
• Customers
• Insurance companies

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Recent Events -1

• Eliot Spitzer, New York Attorney General
• Investigation into contingent commissions
• Charges of bid rigging
• Marsh McLennan Companies
• Other companies involved
• AIG
• ACE
• Zurich American Insurance
• The Hartford
• Munich American Risk Partners

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Recent Events - 2

• Ending contingent commissions
• MMC
• AON
• Willis
• Refunds of commissions to clients
• Employee terminations

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Recent Events - 3

• Transparency and disclosure
• Whats important
• Cost v benefit
• Industry response
• CIAB
• RIMS
• NAIC
• Financial Services
• Sarbanes-Oxley
• GLB

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Recent Events - 4

• How are agents and brokers regulated
• State regulation
• Financial services modernization

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The Future of Insurance Brokerage

• Some thoughts on changes in the industry
• Products and services
• Distribution channels
• Intermediaries
• The economics