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Friday, Mar 29, 2024

Jim Scanlon: Taking and Moderating Risks

Jim Scanlon wants to buck the stereotype that insurance brokers are schmoozers and salesmen, happy to sell insurance policies with all the bells and whistles, and happier yet if premiums go up, because the latter means higher commissions. No doubt some brokers fit that mold.“We thought that stereotype was a bad business model,” said Scanlon, CEO of Scanlon/Guerra/Burke Insurance Brokers. “The better our clients perform the less premiums they pay, and that leads to customer retention,” he added. “For our moral compass, that was a better direction to head.” Scanlon got into the commercial insurance business in the early 1980s. He has since grown his firm from a mom and pop shop with premium volume of $800,000 into one that’s on-track to log more than $110 million in premiums this year. And he expanded the business model to provide consulting services to middle market companies in areas such as human resources, safety and compliance and risk management. “We found that no longer was it good enough to just sell insurance,” said Scanlon. “We wanted to work into the position of being a trusted advisor to clients.” Scanlon, 50, is a Valley boy through and through. He was raised in Reseda and Tarzana, attended Crespi Carmelite High School in Encino, and studied history at Loyola Marymount University. His father, who had multiple sclerosis and was eventually confined to a wheelchair, founded a small insurance firm in 1964. In 1981, and fresh out of college, Scanlon went to work with his father at the encouragement of his mother. “I credit my father with teaching me that when the phone rings you answer it,” said Scanlon. “I started out doing all of the grunt work, and making about $12,000 per year. But it gave me a good feel for how a small business is run.” Scanlon’s father passed away in 1983, and Scanlon purchased assets of the business from his mother. But the firm was flailing and didn’t even have a balance sheet, he said. His mother also continued to work at the firm part-time. After taking over, Scanlon’s first priority was to get to know long-time customers and friends of his father. These people treated his father with kindness and generosity when his father’s health was failing, and they remained loyal customers, he said. People business He grew the premium volume organically from 1983 to 1996 to $15 million. Along the way, he also made a point of continually learning about business and how to be a better partner with clients. “I liked the business because it’s a people business,” he said. In 1996, Scanlon brought on two partners to expand to the next level. “I was tired of running the show by myself,” said Scanlon. “The insurance business is a distribution business and I knew we had to grow to stay competitive. But I also wanted to grow to bring a higher level of consultation to customers.” Partner, Mario Guerra, offered expertise in the political process. Paul Burke offered a strong background in finance. Justin Schneir, who joined the firm four years ago, also recently made partner. Scanlon said after 1996, partners – excluding Schneir – noticed similarities in their most successful clients; each company had well-established risk management, safety and compliance, and human resources programs. So the firm began consulting in these areas. A few of the services include: developing or building upon safety programs; providing software and an Intranet system to help companies deploy risk management programs over time; and managing human resources. In-house staff implements all of these services. The firm currently has 35 employees, up from a dozen or so prior to 2000. “This was really well received by the marketplace, but it took a while to dial-in,” said Scanlon. “We realized there were two sales, one to the decision makers and another to the implementers. In order to build trust, we had to listen and ask good questions. But when we got buy-in we had incredible results.” The consulting services help clients decrease the number of reportable incidences per year, such as workers compensation and property claims, said Scanlon, and that translates into better insurance premiums. For Scanlon/Guerra/Burke Insurance Brokers, the business model has led to increased customer retention. The insurance industry has been hit hard in recent years by a decrease in premiums tied to de-regulation in the workers compensation business; a flood of mergers and acquisitions that led to some clients disappearing virtually over night; and the recession. During this time, however, the firm managed to stay relatively flat in terms of revenue growth and has not implemented mass layoffs. Client retention rates are also six to seven points higher than industry averages, said Scanlon, and the firm closes about 80 percent of what it proposes (services and insurance policies) to new and existing clients. Scanlon said his biggest challenge as an entrepreneur is finding the right people to serve clients and implement growth plans for the company. “I’m good at talking with business owners and formulating plans,” said Scanlon. Paraphrasing a statement he has heard, he added, “Most entrepreneurs are hunters and not farmers, so you have to have a balance.” But, getting back to the issue of bucking the stereotype about insurance brokers, Scanlon said there’s another important challenge. “Overcoming ego…listening to what clients want, not just what you think they want.” SPOTLIGHT – Scanlon/Guerra/Burke Insurance Brokers Year founded: 1964 Partners: Jim Scanlon, Mario Guerra, Paul Burke, Justin Schneir Premium Volume in 2007: $116 million Premium Volume in 2008: $109 million Premium Volume in 2009: $111 million estimated

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