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Sunday, Sep 25, 2022
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Brokerages Get Fat – and Healthy – on ObamaCare

Debate all you want about the merits of ObamaCare, but greater San Fernando Valley insurance brokerages are already reaping some benefits. Widespread uncertainty about the complex reform law that goes into effect Jan. 1 has inspired companies to seek expert advice on insurance coverage, causing big brokerages with more specialists to grow even larger. That’s the consensus observation from executives at the largest insurance brokerages in the greater San Fernando Valley as ranked by premiums written locally. In fact, almost all of the firms on the Business Journal’s list reported higher premium totals last year than the year before. Scott Firestone, area president at Arthur J. Gallagher, an Itasca, Ill. brokerage that is No. 1 on the list with reported Valley-area premiums of more than $1 billion, said companies are looking to adjust their coverage to conform to the new regulations. “With ObamaCare, if you can provide clarity around health insurance that’s important to clients,” said Firestone, who oversees the firm’s Glendale office. Brokerages, of course, sell insurance from different carriers, matching up their business clients to the most suitable policies. They are paid a percentage of premiums, which varies based on the lines of insurance written. Jason Sandler, partner at OHM Benefits & Insurance Solutions in Northridge, the No. 24 company on the list, said his premiums grew about 12 percent last year. While he noted that small firms can offer specialized expertise, larger ones tend to have more specialties. “A lot of employee groups and employers out there are trying to find brokers to help them navigate health reform,” he said. “All my growth was from companies that had other brokers but weren’t getting the level of service or expertise they demanded.” The 25 brokerages on the list booked total premiums of $3.01 billion. One brokerage reported lower premiums and one was flat, but 23 brokerages reported a larger total than the previous year. Some of the growth was driven by higher premiums for health coverage, which rose 4 percent last year, according to the Kaiser Family Foundation. Meanwhile, general business liability premiums rose 3 to 5 percent. Both figures were higher than the 1.7 percent consumer inflation rate. Firestone at Gallagher said part of his growth also was attributed to higher premium costs for workers compensation – a bad sign for business owners. “Workers comp premiums are on a steep rise,” he explained. “Workers comp has two parts – medical care and long-term disability – and it’s the medical portion that is driving the rise.” Michelle Boyer, director of marketing at Momentous Insurance Brokerage in Van Nuys, the No. 6 brokerage on the list, said her company also has seen premiums rise for employment-practice insurance, which covers companies against allegations of wrongful termination, sexual harassment and job dicrimination. “We are seeing more and more claims, and that in turn drives up premiums,” she said. Consolidation trend Although Gallagher showed a nearly 30 percent rise in premiums since last year, Firestone called it a “clarification,” because in previous years the agency did not report its premiums from health and life insurance. This year, it decided to include those lines in its total figure. Firestone estimated his premium total actually grew about 13 percent last year. In addition to premium increases, the brokerage grew through its acquisition of Chapman Insurance in Pasadena, an agency that specialized in coverage for non-profit organizations. Pete Moraga, spokesman for the Insurance Information Network of California, a trade group in Los Angeles, said the insurance industry is going through a phase of mergers and acquisitions, as evidenced by Allstate Corp.’s $1 billion purchase of Esurance in late 2011. “When you have an economy with major challenges, companies look for ways to adjust and maybe they make an acquisition to lower their overhead costs and expand their markets,” he said. “You see it in both the insurance companies – and the agency and brokerage side.” As money rolls into local brokerages, they have begun to expand their payroll. Sandler at OHM said he is in hiring mode to maintain the high employee-to-client ratio his customers expect. Boyer said Momentous has hired about a dozen employees in the last year, consisting of both sales and support staff. Firestone at Gallagher said a lot of brokers want to join his firm because of the culture, which has fueled the brokerage’s expansion. “About 70 percent of our growth has come because people have chosen to join our firm,” he said. “And when they work for Gallagher, they bring their clients with them.” Download the 2013 VALLEY’S INSURANCE BROKERAGE FIRMS list (pdf)

Joel Russel
Joel Russel
Joel Russell joined the Los Angeles Business Journal in 2006 as a reporter. He transferred to sister publication San Fernando Valley Business Journal in 2012 as managing editor. Since he assumed the position of editor in 2015, the Business Journal has been recognized four times as the best small-circulation tabloid business publication in the country by the Alliance of Area Business Publishers. Previously, he worked as senior editor at Hispanic Business magazine and editor of Business Mexico.
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