The nation's largest insurance brokers are being outperformed by smaller firms that deliver much higher levels of service quality to corporate clients, according to the results of Greenwich Associates most recent U.S. Large Corporate Insurance Study.
As part of its annual study, Greenwich Associates interviewed 676 large companies about their insurance needs and providers. The research shows that three brokers continue to dominate the U.S. corporate insurance market in terms of customer penetration: Marsh & McLennan, which is used as a broker by 45% of large U.S. companies, AON, which is used by 41% of large companies and Willis Group/Hilb Rogal, which is used as a broker by 23%.
The research results reveal that clients of these firms give the three leaders quality ratings that lag those of smaller brokers by a significant margin in a series of core service categories such as claims coordination and customer service. More tellingly, in questions about overall levels of client satisfaction and clients' willingness to recommend their brokers to their peers, firms outside the top 10 in U.S. market penetration top the major nationals by more than 30%.
The winners of this year's Greenwich Excellence Awards in U.S. Large Corporate Insurance Brokerage all have national market penetration scores of less than 10%. They are Arthur J. Gallagher & Co., BB&T Insurance Services, Lockton Companies, and Wells Fargo Insurance. These companies qualified for Greenwich Excellence Awards by earning satisfaction ratings from their clients that exceed those given to competitors by a statistically significant margin. "These firms are rated as 'excellent' in customer satisfaction by at least 50% of clients; in the case of BB&T that share reaches 59%," says Greenwich Associates consultant David Fox. "In comparison, none of the major brokers are rated as 'excellent' in customer satisfaction by even 40% of their clients, and certain firms fall below 30%."
Small Broker = Client Focus
Corporate risk managers consistently cite the devotion of smaller brokers to client service. "Even if the overall capabilities of these firms fall short of those offered by the major nationals, corporate risk managers say the smaller firms are able to marshal the resources needed to meet their needs because their organizations are built on client-centric models," says David Fox.
Large brokers offer international capabilities and advisory services that: 1) provide significant amounts of value to corporate clients and 2) cannot be duplicated by smaller competitors. However, smaller brokers demonstrate a considerable advantage over larger rivals when it comes to the day-to-day basics of managing coverage and claims for clients. When it comes to coordinating claims, for example, major brokers offer global capabilities unmatched by smaller firms. But, corporate risk managers rate smaller brokers as being 50% more effective than large firms in claims coordination.
"Risk managers see smaller brokers are being more interested in being partners, as opposed to providers," explains David Fox.
Assessing the Majors
The good news for major brokers: Some of them are improving their quality. The share of corporate clients rating Marsh & McLennan as "excellent" in terms of overall satisfaction increased to 38% in 2010 from 35% in 2009. The share of these companies giving Marsh a top rating in terms of "likelihood to recommend" increased to 52% from 44%. Likewise, Willis Group/Hilb Rogal saw its "excellent" ratings in overall satisfaction increase to 39% in 2010 from 35% in 2009. "For Marsh and Willis, the Greenwich Associates study results reveal many positive signs indicating that the trend is moving in the right direction, even if the firms are not where they would like to be at the moment," says David Fox.
The same is not true for Aon, which currently ranks well behind the pack in terms of client ratings of service quality and actually saw its share of "excellent" ratings decline year-over-year in several important categories, including overall satisfaction and willingness to recommend.
"The study results suggest that major national brokers have for some time been relying on their historic relationships and international capabilities to maintain their impressive levels of market penetration," says David Fox. "However, with the increased emphasis placed on risk management by large
U.S. companies since the start of the global economic crisis, corporate risk management efforts and individual risk managers have become much more sophisticated. As a result, they are looking for a better balance between macro-level advisory services and international capabilities on the one hand, and high-quality, client-focused service on day-to-day coverage and claims on the other. The challenge to the major U.S. brokers is to respond to these demands by stepping up the quality of service they deliver to large companies in the United States."