Roundstone Management, Ltd. (“Roundstone”) based in Westlake, Ohio is an insurance organization focused on the development, underwriting and servicing of alternative risk products, including captives, rent-a-captives and specialty insurance programs. Roundstone offers intermediaries and buyers an expertise in the captive marketplace with an unbundled services approach utilizing the facilities of Roundstone Insurance, Ltd., a class III Bermuda reinsurer registered as a segregated account company.

1. WHAT LIES
AHEAD
A blue ribbon panel eyes the future of the
independent agency system
By Elisabeth Boone, CPCU A highlight of the event was a
panel discussion moderated by
In
George Nordhaus, founder and
the property/casualty chairman of IMMS/Group 500. The
business, as in any panelists represented a broad cross
industry, pundits and section of the property/casualty
prognosticators are a business: Roger Looyenga, CEO,
dime a dozen. A lot of self-styled Auto-Owners Insurance Group;
experts toss opinions around like Robert Sargent, president, Tennant
confetti, but a few wise heads possess Risk Services; Mark Manfre,
the clarity of vision to see into the executive vice president, Insurance
likely future. Office of America; Dan Carmichael,
Nine such savants were on hand CEO, Ohio Casualty; Dan Epstein,
to offer their views to attendees at president, ResourcePro; William
the IMMS/Group 500 Annual Hold, cofounder and president, The
Conference presented by Insurance National Alliance for Insurance
Marketing & Management Services Education & Research; Frank Burke,
(IMMS) in May. Held in Chicago, the president and CEO, First Insurance
conference focused on helping agents, Funding; Mike Schroeder, president,
brokers, and other insurance Roundstone Insurance; and Al
professionals develop a network of Diamond, president, Agency
valuable contacts in the business. Consulting Group.
2 ROUGH NOTES

2. The independent route
Offering his perspective on the
state of the independent agency
system was Roger Looyenga. In its
24-state
territory,
Auto-Owners
is represented
by some 5,500
independent
agencies,
which are its
sole source of
distribution.
“We‟ve all
Roger Looyenga heard about
the demise of
the independent agency system,”
Nordhaus said. “Why do you go the
independent agency route?”
“We‟ve done business with
independent agents for 90 years,”
Looyenga responded, “and the reason
we‟ve always done it that way is
because it‟s a great way to market the
product.”
According to a recent survey,
Looyenga said, respondents want five
things when making a purchase: to
buy from someone they know and
trust; to pay a competitive price,
although not necessarily the lowest
price; to have a choice in what they
buy; to have one-stop shopping; and
to get service from the person they
bought from.
“Only the independent agent can
provide all five of those needs,”
Looyenga declared, pointing out that
the officers of the company had
signed a pledge that they would not
go to a competing system.
What’s up in wholesale?
When retail independent agents
and brokers have unusual or hard-to-
George Nordhaus, Founder
place risks, they turn to specialty
and Chairman of IMMS/Group wholesalers.
500, served as moderator for One such firm
the panel discussion.
is Tennant
Risk Services
Insurance
Agency, LLC,
a wholesale
underwriting
manager and
broker based
in Hartford,
Robert Sargent Connecticut.
Licensed in
all 50 states, Tennant also is a Lloyd‟s
correspondent broker.
Asked by Nordhaus to assess the
future of intermediaries in the
market, Tennant‟s president, Robert
Sargent, said, “I think general agents
and wholesalers have a very bright
future in the market. I tend to

3. Mark Manfre Dan Carmichael Dan Epstein
measure people‟s prospects based on „There‟s no way you can stay in is extremely labor intensive.
the added value they provide their business for 18 years when you‟re Advances in technology, as Dan
customers. In the insurance business, paying 60%.‟ The fact is, if you reach Carmichael noted, have helped both
especially in specialty lines, focusing certain premium thresholds, you can insurers and agents enhance their
on specialization provides an pay 60% with no trouble at all,” he efficiency and reduce expenses.
important advantage to our declared. “Our model is working.” Even with sophisticated
customers. I think we‟ve been very automation systems, however, agency
successful in supporting retail support staffers continue to bear a
Technology rules
independent agents. heavy load in processing transactions.
“We‟ve delivered online programs When Ohio Casualty tapped Dan Dan Epstein, vice president of
for quite a while, but this is the first Carmichael to be its new president business development for ReSource
time we‟ve really pushed the online and CEO, expenses were high, Pro, said his firm offers a solution for
system,” Sargent said. A key concern efficiency was low, and the top bogged-down small to mid-sized
with any such system, he noted, management of parent company Ohio agencies: remote staffing.
especially in specialty lines, is Casualty Corporation realized it was Through remote staffing, Epstein
underwriting accuracy. “That‟s a very time for a change. explained, ReSource Pro provides
difficult proposition. We‟ve developed “Technology was one of the experienced, college-educated
a very thorough application and put it answers,” he recalled. “We believe insurance processing specialists in
online. Of course, if the retailer has today that all of the elements that are China, who connect remotely to the
questions, he can call and discuss necessary for single entry, multiple agency‟s system via the Internet. The
them with an underwriter.” company interface (SEMCI) are service is available to retail brokers,
available. We‟ve been saying for at MGAs, and program managers.
least 30 years that we‟re a year or The agency is not required to
Power of partnership
two away from SEMCI. Now we are migrate its management system or
A fast growing, privately held there,” he declared. data to an external provider.
agency with premium of over “We want you to be able to stay in ReSource Pro receives daily task
$550 million, Insurance Office of your agency management system. It updates via electronic fax, e-mail,
America, Longwood, Florida, operates makes no sense for you to have to suspense codes in the agency‟s
18 offices in eight states. Mark Manfre toggle out of that system, go into a management system, and according
is one of IOA‟s original partners and its proprietary Web site—and there are to scheduled priority lists. The agency
second largest producer, specializing in plenty of them out there—for you to can set access restrictions and
the real estate, construction, and be able to input that same data that‟s monitor performance of the remote
manufacturing industries. in your system, whether it‟s a quote processing specialists.
Nordhaus asked Manfre how IOA or an endorsement or a bill for a Among the tasks those specialists
grew to $550 million in premium in customer. Whatever the case, you can perform are policy checking,
just 18 years. should not have to rekey any of that issuance, and endorsements; rating,
He explained, “The typical agency information online.” quote preparation, and binding;
has producers who build up a book of Rekeying data is inefficient and billing, reconciliation, and claims
business but don‟t get to share in the costly not only for agents but also for reporting; and inspection reviews,
profits or ownership of the agency. The carriers, Carmichael asserted. “You, MVRs, etc.
vision of our founder, John Ritenour, as agents, have a lot more control His company‟s experience shows,
was to bring in producers and give them over this situation than company Epstein said, that remote processing
something they don‟t get elsewhere: the management or vendors do,” he said. has had a substantial impact on both
opportunity for ownership in the “I ask each of you to contact your the top line and the bottom line of the
agency.” After two years of satisfactory carriers and find out why they aren‟t agencies that use ReSource Pro: “on
production, producers are invited to buy using more applications. They need to the top line by increasing the
stock in IOA. accurately and quickly build out as productivity of their people, and on
All commissions, including many applications as possible in their the bottom line because it‟s
contingencies, are assigned to IOA, systems so that you have basically significantly cheaper to have the
which holds the contracts with the transparent access to their systems,” same people in China doing the work
carriers. All commissions for personal Carmichael said. quickly and accurately.”
lines and small commercial accounts
(under $10,000 premium) are Outsourcing is in The education piece
retained by the agency.
“We pay our agents 60% for both With its huge volume of The National Alliance for
new and renewal business,” Manfre transactions—millions daily, at Insurance Education and Research
said. “A lot of people have said, least—the property/casualty business provides practical, hands-on
4 ROUGH NOTES

4. Dr. William T. Hold Frank Burke Michael Schroeder Al Diamond
education and training to producers, continued, “but to offer to everyone as see captive activity almost every
risk managers, and service an additional service.” week,” he commented.
representatives. Finally, “Your agencies are good
In response to a question about underwriters, and you ought to give
the marketplace, Dr. William T. Hold
Captive update some consideration to sharing in the
replied: “I see two things—excitement Michael Schroeder of Roundstone underwriting profit,” Schroeder
and fear. Those agencies that are Insurance, Westlake, Ohio, presented asserted. There are some classes of
successful are doing pretty well” an update on developments in the business with sub 50% combined
because of stable markets and having captive insurance market. Schroeder, ratios, and you can make a fairly
a strong sales organization. an attorney, is responsible for the handsome return on your
“The fear part,” Dr. Hold noted, management and development of investment for retaining some of
“especially in Florida, Louisiana, and Roundstone, a Class III segmented that risk,” he noted.
Mississippi, is that agencies are worried account reinsurer based in Bermuda.
about their customers not coming back. “One publication says that
A consultant’s view
It‟s very disturbing to reopen your captives are growing faster than the
agency and have no customers. Where standard commercial market,” Offering his perspective on changes
did they all go? Many of them haven‟t Schroeder said. “That‟s catching a lot in the property/casualty business over
returned to the Gulf Coast; they haven‟t of people‟s attention. More and more the past 30-plus years was Al
returned to New Orleans. There are states are passing legislation to Diamond of Agency Consulting Group,
tremendous implications when the support the captive idea.” Inc., Cherry Hill, New Jersey.
infrastructure dies.” Asked what factors are spurring “The independent agency system is
the growth of captives, Schroeder not on a downhill slope, although in
said, “One thing that‟s happening is the last 20 or 25 years the number of
New trends in premium finance
that the service providers that run agencies has declined from about
Frank Burke of FIRST Insurance captives and provide investment 70,000 or 72,000 to our estimate of
Funding, Inc., Northbrook, Illinois, management services are becoming about 40,000 or 42,000 now,” Diamond
offered a perspective on emerging more sophisticated and more effective said. “It‟s not the number of people in
trends in the premium finance at delivering their services all over agencies that has declined, just the
business. He observed that what just 10 this country. In the old days you had number of agencies, and it‟s not
or 15 years ago was a relatively simple to fly to the Cayman Islands or because of business failures. It‟s
and straightforward business has Bermuda in order to sit down and because of lack of perpetuation, agents
become both complex and sophisticated. have a meeting to find a captive cashing out when they retire. These
He pointed out, “Our biggest solution or an investment solution for are folks who run small, medium-sized,
competitors are insurance your client. Today we have the and large agencies who would rather
companies themselves. More than Internet and electronic delivery of get the cash than perpetuate their
half of the premiums written that documents. We manage our captive agencies. That‟s not our favorite thing,”
are eligible for financing are facilities from Ohio,” Schroeder said. he continued. “We‟re in the business of
financed by carriers, either on a no- “Why should agents get involved agency perpetuation.”
interest basis or on a very low-cost with captives?” Nordhaus asked. Today, he commented, “Agencies are
basis. We still don‟t understand why Schroeder said. “It‟s another growing larger, and they‟re becoming
a business that sells a product retention product that you can make more professional. But as others have
decides they have to offer the your clients aware of. For an account observed, there‟s still a niche for small
opportunity to pay for that product with loss participation of half a agencies to remain intact, to remain in
on a monthly installment basis at no million dollars, we‟re going to suggest their local areas, and to do very well
charge. Most industries don‟t do a captive alternative. We think it for themselves as part of a larger
that. We see it as our job to continue beats a high deductible or a high SIR. organization,” Diamond said.
to educate insurance companies that “The other reason I think agents “My comment to insurers with
when you sell a product that‟s should look at captives is that if you which I do business is: We should be
effective on January 1, you really have a particular class of business dedicated to growing and making
should be paid for it on January 1. that you‟re having a hard time money. If the successful members of
Put that money into investments finding an insurer to deal with, you the independent agency system can
and let us do the business of billing can put together a captive and have grow your business, use them. If the
and collecting premiums. that group or your agency take some agencies can‟t grow your business,
“We see agents and brokers of the risk,” Schroeder continued. grow it some other way. I happen to
beginning to view premium financing “The distressed lines tend to find think that independent agents can
not as something to offer their slower themselves a captive solution. very well grow the business,”
paying clients for cash flow,” Burke Construction today is an area where I Diamond declared. ■