In the wake of scandals that have shaken up the insurance brokerage industry, BB&T Corp.'s insurance unit is looking to win big commercial customers away from their current providers.
"We may be a great alternative for people who hadn't considered us before," said Wade Reece, president of BB&T Insurance Services. "There is no question we are getting some at-bats we probably would not have gotten were it not for the current market conditions."
BB&T Insurance, whose aggressive agency acquisition campaign in recent years has made it the sixth-largest U.S. broker, has a valuable opportunity to grab market share among large corporations because of the ethical cloud hanging over the three biggest insurance brokerages, he said.
Gretchen Roetzer, the lead insurance broker analyst at the ratings company Fitch Inc., agreed that now is the time if players like BB&T Insurance and Wells Fargo's huge insurance unit, Chicago-based Acordia Inc., are going to sign up some of the biggest companies. In a normal year, like 2004, very few Fortune 500 companies would issue requests for proposals, she said, but this year most of them are doing it, which she attributed to the Big Three's scandals.
"A year ago it wouldn't have been possible to compete against the Big Three - their relationships are deep and long-term, and they are truly global," she said.
Bank of America Corp., Acordia, Wachovia Corp., Commerce Bancorp Inc., and JPMorgan Chase & Co. either declined interview requests or did not respond to calls seeking their comment.
The companies did not admit or deny wrongdoing, but the charges that they steered business to insurance providers based on hidden incentive fees has prompted many customers to reevaluate them, Mr. Reece said. A "tremendous" number have issued requests for proposals in order to gauge the market, and BB&T is among those enthusiastically responding with bids, he said.
BB&T Insurance, which had 2004 revenue of $650 million and expects $725 million this year, already gets about one-quarter of its business from Fortune 1,000-size companies, and has numerous Fortune 500 clients, he said, and now has a golden opportunity to add share in this segment.
It only last year became a player at this level of the business. BB&T gained a slate of large commercial customers, and positioned itself better for the current opportunity, with its purchase last year of McGriff, Seibels & Williams Inc. in Birmingham, Ala. The $354 million deal, which closed Feb. 1, 2004, moved BB&T from being a regional to a national insurance provider and made it a serious player in the large-account arena.
The key to winning business in this climate is showing that a brokerage runs a clean ship and that business is not improperly steered to certain underwriters by upper management, Mr. Reece said.
"All brokers' business models are not the same," he said. "Ours has always had a very client-centric focus; all our efforts are put at the producer level because we believe the best decisions are made closer to the client."
David Fanger, an analyst and senior vice president at Moody's Investors Service, said upstarts like BB&T and Advanta could have a shot at big corporate customers just because they have not been in the headlines along with Marsh, Aon, and Willis.
"If you haven't settled with Eliot Spitzer and no one is accusing you of anything, you're going to be better off," he said. "The questions will be, how good is your disclosure and how good is your compensation structure?"
Wells Fargo took a step similar to BB&T's in the McGriff Seibels deal when it bought ACO Brokerage Holdings in 2001. ACO was the parent of Acordia, one of the nation's largest insurance distributors.
Mr. Reece agreed that his large-business clients present cross-marketing opportunities to areas of the parent company like capital markets. But he emphasized that cross-selling was not a major motive in the McGriff Seibels deal. Instead, it was driven by the company's desire to operate in all insurance markets, he said.
Willis Group, the third-biggest player globally, agreed in April to pay $50 million to settle New York Attorney General Eliot Spitzer's investigation of insurer kickbacks. In similar cases, Aon, the second-biggest broker, and Marsh & McLennan, the largest, agreed this year to pay $190 million and $850 million, respectively.
Settlement documents from Mr. Spitzer's case against Willis show that a company executive asked that regional marketing officers steer business to "partner" insurers that paid contingent commissions.
Mr. Garmhausen, who covered mutual funds for American Banker from 1997 to 1999, is a freelance writer in Brooklyn, N.Y.
