Tom Corbett says people often consider his business dull.
“The insurance industry can be seen as boring from the outside, but it’s actually interesting,” said the chairman and chief executive of Newport Beach-based Alliant Insurance Services Inc.
What Corbett’s done there is anything but boring. In his 40 years with Alliant, he’s built the firm into the 12th largest insurance broker in the world, according to A.M. Best Co., which is considered the gold standard in insurance ratings. When he became CEO in 1994, the company was the 30th largest in the U.S.
Alliant projects it will record $1.1 billion in sales this year, a 14% increase over 2016.
“It feels fantastic” to surpass $1 billion, he said. “It’s been quite a ride.”
It’s the largest firm on the annual Business Journal list of insurance brokers, reporting $123.4 million in sales in Orange County last year, more than double the $59.2 million at the Irvine office of second-largest Marsh Risk & Insurance Services.
Seeking Better Deal
Alliant designs proprietary insurance products in areas like healthcare and workers’ comp, and liability for specific industries, such as municipal governments and construction firms, around the country. It pools customers’ premiums to seek the best possible rates from insurance companies.
“We try to bring people together to buy insurance, and they get a better deal,” he said. “We like to believe we get great attention from our insurance companies.”
The Los Angeles native, who has a degree in microbiology from California State University-Long Beach, originally planned to become a doctor but switched careers for a variety of reasons, including starting a family. Alliant, then headquartered in San Diego, hired him in 1977 to open its first office in Newport Beach. It now has 104 offices companywide.
During an interview at his sixth-floor headquarters on Dove Street, Corbett pointed out the original office down the street.
“When we opened the office, we had zero business, which was unnerving,” he said.
When he began selling insurance, he said the industry at that time had many average workers executing the status quo. He believed if he could present above-average solutions, he could win customers. Corbett also sought to differentiate himself by focusing on certain industries, beginning with municipalities. He found insurance more intriguing than he originally suspected.
“Insurance is more about risk management and problem-solving. There’s a lot of personal reward in analyzing a problem, figuring out what may work, and bringing the solution to your customer.”
Nowadays, he said his agents develop a deep expertise in the industries they service. “Listen more than talk is our motto,” says its website.
“Most of our competitors are trying to be all things to all people,” he said. “They are generalists, more geographically based.”
For example, Alliant represents 70% of the Indian nation tribes in the U.S. It has designed insurance products for specific sectors, such as law firms, restaurants and even valet parking companies.
Construction
A big area of success has been the construction sector, which has grown from about $10 million in annual sales five years ago to nearly $150 million this year, he said. Alliant’s specialty is surety bonds, where property owners require bonding from contractors to ensure jobs are completed.
Even when the construction industry eventually has its expected downturns, Corbett said Alliant is committed to the sector for the long term. For now, he said he’s optimistic about construction and the overall local economy, citing leading indicators, such as the unemployment rate.
“The business environment for us has never been better. I’m very bullish on the business environment for the country, as well.”
Rising Premiums
Executives often complain about rising insurance premiums, a problem Corbett said he sympathizes with.
“We’re trying to satisfy the clients by giving them better solutions,” he said. “We get rewarded with better rates from the market, and the clients get access to a risk solution they cannot get anywhere else.”
He said premiums may rise after certain shocks, such as the recent hurricanes (see related article, page 29).
Commissions are generally 2% to 15%, with lower commissions for larger premiums and higher commissions for expensive products, such as workers’ comp and earthquake insurance. He said some clients prefer to eliminate commissions and pay on a fee basis.
Company growth has been aided by eight acquisitions in the past two years, which Corbett said is slow compared to competitors that do as many as 30 a year.
“We’re not a big acquirer,” he said. “We see our business plan as organically oriented. We see acquisitions as a foundation for additional opportunities to grow organically.”
No to Slavery
Finding good employees may mean hiring from rivals, which can present problems. If the new employees bring their old customers along, Corbett tries to soothe the previous employer by reaching a financial agreement, but sometimes the other firm won’t accept it and sues.
For example, competitor AON PLC accused Alliant of stealing 10 employees from its Fresno office, though it lost in a jury trial in March. Corbett said such lawsuits come with the territory. He said employees should be able to switch jobs and shouldn’t be under contractual controls.
“I continue to believe slavery went out 150 years ago and people should have a right to determine where they want to work or live.”
Alliant was in the running to buy a portion of an insurance unit from Wells Fargo & Co. It lost the bid for what Corbett estimated was a $1 billion to $1.5 billion sale. In July, Wells Fargo sued Alliant for allegedly using confidential information obtained during the failed bid to allegedly poach top sales executives.
“They are accusing us of substantial violations in ethics,” Corbett said. “The accusations by Wells Fargo are without basis, and we will defend ourselves vigorously.”
Employee Owners
Recently, Alliant completed a buyout of one of its shareholders, KKR & Co. In its 2015 annual report, KKR cited its Alliant investment as a key reason for a 9.3% increase in its privately held investments that year.
Other shareholders include sovereign wealth funds, pension funds and Stone Point Capital, an insurance industry heavyweight with $19 billion invested in the global financial services industry.
However, Alliant is majority owned by about 800 of its employees.
“We’re very proud of that, the breadth of the ownership,” Corbett said. “We think the opportunity to be an owner in the company is a big attraction.”
Even though he is 71, Corbett said he has no plans to retire. He’s pushing his company to grow organically, five percentage points higher than competitors.
He knows that insurance “is not everyone’s favorite topic.”
“I’ve always said that if you want to be left alone at a cocktail party, tell them you sell insurance.”
