The revenue-generating and relationship-building power of reinsurance was a leading topic of discussion and debate among agents, speakers, and industry executives at Agent Summit 2018. Among the leading providers of reinsurance programs for agents and dealers is SouthwestRe, the Albuquerque, N.M.- and Dallas-based company founded by CEO Jim Smith in 1985. In September, SouthwestRe and its sister company, Dealers Assurance Corp., were acquired by Canada’s iA Financial Group. To learn more about the company and ask what opportunities and challenges the reinsurance segment has in store for agents, Agent Entrepreneur caught up with Scott Craigmile and Carmen Torres, the duo behind SouthwestRe’s sales and marketing efforts.
AE: Carmen, Scott, how did you break into the auto industry and what led you to SouthwestRe?
Torres: I actually started my career at the Bank of Santa Fe, a small community bank which was acquired by Wells Fargo. SouthwestRe had an open banking position I interviewed for and got. That was 15 years ago, and I have spent most of my career on the administrator side. Working at SouthwestRe, moving around in the company, I have been exposed to a lot. I’ve served as reinsurance company administrator, head of our Client Services department, and most recently as vice president of sales and marketing. Over the years, I have been fortunate enough to develop a certain level of expertise in administrative management, reinsurance company administration, agent support, and many other things. In some ways, I have grown up in the business here, and I have really enjoyed it.
Craigmile: I took a little different path. I got into the business when I went to work for Pat Ryan in 1979. I left in ‘99 to start my own agency. I became an agent of SouthwestRe at that point. We had lots of business from the get-go and I got to know Jim Smith. Shortly after starting my agency, I was offered the opportunity to run a dealership in Albuquerque. Jerry Freeman, a Dallas megadealer, had been one of my clients with Pat Ryan, and he asked me to be his operating partner. I already had a couple really good guys working for me in the agency, so I made the decision to go run the dealership. I did that for the next six years, and when I got tired of commuting from Scottsdale to Albuquerque, I went back to working at the agency. Then, in 2009, Jim asked me to join his company. I did so on a contract basis, then went full-time in 2012.
AE: My impression of SouthwestRe has always been that of a company on the move.
Torres: That probably stems from Jim Smith. You know him well: active, dynamic, lot of ideas, keeps everybody on their toes. We have joked internally that Jim will make these very aggressive deals and we’ll wonder, “How are we going to do this?” But he has so much faith in the company and our ability to roll up our sleeves and work it out. Things are always moving and changing, and that’s because we don’t have a sit-back-and-wait mentality. Even though he is currently pursuing other opportunities, Jim’s entrepreneurial spirit is still the very bedrock of SouthwestRe, and we are still guided by his leadership..
Craigmile: I agree. Jim wakes up every day with a new idea. Between agents having new ideas and Jim having new ideas, I like to think of us as a speedboat racing around the big ocean liners. We’ll do anything that makes sense for everybody. When I worked with Pat Ryan, what we had was what we had. A lot of companies do it that way. We’ve always been a little different here at SouthwestRe.
AE: What’s an example of an agent’s idea that paid off?
Torres: We recently introduced a specific technology package. It was based on an idea an agent brought to us just in the last few months. He wanted a type of service contract that was either not available in his market or in very limited use. He had called three or four other admins and they weren’t interested. We didn’t offer it. We didn’t have any historical data for it. We hadn’t done any market research. And yet, within three months, we’re now in limiting testing. We really do try to be open and flexible with agents. It just has to make sense, as Scott said.
Craigmile: If someone asks us to build a specific program, our product development group is very good at making it a priority, putting it together, and getting it out to agents so we can use it. We have done a lot of that over the years.
AE: Should agents still be concerned about prequalifying dealers for reinsurance, or is business so good that reinsurance will pay off for anyone?
Craigmile: The one main thing that could still keep reinsurance from being viable for a given dealer is their size. If they’re too small, I would put them in a retro program. But there is no reason a dealer of any size should not want to participate in underwriting profits and investment income.
AE: Is there a benchmark or cutoff for that?
Torres: There is. We generally advise agents that a dealer should be writing at least $200,000 of annual premium and at least 30 service contracts per month. And that is on the agent’s side, to ensure they’re looking at what the dealer wants. Reinsurance is no longer a foreign concept to dealers. In fact, there are very few dealers left who have not heard about it. In today’s market, it’s all about who has the best and most competitive program.
AE: Has last year’s acquisition of SouthwestRe by iA Group affected the way you build and market your programs or work with agents?
Craigmile: When providers change hands, I think agents are always going to be a little skeptical until they know for sure what’s happening. You may have seen the release our president, Eddie Eckert, sent out, talking about the differences between our acquisition by iA and some of the private-equity investors that have bought competitors. iA didn’t buy us to flip us. They want us to be their entry to the U.S. automotive market. It’s a good situation for us and all of our agents.
Torres: There is always a certain level of apprehension, especially with long-term clients. “Will I still get the same service I’ve come to expect, the same deal?” We met with every agent we have to assure them iA does not want to bring in a new executive leadership team. They want to capitalize on the footprint SouthwestRe has. There will inevitably be some changes, as with any acquisition, but the core of what Jim has built and the fact that we are an agent-based organization will continue.
AE: Can you identify any trends in the reinsurance segment that agents should be tracking?
Torres: We know the 2017 Tax Cuts and Jobs Act will have some ramifications for non-controlled foreign corporations. We are trying to determine how that change is going to affect our clients, and there is some disagreement in the industry.
AE: We saw it at Agent Summit.
Torres: We did. And we are all working together, trying to figure that out. From the agent’s perspective, make sure your providers are communicating directly with you. You may find yourself in a predicament if administrators take different positions. Get as much information as you possibly can.
AE: Any other developments agents should be aware of?
Craigmile: Specific to SouthwestRe, with iA and all their financial wherewithal, we now have money to invest in things we might not have done in the past. Dealer loans have been a big part of the business, and we can do that when it makes sense for the agent and for us. Our partnership with Ron Reahard on a national training program is another great example.
AE: Reahard was a good choice.
Craigmile: He’s great. He was our first choice and we’ve never wavered.
Torres: We’re very excited about that. Partnering with Reahard to build a training program just shows our commitment to agents. We want to provide more services and value they didn’t have with us before. After all, several years ago, we were one of the only ones doing reinsurance. We have to be dynamic to stay competitive.