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Q&A: Dave Zuercher


Acordia changes at the top

Published February 26, 2007

Chicago-based brokerage Acordia Inc. has a new name and a new chief executive officer. Dave Zuercher, who has been Acordia's chairman the past five years and head of international and insurance services for Wells Fargo & Co., became president and CEO of the world's fifth-largest brokerage in August, succeeding Peter J. Wissinger, a 20-year Wells Fargo veteran who served at the helm for only eight months. Earlier this month, Acordia became known as Wells Fargo Insurance Services Inc. in a move to better associate the brokerage with its banking parent. Mr. Zuercher spoke recently with Business Insurance Senior Editor Sally Roberts about the management change and the brokerage's future.

Q: You quietly succeeded Pete Wissinger in August after he spent less than a year at the helm. What was behind the management change?

A: In respect to Pete, he had a very successful career with us in businesses other than insurance, and it was just one of these things where he decided he wanted to do some other things in his life. I wish he would have decided that last January when we put him in charge of everything (laugh), but unfortunately he decided that in July. We wish him well. He was a big star for us for many years.

Q: Why did you decide to assume the role?

A: We have had some turnover. Kevin Conboy (former CEO) had retired and then we had Pete, so I felt it was more appropriate for me to take over the role. Most of the 5,000 team members that we have knew me very well. I had been a presence. We had set some strategic initiatives in place, such as the name I felt it would be inappropriate to bring in another executive at this time to have to implement those things.

I have a number of other roles at Wells Fargo. Fortunately, I have a lot of backup, mainly in the international I was able to delegate most of my responsibility there to my deputy. I intend to stay in the insurance side and intend to lead the company for the foreseeable future.

Q: Wells Fargo recently announced that Acordia was changing its name to Wells Fargo Insurance Services. Wells attempted to do something similar in 2001 shortly after the acquisition, but it never came to fruition as Acordia resumed its original name and operated as a wholly owned subsidiary of Wells Fargo. Why are things different now?

A: We know the business now. When we bought Acordia in 2001, I think our experience level--especially with respect to the brokerage side of the business--was not that great. So the idea was we didn't want to upset our Acordia clients while we were trying to learn the business better. I think we moved too quickly to change the name back then. And then you had the hard market and (Sept. 11, 2001, terrorist attacks) and a whole bunch of other things that were going to get our producers focused on their clients trying to take care of their needs, find markets for them when rates were climbing fairly rapidly, and we just didn't want to get our producers spending time worrying about all the changes that would happen in the structure. We wanted them to focus on the customer. As the market got back to a more normalized state, it became much easier to do that.

The second reason is because our producers finally got to the point where they said "When are you going to change the name? When can I walk out to my clients with the Wells Fargo brand on my business card?"

Q: Pete Wissinger had mentioned in the past a desire for Acordia to be the world's largest broker. Is that a goal for you?

A: While that's a worthy goal, what we really want is to be the best. We want to be the best middle-market broker in the country and we want to be noted by our customers as that, and we want to be noted by prospective customers as the best choice for service in the event they become unhappy with their existing broker.

Q: How are you planning to grow WFIS in light of the soft market?

A: It's a soft market, there's no doubt about it. I think one of the things that we have done in the past is focus on our existing customers and cross-selling. We really haven't focused as much on organic growth from outside the Wells Fargo customer base as we would want. So I think that's one of the things we're going to focus on a lot more. And we're going to continue to focus on acquisitions. We've built this company over the years by acquisitions and there are still a few markets in the United States where we are not well-represented and we'd like to improve our representation in those places.

Q: You have been quiet lately on the acquisition front lately. Why is that?

A: I guess we've been quiet in that the size of the acquisitions hasn't drawn a lot of headlines. We've done six acquisitions in the last 18 months to two years. The big issue in the whole acquisition space is the price. We at Wells Fargo just do not make dilutive acquisitions. And because of the pricing in the market, it's just very difficult for us to get the right price.

Q: Will you continue to focus on smaller acquisitions then or are you looking at acquiring larger companies?

A: You could see us in some larger acquisitions as time goes forward. We're not focused on doing the smaller ones by any stretch of the imagination. In some cases, the smaller ones work for us because we can fold them into an existing office and we didn't have to set up a whole new office structure. That way we could pay a little bit more than we normally would pay...and get some expense (savings) out of it.

Q: I know that WFIS is a member of the HLA Global Network. Do you think there will ever be a time where you will need to open up your own office overseas to meet clients' needs?

A: No, I think we're tied to the idea of developing a broker network that's truly seamless for our clients. We think we can do that. We've done it successfully on the bank side over the years with either corresponding banks or with our relationship with HSBC (Wells Fargo HSBC Trade Bank, a joint venture of Wells Fargo Bank and HSBC Holdings P.L.C.) on the international side. So we're very excited about the HLA Global Network. We've done some very exciting and interesting deals as a result of that network. And having local presence on the ground in 90 countries has helped us quite a bit in some cases. We just want to make it better and stronger.

Q: How is the cross-selling going?

A: We're very pleased with our cross-selling activity. We have embedded the brokerage business and brokerage story now throughout the entire Wells Fargo organizations--not just the bank, but all of the other 80 businesses--and we're seeing a good deal of positive traction. If you look at our net new business over the last four years, nearly 50% of our net new business comes from Wells Fargo customers.

Q: How much of the net new business is commercial?

A: It's almost all commercial lines.

Q: Do you have to have a different cross-selling strategy for personal lines vs. commercial lines?

A: You do. In personal lines...obviously you have the VIP or wealth management-type client and you also have the person who may have taken out a mortgage with Wells Fargo and wants to get a homeowners policy. I think it's how you approach them and how you do it most effectively and efficiently and how you can develop the right channel for them to do business in that is most important.

That was really behind our whole initiative at this time last year of putting all of our insurance business together. We had two insurance businesses, the Acordia business and the Wells Fargo bank assurance business. But there was some overlap there. What we were trying to do is create the proper channel so that we can make sure when we approach these clients or they approach us we can serve them in an effective manner and they get a good buying experience out of it.

Q: What about commercial lines?

A: It's a real referral model. So in commercial, a Wells Fargo business entity, like one of our branch stores that handles small businesses or one of our regional commercial banking offices that handles medium-sized business or one of our U.S. corporate banking offices that handles large businesses...they would typically talk to their customer about the idea of insurance and then make a referral to one of our producers. We have it essentially set up to where if you're in Denver, say, you would make a referral to a Denver producer and then that producer would make the sale from there and the banker would be out of the mix.

Q: So it sounds then that you need the Wells Fargo bank footprint to mirror that of WFIS' footprint.

A: That helps a lot. In the small-business arena, it's much more driven by technology...the ability of the small-business man to look at an Internet site at the same time he's talking to an agent who might not be across the table from him. In the larger business, clearly it's person-to-person, eyeball-to-eyeball selling.

Q: Like other insurance brokers, Wells Fargo Insurance has faced charges over its compensation practices from several state attorneys general, including former New York Attorney General Eliot Spitzer. Unlike the other brokers, though, you did not settle the lawsuits, choosing instead to fight. Why?

A: The short answer is we haven't done anything wrong. Contingent compensation is a longstanding practice in the industry and it is legal and it's been upheld in numerous legal cases over the years. I think that's the main reason; we just don't think we've done anything wrong. We do agree that disclosure is a very important aspect to any kind of compensation we receive and our customers should be entitled to understand where we make our money, and we employed a very rigorous procedure two years ago, almost. So far, we've disclosed every dime we've received on a policy-by-policy basis to every client.

Q: Where does the lawsuit stand?

A: I really don't want to comment on the case itself and on the particulars of the case.

Q: What do you think of Travelers' and Chubb's recent decisions to phase out contingent commission payments to brokers and replace them with supplemental payments that fall outside the definition of contingents?

A: We believe we perform a valuable service for our insurance carriers. If you look at the type of customer we have--the middle-market and small-business customer--for 99% of our clients, the only risk manager they see is one of our people. So there is a value we perform and we are happy to be compensated for that. If (Travelers and Chubb) choose to develop another form of compensation that recognizes the fact that we give them business that performs at or above the norm or an acceptable rate to them--and that's what we're intending to do--the consequently we're happy to be compensated for it and disclose it to our clients.