Facing middle-market challenges

Facing middle-market challenges | Insurance Business America

Insurance News

Facing middle-market challenges

President examines the difficulties of dealing with firms with minimal risk management resources

Insurance News

By
Chris Davis

Mike Todorovich (pictured), president and partner of Lockton Midwest, has spent 25 years honing his expertise in M&A, insurance, risk management, and employee benefits consulting.

His career has granted him a front-row seat to the evolution of leadership strategies and industry dynamics, particularly within mid-market businesses.

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Middle-market challenges

Todorovich emphasized the unique challenges faced by middle-market companies, which often have minimal true risk management resources.

“Middle-market companies often have very small, or non-existent, risk management teams. So you have a CFO, Treasurer, and even CEO who might be involved in all things insurance, as well as even overseeing benefits,” Todorovich said.

For these companies, making data-driven decisions is crucial. Todorovich’s team focuses on reducing subjectivity in areas such as limit adequacy, while maximizing the use of claims sources, to properly assess operating risk in critical areas including D&O and cyber risk. The team’s job, he said, is “helping more quantitatively focused people, who aren’t risk management-minded or human capital benefits-minded, make decisions using better data.”

To support these companies, Todorovich’s strategy includes redirecting broker investment dollars towards platforms that enhance the overall client experience.

“We’ve invested in facilities that will help clients make better data-driven decisions,” he said. This approach allows his team to offer tailored solutions that address the specific needs of each client, ensuring they receive the support required to navigate complex risk landscapes.

An example of this is Lockton’s approach to benefits consulting, where it employs data analytics around pharmacy benefits and has an in-house group of doctors to manage complex medical claims. This service helps clients handle their toughest benefits challenges more effectively.

Focusing mostly on M&A, Todorovich offered insights into the complexities and challenges therein. With over two decades of experience in working with middle-market and larger private equity firms, he understands the nuances that matter most to financial sponsors.

“Knowing what they need during a transaction, and during the life of the investment, is everything,” he said. Ensuring the sponsor is not just engaging a broker to check the box of diligence, but also pushing their broker to drive value, when the opportunity to reduce premium expense and/or create process efficiencies, is critical.

Streamlining the process

As an insurance broker, Todorovich’s role is to streamline the due diligence process by focusing on the critical elements of insurance and benefits, rather than overwhelming clients with unnecessary details.

“Helping them find value in key areas, while not letting them get distracted by the less critical things that others would drive them toward is key,” he said.

Lockton’s specialization and Todorovich’s extensive experience play a crucial role in delivering value during M&A transactions. “Our folks that … run [due] diligence projects, this is all they do for a living,” he said. By concentrating on driving efficiencies and ensuring a thorough understanding of insurance and benefits matters, his team helps private equity firms achieve their objectives.

Generating new revenue in such a specialized field is no small feat. Todorovich relies heavily on networking and personal connections to identify new opportunities.

“It is 100% relationship-driven,” he said. Leveraging resources like LinkedIn and connecting the dots of “center-of-influence” advocates, he builds relationships with private equity deal professionals.

A significant part of Todorovich’s strategy involves working closely with legal departments and M&A attorneys.

“Partnering with M&A attorneys is a really productive path to go down,” he said.

Transaction liability summit

Recently, Lockton hosted a transaction liability summit in Utah, bringing together M&A attorneys, reps & warranty carriers, tax carriers, and private equity clients. “It was a tremendously productive use of time,” Todorovich said.

The event facilitated valuable industry updates, unique deal dynamics discussions, and, importantly, personal connections that enhance productivity and understanding during high-pressure deal scenarios.

Value through innovation

Todorovich believes that the future of the insurance industry lies in combining superior service with innovation and creativity.

“It’s about driving value through innovation, creativity, and just more thoughtful ways to help increase the valuation of the business you’re working with,” he said. Simply being good at servicing clients is no longer sufficient; brokers must also innovate to stay competitive, he said.