The Daily Transcript: Barney & Barney witnesses 100+ years of changes to insurance industry, San Diego
Nov 8, 2011
The Daily Transcript: Barney & Barney witnesses 100+ years of changes to insurance industry, San Diego
By ANDREW KEATTS, The Daily Transcript, Tuesday, November 8, 2011
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Barney & Barney is a local insurance shop that’s been servicing the San Diego community for more than a century.
It’s also the 29th largest insurance brokerage in the country, with offices in Orange County and the Bay Area in addition to its San Diego headquarters, and has more than quadrupled its annual revenue in the last 12 years.
In his 26 years with the company, managing principal and CEO Paul Hering says it’s the overall scale of the Barney & Barney’s operation that has changed the most, giving it the feel of simultaneously a local institution as well as a regional operation with the size to meet unique client needs.
"When I joined the company in ‘85 we were located at 5th and Ash in a small building, everyone under one roof," he said. "There was a certain intimacy, knew something about everyone, what was going on in their lives. Today we have three locations in the state with 340 full-time employees, people telecommuting from other states and companies. You work hard to preserve culture, but there’s an obvious scale difference."
Formed in 1909 as "Kendall & Barney" by high school graduates Phil Barney and Stewart Kendall selling fire insurance out of the Granger Building downtown, the company added its second Barney two years later when Lorenzo Barney, Phil’s brother, joined the company.
At the time of the company’s founding, insurance sellers generally didn’t offer life insurance, believing it suffered from both adverse selection and moral hazard.
Also in 1911, as Lorenzo was joining his brother’s insurance company, construction had begun in Balboa Park for the Panama – California Exposition, which would become the San Diego Zoo five years later when the animals imported to the exposition were quarantined.
Barney & Barney weathered the depression, which stopped the growth of what had been a booming commercial insurance industry, by collecting 90 percent of the overdue premiums and taking over insurance for the historic Building and Loans failures with commissions paid by the State Commissioner.
The founding brothers Barney sold the company in 1943, but the new owners retained the name.
The employer-based health insurance system as we know it today had its start around this time, as WW II-induced wage controls forced employers to start offering coverage as a means of attracting employees.
In the 1950s, the company created its Life & Group Department, which would come to be Southern California’s largest employee benefits department.
The company continued to grow through the ‘60s and ‘70s. In 1973, President Nixon signed the HMO Act, providing federal endorsement, certification and assistance for health maintenance organizations.
But after moving to offices in UTC in 1985, Barney & Barney encountered years of virtually no growth through the nineties, leading to a major restructuring in 1999.
According to Hering, that restructuring in 1999 was the biggest event the company has had to deal with in his 26 years as an employee.
Annual revenues were stuck between $10 million and $15 million during the preceding years. Like other insurance companies during the time, the company had plateaued and was unable to break through to another level.
"That was the catalytic event for us," he said.
Within the company, Barney & Barney became more performance-oriented.
"We made sure we were properly incentivizing people, and made changes in corporate governance and leadership changes," he said. "We changed compensation systems, which are challenging, significant things to deal with."
And after that restructuring, the company was able to avoid pronounced effects during the Great Recession.
"I certainly wouldn’t say that the challenging economy has had that much effect on us frankly," Hering said. "We’ve been able to outpace economic challenges by bringing new clients into our organization. We’ve been able to grow our business by bringing in new clients."
Hering acknowledges that it’ll be difficult to maintain the 15 percent annual growth the company experienced from 2000 through what’s projected for this year, but hopes the company will be able to hold steady at 10 percent for the foreseeable future.
"We just need to continue to execute," he said. "We need to build out our recent investments in Orange County and the Bay Area, and continue to offer best possible services to clients while hiring the best and brightest people."
One of those employees, Mary Mangosing, has been with the company for 35 years, making her one of the firm’s longest tenured employees.
She says she started in the mailroom on an easy-to-remember date ("7/6/76") before being promoted out to payroll in less than six months. "That was cool," she said.
There were 11 partners with the company when she was in payroll, and she was one of the only employees in the company with a computer. "One of those big, loud computers," she said.
Barney & Barney is still a great place to work, she said, no matter how different it is.
"I still know everyone by name, since I’m in payroll, but I don’t always recognize who they are anymore," she said.
In observance of its centennial, the company formed the Barney & Barney Foundation three years ago as a vehicle of formalizing its charitable donations. In its first year, the foundation gave $180,000 to 12 charities. Since then, the foundation has donated another $200,000 to 18 more charities.
