Small, But Not Small-Minded

Jörg Schmidt believes in service. He puts it before profit, even.

So he’s there, on the end of the phone, ready to give advice or offer assistance in almost any area he feels confident about.

“When I can help, I put up my hand and say so,” he declares. His clients know this, so they often ask him for input. One of them, a customer of 20 years’ standing, sometimes sends pending supplier contracts to Schmidt, soliciting his advice on relevant clauses. When another was told by the Italian government’s medical ethics advisory body that his company would need liability coverage of a million euros ($1.26 million) per head for a clinical trials program, Schmidt sped to Italy and convinced the committee that the requirement should be capped at 10 million euros per trial.

This is the core ethos behind SVT, Schmidt Versicherungs Treuhand, his small brokerage. Small but beautiful, he likes to say. It’s based in Weinfelden, a town of 10,000 souls a half-hour’s drive from Winterthur and 30 minutes more (down the same road) from Zurich. They are the Swiss cities where the big boys ply the trade, but Schmidt is happy being small—but not small-minded.

“Some do not expect a company that plays in our league to be located in such a place,” he says, “but I like the countryside.”

He got his start in Zurich, working for the eponymous insurer on the legal side of claims. The approach was different then, 30 years ago, before brokers existed in the Swiss market. Whenever a client came with a claim, Schmidt and his colleagues would work to find the coverage to meet it. But there was a change.

“We began to look more closely at our own financial interests,” Schmidt says. “That wasn’t the way I had been brought up to do things.” He moved to Winterthur, to the next city-named insurer, where the claims ethos was more to his liking.

“The client pays a premium and buys a promise,” he says. “I saw my job of claims handler as ensuring that the promises made by the salesman were kept when a claim was made. Even though the expectations and the promise may not always have matched exactly, I would act to ensure that the client received what they believed they had been promised.”

He acts the same way today, the way he learned in Zurich years ago. “Sometimes people don’t get what they deserve,” Schmidt says. “They need to have a voice, someone who can help them to get what’s due to them. I designed a business model based on this idea. It gives clients ‘eye contact’ with the large insurers.” He gesticulates, to show how the broker can raise his client up to a height sufficient to negotiate with his larger insurer on equal terms. “This is why I became an entrepreneur, to do this for clients,” he says.

It is an important word for Schmidt—“entrepreneur”—a word that clearly fits him as well as his clients.

“It is the aspect of SVT that really counts when I do acquisition work. When I speak to another entrepreneur, it is owner to owner. We speak the same language. No employee can have the same impact.”

That philosophy, combined with a strategy of focusing on a few specialties, has allowed Schmidt to carve out a sustainable niche in a competitive market. “We swim in the same pond as the big boys,” he acknowledges. “Specialization is the way we compete. Why should I swim in a pool of sharks?”

At Winterthur he focused on insurance for manufacturers, so SVT began with the same kind of clients. But as competition increased and brokers in the Swiss market multiplied, he looked for new niches. About a decade ago, he took on a small client running a clinical medical trial. The client told others in the field about the genial Swiss broker who would offer over-the-top service to companies with only a handful of employees and a small premium volume. Schmidt’s clinical trials business began to multiply, alongside his more traditional manufacturing and professional portfolios, and his expertise in the field began to grow. He sought out markets for the risk, established programs to cover multinational trials, trained staff in areas such as multi-local regulations and compliance, and made presentations about risk management at universities and conferences. And he continued with his service focus.

“One start-up client came to me to ask about obtaining patents in the U.S.,” he says. “They were small, five or six employees. I had some knowledge and some contacts, so I helped.”

When they first sought insurance, Schmidt says, the big players told them they were too small. “The big boys want a certain income before they will even look at an account,” he says. Now that little company regularly runs trials insured for 1.5 million Swiss francs.

SVT’s aviation portfolio stems from a personal interest. “I have a pilot’s licence, so I know what the inside of an aircraft looks like,” Schmidt says, stressing that his ambition is not to cover the entire Swiss private fleet. Instead he insures product manufacturers creating various items, such as safety equipment, which go into aircraft.

“It’s not about hull. It’s an industrial risk with an aviation specialty. We know about their liability risk, and there are very few brokers who will handle it.”

The path has not always been easy. In the early ’90s, Schmidt ventured out on his own to provide advocacy for clients in a market where most of the new brokers were former agents. In Schmidt’s words, they were “playing both sides.” He forged a joint-venture partnership with the London-based Lloyd’s brokerage Lambert Fenchurch and began to spread his ethos around. About a year into the project, he had a call from former contacts at Chrysler, which had returned to Europe in the early 1990s and was now producing vehicles in Austria. A year later, Schmidt was handling Chrysler’s roadside assistance program for the whole of Europe. “It was my biggest client, generating 50% of my income.”

It was not to last. Late in 1998, while driving to work, he heard the news that Daimler was acquiring Chrysler, forming a transatlantic auto manufacturer. “After a few minutes it sunk in—this was going to have some impact on my business.”

That impact was devastating. Daimler, which was running its insurance programs in-house, quickly collapsed Schmidt’s Chrysler deal. “Economically it caused some headache,” he understates. “Instead of a nice profit, I was suddenly confronted with a deficit for the next year. I had to lay off some of my staff.”

You get the sense that, for Schmidt, this was like banishing family members. “I had always known that relying so much on one client was a risk, but when an account like that comes along, who would say no?”

In this, the biggest challenge of his career, Schmidt acted decisively. Lambert Fenchurch was about to merge with a London competitor, C. E. Heath, so he bought out his partners a week before their own sale, when the value of SVT was at its nadir due to the loss of the Chrysler business. But his next decision, he confesses, was the worst of his career. A small independent brokerage in Winterthur invited Schmidt to merge SVT.

“The principal wanted to retire in a few years,” he says, “and we could save some money in the mean time.” It seemed sound; the companies were combined in 2000 to become M&S Consultants. But Schmidt quickly realized that he had made a grave error: The ethos was wrong. “We had very different ideas about how to run the company,” he says. “My new partner didn’t care so much about service. I tried my best to do what was right for my clients, but after five years I gave up.”

He walked away from the partnership, with no compensation for his contribution, but did not throw in the towel. Urged on by Renate Tschabold, his current business partner (and girlfriend), he re-launched under his old brand, SVT. Within two weeks, about 90% of his former clients had returned to the fold, which caused an initial struggle: “We had to build new infrastructure very quickly—a legal entity, office space, new agreements with insurance companies, all the time pretending we were a very organized office.”

His clients never realized that he and Tschabold were working out of their home, improvising daily, rushed off their feet. Almost all of them remain on the books today, even as behemoth competitors try to pluck off the larger accounts.

Today’s reincarnated SVT has about 120 clients, from paper mills to chocolate-manufacturing equipment makers, including a brace of billion-dollar companies. In aggregate, they spend about 8 million Swiss francs in premium annually through SVT, excluding pension contributions (“the most difficult and the most sensitive side of the business…it is everybody’s money”), which Schmidt handles for his clients as an added service.

He gets the job done with seven employees, including two part-timers. But for a long while he has been looking for one more staffer, a protégé to share the client-relations role, which now rests completely on his shoulders.

“The employees run the daily business, but there is no account executive,” he says. “That’s my biggest challenge now, to find a person with the personality, the knowledge, and the experience to fulfill such a position.”

He seems a bit puzzled as to why it is taking so long. True, the employee market in Switzerland is tight, with demand for experienced people greater than supply in most sectors. Perhaps people don’t want to commute from the cities; perhaps they don’t see sufficient opportunity at SVT.

“The big companies offer the chance eventually to be head of a big department, but here you become part of a family,” Schmidt says sincerely.

It does seem rather like a family breakfast one recent morning at SVT’s offices, a converted apartment in the sleepy Swiss countryside (two thirds cheaper than the same space in the city, Schmidt explains). He and Tschabold sit side-by-side at the kitchen table, the communal hub of the office, surrounded by their younger employees. When the morning mail has been circulated and opened, and the day’s issues discussed and actions resolved, everyone takes their used plates, cups and placemats to the sink and washes them up immediately before heading back to their desks.

Later, they walk to the adjacent building to look at a second converted apartment, one that SVT has just bought and is nearly ready to occupy. A high-end coffee maker, still boxed, awaits them. The telephones and data lines were installed that morning (Schmidt starts working at seven). The unit will provide a large meeting room, an executive relaxation area, and office space for Schmidt, and it will free up space in the other suite for the new employees he can’t manage to attract. “I could grow more quickly,” he says, “but it is very difficult to find the right people.”

The new space is not perfect. Both Schmidt and Tschabold agree that the aesthetic isn’t quite right. Respectively an accomplished photographer (clients enthusiastically receive the annual SVT calendar, which presents Schmidt’s arresting images) and painter (Tschabold’s playful canvases adorn the office), they would have done it differently had they started from scratch: different floor tiles, a different shade of white for the walls. “We can live with it,” Schmidt says. He and Tschabold exchange glances, as if trying to convince each other. It’s clear, nonetheless, that details are important to them. “A business should have some style,” he says, “and that style should be reflected in details such as the corporate stationery. When you look closely, you realize there’s more than one kind of white, and we ought to have the right kind.”

This, too, is pure Jörg Schmidt: There is little room in his mind for shades of gray.

“We work with insurance companies on a very high level, and we are known to be totally reliable,” he reports with faintly discernable pride. “We would never cheat or pull their leg. When we send a submission, underwriters know they can utterly rely on our information.” Some—Schmidt mentions Chubb, but there are others—send U.S. clients with coverage demands in Switzerland straight to Weindfelden.

“We are dependable partners, which is what they want and what we want to be.”

Others, and here Schmidt mentions XL, have given SVT settlement authority for claims up to several million dollars. “That’s unusual here, maybe unique for the business we are doing,” he says. But it is also efficient and mutually beneficial, he explains. When clients are negotiating with their trusted broker, the claims they present tend to be more realistic, since they are not expecting to enter an escalating conflict. The result is often fuller and easier compensation for the client and lower overall costs for the insurer.

This remains, for Schmidt, the most important thing. Everyone is happy. It may not be a formula for enormous growth, but for Schmidt it is enough. He has established a brass-plaque office in Austria, which under European Union rules allows SVT to trade across national borders within the 25-country bloc. When service on the ground is required, he turns to an alliance of independent brokerages spread across the globe whose members cooperate to provide local services when necessary; for the U.S., he turns to The Council. As one would expect, Schmidt uses this extensive set of contacts in a fashion that fits his ethos.

“Over the years, I have grown a network of national and international partners, which helps me to provide additional services to my clients,” he says. “For example, if someone wants to start a new business in the U.S., we know who to talk to about tax issues, licensing and the like.”

By keeping his international partners familiar, his staff like family, and his markets and clients like players on the same team, Schmidt can also keep one eye on all the moving parts. “I know exactly what is going on all the time,” he says, “and my clients have direct access to me all the time.”

As if to prove the point, Tschabold interrupts our conversation with a report of a recalcitrant client.

“Someone didn’t pay their premium, which isn’t very nice,” Schmidt tells me. He is on the phone immediately to leave a terse message, and 15 minutes later, he receives notice that the payment has been made. It had been an oversight.

“When I left Winterthur International, I moved out of a big luxury liner with a nice cabin and into a little sailboat,” he says. “But on the big boat, I wasn’t the captain. In the small boat, I can decide where it goes. If there is a wave coming, I get wet immediately, but then I can change direction. In the big boat, I wouldn’t even have seen the wave.”

It is in this way that size matters to Schmidt: controllable, comfortable and collegiate, with a constant flow of satisfaction and an occasional cascade. After all, he says, “You have to learn to get wet sometimes.”