While having a brand name everyone knows gives Fireman's Fund aleg up in the market, the carrier had to overcome an "identitycrisis" before it could build a new, profitable business modelbased on the competitive advantage its history provides, thecarrier's newly elected president contends.

When Joseph Beneducci was named executive vice president andchief operating officer in May 2003, "we had one of the mostrecognized brands in the business, but the biggest challenge wasresolving an identity crisis from the late 1990s stemming from notfocusing on what we really did well and what made us distinctive inthe market," he told National Underwriter in an exclusive interviewhere last week.

"We didn't use our own intuition," added Mr. Beneducci--who waselected president on Feb. 3, while retaining his COO title. "Wetalked to our agents and customers to determine what value they sawin us and what they really needed from us. We became a verydisciplined organization in meeting those demands, concentrating onmarkets where we could distinguish ourselves by offering unique,value-added products and expert services."

As a result, according to Mr. Beneducci, "we've evolved from ageneralist to an expert underwriter and service provider in theareas where we can stand out. We've got to be seen as a marketleader, not just someone who's improved their internal business.We've got to be valued by agents and buyers for what we offer."

To accomplish this, the Novato, Calif.-based carrier (a memberof the Allianz Group since 1991) narrowed its target markets tothree main business groups: small-to-midsize commercial accounts;high-end personal lines; and a specialty unit that includes marine,casualty and crop programs. Each has its own president--RobertCourtemanche for personal insurance, Gary Bhojwani for commercial,and Art Moossmann for specialty.

In addition, the carrier recently assumed a 50 percent ownershipstake in a life sales wholesaler that will carry the Fireman's Fundbrand, offering Allianz Life and other carriers' products (mostlyannuities), thus providing its property-casualty agencies withaccess to life and retirement coverage for premium personal linescustomers.

The carrier's independent agency force was consolidated from"well north of 5,000 to about 3,100--a special group thatappreciates what Fireman's Fund brings to the table and where wemaintain a prominent position in our key target areas," explainedMr. Beneducci.

The company also reorganized internally to better integrate itsbrand identity and business strategy. It established one agentcontact point for all lines under a chief sales officer (LarryHannon), appointed a chief marketing officer (Darryl Siry) to unifythe carrier's message, and combined back-office functions into oneshared services group.

"Before we made these changes, there was a picture of us in thedictionary under the word 'silo,'" joked Charles Kavitsky, chiefexecutive officer at Fireman's Fund since May 2004. "Now everyoneis focused on the same sustainable business model."

The "discipline" imposed by the reorganization required a majorinternal cultural change, the two executives stressed. "In thepast, only a small minority here believed we could achieveprofitable growth," said Mr. Kavitsky. "Everyone here embraces thatnow. It's an entirely different attitude toward how we dobusiness."

The change has paid off, with the carrier's 2005 combined ratioexpected to be "well under 100," noted Mr. Beneducci.

However, despite the internal and external changes, Fireman'sFund is determined to remain true to its historic mission to helpits customers--both agents and insureds--prevent and recover fromcatastrophic losses, the duo emphasized.

One key element of the company was untouched by thereorganization--the carrier's long-term philanthropy arm, Fireman'sFund Heritage, which supplies equipment and training tofirefighters and the communities they serve, funded in part byemployees and agents. This follows the spirit of the carrier'sfounding in 1863, when Fireman's Fund was named for an arrangementin which 10 percent of profits went to widows and orphans offirefighters.

"We are very proud of our history, and rightfully so, but youcan't live off the past," said Mr. Kavitsky. "You have to keepmaking history and be proud of what you do going forward." The keychallenge, he added, is "how do you manage with your heart as wellas your head, and is there a return on that? We believe the answeris a resounding yes."

As an example, he noted that as it had in 2004--when a grandslam of hurricanes hit in rapid succession--Fireman's Fundannounced last year that a single deductible would apply to claimsfrom Hurricanes Katrina and Rita.

"All I asked [in 2004] is what would happen if we waived thedeductible for the second event," recalled Mr. Kavitsky. "Theknee-jerk reaction was all the reasons why we can't or shouldn't dothat--the reinsurance wouldn't kick in, the money it would cost us,the precedent it would set."

However, after a few days of review, he noted, "we found many ofthese issues wouldn't be a problem, while there would be a definitebusiness benefit in terms of generating loyalty and establishing avalue proposition. That loyalty has already rewarded us with ahigher retention rate."

He noted a second benefit--less costly claims resolution."Beyond getting lots of accolades, we had very little litigation.We didn't have a problem over whether a tree that fell on a housewent down in the first or second storm, or whether the ownercouldn't get someone out to fix the damage from the first event intime to prevent more damage from the second disaster."

The carrier also provided, "free of charge," recovery servicesto insureds and agents devastated by the Gulf storms, includingtrauma counseling, identity theft prevention, and assistance in"coping with the practical and emotional effects of thehurricanes," a company release noted.

Fireman's Fund has "somewhere north of 6,000 claims, andcounting" from Katrina, noted Mr. Beneducci. "But because we took adisciplined approach to diversifying our portfolio, Katrina itselfwas not catastrophic in terms of our exposure."

For that reason, Fireman's Fund does not back calls by Allstateand others for a federal catastrophe reinsurance fund to help coverfuture disaster losses.

"We oppose it," said Mr. Beneducci. "To spread this exposure toothers not in the storm path is not the best solution for the vastmajority of customers. Instead, each company has to look at theirexposure in each of these cat-prone areas and make sure they canhandle the capacity at risk."

A more effective approach would be to alter accounting rules toallow for long-term catastrophe reserves, Fireman's Fund believes,along with discouraging state governments from artificiallysuppressing rates in disaster hot spots. "The repair andrestoration people we hire raise their prices after a disaster--notto price-gouge, but to reflect the higher demand and increased costfor labor and materials," noted Mr. Kavitsky. "If they can raiseprices appropriately, why can't insurers?"

Terrorism is a different story, however, they conceded, "atleast if you're talking about nuclear, chemical, biological andradiological attacks--events the industry just cannot handle," saidMr. Beneducci. "As bad as 9/11 was, insurers did absorb thoselosses and can still function, but an NCBR event could cripple thewhole industry."

Speaking with NU from his New York office--two blocks from"Ground Zero," the World Trade Center site--he noted that "a dirtybomb" set off in New York might not only "make the areauninhabitable, but could also bring the financial markets down,undermining the ability to pay claims."

He said he hopes the industry focuses its lobbying efforts onreplacing the federal reinsurance backstop in the Terrorism RiskInsurance Act--expiring at the end of 2007--with a long-termsolution to relieve insurers of NCBR exposure.

"We have to have protection against those events that couldliterally cripple the whole industry," he said. "We need to respondbefore something happens that causes the industry's surplus toevaporate."