If it can be said that a critical step on the road to success isadjusting one's own expectations, Dan Wolfgram, executive vicepresident in Personal lines, marketing and communications atWaukesha, Wis.-based R&R Insurance Services, has a clearmessage for producers who might be laboring under an unrealisticview of Personal lines performance.

“If agents think they are going to grow Personal lines businessby rate [increases], particularly in auto, it's not going tohappen,” he says.

Indeed, Personal lines premiums have seen only small (2% to 3%)increases for longer than most agencies care to remember. But if alack of major catastrophes in the past year is a factor,analytics-driven pricing precision on the part of insurers is thelarger component of a continued competitive climate.

On auto in particular, carriers really have the rate dialed in,says Wolfgram: “You just won't see carriers having a bad yearanymore because of unexpected claim frequency. On the homeowners'end of it, I see it getting more sophisticated as well.

“For instance, one of our companies, Acuity Insurance, isdetermining precise, risk-based pricing based on an individualproperty's characteristics, not just the traditional ZIP code,construction type and protection-class rating,” he adds. “That isan approach that more and more insurance companies will take.”

While declining to delve into its specific rating strategy forcompetitive reasons, Acuity reports that its Personal lines premiumhas grown at a double-digit pace for two consecutive years. Thecompany attributes this to precision pricing and a stronger effortby independent agents to write package policies and round outaccounts with personal umbrella. “We are definitely seeing morecomplete accounts in Personal lines,” says Ed Felchner, Acuity'svice president of Personal lines and marketing.

The pricing picture is unlikely to change anytime soon,executives say, and it may take a catastrophe to get real ratetraction in the market. For instance, after Superstorm Sandy, theaverage homeowner's premium in coastal areas surged 25% to 50% atrenewal, according to Tim Russell, senior member at The RussellAgency of Southport, Conn. Otherwise, he adds, “most carriers haveleveled off.”

With rates low, revenue increases forproducers and carriers must come from new business. “There is a lotof push for growth from carriers,” says Bill Gatewood, associatevice president, personal insurance product and sales at Burns &Wilcox. “People recognize there is money to be made in Personallines. Carriers have capacity, they have capital to put to work,and Personal lines is a good place to do it.”

Good capacity exists even in areas at higher risk of naturaldisaster. “There is plenty of catastrophe aggregate outthere—flood, wind, excess coverage,” Gatewood adds. “I don't expectto see difficulty writing coastal, earthquake … those are readilyavailable, which is good news.”

In Florida, increased capacity has had a dramatic affect onreducing the use of the state's insurance pool, Citizens PropertyInsurance Corporation. At the beginning of 2013, Citizens' policycount stood at nearly 1.3 million; today it is 933,000.

“We have seen a healthy increase in private market capacity inFlorida,” says Brian Samberg, president of Southeast InsuranceAgency in Boca Raton. “New carriers have come in, such as ElementsProperty Insurance Co. There are some older players that haveincreased their underwriting as well—American Integrity, Olympus,Universal Property and Casualty, Florida Peninsula. … There is ahost of companies writing [Personal lines] today.”

The one regional exception to carriers' increased appetite hasbeen replacement cost roof coverage in the storm-prone Midwest.Many companies have restricted full coverage policies on roofs thatare more than 10 or 15 years old, offering only actual cash value(ACV) coverage.

“We represent about 15 carriers, and every one we represent istalking about [ACV on roofs] except for Acuity,” says Wolfgram, whoadds that some companies are thinking of covering the labor costsat ACV as well. “Other carriers have cut back on covering cosmeticdamage to metal roofs, and others won't deal with cedar shinglesbecause they get damaged quickly in a hailstorm.”

Tech-Driven Innovation

Technological advancements have been a key factor in theevolution of Personal lines cover, not only in the analytics behindthis increased pricing precision, but also in the efficienciesdelivered by modernized policy processing platforms, agencymanagement technology and comparative raters for auto andhomeowners' coverage. “Technology-driven efficiency has increasedour revenue per relationship,” Wolfgram says.

Likewise, technology also impacts customer expectations in thisconsumer-focused segment. “We live in an age where everyone'sperception of a digital experience gets set by the last site theyvisited, irrespective of whether it's a retailer selling shoes or afinancial services site,” says Jim Fiske, vice president and U.S.marketing manager for Chubb Personal Insurance. “Things thatcustomers take for granted in the digital age, the insuranceindustry has not necessarily kept up with in providing a digitalexperience.”

Chubb has an ongoing initiative in place to continually improvethe digital experience for customers, agents and otherintermediaries. In 2014, the company re-launched its Personal linespublic site. “We cut 60% of the text on the site and made much moreinformation available through video delivery, because that's howcustomers want to receive content,” Fiske says.

Whether they like it or not, agents who aren't already doing soshould seriously consider becoming actively engaged in socialmedia: “Facebook, Instagram, Twitter—those are all media wherecustomers expect to find you,” he says. “Look at how Yelpinfluenced the way people look for services. Agents have to takeadvantage of that and increase their visibility by being active insocial media. People just aren't reading the newspaperanymore.”

“In attracting business, you need a strong webpresence because people start their search on the Internet orobtain pricing before they talk to you,” Russell adds. “Customersare also more educated than in the past. Rather than make anold-fashioned sales presentation, you need to draw them in and havemore of a conversation than a sales pitch.”

Recognizing that Personal lines customers increasingly areturning to the Internet to begin their coverage search, Acuityrolled out a “lead generation” service for independent agents inmid-2014. Prospective customers who complete an application forcoverage at Acuity's website obtain a quote and are referred to alocal independent agent to complete the consultation and sale.Agencies also can embed the customer-facing application withintheir own sites.

“The difference between what we do with our lead generation andwhat other companies that offer online quoting to consumers do isthat we don't compete with independent agents,” says Felchner. “Weprovide it as a service to independent agents to write morebusiness.”

Making the Most of New Prospects

One potential growth sector for agents is the millennialsmarket. According to Princeton Survey Research AssociatesInternational, only 64% of millennials have car insurance, 10% havehomeowners insurance, and 13% have renters' insurance.

 Insuring their parents' policy can provide an “in” toa millennial's insurance business, but it doesn't guarantee a sale.“The bigger issue for us is helping people understand theexposures,” says Colleen Signorelli, vice president of Personalinsurance at The Daniel & Henry Co. in St. Louis.

Children grow up, leave the house and move to a city like NewYork or Chicago where they don't have a car, she notes. “They don'tjust need renters' insurance; they need coverage for non-ownedauto. So we are doing more educating and selling of non-owned autoand other coverages that often get overlooked for youngerclients.”

Signorelli says that the agency is sustaining a 5% growth ratein Personal lines. “That is mainly coming from new business, withsome moderate renewal increases,” she says. “With a book the sizeof ours, even with 90% retention, you have to write a lot of newbusiness to offset what you will naturally lose.”

Another opportunity for agents is in thehigh-net-worth market. Says Gatewood, “There are more companiescreating programs specifically for affluent clients. It's one ofthe fastest-growing subsets of our Personal lines book, and it hasbeen that way for three to four years.”

An economic rebound is behind this growth, he adds. “We see someof the higher-priced boats starting to sell again. More of the $1million-plus homes are selling, more construction work on largerhomes, more home additions, and so on. I hope that is indicative ofthe overall state of the economy improving.”

However, the high-net-worth segment can be a difficult marketfor an agency to break into, and the amount of work that goes intolanding a new client isn't always equitable to the amount of coverthey end up purchasing. Additionally, “The specialty affluentmarkets are trimming back the number of agents they work with,cutting off the agents that they can't get deep market share with,”says Gatewood.

Chubb Personal Insurance knows the high-net-worth market well.Its Masterpiece policies feature a number of coverages targeted tothe affluent, including agreed value on auto, worldwide car rentalcoverage, extended replacement cost coverage (without a cap) onhomes and worldwide umbrella coverage. In 2014 the companyintroduced a “Move Up to Chubb” campaign, using predictive modelsto identify high-net-worth households that match the carrier'sappetite, and then engaging with select agents to market to thoseaccounts.

While Chubb won't talk numbers, Fiske says the results of theprogram are “encouraging.” This year, the carrier partnered withthe University of Pennsylvania in Philadelphia to create aCertified Advisor of Personal Insurance program. The 12-monthcertification program, consisting of six modules of in-class andonline study, is designed to help select agents and brokers betterunderstand the risk management and insurance needs of theirhigh-net-worth clients.

Ultimately, capitalizing on opportunity in any market segmentcomes down to keeping the “personal” in Personal lines.

“You have to deliver great service,” says Signorelli. “You haveto take the time to do the research and understand the market. Youhave to analyze coverages and show customers where you have betterand more meaningful coverage. Missouri is the 'Show-Me State'—youhave to show customers where you shine.”