If it can be said that a critical step on the road to success is adjusting one's own expectations, Dan Wolfgram, executive vice president in Personal lines, marketing and communications at Waukesha, Wis.-based R&R Insurance Services, has a clear message for producers who might be laboring under an unrealistic view of Personal lines performance.

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

Indeed, Personal lines premiums have seen only small (2% to 3%) increases for longer than most agencies care to remember. But if a lack of major catastrophes in the past year is a factor, analytics-driven pricing precision on the part of insurers is the larger 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 year anymore 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, is determining precise, risk-based pricing based on an individual property's characteristics, not just the traditional ZIP code, construction type and protection-class rating,” he adds. “That is an approach that more and more insurance companies will take.”

While declining to delve into its specific rating strategy for competitive reasons, Acuity reports that its Personal lines premium has grown at a double-digit pace for two consecutive years. The company attributes this to precision pricing and a stronger effort by independent agents to write package policies and round out accounts with personal umbrella. “We are definitely seeing more complete accounts in Personal lines,” says Ed Felchner, Acuity's vice 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 rate traction in the market. For instance, after Superstorm Sandy, the average homeowner's premium in coastal areas surged 25% to 50% at renewal, according to Tim Russell, senior member at The Russell Agency of Southport, Conn. Otherwise, he adds, “most carriers have leveled off.”

With rates low, revenue increases for producers and carriers must come from new business. “There is a lot of push for growth from carriers,” says Bill Gatewood, associate vice president, personal insurance product and sales at Burns & Wilcox. “People recognize there is money to be made in Personal lines. 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 natural disaster. “There is plenty of catastrophe aggregate out there—flood, wind, excess coverage,” Gatewood adds. “I don't expect to see difficulty writing coastal, earthquake … those are readily available, which is good news.”

In Florida, increased capacity has had a dramatic affect on reducing the use of the state's insurance pool, Citizens Property Insurance Corporation. At the beginning of 2013, Citizens' policy count stood at nearly 1.3 million; today it is 933,000.

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

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

“We represent about 15 carriers, and every one we represent is talking about [ACV on roofs] except for Acuity,” says Wolfgram, who adds that some companies are thinking of covering the labor costs at ACV as well. “Other carriers have cut back on covering cosmetic damage to metal roofs, and others won't deal with cedar shingles because they get damaged quickly in a hailstorm.”

Tech-Driven Innovation

Technological advancements have been a key factor in the evolution of Personal lines cover, not only in the analytics behind this increased pricing precision, but also in the efficiencies delivered by modernized policy processing platforms, agency management technology and comparative raters for auto and homeowners' coverage. “Technology-driven efficiency has increased our revenue per relationship,” Wolfgram says.

Likewise, technology also impacts customer expectations in this consumer-focused segment. “We live in an age where everyone's perception of a digital experience gets set by the last site they visited, irrespective of whether it's a retailer selling shoes or a financial services site,” says Jim Fiske, vice president and U.S. marketing manager for Chubb Personal Insurance. “Things that customers take for granted in the digital age, the insurance industry has not necessarily kept up with in providing a digital experience.”

Chubb has an ongoing initiative in place to continually improve the digital experience for customers, agents and other intermediaries. In 2014, the company re-launched its Personal lines public site. “We cut 60% of the text on the site and made much more information available through video delivery, because that's how customers want to receive content,” Fiske says.

Whether they like it or not, agents who aren't already doing so should seriously consider becoming actively engaged in social media: “Facebook, Instagram, Twitter—those are all media where customers expect to find you,” he says. “Look at how Yelp influenced the way people look for services. Agents have to take advantage of that and increase their visibility by being active in social media. People just aren't reading the newspaper anymore.”

“In attracting business, you need a strong web presence because people start their search on the Internet or obtain pricing before they talk to you,” Russell adds. “Customers are also more educated than in the past. Rather than make an old-fashioned sales presentation, you need to draw them in and have more of a conversation than a sales pitch.”

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

“The difference between what we do with our lead generation and what other companies that offer online quoting to consumers do is that we don't compete with independent agents,” says Felchner. “We provide it as a service to independent agents to write more business.”

Making the Most of New Prospects

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

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

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

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

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

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

However, the high-net-worth segment can be a difficult market for an agency to break into, and the amount of work that goes into landing a new client isn't always equitable to the amount of cover they end up purchasing. Additionally, “The specialty affluent markets 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 to the affluent, including agreed value on auto, worldwide car rental coverage, extended replacement cost coverage (without a cap) on homes and worldwide umbrella coverage. In 2014 the company introduced a “Move Up to Chubb” campaign, using predictive models to identify high-net-worth households that match the carrier's appetite, and then engaging with select agents to market to those accounts.

While Chubb won't talk numbers, Fiske says the results of the program are “encouraging.” This year, the carrier partnered with the University of Pennsylvania in Philadelphia to create a Certified Advisor of Personal Insurance program. The 12-month certification program, consisting of six modules of in-class and online study, is designed to help select agents and brokers better understand the risk management and insurance needs of their high-net-worth clients.

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

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

Special Reports /

Personal Lines: Incremental Increases the New Norm?

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