Small Business Now Big Business For Insurers

Small Business Now Big Business For Insurers

It's hard to distinguish among the national commercial insurance company players in the small-business market without a scorecard, as carriers join a growing lineup with me-too tools like online rate, quote and issue capabilities and customer service centers.

When insurance company marketing representatives show up at James D. Sutton's office at the James F. Sutton Agency in East Islip, N.Y., “they ask us what other companies are doing so they can remain competitive,” Mr. Sutton said.

“We're happy to be in this situation,” he added, noting that the commercial business written through his agency is primarily Main Street businesses such as small contractors, retail stores and small service businesses.

“The companies are out here banging the bushes for the small business. It's not the stepchild it once was,” he said, noting that many insurers have set up special units devoted to serving the small-business market.

Every one of five carrier representatives interviewed by National Underwriter highlighted three ingredients in their small-business programs, labeling these as essential to success in the market:

• Special products.
• Easy-to-use rate, quote, issue technology.
• Customer service centers.

Beyond that, subtle differences emerged as they described reasons for being in the market and the ingredients they believe set them apart from the pack.

AIG: Specialty Leads

An unusual name on the list of insurers making a push in the small-business arena is American International Group. “We've always been seen as the large commercial insured provider–the 800-pound gorilla–in the large-account world,” said Andrew Silver, a representative of the New York-based company.

According to Vincent Tizzio, president and chief operating officer of AIG Small Business, AIG's entry into the market evolved from its dominant position in specialty commercial lines.

AIG Small Business was formed in July 2001 and “went operational in October,” Mr. Tizzio said, noting that customers handled by the unit are those with revenues of $10 million or less. “Our product focus is primarily geared toward specialty classes of insurance. Management, professional and lead umbrella liability constitute our core products,” he said.

Since 2001, the unit has evolved to encompass all of AIG's property-casualty offerings except environmental coverage, he said. “Yes, we also have a package policy,” he added, when asked whether AIG now offered more standard coverages to businessowners.

“We provide our customer base with a lot of the benefits that our middle-commercial and national account customers receive,” he added, listing “the good faith of [AIG's] triple-A paper” and the loss prevention services that AIG typically offers, such as employment practices liability resources and umbrella crisis response services.

“For us, the notion of marketing and distributing specialty products is really an education awareness campaign,” he said, noting that one of the key benefits that an agent has in working with AIG is the ability to fill in coverage gaps that might not be satisfied through a package purchase. He said that AIG uses a number of media–including e-mail campaigns and Webinars–to provide education about specialty coverages.

“Knowledge is power,” he said, explaining that the educational tools “are for the agents. We don't deal with the customers directly.”

Like other small-business insurers, AIG has a customer center that “provides basic information to brokers and agents, and on occasion to customers–but that's a very infrequent experience,” Mr. Tizzio said. AIG refers to its customer center as AIG C3, referring to the C's in the term Customer Care Center.

AIG Small Business, a centralized unit in Berkeley Heights, N.J., serves several thousand brokers and agents across the county, Mr. Tizzio said. “Brokers and agents expect one-stop shopping. They expect an ease of use on a transaction experience. We facilitate that, in part, by being centralized,” he noted, adding that AIG also has “e-Engineso,” a number of end-to-end systems that provide book, bill, bind and quote capabilities online.

AIG won't reveal the volume of business written by AIG Small Business or growth targets, but “we have pretty aggressive goals,” Mr. Silver said.

“”hink about it in terms of how underpenetrated this market segment is,” Mr. Tizzio said. “No one has a dominant share of this market space.”

Brokers and agents expect one-stop shopping. They expect an ease of use on a transaction experience.

Vincent Tizzio
President and Chief Operating Officer
AIG Small Business

Travelers Passion

At Travelers, the approach is definitely not “centralized.” Travelers serves Main Street on Main Street, according to Patrick Kinney, Northeast regional vice president.

“The small-business market covers Main Street America. It's located in every town. It allows us to be in every state,” he said.

Both Aetna and Travelers had small-business operations before merging in 1996. The Select Accounts operation emerged from the deal as a $1.5 billion unit with the slogan: “Small business is big business to us,” Mr. Kinney said, adding that Travelers now writes $2.1 billion in premiums for Main Street America accounts–those with less than 50 employees or $10 million in sales and property values, each usually generating less than $50,000 in annual premiums.

Main Street “is where entrepreneurialism succeeds, and it's the place where our agents are,” he said, admitting to having a “passion” for the small-business segment.

“We're as local as you can get in this business,” he said, noting that 29 field offices are staffed by “experts in small business [who] do nothing all day but worry about agents” small-business flow, their risks, their underwriting needs.”

“They understand that you can't write business for Poughkeepsie, N.Y., from Fairfield, Conn.,” he said, suggesting that carriers with centralized small-business operations can't react to intricacies of different state business environments and legal systems.

In addition to local field offices, Mr. Kinney lists comprehensive products customized for specific businesses, customer service centers located in Elmira, N.Y., and Spokane, Wash. (used by 3,300 Travelers” agents writing $500 million in premium), and award-winning technology, among tools supporting its agents.

“To be successful in small business, agents need technology that enables them to rate, quote and issue [most] policies in less than five minutes,” he said, adding that Travelers” Agent HQ system allows agents to see rating manuals, claims information, policies and bills online.

Travelers also allows agents to do everything from their agency management systems. “They don't have to double-key. They can sit in their agency management system and see a bill. Without dialing into the carrier system, they can see the policy, they can see the claim,” Mr. Kinney said, noting that Travelers” technology has won awards from both Applied and AMS.

Will there be changes in this approach if the proposed merger with The St. Paul Companies is approved, as is expected? Travelers representatives declined to comment on specifics, but word on the street from agents is that Travelers” approach is likely to prevail in this market.

Main Street is where entrepreneurialism succeeds, and its the place where our agents are

Patrick Kinney
Northeast Regional V.P.
Travelers

Zurich: Get To Know Agents

Getting to know agents is a big part of the mission at Zurich North America Small Business, and the insurer's “state agents” are now driving the mission forward.

Judy Ridino, a California-based state agent, one of 175 former account executives taking on the new title in late January, explained the concept that has evolved for the writer of $1.4 billion in small-business premiums.

“I live in San Luis Obispo County. I'm very familiar with the ups and downs. I know the agency plant very well, and that's a huge part of what we [State Agents] do,” she said. “We build relationships with the independent agents that we do business with.”

In a press statement released on Feb. 12, Zurich North America and Answer Financial, the provider of Sam's Club Insurance Service program, announced a strategic marketing alliance to offer commercial insurance to members of Sam's Club, the nation's largest warehouse chain serving small-business owners. Marian Callaway, a Zurich representative, said the arrangement was not made through Zurich Small Business but through a separate division called Strategic Partnerships.

“We are primarily and strongly focused on the independent agent,” Ms. Ridino said. “That is our mainstay.”

Zurich Small Business, she said, has given its state agents “the training and the tools to make sure [they] can sit on that other side of the desk” and realize what's important to an independent agent. “We have know what it is to be in their shoes,” she said. “So instead of talking about written premium goals and loss ratio goals on a regular basis, we talk about revenue–which is the way an agency principal thinks.”

“If I'm going to visit the principal, I talk about margin and revenues; for a CSR, I talk about technological abilities of our system,” she said. For producers, the discussion might be about opportunities and marketing tools.

More specifically, she said, she might offer one-on-one coaching to a producer or a CSR working toward a producer role. A state agent can work with a producer on five, 10 or 15 target classes of interest from among 116 classes of business that Zurich has identified as “World Class classes–the best as far as profitability and ease-of-doing business. If there are enough of those businesses in the territory, we help them become experts and help promote the agency.

“We have point-of-sale brochures available. We have the MarketStance data to help them,” she said, referring to the market analysis database tool that is a registered trademark of IntelliStance LLC in Middletown, Conn. “We have links on our Web site to help them get leads,” she added, explaining that a producer targeting medical offices, for example, can click a link and get a list of medical offices in the city or county.

“We also have a cooperative advertising program,” she said.

Ms. Ridino said she also spends time training producers on the front-line underwriting process–a responsibility that Zurich has become very focused on in the past year.

A piece of business may fit the matrix of acceptable classes, but producers need to ask if it fits from an underwriting standpoint, she noted. “Are there slip-and-fall hazards? Is their any potential fire hazard?” she asked.

Like other insurer representatives, Ms. Ridino said that “efficiencies are the only way to make money in small business.”

“But what you can't lose sight of is the underwriting,” she added. “Efficiency isn't going to do you a darn bit of good if you don't have the underwriting.”

We have to know what its like to be in the agents shoes

Judy Ridino
State Agent
Zurich North America

Firemans Fund: Quality Of Life

When Cecil Booher, head of small business for Novato, Calif.-based Fireman's Fund, lists the attributes that distinguish his company in the small-business arena, he'll list products last.

“A lot of people talk about how broad their products are, [but] this is really a 'me-too'” industry. Any carrier can file products and forms to match another. It's hard to differentiate sustainably on coverage.”

“We're good with coverage. But that's not what we're going to drive this business on,” he said, although he did describe coverage endorsements specific to particular industries.

Fireman's Fund has over $400 million in premium coming from buyers who pay less than $50,000, but some of these buyers are handled in different units, Mr. Booher said. The company is transitioning to a broad definition of “small business.”

Generally, that definition now encompasses “entrepreneurs whose decision-making process relies heavily on the decisions their agents make on their behalf,” he said. Adding that the insurer is now using a data-driven approach to develop a deep knowledge of its customers in specific industries, he said that agents and customers generally want to run their businesses more efficiently and profitably–and for customers, that can mean delivering more than insurance.

For example, one of the centerpieces of Fireman's Fund's offerings to small- and middle-market businesses is an insurance portal called iCustomer. An iCustomer Web site is co-branded with an insurance agency, containing links to information for customers in a particular industry, such as industry best practices, or risk management and human resources tips and tools.

There are also links to other types of vendors with which Fireman's Fund has negotiated product discounts, Mr. Booher said–giving office supplies and shoes for restaurant workers as examples.

The co-branded sites, which also allow claims reporting and let agencies view policies online, can raise an agent's profile within a community, providing the ability to offer entrepreneurs the best products and advice to manage their businesses.

“The emphasis is on understanding that a small-business owner has one purpose in life–to run my business. My margin's important to me. So at the back-end, an insurance contract protects certain losses. Equally important is the industry-specific process we're putting in place to help customers manage business and agencies grow profitably,” he said.

Among the businesses Fireman's Fund focuses on are those in the real estate industry, the entire retail sales sector, professional services, and farm and ranch owners. Mr. Booher said Fireman's Fund is working to align its staff–including claims representatives, customer service center staff and sales development managers–around industry focus areas.

In the claims services area, Fireman's Fund has a “fast-path claims center” in St. Louis that manages small claims.

Sales development managers work to understand how an agency works–from the owner to the receptionist to the CSR–striving to understand their individual and personal needs. “If you improve the quality of life of a person in an agency, they're going to be more inclined to give the business to Fireman's Fund,” he said.

CNA: A Policy That Fits

At CNA in Chicago, Henry Pippins Jr., senior vice president of small business, views firms with fewer than 100 employees as the fastest growing part of the economy.

With “all the right-sizing and downsizing of corporations, a lot of people that are out of work are going into their own independent businesses,” he said, adding that small businesses make up the majority of those in emerging industries of the economy, such as technology.

A technology company, Mr. Pippins noted, may only have five employees, purposefully avoiding a small-business definition for business fitting in his unit that is based on employee count. “We're looking at businesses with $20 million in sales or under,” he said, noting that while he has no hard and fast growth targets for CNA's $800 million book, he expects it to grow to about $1 billion over the next couple of years.

“As opposed to distinguishing us, there are three areas that you need to excel in to be a player in small [business], and I think CNA is excelling in those three,” Mr. Pippins said, listing the qualities as: being easy to do business with, having a broad risk appetite, and “the right product.”

The “CNA Central” platform provides the “easy-to-do-business-with component, allowing agents to issue, bind [and] quote policies over the Internet.” In addition, “we include about 80 percent of the [standard industrial classification] codes in our appetite,” he added.

In the product area, CNA has a new one, having introduced its Business Account Package Policy, or BAPP, in January. The new package adds “choice endorsements” to a businessowners policy, allowing an agent to either increase coverage with enhancements specific to the industry of the customer or to decrease the coverage and get a commensurate decrease in premium.

“Choices” can adjust either type of coverage, or the limit, or both, Mr. Pippins said, noting, for example, that a choice endorsement for a delicatessen can give additional coverage for temperature change or spoilage.

“On the flip side, a lot of small business start-ups are just looking for basic coverages to meet regulatory requirements–so they can say they have insurance. For those folks, we offer a BAPP Basic endorsement–that takes coverage off,” he said, noting that that's actually the feature that's creating a market buzz for CNA.

“A number of competitors have enhancements similar to the choice endorsements where you can add coverage. It's not new, but it's new for us,” Mr. Pippins freely admitted. On the other hand, he's not aware of any competitor offering something like the stripped-down “BAPP Basic” product.

The Basic product also is conducive to a move by CNA to accept program business opportunities for homogeneous groups of risks in particular industries, Mr. Pippins said. “If the majority of members just want a basic coverage, then we can offer it to the whole group,” he said, noting that CNA writes about $60 million in 16 small-business programs.

Like the other carriers, CNA also provides a client service model through a service center in Maitland, Fla.

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Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, March 5, 2004. Copyright 2004 by The National Underwriter Company in the serial publication. All rights reserved. Copyright in this article as an independent work may be held by the author.

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