Big-Time Players Target Small Business

A number of commercial insurance giants–some of them global in scope–remain hungry for growth in the Main Street market. They compete with smaller and more specialized firms by offering broad coverage along with risk management tools and service options to support independent agents whose bread and butter prospects are small-business owners like themselves.

Each carrier queried for this article cited a common “secret” for success in the small-business market–the easier it is for agents to fill out applications, bind coverage and service Main Street accounts, the more successful both the carrier and producer will be. Carriers recognize that to be profitable in this tight-margin market, producers must spend a minimal amount of time on administration to maximize their sales goals.

All said they had built their small-business programs to a point where agents could quote and bind in a short period of time, and a few said that for many classes of business, the process would not even involve a live underwriter.

Trying to define a carrier's small-commercial appetite in terms of size resulted in a wide definition of the target market. One carrier's idea of a middle-market account might be another carrier's small-market risk. But all agreed they are in this market for the long haul.

Who are some of the big players in the small-commercial market? Brief profiles of seven such carriers follow, in alphabetical order:

American International Group may be a global carrier, but it also plans to be the one that fills the gaps for small businesses where traditional coverage is lacking, according to Vince Tizzio, president of AIG Small Business. “The demographics are replete with opportunity for us,” he said, citing three reasons for developing the company's niche products:

o First, there was an underserved market in which AIG was underrepresented.

o Second, AIG could provide a superior product and service that met the needs of a vast universe of customers.

o Third, AIG felt it could offer value to this customer segment.

AIG does not offer a pure businessowners policy, instead providing different products such as general liability, workers' compensation, and other coverages for the small-business risk–which it defines as a client whose business does not exceed $25 million in revenue to as small as $500,000.

Explained Bill Cotter, AIG Small Business chief operating officer, the problem with a standard BOP policy is that as the nature of current business changes–from a concentration on domestic service to dealing overseas–policy gaps are discovered that AIG plans to fill.

The independent agent is an important asset to the expansion of AIG's small- business opportunities, Mr. Tizzio noted, as it is the agent who the typical small-business owner turns to for help in making insurance decisions. AIG offers support in the form of risk management tools and education so agents can help small-business owners overcome potential exposure pitfalls.

In providing education to both the agent and small-business owner, it is important that both are protected, according to Bill Skapoff, vice president at AIG Small Business. Through education, small-business owners come to appreciate the risks they face, while agents get a heads up on potential exposures to avoid errors and omissions claims.

“After four years in this marketplace, we have learned a lot about how these customers come to market and how they buy and why they buy,” said Mr. Tizzio. “As a result, we are adding products and services to our suite of small business. We are developing new media of information exchange and utilizing technology as a facilitator. We are trying to refine our broker channel with the people with whom we transact and add as much value in the form of service as we can.”

Since Larry Illion, senior vice president of CNA Small Business, came to the Chicago-based carrier 18 months ago, he has worked to grow the insurer's classes of business from 400, under its old system, to 1,500 using its latest technology. By the end of this year, CNA expects to expand to 2,000, with an increasing appetite.

Making it easier to do business has meant cutting down the number of screens an agent must navigate to place business at CNA Central. This also means eliminating the need to deal with an underwriter.

To make small business more profitable, an increasing number of agents are ceding more of the servicing of their accounts to call centers, according to Mr. Illion. By doing so, the agent can sell more business and is not tied-up serving an account that offers the agency slim margins.

Companies understand they need to provide such services, he noted, not only to assist agents in growing their business, but because if both agents and policyholders are not satisfied with the level of service they receive, they will go elsewhere.

“More and more it is becoming a partnership [between the agent and carrier] on small business,” explained Mr. Illion. “The model is partnering and creating a virtual relationship with the client. We need to do what we do best and not duplicate each other's efforts. We need to create a more efficient model so in the end, the client is served best.”

To this end, CNA is working to develop better integration between its proprietary Web system and the producer's agency management systems, he said, noting that the carrier has spent $38 million in 18 months to achieve that goal.

“Small business is very complex to do well,” said Mr. Illion. “It's tough to be really good at it, but it has that survival-of-the-fittest quality to it. We intend to be among the very fittest in this space over time.”

The Hartford Financial Services Group is looking to grow significantly in the small-market arena, according to Jeffrey Olmstead, assistant vice president of small-commercial insurance.

The carrier's definition of “small” market is $15 million maximum in property value or revenue. Over that, prospects become middle-market accounts.

This year, the company added an identity recovery product to its line of small-commercial coverage, named “Spectrum.” The coverage provides $15,000 in expense reimbursement and case management customer support. “We believe the individual's so important in a small business that the time it takes to recover from identity theft can be detrimental to the business,” said Mr. Olmstead.

The program is available in every state except Louisiana and Virginia.

Other endorsements include E&O coverage for real estate professionals–specifically owners and managers of rental properties, where coverage is extended for bodily injury in a negligence case.

The Hartford is also aiming to expand its target markets beyond its current 1,600 classifications in the coming months. This would include the expected introduction this month of workers' compensation for auto repair shops.

On the technology front, Mr. Olmstead said Hartford has won several awards for its proprietary application, and that 90 percent of its submissions are over the Web.

Since the company's founding in 1919, the Fairfield-based Ohio Casualty Group has always had an appetite for small business and has always been effective in it, according to Phil Lucca, vice president of commercial lines. “Small business is all about speed and less handling to reduce cost,” he observed.

Part of being successful in this niche involves filtering accounts to service centers–not a call center where someone takes a message or a policyholder's information, but where the individual answering the phone can help clients make choices “a lot closer to the service level they receive from their own agent,” he said.

Ohio Casualty has had such an operation for two years, he noted. Each agency receives a unique 800 number to give their client. When the client calls the service center, the representative sees which agency the client is calling from, and answers the phone as if they were at the agency.

“This reinforces the independent agency relationship with their client,” Mr. Lucca pointed out. “It gives the client the confidence that they are dealing with someone that agency knows well, and will interact with their client appropriately. Our agency branding approach is a hallmark of our company. We work hard to reinforce the agency's visibility to their client.”

The company just introduced its artisan contractor preferred program (for individual contractors such as plumbers and electricians), designed to be comprehensive and at a lower cost than if the individual bought separate commercial policies.

Generally, he said, the company is looking to write business by account and not line of business, and offers several programs for independent agents to offer their clients.

“Small and midmarket is our appetite,” according to Mike Hughes, senior vice president for Safeco Business Insurance. “We want to feel we are one of the dominant players in that business.”

The Seattle-based company's “Automated Underwriting Platform,” coupled with Safeco's “Now Sales Front End,” allows 85 percent of small-business accounts to be quoted in five-to-15 minutes–”and get you our best quote the first time,” he noted.

The system is geared to handle BOP, workers' comp and, recently, commercial multiperil for package business for small to midmarket accounts.

Safeco's appetite varies depending on the line. A BOP quote can be written for a client with up to $15 million in sales and 50 business locations. Workers' comp can go up to $25,000 in premium. Commercial auto was expanded recently from nine to 15 vehicles. Commercial multiperil can go to $20,000 maximum premium covering 341 classes of business. And all of these programs, he emphasized, can be written without an underwriter touching them.

Safeco is also focusing on keeping renewal business, Mr. Hughes continued, with 90 percent of renewals getting out 30 days before expiration. Agents have the capacity to perform service requests or add endorsements online, as well as review a client's account. Beginning in May, agents will also have the ability to request a hard copy or e-mail copy of a policy to be sent to the client, agent or both.

To ensure the carrier-agent relationship remains effective, Safeco employs 170 sales professionals whose task is to work with agents and educate them.

“We feel very, very good about where we are at, and we want to dominate our space,” said Mr. Hughes, noting the carrier writes this business in all states except two–Hawaii and Delaware. (He said the company plans to begin writing in Delaware shortly.)

“This is what we do,” he said. “We don't go after large accounts. We strictly focus on the small-business owner.”

As a regional carrier writing in 20 states and Washington, D.C., the 80-year-old Selective Insurance Group, based in Branchville, N.J., believes it has developed a pretty good technology for its small-business unit in the past five years.

Jonathan Oltman, vice president of mercantile and service for its strategic business unit, said of the more than 300 classes of businesses eligible for coverage, its flagship is artisan liability for small risks, aimed at an individual, self-employed contractor or electrician.

The company also offers office coverage for retail, wholesale or service businesses; a builders risk product for new construction; and liability coverage for small nonprofit civic groups, such as the PTA, Chamber or Commerce or Little League association.

He said the company plans to add an increasing number of products to its one-and-done technology system, offering a comprehensive line of coverage that can include commercial auto, umbrella and workers' comp.

There is no “hard and fast” rule for the carrier's appetite, he said, but generally Selective is looking for accounts with premium not exceeding $25,000.

Zurich has a broad definition for small business–”much broader than others,” according to Rick Law, president of Zurich Small Business–a unit of Zurich North America Commercial, which in turn is part of Zurich Financial Services.

“We are an active market for independent agents and brokers,” he said. “Our broad appetite includes classes and coverages that enable us to differentiate our offering for both monoline and package opportunities. An example would be our current expansion in monoline auto and workers' compensation.”

As important as it is to provide products to independent agents, the company looks to be a player in the wholesale market as well for niche businesses. He said he views this as an advantage for agents, brokers and wholesalers alike.

On the technology front, the company's aim is ease of doing business and furnishing agents the tools they and their clients need to control risk, said Gerald Chiddick, vice president and senior marketing officer for Zurich Small Business.

These tools include “virtual consulting”–a risk management tool covering loss prevention that agents can tap to help clients manage and contain loss costs.

“A lot of small-business owners want an advocate and a consultant, and that is the independent agent,” said Mr. Law. “We want to make sure we provide the breadth of product to make [independent agents] valuable to the small-business owner. That is how we stay ahead of the competition.”