Regional insurance companies–those with an established presence in a limited number of states–are often lauded by independent agents as being more focused, easier to work with and closer to the customer than some of the bigger national or global carriers. Grange Insurance, headquartered in Columbus, Ohio, prides itself on its Midwest footprint and the fact that its only distribution stream is its more than 16,000 licensed independent agents at more than 3,000 agency locations.
Doug Sharp, vice president of agency relations at Grange, spoke with AA&B about the company's distribution strategy, "Heartland" focus and how these attributes make Grange well positioned for growth, in good times and bad.
AA&B: Many agents extol regional insurers as being more intuitive and closer to the needs of their customer base. What are the benefits and challenges of being a regional insurer?
Sharp: I think the agents have it right. I have worked for national carriers and regional carriers. There is definitely a noticeable difference in the depth of the agency relationships and local market knowledge with the regional carriers. We simply have more focus and less bureaucracy. There are fewer layers in the organization. Decisions are made closer to the field. We have a vested interest in the agents' success. In many cases, we know them and their families well. As a regional, we're challenged by geography, which can come into play occasionally on commercial accounts. From time to time we are presented with a risk we can't quote due to property or other exposures located in states where we are not licensed. This is not typically a problem, though, when writing most mid-size or smaller commercial accounts.
AA&B: Tell us a little about your distribution strategy.
Sharp: Including agencies representing our affiliate, Integrity Mutual, we currently have more than 3,000 agency locations and more than 16,000 licensed agents. Our footprint is definitely Midwestern. Grange operates in Ohio, Pennsylvania, Michigan, Indiana, Illinois, Kentucky, Tennessee, Virginia, South Carolina and Georgia. Our affiliate, Integrity Mutual, operates in Wisconsin, Minnesota and Iowa.
Grange's P&C business is 80 percent personal lines, with personal auto representing the majority of the personal lines premium volume. We also write small and midsize commercial accounts, which represent 20 percent of the total P&C volume. Grange Life offers a competitive portfolio of term, universal, whole life and annuity products.
AA&B: Grange has a well-known and publicized commitment to the independent agency system. Why do you believe this is superior from working with direct writers or a combined distribution force of captives and independents?
Sharp: Our singular focus on one distribution channel for our products allows us to dedicate 100 percent of our resources to being successful within that channel. We're not conflicted, and we don't have competing priorities. Our focus on being the company that's easiest to do business with, or EODB as we refer to it, galvanizes our associates to work hard to provide the best automation, the best products and services for our agents. This is evidenced by our consistent top ratings for our agency technology from agent satisfaction surveys conducted with various agent associations. The Ohio, Indiana and Michigan agent associations conduct agent satisfaction surveys, either annually or bi-annually. Grange's automation and marketing support has been ranked No. 1 in each of these surveys over the past four years.
These results are consistent with our own agent satisfaction survey, which is conducted annually by an independent third party. More than 600 agencies respond to our survey each year, and they consistently rank Grange technology as the best in their offices versus our peer competitors.
Further evidence of our success in EODB and technology includes our numerous industry awards, including the Applied Systems Interface Partnership award, ACORD/AUGIE award, and our ranking as one of the top 250 companies in the Information Week list of innovative companies. In fact, Information Week recently listed Grange as one of the top 20 companies with "great ideas to steal."
AA&B: Many of your top states–Michigan, Ohio, South Carolina and Indiana– have been particularly hard hit by the recession. What are you seeing in commercial renewals in these regions, and how are you assisting agents in retaining business and getting new business?
Sharp: Although we did see some of our policyholders go out of business during the height of the recession, overall our commercial policy retention has been a little better than expected given the economy. Unfortunately, the average premium per policy renewed has gone down due to reduced payrolls, fewer exposures, reduced sales, discounts and so on. Our agents by and large are doing a good job working with their customers to help them manage their costs during this economic downturn so they retain the customer. We all recognize that overall premiums will begin to rise once employment and construction activity perks up again.
The most pleasant surprise this year has been the uptick in our new business flow. Grange has experienced its strongest new business year in the history of the company. Submissions are up, and thanks to the strong new business writings, our commercial policy count overall has remained flat with last year. Our new business volume is up 28 percent year to date. Last quarter's new business volume was 15 percent higher than any other quarter in the company's history.
AA&B: Do you have any plans to expand or contract your agency force?
Sharp: We are primarily interested in continuing to expand our agency presence in states outside of Ohio. We have actively been growing our business outside our home state as part of our long-term strategy to balance our book of business geographically. Agency appointment activity has been very high in some of our newer states, such as South Carolina, Virginia and Pennsylvania.
In general, we want to grow all our lines of business, which includes a complete portfolio of personal, commercial and life insurance products. Our approach is to appoint agencies for the lines of business that most closely match their needs and expertise.
In our newer states, we are focused on growing our full personal, commercial and life portfolio of products in Pennsylvania. Our focus in Virginia is on personal lines, commercial auto and life business. In South Carolina, Grange only writes personal auto, commercial auto and life insurance.
AA&B: Earlier this year, Grange introduced a new branding program. What was the reason, and what benefits have you seen since then?
Sharp: Historically, Grange has been very successful meeting the needs of middle America. As we all recognize, the definition of Middle America has continued to evolve over the years, and is quite different today than it was 20 or 30 years ago. In other words, Middle America isn't just the traditional "June and Ward Cleaver" family depicted in the '50s and '60s. Today's Middle America is much more diverse in terms of age and race, family units and relationships, our attitude toward work and life balance, and the way we communicate with one another.
Our new brand better reflects this new, exciting and broader spectrum of Middle America. You see it already in our advertising and communications, and eventually you'll see the effects in our products and services we offer to meet those customers' needs. The new brand has really helped us refine our consumer strategy.
Our new commercials are currently running throughout our Grange operating states. We advertise with several large college sports programs and professional sports teams in our target markets. We use TV, radio, billboards and print ads in all of these markets. Many of our ads are placed on a co-op basis featuring our local agents. Our Web site (www.grangeinsurance.com) has been totally redesigned to reflect the new brand and messaging.
AA&B: How is the use of real time progressing with your agency force?
Sharp: We've seen a steady increase of real-time transaction over the past year. New business entry via real-time/bridge increased 62 percent since year end 2007. The number of agents using real time/bridge has increased 45 percent since year-end 2007.Most of the real-time activity for Grange has been in personal lines rating. Just last month we recorded our 3 millionth real-time bridge transaction.
AA&B: Personal lines coverage is a big part of your overall marketing strategy. What impact has the recession had on these lines of business?
Sharp: Tight economic times do make consumers more price sensitive in general, and that includes insurance premiums. This sensitivity creates some additional shopping activity, especially for drivers with higher premiums due to their age or driving record. Offering customers more convenient payment options, including online monthly payment options, has helped Grange customers manage their premiums during this downturn.
Although price is always an important part of the equation, we find that once a customer is "on the books," what really drives policyholder retention in a positive way is providing excellent claims service, and the advice and service they receive from their independent agent. Our post-claims customer satisfaction survey consistently reports that 96 percent of our policyholders would recommend Grange to their family or friends based on their recent claims experience. We think that statistic, along with our strong independent agency relationships, have helped keep our customer retention high during the recession.
AA&B: Pricing in personal lines overall seems to be firming, unlike commercial lines. Has Grange increased premiums for personal lines, and if so, do you think it could hurt retentions in a still-soft market?
Sharp: Grange will continue to price our products responsibly, even in the face of competition. We believe that it is in the best interest of our policyholders to charge an adequate but fair premium for the coverages afforded, based on our experience. Our promise to our policyholders is that we will always be there for them in the event of a covered loss. The only way we can do that is to offer a good value to them at a fair price.
Just a personal observation–I've been in the business now for more than 30 years, and there is always another company in the market that will offer a lower price for a given risk. Many of these companies have come and gone over the years. If a customer is interested in a long-term, stable insurance company, then they'll understand the value of fair and adequate pricing, versus always chasing the lowest premium quoted.
AA&B: Grange CEO Phil Urban announced he will retire next year. Is there a short list of successors, and do you anticipate any changes in corporate philosophy or structure resulting from his departure–such as a possible expansion into additional states?
Sharp: Our board is conducting a very thorough search, both internally and externally, to find our next CEO. They did a great job ten years ago when they found Phil, and I am confident they will do another outstanding job identifying his replacement.
AA&B: Tell us a little about the Audubon Center and Grange's other involvement in community outreach.
Sharp: As someone who loves the outdoors, I am very excited about Grange's support and involvement with the new Audubon Center. We have taken a "brown field" area in downtown Columbus that over the years has been used as an industrial site (pre-EPA), a car impound lot and warehousing district and converted it into a beautiful metro park. The new Grange Insurance Audubon Center is now a place where urban school children will be able to get hands-on experience with nature and science–an experience they simply can't get anywhere else in Columbus. This is really a great improvement for the property, the City of Columbus, and especially for our kids.
© Arc, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to TMSalesOperations@arc-network.com. For more information visit Asset & Logo Licensing.