MARKETING
The Hartford's new unit provides customized service
to clients with $5 million to $15 million in revenues
By Phil Zinkewicz
(Left to right) Judith A. Blades is Senior Executive Vice President/Property & Casualty at The Hartford Financial Services Group, and Stephanie Bush is Vice President of The Hartford's Select Customer Xpand/Small Business Market.
The term "niche marketing" has been in use in the property and casualty insurance arena for decades. It is a simple concept. An insurer takes a long and hard look at its strengths and weakness and makes a determination as to what segments of the insurance-buying marketplace it can best approach in terms of products and services and, of course, potential profitability. In most cases, niche marketing works, unless, of course, everyone starts chasing after the same niches and then there is the problem of excessive competition. But, by and large, most insurers have learned that capitalizing on their strengths is preferable to trying to be all things to all people.
One problem with niche marketing, however, is that sometimes niches can begin to overlap. What were clearly definable as specific niches one day can become blurred the next because of economic changes. When this happens, it might mean that there is a need for further market segmentation--creating a new niche, as it were.
Judy Blades, senior executive vice president of property/casualty operations at The Hartford Financial Services Group, Inc., says this blurring of lines is occurring right now in the commercial lines arena between the small business market and the middle business market. Blades likens this phenomenon to colors. Blue is a primary color; so is yellow. But when blended, they form a new color, green.
"If we think of small businesses as yellow and middle market business as blue, then there is a "green" layer between them with elements of both primary colors but which has a distinct hue of its own," says Blades. "What I call the green market consists of exposures in the upper end of the small business market and lower end of the middle commercial market. It is a relatively untapped market, which includes close to 600,000 businesses and represents a $20 billion in premiums. These are businesses with between $5 million and $15 million in revenues and premium ranging as high as $75,000 to $100,000. The segment is quite broad, including manufacturers, wholesalers, retailers, professional services firms, high-tech businesses, contractors and others."
To tap into this market, The Hartford retooled and enlarged its small business capacity and invested tremendous resources to provide the right product, service and technology to satisfy this segment, according to Blades. "Befitting its heightened emphasis on this market, The Hartford has established a new business unit, Select Customer Xpand, specifically to provide agents with an easy and profitable means to write businesses that fall between the traditional small commercial and middle market segments," she says.
Stephanie Bush, vice president of The Hartford's Select Customer Xpand segment, says the "cornerstone product" of the new business unit is Select Customer Xpand. "This is an easy-to-write business owner's policy (BOP) with enhanced coverages and customized limits for larger small business accounts." She says that specific features of Select Customer Xpand include:
* Broad underwriting appetite with more than 500 eligible classes across a variety of industries.
* Electronic vandalism and business income protection available for all business classes.
* Specialized stretch endorsements, which handle increases in individual base coverages and/or additional optional coverages in a single endorsement tailored to a specific industry group. These stretch endorsements are available for broadcasters, building owners, business services, communication and media, special trade contractors, international janitorial services, law offices, manufacturers, metal manufacturers, publishers, printers, retailers, technology and wholesalers.
* Higher optional coverage limits of up to $2 million for accounts receivable, valuable papers and electronic date processing.
* Option of adding blanket building and contents coverage across multiple locations.
* Split rating approach for all classes, so accounts aren't overly penalized for higher exposures in a particular area.
Within the desired size categories, there is broad eligibility for the new program, Blades says.
"To target this niche, insurers must apply a hybrid approach, balancing the need for speed, productivity and efficiency with the discipline, individual account underwriting protocols and customized products common to middle market business."
-- Judy Blades
Blades and Bush emphasize that the impetus for creating this new niche came from the company's independent agents--"the voice of the customer" is how they describe the company's agency forces.
"As today's small businesses rapidly expand their operations--moving into workspaces with higher property values, recording higher annual sales and hiring more employees--their insurance needs change," says Bush. "Our insurance agents recognized this change and came to us, urging us to push up the limits on our small business operations, responding to inflationary trends. We've done this, but then we came to realize that this was a market that needed to be segmented. We also realized that this was a potentially lucrative market, so we held a series of focus groups to find out from our agents how best to tap into it."
One agency that was part of a focus group and that has already benefited from Hartford's Select Customer Xpand program is the Palatine, Illinois-based Pitcher Insurance Agency, Inc. "We have several clients that fall within the $5 million to $15 million range, particularly in the manufacturing area," says Ron Pitcher, president. "This program is ideal for us. In fact, we had one client we were in danger of losing. We knew the client was shopping for bids. They had bids out to more than 20 different carriers. We went to The Hartford and, through this program, we were able to compete and retain the client. The Hartford's underwriter for this area, Carla Gatewood, came back to us with a quote within one day. It was amazing."
Pitcher says that many carriers will write the $5 million to $15 million accounts under their middle market programs, but that "the enthusiasm is not always there." He says: "This program fills the gap between the underwriter who says 'Yeah, I'll write the business,' and the underwriter who is aggressively seeking the business. For many agencies like us, these accounts are our bread and butter business and it's great that Hartford has recognized that. By focusing their attention on these accounts, Hartford is able to provide fast service and competitive pricing. The Hartford has taken a segment of the marketplace, super quantified it and said, 'This is what we want.'"
Says Blades: "Small businesses have certain commonalities of exposures, and insurers have learned to handle them quickly and efficiently. The needs of middle market businesses are more complex and insurers have devised methods of addressing these needs in order to individually underwrite accounts so that prices, retentions and products can accurately reflect each business's specific exposures. But this new segment, the 'green' market segment, requires both quick handling and turnaround plus individual underwriting."
She continues: "Some insurers tend to deal with this new market segment by lumping it in with the small business market to address the need for quick turnaround. Others lump it into the middle market to address the need for individual underwriting. Neither is a good fit. So, we believe that the market should be addressed as its own individual niche. To target this niche, insurers must apply a hybrid approach, balancing the need for speed, productivity and efficiency with the discipline, individual account underwriting protocols and customized products common to middle market business."
Bush says: "We have established a team of dedicated underwriting specialists with expertise working with businesses of this size to thoroughly assess each risk, provide the right product, and price it properly. "These underwriters also have the flexibility to customize terms and conditions of coverage based on the individual risk underwriting profile for each client."
Blades adds: "Through our Select Customer Xpand underwriting teams and local sales support, we want to be second to none in providing fast turnaround to agents who are submitting accounts in this size range. We have challenged ourselves in this new market segment to bring about a five-day turnaround. Our goal is to underwrite new business upfront by providing our agents with the tools and local contacts they need to receive quick turnaround on risk acceptability."
Among the tools that The Hartford will deploy to quicken turnaround is its new small business online sales guide, which Bush says "provides clear, upfront appetite indications for different types of businesses. The guide also identifies class-specific details such as definition, local appetite, available optional coverages and mandatory forms. Agents can access the manual via The Hartford's Electronic Business Center (EBC) at http://ebc.thehartford.com."
Says Blades: "To succeed in this promising market, it is very important to strike the right balance between sales and operating efficiency, and underwriting intensity and integrity. Ideally, these businesses require a hybrid approach that allows accounts to be handled in an efficient way so the agent can place business quickly, without an unnecessary expenditure in resources. It's also important to create flexible and streamlined products customized for both the business size and industry sector. These products should retain the essential simplicity of the businessowners policy, while including more precise rating capabilities so that premiums can be better matched to exposures.
"The bottom line is that we are responding to what our agents have told us that our insureds need," continues Blades. "And, they have told us that 'green' businesses are different enough to deserve a group of specially trained and expert underwriters who should have the skills to quickly and thoroughly assess each risk as an individual entity, provide the right products and price them properly. We believe that, ultimately, we can capture this significant segment of the commercial lines market and realize good loss ratios. This will also result in a consistent market for agents." *
For more information:
The Hartford
Web site: www.thehartford.com