The Hartford's executive team, includes, in foreground, Ramani Ayer, chairman and CEO; middle row, left to right, William Stanway, president, commercial lines; and Stephen J. Hasenmiller, president, personal lines; at top, David R. Bradley, president,
Hartford Specialty
MARKETING
After regaining its independence, The Hartford
is focused on building sales tools
"We want to leverage our people to be far more comprehensive in their business--to be more than just insurance people--that they think like heads of businesses."
--Ramani Ayer, Chairman and CEO
The Hartford isn't a simple company. Founded in 1810, with current revenues of more than $12 billion, The Hartford has evolved from a fire insurance company to a global multiple lines giant. Recently separated after a decades-long marriage to ITT, The Hartford is once again an independent company.
Clearly there is a "mindset of abundance" at The Hartford. Chairman and CEO, Ramani Ayer sees a glass half-full, not one that is half-empty. But he wants more in his glass. Ayer says, "Hartford has only 3% of the market. I look at that 97% and say 'How can I get more?' That to me is how a growth culture looks at the market. What I don't have of this (market) is huge. I think I can get a sliver of that (market)."
Named chairman in February 1997 after serving as president and COO of The Hartford's Property Casualty operation, Ayer has made an impact on how people perceive their opportunities with The Hartford.
This means that Hartford will explore markets not traditionally reserved for independent agents. Since the 1980s, Hartford has been the carrier for the AARP personal lines insurance (direct marketing) program. In 1997, Hartford entered an agreement with Fleet Banks to write auto, home and small business packages for small businesses on a direct marketing basis. Similar arrangements have been forged with First Union Corp. and First Chicago NBD Corp. Does this mean that The Hartford has abandoned the independent agent in favor of the banks and direct marketing?
No. In fact, The Hartford is actually doing just the opposite.
The Hartford understands that some people will buy direct no matter what, but most will buy from an agent. Chairman Ayer and the rest of his staff simply want to have their share of both markets. It is estimated that 96% of the personal lines insurance buying public purchases insurance from an agent, not directly from a company. The fact that more of the sales are with a direct writer or captive agent than an independent agent excites Ayer and his staff. Business now serviced by the direct writers and captive agents is where Ayer sees the opportunity for the Hartford and independent agents.
President of Personal Lines Stephen Hassenmiller says, "Where should the agency focus? Don't go after direct response (prospects); go after people who buy from agents."
Expense control
Independent agents know that the direct and captive agents have taken marketshare away from the independent agency system because of price and sometimes because of superior company service or product. "We have to eliminate redundancies between agencies and companies," Hassenmiller says and that is why he feels Hartford's upload and download effort is so important. "Agents have wanted SEMCI for a long time. I think that is a key to enabling an agency to compete with the direct writers." By July 1998 Hartford will be offering upload and download to the 60% of Hartford independent agents who have Applied Systems or AMS.
The theme of cost reduction through automation, building claims expertise and market focus is critical to Hassenmiller and The Hartford in general. Hassenmiller knows that the direct writers have enjoyed price advantage because they have had expense cost advantages. Both he and Ayer see expense control as a major goal of the company and feel that Hartford can now compete with the direct writing or captive agent.
Price isn't always the answer, nor can one company have a cost advantage everywhere. Hartford has committed to file in many more states a new auto insurance program it introduced in 1997 in Illinois. Enhancements include:
* a lifetime repair guarantee from Hartford-approved repair shops,
* 24-7-365 day claims service,
* original equipment repair vs. aftermarket parts,
* full replacement without depreciation for vehicles involved in a total loss within 180 days or 7,500 miles of purchase, whichever comes first,
* annual policies, and
* reduced auto rates for alternative lifestyles (non-traditional households).
Chairman Ayer sees The Hartford as having both a broad and highly focused market at the same time.
In commercial lines today one senses that things have to be stirred up and rethought to build competi-tive advantage. In small com-mercial lines business, The Hartford ap-pears to be doing just that.
William Stan-way, president, Hartford Com-mercial Lines, explains that for a long time, The Hartford has been working with affinity and association groups to build special pro-grams for dis-tinct industries. Stanway says that the time is now for The Hartford to translate that expertise into positive marketing opportunities for agents who may have similar customers in their agency. A number of teams have been created in the field that specialize in specific industries and target markets. These specialists in underwriting, pricing, loss control, claims and marketing can help agents build marketshare in private schools, metalworking, plastics, wholesalers, printers, special trade contractors, janitorial services, auto dealers, food processor and grocery stores.
Always on the lookout for new opportunities, Stanway says that he would like to see agents bring more association or affinity business to The Hartford. He's looking for businesses where there is the right degree of sponsorship, meaning the agent has a strong relationship with the group and can market to its members, and the group itself has positive influence with its membership. Stanway feels that a "hook" of sorts is needed to capture marketshare in the group and will work with the agent to exploit that hook.
Stephen Hasenmiller (left), President of Personal Lines chats with William Stanway, President of Commercial Lines. Expense control is a major goal and The Hartford feels it can now compete with the direct writing or captive agent.
Knowing industry groups will be critical to overall expense savings at The Hartford. As underwriters learn markets, they can translate this knowledge into better selection criteria, pricing and coverage. More knowledge means more effective, focused loss control programs and claims handling that is in tune with the customer's needs and way of doing business. Putting these industry specialists closer to the customer and the agent will mean better, more profitable penetration in the marketplace.
Ayer sees people as one of his competitive advantages. "We want to leverage our people to be far more comprehensive in their business--to be more than just insurance people. We want them to think like heads of businesses."
Bill Stanway agrees. He's built a bonus plan for underwriters and other field people that is partly tied to an agency satisfaction rating and overall quality, partly to profit and partly to growth. He's made a commitment not to unnecessarily reorganize territories, allowing the agent and underwriter to build their relationship.
In the current commercial lines price war, both the companies and agencies lose revenue. One way of attacking the problem is through expense control. Getting things right the first time through commercial lines interface has until now been more of a dream than a reality. At the end of 1997, Hartford successfully uploaded and downloaded BOP (Hartford Spectrum), commercial auto and workers compensation using an interface developed in partnership with Applied Systems of University Park, Illinois. This year, agents of The Hartford who have the Applied WinTAM system will be able to both upload and download their BOP accounts. Hartford and AMS Services of Windsor, Connecticut, are testing upload and download using the APT module.
The Northeast Agency in Buffalo, New York, was one of the first agencies to use the Hartford/Applied small commercial interface. Mike Rand, president and CEO of Northeast says that the success of the interface actually encouraged him to implement transactional filing for small commercial lines in his $20 million multiple-line agency. "Until The Hartford interface, we couldn't justify T-filing our small commercial lines accounts." Rand also says that the cost savings and efficiencies wrought by interface will encourage him to "choose the path of least resistance" and place small commercial lines business with a carrier that will offer this more efficient way of doing business. His message and that of other agencies is that "we agents too understand the problem of operating expense." BOP business, like personal lines, needs a more efficient process of delivery and service if both the company and agency are going to continue to profit from the small commercial market segment.
Agents hear from many companies that they provide great products for agencies and that agents should do business with them because of their superior people, pricing, coverage and service. Hartford realizes that having great products, people, service, pricing and coverage isn't enough anymore. Helping distribution systems capitalize on those products is equally as important.
Before becoming president of Personal Lines, Stephen Hassenmiller ran the AARP program for Hartford; and before that he worked for many years in the field with Hartford agents. He's learned from both experiences. "The vast majority of personal lines business is written through agents and that's not going to change for the foreseeable future. Unfortunately, most of those agents are direct writing agents. Our strategy is to position the independent agent to be able to go out and take that business back. To do that we have to have the efficiencies, we have to have the low cost, we have to have the sales processes. We feel we can assist our agencies in accomplishing all of that."
Hassenmiller explains how The Hartford could help independent agents capture personal lines marketshare. "We've developed sales centers to provide qualified leads and the systematic approach to identify leads in an agent's territory where the agent can go out and proactively sell that business and take it back from the direct writer. We can show an agency how and help them establish a telemarketing center of their own to help them capture leads, or we can provide them with prequalified leads in their area. Then the agent needs a process to solicit these customers and to follow up on the quotations. That's something that the direct writers and the direct response channels do today. A lot of selling is selling skills and persistency, and it's a process of following up and going after that business. Consistency is having a process where over time you can develop the skills to succeed."
Personal lines sales software
To help agents sell more personal lines, The Hartford developed P.A.S.S. sales and lead management software. P.A.S.S. is designed as a stand-alone module to assist the sales producer in x-dating, telemarketing and direct mail. A diary follow-up system is included along with a sales management component that helps supervisors monitor leads. In addition to P.A.S.S., The Hartford created personal lines sales training for producers and producer managers that is delivered in the field by specially trained Hartford staff. Topics include sales management, lead generation, sales principles and techniques.
Anthony Parrella, president of A. Parrella & Associates, Naugatuck, Connecticut, feels that the investment in P.A.S.S. was well worth the $5,000 investment and strongly suggests that others investigate the sales system. In a little over a year and a half, Parrella has generated 714 new personal lines accounts using the P.A.S.S. system. Parrella explains, "We have three people known as fact finders who obtain x-dates. When the x-date is due, we have two surveyors who gather information about the account which is then passed on to two sales people who make the presentations and sales. We purchase leads in competitive zip codes and these are imported into our P.A.S.S. system. The great thing about P.A.S.S. is its ease of use."
Parrella emphasizes that the P.A.S.S. system plus leads alone won't work unless there is a commitment on the part of the agency to hire and develop people who can contact the leads, work the leads and follow-up features of the system and convert qualified leads into sales.
In commercial lines, the focus is on the development of new commercial lines producers. The Hartford School of Insurance is about to matriculate its first dozen students. Rick Quagliarolio, executive vice president of Field Operations Commercial Lines, says when they broke ground on The Hartford School of Insurance, they thought they would have only four graduating classes in 1998. The response has been so overwhelming that Quagliarolio anticipates the school will graduate as many as 8 or 10 classes in 1998. Students (agencies) pay for their own travel, room and board and a $3,000 tuition fee. Even at this cost, both small and large agencies have enrolled new producers.
The school is split into seven sessions or modules, with part of the time spent in class at The Hartford and part in the agency. The agent doesn't get just technical training from The Hartford. A great deal of class time is spent in learning how to turn opportunities into sales--taking that x-date and turning it into commission for the agency.
Quagliarolio points out that their approach to the school is different from what other companies may have used in the past. "The school is a response from agency council meetings. The overwhelming feedback was that agents are lacking ongoing training programs from any of their carriers; not that no one was doing it, but that there had been a significant drop off on the part of carriers in the industry offering training programs. With that feedback we took our research group and did a more formal survey of all of our agents." It isn't all technical training either, says Quagliarolio. "To do just technical training would not be proper. Every piece of the agenda (the student) goes through in the technical training has imbedded into it sales training, including case studies and live presentations."
Once the practical is learned, the application of that knowledge is taught. Says Quagliarolio, "Now that you know the technical information, we show you what to do with it in terms of sales and how to relate to the needs of the business so you can turn it into a sales opportunity."
For many years, The Hartford has been assembling a sales training group. Until now, it was used internally to work with underwriters and field people to make them more responsive to the agent. Because of the nature of The Hartford's book, staff and field people make many sales presentations with agents. Quagliarolio explains how The Hartford incorporates sales into the curriculum. "We've taken that group of (sales trainers) and they develop that part of the curriculum that takes the technical training and evolves it into a sales opportunity. Not only do (the sales trainers) help develop the curriculum, but they do some of the training of the new producer--taking the new producer from the x-date to the sale."
Judy Blades, president, Business Insurance Commercial Lines for The Hartford, says this about the school: "Those companies that provide producer training usually require that the producers have their license and at least six months of experience. The Hartford does not require either. We'll take brand new producers who need training. This training isn't just for the large agency. We have an entire segment devoted to small commercial business."
Blades explains that The Hartford believes that the ultimate success of the school will be how well students apply the knowledge they have learned. If students understand what needs to be gathered to determine the customers' needs, learn how to use pricing programs to get the best value for customers, and through a case study approach, actually apply technical ideas to the sales process, everyone will profit. Blades says that the process doesn't stop here. "Once (the students) do their core weeks of self study which they do on the job, they have three weeks of intensive training in Hartford--product training, sales training, utilizing the case studies. Then (the students) go into phase III which consists of an individual assessment and a personal development plan that is designed to assist their skills and guide the mentoring agency through the steps that are necessary to round out the development of the producer. We also provide the agency a guide to ensure their continued development."
The Hartford doesn't just sell auto, home and BOP policies. The Hartford is life, health and large commercial lines as well. For those agents with life insurance producers and departments, The Hartford wants more complex and business-oriented life insurance prospects. The existing commercial lines customers often are the best prospects for business life, disability, and disability buy-out policies.
The Hartford is reexamining the relationship between its Specialty Lines Division and the Commercial Lines Division. David Bradley, president of Hartford Specialty, explains that he sees a number of small and mid-sized agencies fighting to keep business that has traditionally gone to the big brokerage houses. He sees agents and producers calling Hartford Specialty to find answers and learn new programs.
Commercial Lines President Bill Stanway hears the same message. That's why he and David Bradley are working closely to train standard commercial lines underwriters about opportunities within existing accounts and new prospects that may require assistance from the Specialty Lines Division. As underwriters are trained to spot opportunities for risks they would normally turn away, both the agent and The Hartford are served.
Innovative specialty programs
Bradley also suggests that the agent might want to learn more about some of the exotic programs that are being developed today. One such program that The Hartford is especially excited about is "integrated risk," a combination of coverage and self-insured retention in an integrated property and liability package or "finite" type risk coverage. Bradley explains that these programs are limited only by the creativity of the underwriter, the customer and the agent. He gave this example of how such a plan might work. "Plans often combine some or all of property, liability, D&O, E&O and fiduciary coverage limits. The client bears all losses less than $500,000 and retains all aggregate losses (where each claim is less than $500,000) up to a sum of $15 million. The client might also purchase (corridor) coverage for individual losses from $500,000 to $1 million. That (corridor) coverage premium would be adjusted (like a retrospectively rated workers compensation policy) perhaps over a five-year basis."
With plans like these, The Hartford often supplies claims and loss control services for retained losses in addition to selling the corridor coverages and excess coverage for individual losses of $1 million or more and aggregate losses that exceed $15 million up to $20 million or $50 million. Sometimes lines of insurance such as D&O are carved out of the integrated risk because of existing client-company relationships or other considerations.
Other markets where Hartford Specialty wants to do business include primary and excess property and liability, often over large self-insured retention, non-medical professional liability and miscellaneous E&O, wrap-up contractor programs, and crane and demolition contractors.
It is the opinion of most in this industry that the overwhelming majority of commercial lines will be purchased from an agent (most probably the independent agent) into the foreseeable future. However, in 20 years will 96% of consumers still purchase personal and small commercial lines insurance from an agent? Banks, the Internet, kiosks and other direct marketing efforts will make inroads into "agent" marketshare.
The point is well taken and thought through by The Hartford. Chairman Ayer and his staff want their share of the expanding direct market, but at the same time they are investing heavily to improve the effectiveness and competitiveness of its independent agency sales force. Ayer wants The Hartford to increase its overall market penetration at the expense of the direct or captive agent, not the independent agent. *
"Integrated Risk" is a combination of coverage limited only by the the creativity of the underwriter, the customer & the agent
David Bradley, President of
Hartford Specialty