PLI overnigh success? 11/98

MARKETING

PLI AN OVERNIGHT

SUCCESS?

Four years after Chubb bought an independent personal lines agency,
the agency is still independent--and a whole lot bigger

By Dennis H. Pillsbury

pli PLI (Personal Lines Insurance) Brokerage, Inc., in Warren, New Jersey, became an overnight success in late 1994 when it added the personal lines business of Alexander & Alexander to its portfolio. However, as nearly anyone knows, overnight successes normally take years in the development and must be followed up carefully to maintain the success. In other words, an overnight success is a misnomer that describes an event that, unless we're talking about hitting the lottery, rarely lives up to its name. And such is the case with PLI.

The agency was founded a decade before the A&A deal. It was offered the opportunity to purchase the A&A business because it already was successful, albeit on a much smaller scale.

PLI started out in 1984 in Morristown, New Jersey, the dream of one contrarian who believed that an independent agency could succeed by focusing only on personal lines insurance, with an emphasis on high value personal lines. The agency grew by establishing relationships with Realtors, mortgage brokers, financial planners and so on.

Naturally, when the A&A offer came along, it was an interesting proposition but involved greater financial wherewithal than PLI alone could muster. So the agency went to one of its lead companies--Chubb--a company that shared its interest in high-valued personal lines. Well, Chubb was interested, very interested. And in 1994, Chubb struck a deal that included purchasing PLI and the A&A business. Overnight, PLI got very big--going from an independent agency operating in three states to becoming a national personal lines brokerage with some 40 offices across the country.

But, in many ways, that was the easy part. Acquiring the business involved financial resources and negotiating skills, but now PLI had to service that business effectively and profitably, and, most importantly, find a way to make it grow.

We talked to Bob Teschke, PLI president and CEO, about what was involved in transforming the agency into a national brokerage. Bob came to PLI from Chubb. He had been with the company for 25 years, mainly in the Pittsburgh, Pennsylvania, office. In 1990, he transferred to New Jersey and was branch manager for the division responsible for servicing Chubb's Masterpiece clients. He also was responsible for building Chubb's customer center.

Challenges

There were several challenges facing the suddenly large personal lines agency. One of the first was that 40 offices proved to be too many. There were a number of offices that were handling fairly small books of personal lines that just did not justify their continued viability. However, closing those offices would leave a number of people without an office to service their account. PLI had built its reputation by providing good service to its clients. This had to be maintained on a national level. In order to service those clients who were in areas being served by offices that were to be closed, PLI set up National Insurance Center in its headquarters in Warren, New Jersey. This allowed PLI to pare down the number of offices from 40 to 24. Interestingly enough, due to strong growth, PLI now is starting to add offices where it makes strategic sense. A new office was opened in Kansas City in February of this year and another is "in the works."

Another challenge involved the composition of the book of business. PLI had been focused on upscale business, but the Alexander & Alexander book included clients that covered the gamut of economic strata. The kind of hands-on, consultative service that was required by upscale clients who often had unique personal risk management needs was not necessary for less-affluent clients. The agency basically provides different levels of service to reflect those needs. Account executives, who are principally responsible for sales, deal with the lead source partners to write new upscale and emerging clients. Once the sale is complete, account managers are responsible for servicing these clients. Today, PLI has 24 account executives and 99 account managers. It employs a total of 230 people, with 65 of those in National Insurance Center. The agency has more than 75,000 clients with 23,600 serviced by National Insurance Center.

"Chubb makes certain there aren't even appearances of special treatment. The company is very committed to the independent agency system and doesn't want to do anything that would jeopardize that relationship."

--Bob Teschke, PLI president and CEO

Yet another challenge was the fact that PLI was owned by Chubb. Independent agencies that dealt with Chubb looked askance at the deal. There were concerns that PLI would get "better deals" or "first consideration." But that wasn't the case. Teschke explains that Chubb looked at the PLI acquisition as somewhat of a defensive move designed to make certain that the A&A book did not go to a competitor. But that did not mean that Chubb got all of that business or even wanted it. PLI continues to operate as an independent agency, representing a large number of companies, including its core group of Chubb, Safeco, Travelers, CNA, Hartford and Progressive. And, while it is Chubb's second largest agency, it ranks very high in size with its other core carriers. Most important, from the perspective of other agents, is the fact that PLI operates just as they do. PLI is an independent agency that happens to focus on upscale personal lines insurance. It does not receive any special treatment.

"We're just another competitor," Bob says, "and that's the way other agents view us." Bob continues that the Chubb connection, in some ways, makes things a little more difficult. "Chubb makes certain that there aren't even appearances of special treatment. The company is very committed to the independent agency system and doesn't want to do anything that would jeopardize that relationship."

And there's more. The A&A business was not fully automated when it was purchased. And what was automated was not necessarily compatible. PLI has inputted the data for all its clients into its Applied System data base. The agency also is in the processing of completing a WAN (wide-area network) that will make all client data available in all offices. "This means that when a hurricane hits Florida or an earthquake occurs in California, our clients still can be handled from National Insurance Center in New Jersey," Bob says. "If our local office is out of operation, that doesn't mean our clients will suffer. They'll still be taken care of quickly."

Bob continues that the agency's goal is not just to provide adequate service but to "amaze clients. We've already had instances where people in Florida had their homes damaged by a hurricane and we were able to take care of them on the same day from our office in New Jersey."

PLI is an agency that proves that, not only can personal lines be profitable, but it can be enormously successful. The agency today has more than $100 million in premium and $20 million in revenues. Operating income has grown at double-digit rates each year since the acquisition of the A&A business, with even more significant growth occurring over the last two years.

Lessons learned

It is easy to ignore PLI as an aberration. But it's not. Like all other independent agencies, PLI started out as the dream of an entrepreneur. In this case, it was an entrepreneur who said that personal lines could be profitable. What happened since then is yet another example of the numerous directions independent agencies can take in order to grow.

Today, agencies are looking at working with banks, setting up captives, establishing fee-for-service corporations and a wide variety of other alternatives. PLI simply looked to one of its company partners and at the potential of an alliance with a major commercial broker (A&A). In many ways that is much less of a stretch than going to financial entities that operate outside of the insurance industry. But the key point is that a focus on providing the best service to targeted clients can lead to opportunities.

Automation has been an important part of the success of PLI. When disaster strikes anywhere, PLI still can provide full service and claims settlement to clients in that area thanks to its WAN that allows all offices to access information on its clients. Automation offers real opportunities for agencies to provide value-added service to clients and to expand beyond traditional roles. It also allows agents to provide full service to a large number of clients in an effective and efficient way. PLI, for example, is able to conduct annual reviews with all of its high-end clients to identify areas where new coverages may be needed.

Focusing on one area allows an agency to develop an expertise that can be attractive to other successful enterprises. PLI has grown and prospered through its relationships with Realtors and others mentioned above. This has come about because PLI's focus means that its people provide the best information on personal lines property and casualty insurance in a consultative manner that enhances the services offered by its lead source partners. And it's working. The average new sales revenue for PLI account executives and account managers is significantly higher than the industry average.

Vision 2005

PLI's future plans involve increasing its core business of upscale personal lines through new business efforts aimed at that market. Currently, PLI's business mix consists of about 20% platinum (those with personal lines premium in excess of $7,500); 20% gold (premiums from $2,500 to $7,500) and 60% silver. The goal is that PLI in the year 2005 will be 40% platinum; 40% gold and 20% silver. This is being accomplished through targeting upscale customers by account executives both in their individual marketing and in their relationships with lead source partners. Advertising also appears in publications that go to the upscale clients and potential clients.

PLI also is looking to acquire personal lines books of business that feature a large segment of upscale business or to acquire or partner with agencies that give them presence in cities where they want to grow.

PLI is in a unique position as the largest national broker focusing exclusively on personal lines to take advantage of alternative ways to sell that product, including the Internet, arrangements with banks and whatever other opportunities may come down the pike as computers and communications systems continue to develop. As Bob says, "The future is really exciting. We're in the position to be a platform for alternate ways to sell the personal lines product. It's really great. This is a real neat job. It's fun," he concludes.

Maybe that sums it up. If you're job is fun, great things can happen and, if they don't, at least you're having a good time.