William P. Kane, Jr., (right) who heads AIG's Middle Market Accounts Division, is joined at the company's headquarters by Louis Lubrano, vice president, marketing and Barbara E. Zito, vice president, business development. Behind them is the Brooklyn Bridge spanning New York's East River.
onventional wisdom tells us that you can't be all things to all people. Insurance giant American International Group (AIG) is trying to be one thing--the premier underwriter of specialty lines--to all markets, and is focusing significant resources to middle market businesses and the producers that serve the accounts.
"We've always had a focus on the middle market," says William P. Kane, Jr., president of American International Companies Commercial Accounts Division, who has management responsibility for the middle market division. "But now we are going to refine our approach and work to become the premier specialty carrier in this growing market segment."
AIG's approach focuses on leveraging its expertise in specialty commercial lines that it has honed in meeting the needs of clients of all sizes. For example, AIG member companies pioneered specialty lines such as directors and officers, employment practices liability and environmental coverages that are commonplace in today's insurance marketplace. AIG companies also possess knowledge of the insurance needs of specific industries such as financial institutions, health care, high technology and construction. Add to that an overseas network of insurance companies that can be utilized in creating integrated global programs for multinational corporations, and you have a carrier with resources that are unique to the middle market.
In addition to providing new insurance resources for these companies, Kane indicates that this effort will also provide independent insurance agents and agencies with the opportunity to generate more premium income and grow new business.
The middle market division is one of three that make up the AIG Domestic Brokerage Group, which was realigned in 1997 to address the specific needs of producers and clients in various market segments. That year saw the creation of three consumer focused groups: National Accounts--for major corporations with revenue in excess of $700 million; Commercial Accounts--pegged at those firms with between $100 and $700 million of revenue and the Middle Market Accounts group for businesses with revenue under $100 million.
"We are not abandoning the Fortune 500 and the Fortune 2000 companies that we serve," says Kane. "Rather we are providing a vital and needed service to the nation's smaller companies with a broad range of products and services that is unmatched by any of our competitors." He is quick to add that while AIG's Middle Market Group is not without competition, none of the other insurers offers such a complete line of products. "We are thus able to offer state of the art insurance solutions to our customers," he says.
Insurance customers will benefit significantly from the 10 regional offices that AIG maintains in major cities. Each of these offices is headed by a regional vice president, with underwriting and service staff dedicated to each market segment. In addition, AIG makes use of product and industry specialists for each of the specialty coverages provided.
"This is an immense help to the middle market business clients we are seeking," says Kane, "since the vast majority of companies in the under $100 million revenue range do not have the funds available for a staff of experts and/or consultants." He adds that thanks to AIG's size, they are able to also offer and provide services that often fall outside of the normal range of activities of many of its competitors.
In an effort to help its producers, and at the same time improve service to its clientele, AIG created AccessAIG, an easy-to-use Web site that provides its producers with a wealth of information. "AccessAIG is one of the value-added services offered to producers," says Betty Harris, the division's interactive marketing director. "Our online service offers 24-hour-a-day, seven-days-a-week access to all our products and services, including applications, industry information and much more. In addition, it provides a direct link to regional product specialists that can answer any questions about coverage."
The AccessAIG system has a data base of more than 300 products and, according to Harris, 4,500 producers are currently using AccessAIG and they average some 25,000 hits daily. She also emphasizes that the system is user friendly, can provide premium quotes within 48 hours on certain lines and gives the middle market company the same kind of services and expertise that are available to the nation's major companies.
"With the advent of this online resource and the information that is readily and easily available, producers must now become computer conversant or risk falling behind their competitors," says Harris.
An important and frequently overlooked value-added service to customers is AIG's claims management operation. AIG provides all insureds, including Middle Market customers, with a broad range of claims management and cost containment services for workers compensation and property/casualty lines of business.
One important RMIS advancement for middle market customers was the introduction, in August 1998, of IntelliRisk NetSource, an Internet-based version of IntelliRisk, the insurer's risk management information system. It enables insureds whose policies are underwritten by the various AIG companies and their brokers to go online to analyze information in real-time, including account, policy, and claim and payment data.
"We designed IntelliRisk NetSource specifically for our middle market customers to address their risk management needs. NetSource's Internet portability and functionality make it an effective information management tool for this market segment," says Anthony J. Galioto, president of AIG Claim Services, Inc.
AIG's middle market efforts rely on the profit centers within the AIG Domestic Brokerage Group companies to create the products and services designed for middle market clients. The middle market division has focused on offering a wide range of specialty lines, including management and professional liability, coverage for overseas operations, environmental liability, workers compensation and excess coverages.
An example of this approach is AIG Environmental, the leading domestic provider of environmental insurance products and services. "We have a long record of experience in this area," says Joseph L. Boren, president, "dating to 1980. We offer the largest capacity in the industry, covering virtually all environmental exposures."
For the Middle Market customer, Boren cites three products of particular value:
* Cleanup Cost Cap Insurance--which provides coverage to the insured for those cleanup costs which exceed projected costs. "The policy addresses the risk and uncertainty so often associated with beginning an environmental remediation project and can help cap the financial loss exposure for both owners and investors," says Boren.
* Pollution Legal Liability Select--aimed at meeting the needs of companies in merger, acquisitions or commercial real estate transactions. The policy helps them meet legal and regulatory obligations. "The policy, which can be written for 1-to-5 years, also will cover liabilities should the buyer find contamination on the property after it has been bought," says Boren, "something that is especially important in real estate transactions."
* Secured Creditor Impaired Property Policy--directed to financial institutions, and designed to protect the lender rather than the provider involved in real estate transactions involving contaminated properties. "This policy protects lenders from liabilities that may take place during the loan workout period. It is a term policy that exceeds the length of most commercial real estate loans, up to 20 years," notes Boren, "and enables brokers to go to new lending clients with a unique and different product."
"We believe these and other products that are available to Middle Market customers will provide them with the coverage they need and want to expand and grow their operations," says Boren. "They also indicate our seriousness about serving this segment of the marketplace over the long term."
Another important piece of the insurer's domestic activity aimed at the Middle Market customer can be found in the operations of National Union Fire Insurance Company of Pittsburgh, PA, a leading provider of directors and officers (D&O) liability and other management and professional liability insurance. National Union, which also provides its innovative products to the company's National and Commercial accounts divisions, strengthened its position in the Middle Market in late 1998 when AIG and the Nasdaq Stock Market signed an agreement in which it and other AIG member companies will offer a package of management and professional liability products and services specifically designed for smaller Nasdaq-listed companies.
"This coverage covers the gamut of Nasdaq companies--startups with virtually no revenue to the largest of Nasdaq-listed companies," says Ty Sagalow, chief underwriting officer of National Union. "It is also the only coverage that is endorsed by Nasdaq."
The companies can select from a number of coverages--D&O and corporate liability; initial public offering coverage, employment practices liability, ERISA liability, employed lawyers liability, etc. In addition, says Sagalow, insureds will also receive CrisisFund and Employment CrisisFund which pay fees for crisis communications services related to the management of a covered crisis event--such as when a negative earnings announcement triggers a drop in the price of the stock.
"Another policy we pioneered is coverage for small community banks," says Sagalow, "which incorporates a complete range of professional and management liability coverages.
"It is becoming more and more important that privately held companies protect against a wide range of unique liabilities. Our products are designed to address these exposures and help avoid management liability claims and mitigate losses. A good example of this is our sexual harassment and employment practices loss prevention services, which would cost insureds thousands of dollars, are offered automatically with every qualified EPLI policy."
Going hand-and-glove with the expansion of its domestic operations to Middle Market customers, AIG, through its AIU North America Division, has designed a number of products for small and mid-sized companies with operations overseas. "Many domestic companies with incidental foreign exposures mistakenly believe that their domestic insurance program will cover overseas activity as well," says Sal J. DeFini, president of AIU North America. "Unfortunately when something happens to an overseas operation or an executive traveling in a foreign country, they find that is not the case."
Primarily for that reason, AIU created WorldRisk--a portfolio of insurance coverages specifically for companies conducting business outside the United States and Canada. Coverages include international casualty insurance, international property insurance and workers compensation coverage for all overseas employees. Also available are a number of specialty coverages including marine cargo, kidnap & ransom/extortion insurance, political risk insurance, and accident and health coverage, as well as emergency medical assistance.
"One phone call will put the potential customer in touch with an underwriting specialist who will assist in tailoring a portfolio customized to his or her specific needs," says DeFini. "In addition to expert underwriters, also available are claims personnel and loss control engineers in more than 130 countries and jurisdictions worldwide." He adds that these are exactly the same products and services that are available to big clients--including the Fortune 100 companies.
It is clear that AIG has made a major commitment to servicing the Middle Market customer. In addition to providing a wide array of products and services, the company also works closely with producers--providing training, experts in all areas of business, online computer capabilities--and helping them and their customers increase the value of their business. "We are in this for the long haul," says Kane. "When a customer comes to us, we offer a Triple A-rated company, with a strong financial balance sheet and the knowledge that we will still be here well into the future." *
©COPYRIGHT: The Rough Notes Magazine, 1999