Lauren N. Patch (left) is president and chief executive officer of Ohio Casualty Group. Thomas A. Hayes, CPCU, is executive vice president and chief operating officer.
"Talk is cheap," says the well-worn adage; and most people probably agree, especially when the talk isn't backed up with action. Particularly in today's challenging property/casualty market, independent agents most likely wish their insurance carriers would spend less time talking and more time listening. In this article we'll learn about an insurance group that's all ears when it comes to the concerns of both its agents and its policyholders: the Ohio Casualty Group, or OCG. We'll talk with OCG's chief executive officer, Lauren Patch; its chief operating officer, Tom Hayes, CPCU; and Bill Minor, senior vice president of marketing. They'll explain how OCG developed and implemented its "customer intimate" strategy, then describe the positive effects it is having on agent and policyholder relations, the group's public image, and its premium volume and bottom-line profitability.
Let's begin by looking briefly at the Ohio Casualty Group's background and history. Established in 1919, OCG operates in 45 states, providing insurance for autos, homes, and businesses, as well as fidelity and surety bonds. The group distributes its products through some 5,000 independent agents nationwide. One of the top 40 property/casualty insurers in the United States, OCG consists of five insurance subsidiaries: Ohio Casualty Insurance Company (the group's original flagship company), West American Insurance Company, American Fire & Casualty Insurance Company, Ohio Security Insurance Company, and Avomark Insurance Company, which directly markets personal auto coverages in the state of New York. The group also owns Ocasco Budget, Inc., a premium financing entity. OCG's holding company is Ohio Casualty Corporation.
Rated A+ Superior by A.M. Best, the Ohio Casualty Group has total premium volume of $1.7 billion, with $800 million in personal lines and $900 million in commercial business. In December 1998, OCG completed the acquisition of substantially all of Great American Insurance Company's commercial lines division, representing more than $300 million in annual net written premium. The lines of business included in the transaction were workers compensation, commercial multiperil, umbrella, and commercial auto.
Based in Hamilton, Ohio, some 30 miles north of Cincinnati, OCG employs about 1,500 people at its home office and has a field organization some 2,000 strong. President and Chief Executive Officer Lauren Patch has been with the group for 26 years, having joined the organization immediately after graduating from college. Reporting directly to Patch are four home office departments: human resources, information systems, financial/accounting, and corporate marketing. Tom Hayes, executive vice president and chief operating officer, came to OCG from Great American, where he had been responsible for the commercial lines division that was sold to OCG last year. Hayes reports to Patch and is in charge of both field and home office operations, including product management (and product marketing to agents), pricing, claims, premium audit, and loss control. In the field, six regional vice presidents with a considerable degree of autonomy oversee underwriting, policy issuance, customer service, loss control, and premium audit, and are responsible for building the agent relationships OCG regards as critical to its success.
Building niche markets
With $800 million in personal lines premium and $900 million in commercial lines, Ohio Casualty clearly is a major player in today's property/casualty marketplace. Plans call for building volume to $1 billion in both market segments. "Given the consolidation taking place in the industry, we need $1 billion in each market just to have a ticket to the dance and to remain an independent player," Patch declares.
On the commercial side, OCG has carved out a number of niche markets in which it has developed successful programs: small and medium-sized artisan contractors, general liability for small to mid-sized manufacturers, fine restaurants, retail jewelers, hospitality providers, and golf courses. OCG also is strong in fidelity and surety, with some $40 million of premium volume. "All of our loss prevention people want the golf course accounts," Tom Hayes says with a chuckle.
"Some companies want to offer the lowest price by using the lowest cost distribution system. Other companies are product players only. We avoid both strategies by focusing on the policyholder's broadest needs and responding with products and services our agents can provide."
--Lauren Patch
At Ohio Casualty, building business isn't just about selling policies. "In personal lines, we try to become the best solution for the customer on a long-term basis by offering the industry's top auto and homeowners programs, and by providing service that meets all of the customer's needs," Tom Hayes says. "On the commercial side, we pursue a line of business strategy that focuses on customer segmentation. Here too, we go way beyond simply writing policies; we play an active role in helping our customers succeed."
For example, Hayes says, "Our drug-free workers comp program won a PIA award for customer innovation and is now in its sixth year." (This was originally a Great American product.) "We assist customers in developing a drug-free workplace and direct them to licensed testing facilities. A drug-free workplace is safer and more productive--and that means fewer losses and lower premiums." The program, he notes, is especially appropriate for smaller and mid-sized employers. "Most Fortune 500 companies use drug testing. Businesses with 50 to 100 employees don't have the same resources, so we work with them to achieve drug-free status." Another workers compensation safety program, which generates $90 million in premium, focuses squarely on loss prevention: "No accidents or losses; no crushed fingers or broken backs." OCG provides coverage for these risks on both a primary and an excess basis with significant limits.
Another workers compensation safety program designed to meet the customer's total needs, Patch explains, is aimed at helping employers prevent violence in the workplace, particularly violence against women. Employers are shown how to deal with threats of violence and how to limit access to the workplace. Response to the program has been enthusiastic, Patch says, noting that OCG representatives were interviewed about it on CNN. Helping employers create safe and drug-free workplaces, Hayes points out, benefits not only the employer and workers, but also the public at large.
Establishing customer intimacy
Spearheading Ohio Casualty's drive to create a "customer intimate" organization is Bill Minor, senior vice president and director of marketing. Minor joined OCG in 1996, bringing to the group his experience as a vice president and account representative for leading ad agency J. Walter Thompson. During his 10-year tenure there, he worked on major accounts such as Quaker Oats, Oscar Mayer, General Foods, Frito-Lay, Clairol, and Jell-O. "Lauren wanted to position Ohio Casualty as a customer intimate company that understands and meets its customers' needs, and my background is in establishing those strategies," Minor explains. "My job is to help OCG employ customer intimate strategies by providing the best total solution to targeted groups. Our goal is to create a bond with the customer that goes beyond product and price, and doing so requires that we develop a deep understanding of our customers."
By listening to both agents and customers, Minor says, "We can put into place value-added agent and customer programs and get them out to the field via the field force, the Internet, and various forms of communications, including advertising. We conduct customer focus groups, agent roundtables, employee feedback sessions, and quantitative research. We study and digest our findings, then develop programs that meet the needs and desires our research has identified."
"Voice of the customer"
The backbone of OCG's customer intimacy/total solution strategy, Minor explains, is "the voice of the customer." Here, he says, "Our key tool is a customer relations assessment study. We use this device to build a bond with our policyholders and assess how we're doing. We ask questions about the policyholder's sense of commitment to OCG; future intentions (renewing, buying additional coverage, recommending OCG); perception of OCG's overall value in terms of price, quality, and service; the company's image and reputation; how they rate our performance in the ways we interact with them. We focus on so-called 'moments of truth': policyholders' perceptions of our billing, policy delivery, loss control, and claims service, as well as agent contact."
Tom Hayes, CPCU, joined OCG last year when the commercial lines division of Great American, which he headed, was sold to OCG.
After conducting this assessment, Minor says, "We take each of these areas and statistically link it back to the policyholder's level of commitment to determine what areas have the greatest impact on the policyholder's relationship with OCG. We ask the same questions of customers of other insurers to measure their service against ours. This research effort is ongoing and always evolving. We strive for immediate feedback so we can develop responsive action programs."
In deciding how to position itself to the public, Minor explains, OCG conducted research on how the group could portray itself in a way that would distinguish it from competitors' advertising messages. "One thing we learned was that people appreciate their possessions and want to take care of them. We developed a series of television and print ads with the theme 'Protect What's Yours.' In designing the ads, Minor says, "We decided to take a positive approach--no fender benders or burning houses like you see in other insurance ads. Our ads emphasize the differences in our private passenger auto policy that add value: comparable rental vehicles, total replacement of a vehicle that's been owned for less than six months or has been driven under 7,500 miles. Other companies may offer these features, but customers may not be aware of them. We try to help policyholders understand why our policies represent good value to them."
Branding brings results
Branding, the establishment of a distinct corporate identity and image, is helping Ohio Casualty distinguish itself in the marketplace and portray itself as "the company that works for you." Minor explains some key elements of OCG's branding strategy. "Our name and logo are an important part of telling customers who we are," he says. "We designed our new logo to identify ourselves as a group--OCG--instead of simply Ohio Casualty. By portraying ourselves as a group, we can include all of our subsidiary companies under one banner, so our policyholders can recognize the company they're insured with and associate their policies with OCG's print and TV ads. Also, because we're in the market to acquire additional subsidiaries, establishing a group identity will allow us to include future as well as current subsidiaries under one umbrella."
Bill Minor, senior vice president and director of marketing, is the architect of the company's customer intimate strategy.
What effect is OCG's effort to establish a distinct brand for itself having on the insurer's premium growth? "Many factors influence premium growth," Minor observes, "but in the heartland area--Ohio, Illinois, Indiana, Kentucky--we've seen double-digit increases in premium volume as a result of our branding efforts, versus a 5% increase nationwide. That's a positive indication that branding is aligned with premium growth." OCG is now advertising in 11 markets, with plans to expand, and its messages are reaching areas that represent 33% of its volume and more than 50% of its key agents.
"Actually, our whole branding campaign started with our 'Voice of the Agent' effort," Minor says. "A lot of agents said their customers hadn't heard of OCG, and it was easier for us to 'sell' them on dealing with us if their customers were aware of who we are. There's a comfort level in doing business with a known commodity. In markets where we'd already achieved a level of recognition, we've increased our outreach; and in markets where we weren't known, we've quickly achieved recognition. We measure how agents view us in terms of our trustworthiness, as being easy to work with, as being an insurer that helps with underwriting and appreciates agents' business. All our ratings are up among those image attributes."
A matter of quality
Asked how Ohio Casualty seeks to distinguish itself in the marketplace, Lauren Patch responds: "Some companies want to offer the lowest price by using the lowest-cost distribution system. Other companies are product players only. We avoid both strategies by focusing on the policyholder's broadest needs and responding with products and services our agents can provide. We started our policyholder focus in 1994 and 1995. Since then we've significantly improved our services in claims and billing, and we've created a structure and process that policyholders increasingly are favoring. Policyholder satisfaction is increasing, and so are referrals--and our agents are much more comfortable."
OCG doesn't just initiate service improvements--it conducts regular surveys to learn how its customers respond to those initiatives. "We actually measure customer satisfaction levels through broad-based surveys, conducted at random by independent consultants," Hayes explains. "We don't talk just to our customers; we also seek feedback from claimants who have other insurers."
Easing claims anxiety
Dealing with a personal auto or homeowners claim can be frustrating, stressful, sometimes even frightening. To ease claimants' anxiety and simplify the tedious claims handling process, OCG instituted its Direct Report, Direct Response (DR-DR) program. "We take the claim report in DR-DR," Patch explains. "Then we develop an itinerary for the claimant: visit the body shop, make a doctor's appointment, arrange for a rental vehicle. The customer knows exactly what to do through every step of the claims procedure. There's no waiting for a callback; we take immediate action." What's more, OCG provides the claimant a rental vehicle that's comparable to the one that was damaged. "If you were driving a minivan or a Mercedes, you don't get a subcompact," Patch says.
While a personal auto or homeowners claim is being settled, the claimant doesn't have to worry about finding the money for out-of-pocket expenses. Through a facility called OCG Secure, OCG establishes an asset account for the claimant (not a claim draft) if the claim amount exceeds $10,000. The customer is given a checking account and/or a debit card. The customer can write checks for repairs, living expenses, and other needs before the claim is settled. The asset account earns interest, and after the claim is paid, OCG splits the interest with the customer. "This program works for both us and the customer," Patch observes. "We don't have to issue multiple claim drafts, and the customer feels secure because he or she has the means to pay expenses instead of feeling anxious about being strapped for cash." The OCG Secure program was a finalist in a national competition sponsored by The Association for Quality and Participation (AQP), placing seventh out of 63 entries.
Focus on agents
At Ohio Casualty, policyholders aren't the only customers. Agents are customers too. As such, their opinions are solicited, listened to, and acted on. "OCG has a long history of developing relationships with agents. By offering premier products and services, and paying close attention to their concerns, we're able to form a close bond with our producers that works to our benefit and theirs," Tom Hayes says. Whenever possible, OCG seeks to be the first or second leading carrier in each agency that represents it. The group's Key Producer program, in which 15% of its agents participate, and which accounts for 40% of OCG's premium volume, offers special benefits to agents who are willing to set and achieve goals in production and other key areas. OCG also has established agent councils around the country where home office staffers can meet and discuss issues with agents in an open forum. The group also distributes three publications to its agents, as well as two newsletters for policyholders--one for personal lines and the other for commercial lines.
"OCG will be 80 years old in November," Bill Minor says. "Over that time, we've established many long-lasting agent relationships. Our average agency contract is over 20 years old. Our agents want stability, and we give it to them. We're not in and out of product lines and markets. We take a team approach to helping agents compete effectively and bring in quality business."
Commitment to automation
At Ohio Casualty, Tom Hayes says, "We've made a long-term commitment to automation. OCG is the leader in automation with personal lines agents; we have 2,800 interfaces. Between 1997 and 1998, Great American implemented interface in commercial lines, and we're now interfaced with between 500 and 600 agents." Adds Lauren Patch: "We're committed to interface for all of our producers. By 2000 we plan to implement a Web-enabled, Windows-based point and click system that anyone can use; it's designed for the 'lowest common denominator.' The system is user friendly and will eliminate redundancy between the agent and the underwriter. It will offer full upload and download capabilities." The insurer's long-term automation strategy, Patch explains, is to "make it easy to do business with OCG."
Until the last year or so, the conventional wisdom among agency insurers was that the Internet wasn't a viable sales vehicle. Ohio Casualty, however, is definitely a believer in the power of the Web, Bill Minor comments. "We're working to develop a comprehensive Net strategy that will enable us to grow premiums, enhance customer intimacy, and offer choices to our agents and customers via the Net. Our home page is 'information central'--users can view products, request a quote, and be connected with an agent. We're adding multiple links to our site and are seeing significant increases in traffic."
Also, Minor adds, "We've built 300-plus Web sites for agents with links to Ohio Casualty, and we're in the process of developing a field of Web agents to conduct e-commerce with banner advertising and e-mail lead generation. These Web agents will be a key element in promoting our customer intimate strategy. Agents can use the Net as another venue to provide skilled counsel to customers. They already offer consultative services by phone and in person. If they do it correctly, they can use the Net to enhance their consultative abilities."
What's ahead?
Solidly capitalized and focused on growth, Ohio Casualty "has ample capital to consider additional acquisitions in the future," Lauren Patch says. As with Great American, acquisitions will be pursued judiciously, with the aim of building OCG's portfolio in carefully identified areas. OCG also recently purchased St. Paul's personal lines business in Kentucky. "Consolidation in the insurance industry will continue," Patch asserts. "We want OCG to be a consolidator."
From its roots in the heartland, the Ohio Casualty Group has proceeded with deliberation and determination to build a strong, enduring network of agents and customers whose loyalty it earns the old-fashioned way: by listening and responding. There's every reason to believe that the group's carefully honed customer intimate strategy will drive its progress well into the new millennium. *
©COPYRIGHT: The Rough Notes Magazine, 1999