Art Pizzello (above) operates three GROUPadvantage franchises in the Wayne, Illinois, area and another in Tucson, Arizona. Franchise holders at SAM'S Club locations sell auto, homeowners, umbrella, life and health using independent agency system companies.
Michigan independent insurance agent Bryan Hughes expresses unbridled enthusiasm when characterizing the value of the GROUPadvantage® Affinity and Workplace Insurance Program to his business.
"This is the greatest opportunity I've had to add to my client base in my 20 years in insurance," the Muskegon-based agent declared.
Illinois independent agent Art Pizzello's "attitude" about GROUPadvantage is no less fervent.
"GROUPadvantage provides a tremendous opportunity from a franchise holder and independent agent's perspective," Pizzello, from Wayne, Illinois, says. "And with the SAM'S Club partnership, we have a great niche market/fantastic new way for getting in front of many people and delivering products at competitive prices using up-to-the-minute Internet technology. This is the distribution system of the present for me--and the future for many who recognize the value."
It is a distribution system that is giving agents and participating companies a significant business advantage today and for the future.
It's all part of the vision-turned-reality success story Brian K. McCarthy has written since Rough Notes readers were introduced to him and his GROUPadvantage program in the November 1996 issue, when his B.K. McCarthy Insurance Agency was named Rough Notes Marketing Agency of the Month. McCarthy's loyalty to independent agents, his dedication to group and affinity marketing and his appreciation for the Internet's potential value to the insurance industry were clearly evident.
Eighteen months later, Rough Notes reported (April 1998) just how far those convictions had taken McCarthy and the company he founded to develop and distribute the GROUPadvantage program beyond his home state of Massachusetts.
McCarthy's Insurance Holdings of America, Inc. (IHA), of Beverly, Massachusetts, formed a partnership with SAM'S Club®, the leading membership warehouse club and the largest affinity group in the United States, to offer a vast menu of personal and business lines products to SAM'S Club members via franchised independent agents on a state-by-state basis.
The attractive menu offering would be marketed and serviced to SAM'S Club and nearby worksites by franchised GROUPadvantage agents.
Utilizing a sophisticated
e-commerce application for the streamlined distribution of insurance through multiple sales channels, Insurance Holdings would show the insurance industry the unmistakable value the GROUPadvantage program delivers to companies, independent agents and consumers.
This was McCarthy's novel strategy for "changing the game" in the insurance industry. The strategy focused on delivering multiple product lines from multiple carriers on an Internet technology platform that reduces costs, increases efficiencies and maximizes ease of operation for all parties involved.
GROUPadvantage is "immediate" success
One year after that announcement was made--and eight months after the program was implemented in the first SAM'S Club state, New Hampshire--the results have been extraordinary. Moreover, McCarthy and his growing network of franchised agents such as Pizzello and Hughes have learned that affinity relationships are a stronger marketing tool than even they could have imagined.
More than 100 GROUPadvantage agent franchises have been sold. Option commitments have been made for another 138 agent franchises. Companies continue to aggressively sign up for product placement on the GROUPadvantage "shelves." And SAM'S Club members and worksite clients in New Hampshire, Michigan, Illinois, Arizona and Georgia are embracing this new insurance benefit.
The financial commitment necessary to become a GROUPadvantage franchised agent involves an approximate $150,000 first-year expense, which includes a $38,000 franchise fee, about $31,000 for software and ongoing technology costs and the balance for staffing.
McCarthy is particularly gratified by the manner in which carriers are recognizing the program's value.
"GROUPadvantage provides companies the ability to be more competitive in two critical ways--lower expense costs and lower loss costs," McCarthy explains. "With expense costs, companies can eliminate duplication with the Internet-based e-commerce platform that Insurance Holdings has developed. The savings for agents is documented by a study commissioned by IHA which determined that this technology enables agents to operate 35% more efficiently.
"This enables GROUPadvantage participating companies to operate at a 23%-24% expense cost level, including taxes and bureaus, but excluding loss adjustment expenses," McCarthy continues.
"From a loss cost perspective, our technology platform provides carriers the ability to access underwriting information and screen risks at point of sale. GROUPadvantage has adopted a 'no exception' underwriting model which brings more stable rate adequacy. In addition to that, insurance companies see improved underwriting results via affinity marketing.
"GROUPadvantage's unique loss prevention programs have a significant impact on loss results as well. The net effect here is tighter underwriting, 'no exception' underwriting and affinity market point-of-sale underwriting. This results in a loss cost savings to insurance companies of 15% to 17%."
The GROUPadvantage success story has not been without its growing pains, as Kim Sanders, who runs the three GROUPadvantage Central Illinois franchises in the Peoria-Decatur-Springfield area, points out.
"We've had glitches like any new business, in our case with hiring personnel and dealing with technology issues," Sanders concedes. "But when prospective franchisees have asked me about the program, the highs and lows, the entire picture, and then they've asked if we'd do this program again, I say, 'We'd sign up again in a second!'
"We've been in business 20 years in the region. We recognized it was time to do something fresh and different, something that made business sense as Year 2000 approached. We looked at a lot of different options, and we knew this GROUPadvantage program would work.
"We're doing volume sales with SAM'S Club we were never able to do in our agency. And it's not only because we've gained access to such a large affinity group. It's also because we're offering value--value in the form of competitive rates from reputable insurance companies being sold in a timely manner thanks to the technology we can implement on the spot."
Sanders' one regret with her firm's relationship with Insurance Holdings?
"We have three franchises and options on two others. But we know other agents are purchasing seven, nine, eleven options. We just wish we'd bought more," she says.
Pizzello, who operates three franchises in the Wayne, Illinois, area and one in Tucson, Arizona, as WIA GROUPadvantage LLC, believes the GROUPadvantage technology platform provides "a great way to run an agency efficiently. Even when the technology 'errors out' in processing a policy, the system has the flexibility to recover quickly. We can call Insurance Holdings headquarters or the GROUPadvantage Call Center (in Oriskany, New York) if we have a technology problem. They can get direct access to our screen and walk us through the solution. That's a great backbone for the agents in the field."
Hughes, of Paragon Management LLC, Insurance Holdings' largest franchise holder in Michigan with five, has been sold on the GROUPadvantage concept since the day he was first exposed to it.
"We were impressed with the affinity relationship with SAM's Club," the Muskegon-based agent says. "Coupled with the cost savings derived from the Internet application, we felt that combination would give us a product we could market competitively, even with the significant start-up costs. In fact, we did not perceive the foundation costs as being prohibitive relative to the opportunity.
"Sure, a major capital commitment is required, and going forward creates cash flow issues. But the overall investment is more than justified by the potential return on that investment."
Hughes was struck with McCarthy's business plan, particularly as it pertained to contingencies. "Compared to traditional insurance companies," Hughes said, "McCarthy and his team had all the bases covered. They did everything right in setting up their business plan. When we saw some potential problems, Brian already had them covered with solutions. That enhanced our comfort level significantly."
SAM'S Club enthusiastic
about program
Now, seven months into the marketing campaign, Hughes is delighted with the results. "We're excited in part because we've exceeded expectations both in terms of quotes provided and policies sold," he said. "We also like the additional opportunities that are emerging from the program, such as the commercial arena, the worksite and a focus on life, health and long term care.
GROUPadvantage franchised agents have been struck by the high level of cooperation from SAM'S Club management as well.
"SAM'S Club management seems as excited as we are about the value we're providing with this new member benefit and they're working aggressively with us on our worksite marketing," said Hughes.
Elda Scott, public relations manager for SAM'S Club, adds, "SAM'S is continually looking for ways to provide members a value, and GROUPadvantage is a new way."
Hughes is so struck by the GROUPadvantage concept, even after such a short time in operation, that "we're moving aggressively to convert a large chunk of our agency (Chaddock Winter & Alberts) assets to this program."
The companies who have joined the program are equally enthused. Robert M. Dahl, senior vice president, marketing, for the Conseco Health Division, which is marketing eight products in the program, says, "We feel (GROUPadvantage has created) one of the best marriages of technology and marketing that we have seen. This is no longer an experiment. It exists and it works."
Adds Reliant Insurance's Sue Tyler, division president for the Northeast and director of corporate marketing, "This relationship allows us to leverage our core competencies, claims and product pricing in ways we could not accomplish alone. It's incredibly exciting to be teaming up with GROUPadvantage, its Internet technology, independent agents and the largest affinity group in the country."
Kim Bailey, Meridian Insurance Company's operations automation manager, explains that his carrier's motives for linking up with GROUPadvantage is four-fold.
"First, we're committed to independent agents. They will make this program successful because of their local sales, service and support. Second, the affinity partnership with SAM'S Club is an ideal target for our personal lines products and increases closure rates and enhances renewal retention. Third, GROUPadvantage's commitment to superior service, such as its world-class call center in New York, is a great plus for the overall program. And fourth, the likely expansion through the Internet, worksite marketing and additional affinity partners all point to excellent growth for GROUPadvantage and Meridian Insurance."
John McNish of the McNish Agency of Detroit, a holder of four franchises ranging in location from the Detroit suburbs to the Traverse City/Lake Michigan region, has been impressed with the number of baby boomers visiting his kiosks.
"Baby boomers have a clear
insight into the value of affinity/group/workplace marketing," said McNish. "They're price conscious. They're always looking for a good deal in whatever they purchase, so they're looking us up in substantial numbers."
The baby boomer impact is only part of the reason the GROUPadvantage program has been what McNish calls "a huge success" with his operations.
"The response from SAM'S Club members, especially baby boomers, has been nothing short of great," he adds. "We're writing business on 60% of the quotes we provide. That's phenomenal in terms of our providing an immediate value to SAM's Club members who have that first experience with us. Everyone is shopping for the best prices in everything, and we're giving them competitive prices that provide them the level of value they've come to expect at SAM'S. We're providing the same value at the worksite. We're enrolling 10, 20 employees at a time and that's a tremendous upside for us. Getting to three or four workplaces a week makes it a rewarding part of our marketing."
Initially, most GROUPadvantage franchised agents are reaping dividends with the P&C product staples, i.e., automobile and homeowners, then following up with successful sales of
life and health products, including disability and long term care.
"Interest is high for these products," McNish said. "Consumers tend to look short-term and long-term, but not always at the same time. In our case, the life and health products are just now catching on. Our clients are seeing the big benefit down the road with annuities, stocks, mutual funds, as well as health and life protection."
It did not take McNish long to appreciate his kiosk location in the four SAM'S Clubs he markets to.
"One friend said it best," McNish remembers. "With the large number of people we see face to face in a typical SAM'S Club in a given week, the ground the club stands on is the highest priced real estate in the state."
GROUPadvantage call center
His sense of appreciation for the state-of-the-art GROUPadvantage Insurance Call Center in Oriskany, New York, grows by the day as well. "It's really part call center for client sales and service and part help desk for franchised agents like myself," McNish says. "Personnel bend over backwards when we have problems either on the sales side or the systems side. They get policies or information out quickly to us, as when a policy might fall through a processing crack, and they also help with issuing problems on the technology side. That's inside company support with exceptional value."
"The impact of our Internet-based technology platform, combined with a marketing alliance that can get agents in front of large numbers of people, has had a dramatic effect," says McCarthy. The impact equates to the following: "If IHA/GROUPadvantage attains 5% penetration of SAM'S Club members for automobile, home, health, life, umbrella and business insurance, Insurance Holdings becomes the fifth largest insurance operation in the United States." *
Conseco Insurance Group
Provident Life & Accident Co.
Protective Life Insurance Co.
GE Capital Assurance Co.
Travelers Group Life & Annuity Co.
Hartford Life
Reliance National Insurance Co.
Meridian Mutual Insurance Co.
American Modern Home Insurance Co.
Lake States Insurance Co.
Clarendon National Insurance Co.
Orion Capital Companies
©COPYRIGHT: The Rough Notes Magazine, 1999