Hartford Specialty Programs executives (left to right) are: Sheila Morin, assistant vice president and manager-new programs development/marketing; Elizabeth A. Campo, assistant vice president; and Susan E. Huser, ARM, assistant vice president.
What's a giant standard insurer like The Hartford doing in the highly specialized arena of commercial affinity groups?
Plenty! In this article we'll talk with four executives of The Hartford's Specialty Programs Division to find out how the division is structured, the criteria it uses to identify potentially profitable markets, the steps involved in creating programs tailored to each group's needs, and the opportunities available to independent agents. Providing input for the article are four specialty business veterans of The Hartford: Linda Crookshanks, senior vice president and head of the Specialty Programs Division, who has been with the insurer for 28 years; Sheila Morin, who joined The Hartford in 1980 and currently serves as manager of new program development and manager of sales and marketing; Susan Huser, a 25-year Hartford veteran who is assistant vice president and head of three of the division's four underwriting teams; and assistant vice president Elizabeth Campo, who has 14 years with the insurer and manages one of the Specialty Programs Division's underwriting teams plus all processing and back-room issues.
Established in 1982, the Specialty Programs Division originally was part of The Hartford's subsidiary Hartford Specialty. In 1996, when the insurer formed its Commercial Affinity group, Specialty Programs became part of that structure. Hartford Specialty Programs is composed of two completely separate operations: Public Entity and New Programs.
Public Entity is the oldest part of Hartford Specialty Programs; since 1982 it's been partnering with PENCO, the wholesale arm of Willis, to provide coverage to a wide range of public entities, such as towns, counties, schools, and fire districts. The Public Entity operation has offices in Nashville, Tennessee, and Columbus, Ohio who report to Senior Vice President Linda Crookshanks at the home office. Assistant Vice President Elizabeth Campo assists with administrative responsibilities for this group.
Susan Huser heads three of the four underwriting teams in The Hartford's Specialty Programs Division.
The New Programs segment of Hartford Specialty Programs, on which we'll focus in this article, was established in 1992. "We were pleased with the results we achieved in the public entity sector, and we wanted to offer other programs based on that successful model," Crookshanks explains. "From our combined home office/field office in Hartford, we can handle every aspect of commercial affinity business, from finding new opportunities to rolling out programs, promoting them, and delivering them--everything from soup to nuts." The New Programs group management team consists of Crookshanks, Morin, Huser and Campo.
Well-defined focus
There's an affinity group for virtually every kind of profession and industry in existence. What kinds of risks does Hartford Specialty Programs target? "We focus on broad-brush property/casualty programs that are casualty driven, with hard-to-place exposures," Crookshanks responds. "We don't write any heavy professional liability, such as doctors, lawyers, or architects; we do 'light' E&O as an add-on coverage where needed. We provide standard property/casualty coverages for a variety of classes, and we develop additional endorsements and enhancements to those coverages."
Basic coverages for commercial affinity group programs are workers compensation, general liability, property, automobile liability and physical damage, and umbrella; protection also can be provided to meet special needs, such as limited pollution liability coverage for spraying operations for arborists.
Hartford Specialty Programs currently offers more than 20 commercial affinity group programs. (For a complete listing, see the sidebar on page 37.) "We've introduced four new programs this year," Susan Huser notes. "We're always trying to roll out programs to add value for our agents and customers." A key to growth in all Hartford Specialty Programs offerings, she emphasizes, is consistency. "Our underwriting is consistent from the beginning with our dedicated, knowledgeable teams," she explains. "Our underwriters attend industry events and meet our insureds. They can talk the same language about the industry and the client's specific insurance needs."
"A majority of our programs come from agents who have expertise in a particular industry, through a buying group or an existing book of business."
--Sheila Morin
Flexible distribution options
How are commercial affinity group programs distributed and administered? "All underwriting and servicing is handled in house," Elizabeth Campo says. "This allows us to provide underwriting continuity across all lines. We differentiate ourselves from our competitors by using whatever distribution system suits a particular program--retail, wholesale or a combination. When developing or starting a new program, we're willing to consider any and all distribution systems." Crookshanks adds: "We prefer hands-on underwriting, marketing, and management, so we choose to deal through general agents and retailers rather than MGAs." All programs, she emphasizes, are accessible to retail independent agents on either a direct or wholesale basis. Under this "open program" approach, Huser notes, the insured can choose his/her own agent. "Small business owners generally prefer to deal with a local agent," she observes.
A stable force in the market
In the markets in which it is active, Huser says, Hartford Specialty Programs competes with both standard and specialty carriers, depending on the particular program. "A lot of carriers move in and out of the marketplace. We offer both agents and insureds a stable presence," she notes. "When we develop a program, we assess the competition and leverage our abilities against them effectively." As part of the commitment to stability, Huser adds, "We offer all lines on an admitted basis to insureds who may have gotten some coverage in the nonadmitted market but couldn't obtain all the needed coverages from one source. We're the one-stop property/casualty shop for our commercial affinity groups."
How does Hartford Specialty Programs attempt to position itself in the marketplace? "We're not the 'one size fits all' market," Morin says. "Some of our competitors offer just one line of coverage and one distribution channel. We offer flexible distribution systems, and we can customize a program to bring the full array of products and services to a buying group." What's more, she continues, "We're proactive--we develop our own niche programs, and we work with agents to create programs. We strive to be flexible and innovative; we understand our customers, and we respond to their needs." What's the score on new business and retentions? "We have a 40% hit ratio on business we quote, and we retain 90% of our business," Huser says. "We're very competitive in the marketplace."
Elizabeth Campo manages one of the underwriting teams of the Specialty Programs Division.
Programs from A to Z
Let's look at some of Hartford Specialty Programs' most popular offerings for affinity groups. One particularly successful program, Huser says, was developed in 1992 for the National Arborist Association, a trade group for tree care specialists that has endorsed the program. Lines of business provided are property, general liability, automobile liability, inland marine, umbrella, and workers compensation; an enhancement is pollution coverage for the application of pesticides and herbicides. How successful is the NAA program? "By the end of this year, we expect the program to be generating written premium of about $9 million," Huser says.
LimoPro, which is designed to meet the needs of limousine business owners, offers property, liability, inland marine, umbrella, and workers compensation insurance, as well as coverage enhancements for communications equipment such as cell phones and radios, crime protection, and employment practices liability insurance. An out-of-service endorsement reimburses the insured for loss of income that results when a vehicle is undrivable because of an accident or mechanical problems. Introduced in 1997, the LimoPro program is expected to generate $4 million in written premium by the end of this year.
Family Fun is a program for owners of family entertainment businesses such as bowling centers and recreational centers that offer a variety of attractions, including miniature golf, golf driving ranges, video games, batting cages, and birthday party facilities. The target market is facilities with minimal or no liquor receipts, and the program offers all lines plus umbrella coverage with limits to $5 million.
An integral part of each commercial affinity group program is a package of risk management, loss control, and claims services tailored to the specific needs of each group. Services are provided by seasoned experts who understand the client's business, and a toll-free claim reporting hotline is available 24 hours a day. "We try to structure our programs around strong risk management as a way of adding value for the customer," Huser says. "We conduct seminars for industry groups, write articles for their publications--we do everything we can to help them control their losses and insurance costs."
Program development process
What factors does Hartford Specialty Programs consider when deciding whether to enter a certain commercial affinity group market and create a program for it? "We look for a group of buyers who are underserved in the market, where there's not a lot of competition providing products and services," Morin responds. "We don't want to be just one more player." A key factor for underwriting purposes is homogeneity, she emphasizes. Also, "When we look at a group of buyers, we want to know all about them. Who are they? What coverages do they need? How do they want to buy insurance? Once we have that information, we can develop products and services to meet the group's unique needs."
In another important step, "We look at industry data on loss experience to see if there's a potential for an underwriting profit. What segment of this market can we pursue profitably?" A good example of market segmentation can be seen in the Family Fun program described above, which focuses on recreational facilities with few or no liquor receipts.
"A majority of our programs come from agents who have expertise in a particular industry, through a buying group or an existing book of business," Morin explains. "We work with these agents to research the market, develop data, and create a marketing plan. Our strategy is to find agents with expertise in a particular group."
Once a program has been developed, Morin says, her sales and marketing unit swings into action. "We prepare press releases and advertising, place articles in our in-house publications, attend industry conventions, and develop point-of-sale mailing materials," she says. "This is an all-out effort to generate excitement about the program and get the word out to agents and customers."
What's ahead?
We asked Senior Vice President Linda Crookshanks to take out her crystal ball and offer some thoughts on where the specialty market is headed as we approach the new millennium. "Over the past several years of the soft market, business that was once the focus of excess-surplus insurers has become the focus of standard carriers," she observes. "There's been a real blurring of the lines between the two." Looking ahead, "I see some pullbacks; business in the tougher classes will migrate back to the specialty markets. I see more strategic partnerships and alliances to meet customer needs. Overall, the ease of doing business with an insurer will be very important in winning business from both agents and clients." At Hartford Specialty Programs, she says, "We'll continue to be flexible in distribution; we'll create more open programs like the National Arborist Association; and we'll continue to invite agents to bring their program ideas directly to our underwriters."
Identifying and meeting customer needs is a vital element of Hartford Specialty Programs' expansion strategy. "We'll accelerate our efforts to understand both of our customers--policyholders and agents--and find out what they need to make it easier to do business. We'll design products, services, and delivery systems to closely align with customer needs," Crookshanks says. "Most customers in Specialty Programs are not in the Fortune 1000; we focus on smaller and medium-sized businesses. The way we see it, we're not just providing insurance--we're helping our insureds succeed in their business--and that helps us succeed in ours." *
* Aerial Applicators (crop dusters)
* Alarm (alarm dealers, installers and monitoring stations)
* American Automobile Association (AAA) Preferred Service Provider Program (all AAA-approved contractors except car dealers
* American Tax Preparers (tax preparers, notary publics, bookkeepers)
* Automotive Parts and Engines Rebuilders Associations (APRA) Program (automobile and truck parts and engines remanufacturers)
* Certified Recovery Agents
* Family Fun Insurance Program (family entertainment business owners)
* Fire Sprinkler Contractors Program (contractors who design, fabricate, install, inspect, and maintain water-based sprinkler systems)
* Greenhouse Growers (wholesale greenhouse operations)
* LimoPro (limousine and chauffeured transportation operations)
* Loggers Program (contractors involved in the felling, harvesting, and transportation of timber)
* Manufacturers Protector Plan
* Member Insurance Program (hardware co-ops for TruServ and Do It Best; key Southwest appliance dealers)
* National Arborist Association (tree care association specialists)
* National Truck Equipment Association (manufacturers and distributors of truck bodies and parts)
* Orthotic and Prosthetic Program (companies that manufacture, fit, adjust, or distribute orthotic and prosthetic devices)
* Pool & Spa Insurance Program (contractors, wholesalers, manufacturers, and retailers that provide goods and services to the pool and spa industry)
* Public Entities (PENCO) (any public entity; i.e., cities, counties, utilities, schools, fire districts, etc.)
* Railroad Protector Plan (contractors, manufacturers, and wholesalers that provide goods and services to the railroad industry)
* Taxi Owners (taxicab operations located in the states of Ohio, Virginia, Michigan, and Connecticut)
* Automotive Recyclers Program (recovery and sale of parts from automobiles, trucks, etc.)
* National Trailers Dealers Association (trailer manufacturers and dealers).
©COPYRIGHT: The Rough Notes Magazine, 1999