West Bend Mutual's executive team includes (seated left to right) Thomas A. Lindell, CPCU, senior officer for information technology and John R. Dedrick, president and chief executive officer; and (standing left to right) Kevin A. Steiner, Sr., vice president of sales, maketing and underwriting; Rick W. Parks, CPCU, AU, APA, assistant vice president-commercial lines; and Jim Schwalen, assistant vice president-personal lines.
Consolidation, diversification, globalization--these are the buzzwords of today's intensely complex, competitive, and challenging property/casualty marketplace. And although these terms are usually associated with industry giants like AIG, Travelers, and Zurich, it's not true that all the action is taking place in the backyards of the big boys. Not every insurer needs or wants to be a worldwide player--and at least one smaller company is reveling in the opportunities it's finding in the new market created by the movers and shakers.
In this article we'll talk with executives of West Bend Mutual Insurance Company of West Bend, Wisconsin, which for the past 106 years has been serving the needs of a receptive and well-defined market in five Midwestern states. We'll find out how this small insurer with a proud history is dealing with the market realities of the new millennium while at the same time staying close to its roots as a home-town mutual.
Located in southeastern Wisconsin, some 30 miles north of Milwaukee, West Bend Mutual Fire Insurance Company was organized in 1894 by civic leaders who saw the need to establish a property insurance facility for local citizens. In 1947, after passage of legislation that allowed insurers to write multiple lines, the company dropped "Fire" from its title and began to offer liability and other coverages. From these modest beginnings, West Bend Mutual has grown into a stable regional insurer that employs more than 600 people, posted 1999 premium volume of $253 million, and serves a five-state territory: Wisconsin, Indiana, Minnesota, Iowa, and Illinois. Some 65% of the company's volume is in commercial lines, with personal lines accounting for the remaining 35%. An affiliate, Michigan Insurance Company of Grand Rapids, last year finished its first full year of operation with $10 million in premium; West Bend Mutual also owns Claim Management Services in Green Bay, Wisconsin, a third-party administrator and employee benefits specialist.
New realities, traditional values
With carefully crafted growth strategies and a strong commitment to information technology, West Bend Mutual is definitely tuned in to the realities of today's demanding marketplace. At the same time, company leaders hew close to the solid heartland values on which the insurer was founded. "The mutual concept has its roots in Europe," explains President and Chief Executive Officer John Dedrick, a 39-year veteran of West Bend. "Settlers formed insurance companies in the Midwest because the East Coast insurers didn't do a good job of serving the region. Today there are still many mutual companies in the Midwest."
As a regional mutual, West Bend doesn't just talk about traditional values like trust, loyalty, and commitment--the company applies them to every aspect of its operation, with a special focus on its relationships with customers, employees, and agents. "The cornerstone of our success is the fact that our employees and agents have a stake in our results," Dedrick declares. "We treat them as true partners." West Bend not only has an agents advisory board in each state in which it does business; customer service representatives also have a voice through state CSR boards. Representation on the boards is on a rotating basis so everyone has an opportunity to serve. "Whenever we launch an initiative, whether it's product or process oriented, we seek input from these partners and give it serious consideration," Dedrick says. "This approach builds loyalty both ways."
Kevin Steiner, vice president of sales, marketing, and underwriting (left), and information technology chief Tom Lindell work closely together to bring the advantages of technology to West Bend Mutual's agency force.
Agents are #1
Not surprisingly, West Bend Mutual places an extremely high value on its relationships with agents. "We distribute our products exclusively through independent agents, and we're very up front about making that an integral part of our operating philosophy," Dedrick asserts. "Some companies pay lip service to the concept of agents as partners; we believe in it. As we're fond of saying, nothing happens till the agent sends in an application."
Wholehearted agreement on this point is voiced by Kevin Steiner, Sr., vice president of sales, marketing, and underwriting. "We're very agent oriented," he says. "Everything we do has agents at the center. Our philosophy is to support our agents with superior products and services, consistent with rigorous, home office-based underwriting standards. We work closely with them to develop quality business."
West Bend's wholehearted commitment to its agency force is well repaid, not only by loyalty but also by production. Among its 450 agents, the insurer's average volume is $600,000. "Our three-year goal is an average of $1 million per agency, excluding new appointments," Steiner says.
Production is important at West Bend, but it's not everything. Management realizes, first, that not every agent can achieve volume as high as $600,000 or $1 million--and, second, that production at any level is only as good as its critical components, from the quality of submissions to the underwriting efficiency of each risk. That's why the insurer's Partners in Excellence® program ranks and rewards agents on a set of criteria that goes far beyond volume.
Accountability and communication
Launched in 1986, Partners in Excellence is based, Dedrick frankly acknowledges, on a highly successful reward system that was developed for the distributors of a major beverage manufacturer. "This program enables us, as a non-direct writer, to make our relationship with agents a two-way street, so we can hold each other accountable," he explains. "It also serves as a communication vehicle between us and our producers."
Partners in Excellence is open to all West Bend agents and runs from January through December of each year, with progress evaluated at the six-month and twelve-month marks. Early in the year the agent meets with his/her regional sales manager to establish program objectives. Performance is ranked in six major categories, with a point value assigned to each measure:
1. Profitability (five-year incurred loss ratio and current year incurred loss ratio)
2. Premium volume (agency growth and agency premium)
3. Underwriting application completion and hit ratio
4. Product line objectives (commercial and personal)
5. Commercial lines retention
6. West Bend Mutual premium volume rank
The program is dynamic rather than static, Dedrick notes; the point values assigned to various categories change from year to year to reflect new company initiatives and goals. "We might place more emphasis on sales one year, whereas in another year we'll focus on profitability, or the installation of new technology in agents' offices," he explains. Agents who achieve certain point totals earn trips to exclusive locales all over the globe.
Does Partners in Excellence live up to its name? The answer, Dedrick says, is an emphatic Yes. "We find a high correlation between our top-performing agents and the acceptance of this program."
A company of their own
West Bend Mutual's commitment to its agents doesn't stop with the Partners in Excellence program. Indeed, the company's management has so much faith in the abilities of its producers that it actually established an insurer that's jointly owned by the company and agents. Michigan Insurance Company which, as was mentioned earlier, just finished its first full year of operation, is 92% owned by West Bend Mutual, with agents holding the remaining 8% stake. To sell the insurer's products, an agent must be an equity holder. This new affiliate once again validates West Bend's belief that its best performers are those who have a stake in the enterprise--both employees and agents. "MICO is exceeding our expectations by miles," Dedrick says enthusiastically. "We have 25 great employees and 38 top-notch agents. Collectively, this is the best group of agents I've ever encountered." MICO offers the same personal and commercial lines products as West Bend; the new entity is expected to finish 2000 with premium volume of $20 million--double its production for 1999.
Assistant Vice Presidents Jim Schwalen (left), personal lines, and Rick Parks, commercial lines.
West Bend Mutual's commitment to agents doesn't end here; later in the article we'll find out about its Internet-based program that's designed to help producers work smarter and faster to put quality business on the books. First, however, let's look at exactly what kinds of business the insurer targets and the coverages it offers to meet policyholders' needs.
Commercial lines: National advantage, regional focus
With 20 years' experience in commercial lines underwriting and management with respected regional carriers, Assistant Vice President Rick Parks is well qualified to direct West Bend Mutual's aggressive commercial lines operation. "Our focus is small to medium-sized independent agencies in our five-state territory and the Main Street businesses they serve," he explains. "We look at larger accounts more than the typical regional carrier; we play outside the box when we have the expertise. We offer our agents a national advantage without the baggage involved in dealing with a large insurer. Through an arrangement with Kemper, we have a facility to serve agency customers with branch locations outside our normal operating territory."
West Bend's largest commercial line of business is workers compensation, where the company is known for its strong risk analysis and loss control programs as well as its effective back-to-work initiatives and successful medical cost containment and claims management systems. The insurer works closely with its Claim Management Services affiliate, a third-party administrator and managed care specialist. "This allows us to provide integrated workers compensation and self-funded health care coverage and service--another 'outside the box' initiative for a regional carrier," Parks comments.
President and Chief Executive Officer John Dedrick has been with West Bend Mutual for 39 years.
One of West Bend's most popular and successful commercial lines products, Parks says, is its contractors BOP. "We introduced this product almost 20 years ago, and we update it regularly to be sure it meets our customers' needs," he explains. "It's a top-selling product for us, and we're definitely a 'go to' market for small and mid-sized contractors." Other niche markets are small garages and local radius trucking operations.
West Bend also provides a market for several categories of hard-to-place risks. Its National Specialty Insurance division, launched last July, offers programs for social services, sports and leisure, special events, detective/security, alarm installation and monitoring, child care, personal appearance care, fairgrounds, and more. NSI is not an excess-surplus facility; it focuses on risk classes that may be unattractive to other insurers. NSI coverages are written on West Bend paper and supported with the traditional products of West Bend Mutual to meet the customer's total insurance needs. "Since NSI's products are available only to West Bend agencies, it represents a significant boost to the value of the West Bend contract. Agents are able to insure a wide array of exposures without sharing commissions. Further, the NSI business is included in the agency's profit-sharing plan," Steiner added.
What challenges and opportunities does West Bend face as a regional mutual insurer in a fiercely competitive commercial lines marketplace? "It's hard to be a generalist these days," Parks responds. "We plan to devote more effort to target and niche marketing, and we'll become progressively more specialized. We think our greatest opportunity lies in our ability to deliver the best of both worlds. As a regional insurer, we're close to our agents and our markets; we're accessible and available to them. Because of our commitment to automation, we can offer products and services as quickly and efficiently as national carriers."
Personal lines: Building the perfect package
With a background that's a mix of personal lines and technology, Assistant Vice President Jim Schwalen is ideally qualified to head up West Bend Mutual's thriving personal lines operation. Like his counterparts, he's unequivocal about the company's strong allegiance to the independent agency system. "We're committed 100% to the independent agency system," he declares. "We know who our immediate customer is: the agent." The company also knows what its strengths are and the markets it wants to serve. "We serve our agents best by offering a stable market for a broad range of customers, from nonstandard through ultra preferred."
Like many other insurers, West Bend Mutual doesn't see the pursuit of monoline personal lines business as a growth strategy. "We're a package company; 75% of our business is package, and it's growing all the time," Schwalen says. "That may be the biggest differentiator between us and other companies. The package business serves us well from both a loss ratio and a retention standpoint. We encounter lots of competition in auto from direct writers. We know we're not immune to losing business, but the more lines of business we write for our customers, the more likely we'll retain them."
The centerpiece of West Bend's personal lines portfolio is its Home & Highway® policy, which provides a wide range of coverages, including auto, homeowners, boats, motorcycles, recreational vehicles, inland marine, and umbrella. Introduced in 1985, the policy can be tailored to meet the needs of agents and policyholders. The program offers three rating tiers for both the homeowners and auto sides to accommodate most risks.
West Bend soon will offer its nonstandard auto product as an additional rating tier in the Home & Highway package. "By combining nonstandard auto with Home & Highway, we will take our product to the next level," Schwalen explains. "We'll be one of the very few companies offering a full range of auto pricing points in a true integrated package policy. This might limit our penetration of the nonstandard market a bit, but we think it's a very good fit with our agents, who focus on the preferred market. If a customer has a problem with his driving record, we don't have to lose the homeowners business because the customer has to go elsewhere for auto coverage. We see this as a good way to boost overall retention; with Home & Highway, we already have a retention rate of 95% plus."
Focus on affinity groups
A key target market for the Home & Highway policy is associations. "We have a lot of success with groups such as dentists, accountants, nurses, educators, and seniors," Schwalen comments. "One reason is that our loss experience is significantly better on association business, which allows us to be highly competitive with these groups. Also, many associations endorse our program and send their members mailings about it. Marketing to associations works well from both a marketing and an underwriting standpoint."
West Bend's newest program is Prime Rewards for seniors, Schwalen says. "This program is specifically aimed at customers aged 50 and above. We've had outstanding loss experience with this group, and its exposures fit perfectly with the Home & Highway policy." The insurer's research shows that seniors are particularly responsive to the concept of rewards, he notes. "Our approach is based on messages like 'The insurance program for people who have earned it.'" The Prime Rewards program offers a discount for seniors, as well as a "lifestyle endorsement" that provides increased limits on jewelry and business property, expanded coverage for sports and leisure equipment, and other protections that meet the market's needs.
Being a regional mutual carrier in today's personal lines market presents plenty of challenges, Schwalen observes. "We're up against big money," he says. "We can't spend a billion dollars on advertising, but we're competing with companies that can. This isn't the end of the line for regional mutuals; it actually creates opportunities for us. With all the mergers and acquisitions of larger companies, we're finding many agents are disenchanted with the changes in policies and procedures. We've gotten a lot of business that way. Also, as a mutual company, we can't be taken over, so we can provide a level of stability that isn't available in larger stock companies. That makes us a good answer for agents who are asking: 'What company is going to be here five or 10 years from now, providing products and services I know?'"
West Bend Connect: The tie that binds
As the Internet becomes an ever more powerful force in the marketing of products and services, independent agents understandably have feared the loss of customers to Web power. At West Bend Mutual, the Internet is viewed purely and simply as a vehicle to empower and support agents and their customers. "We use the Internet for two things," says Tom Lindell, senior officer for information technology: "as an enormous productivity tool for our agents and associates, and to improve the quality of service we provide agents and their customers. We do not view the Net as a means of bypassing independent agents; we see it as a way to help them operate more effectively."
Like every other insurer in the world, West Bend Mutual is acutely aware of the need to contain expenses in a market where profit margins often are perilously thin. "We've been up front with our agents advisory boards about the expense challenges we both face," Lindell explains. "We need to jointly identify the true value we can provide and determine how best to deliver it efficiently and cost effectively. We look at every aspect of customer service and ask: Should the agent do it, or should the company? In today's world, we cannot afford two sets of fingerprints on a simple transaction. When we decide who can best provide the service, we aggressively pursue a solution that works for the customer, the agent, and West Bend Mutual."
At the center of West Bend's commitment to use technology in ways that support the agent is West Bend Connect, an advanced Internet-based system that helps agents work smarter and faster to serve their clients. "It's nice for an agent to call us up for information about the billing or claims status of one of his or her customers--but it's inefficient," Lindell says. "It's not that we don't want to talk to our agents, but for simple requests like these, it's much more efficient for agents to obtain the information through West Bend Connect."
Complete submissions--guaranteed
On the personal lines front, the powerful West Bend Connect engine provides Wisconsin agents (other states will follow soon) 24/7 online access to applications, including a rating bridge for major vendors. "We knew it was critical to build a system that didn't require double entry for the agent, and we've done that," Lindell says. Standard ACORD information flow is followed where possible. Help screens and user-friendly edits ensure a fast and complete "once and done" submission. The download of the personal lines information closes the loop.
"This application system guarantees that a submission contains everything needed to make an underwriting or pricing decision," Lindell explains. "Red, yellow, and green stop and go lights on the screen alert the agent to fill in missing information. This system has been instrumental in eliminating frustration and wasted time on both ends of back and forth phone calls. Profit margins don't allow for slippage; our philosophy is, Do it right the first time and move on to the next item."
Is West Bend Connect succeeding in its mission of supporting agents and enhancing efficiency? The answer, Lindell says, is an unqualified Yes. To illustrate, he offers an example. "In the past, we didn't provide our agents rating disks for commercial lines, and only 18% of our quotes resulted in an order. Today agents can quote a BOP, commercial auto, or contractors BOP in a real time, 24/7, point and click environment. When they had to wait for us to prepare a quotation, they had no control over the process. Today they're in charge of the transaction." The result? Satisfied agents and a significant improvement in the hit ratio. Scheduled to go online next are quotation capabilities for workers compensation and umbrella applications.
Direct claims reporting gets the nod
"To balance the agency/company workload scorecard a bit, I'd like to share our approach to claims handling," Lindell continues. "In the past, we could hardly bring up the topic of direct reporting of claims with our advisory boards. Now our problem is keeping up with our agents' demand for this service, because we won't add more agencies until our staff is fully trained and prepared to provide flawless service. Here's how it works: The client calls us directly after a loss. We complete the ACORD first notice of loss form with the insured in one phone call and often settle the claim at that point. To keep the agent in the loop, we immediately fax or e-mail a copy of the completed ACORD form. Subsequent updates are available online. This frees up the agency to address other opportunities."
How does West Bend's use of Internet technology stack up against the 1980s ideal of single entry multi-company interface, or SEMCI? "We'd been working on the 'old' SEMCI since 1981, and found it to be an elusive target," Lindell responds. "We've made great strides since deciding in 1998 to use the Internet; we've achieved more gains in the last two years than we made in the previous 19 years. The marketplace simply would not allow us to wait."
Like virtually every initiative at West Bend, the development and enhancement of West Bend Connect draws heavily on agent input. "When it comes to designing a system for them, agents absolutely are in the driver's seat," Lindell asserts. "They work with business people with developer tools who understand what agents like. Our developers provide agents access to screens in development so they can test them in real time. Further, when we were determining the order in which to put applications online, our agents set the agenda. We want the system to be as meaningful as possible for our agents, so we involve them every step of the way. We're finding that the more they use it, the more ideas they have to enhance it."
Back to the future
In a marketplace that historically has rewarded size and acquisition power, how does a small regional insurer survive and thrive? For West Bend Mutual, this exercise may involve complex and challenging initiatives, but they all directly support the simple values on which the insurer was established 106 years ago: integrity, quality, stability, and partnership. West Bend's embrace of next-generation technology in pursuit of these enduring values clearly makes it
"A David among Goliaths." *
For more information
West Bend Mutual Insurance Company
1900 South 18th Avenue, West Bend, WI 53095, (262) 334-5571
www.wbmi.com
©COPYRIGHT: The Rough Notes Magazine, 2000