Jeffrey Leo (left) and Robert Schultz are vice presidents of strategic development operations at The Princeton Agency, Inc., and Princeton Insurance Companies, respectively.
The story goes that when the then retired comedian Red Skelton was asked by a reporter how old he was, he replied, "I'm seventy-five. I would be seventy-six, but I spent a year in New Jersey." For whatever reason, the state of New Jersey has often been the butt of good-natured humor by comics, just as have been doctors, lawyers, dentists, mothers-in-law and politicians. But, what has often been forgotten is that the Garden State has also been a very serious home for the world of big business.
Executives of Princeton Insurance, based in Princeton, New Jersey, are the first to agree with that. New Jersey is the state that Jack Owen, the founding father of what is now Princeton Insurance, chose for its start-up operations. And according to Robert Schultz and Jeffrey P. Leo, vice presidents of strategic development for The Princeton Insurance Company and The Princeton Agency, Inc., respectively, New Jersey is the state that remains the cornerstone of its continuing success, albeit today on a multi-state level.
Schultz, who brings 27 years of insurance experience to his current position of being in charge of strategic development operations, says that Princeton Insurance--which is the umbrella name for all of its operations--traces its roots to the mid-'70s when the medical malpractice crisis was at its peak. "As doctors and hospitals became targets for malpractice lawsuits, commercial insurers responded by raising rates dramatically or simply abandoning the marketplace," says Schultz. "The difficulty in obtaining insurance protection threatened to close the doors of hospitals. The crisis gave birth to a new concept that was extraordinary for its time--that hospitals across the Garden State could share their risks and protect one another if commercial insurance carriers were unwilling to do so."
Thus the Health Care Insurance Exchange was formed and, according to Schultz, it was the first hospital formed and directed insurer in the nation. Soon, 56 hospitals were participating in the reciprocal insurance exchange for professional and general liability protection. Each facility committed to pay additional premium if claim expenditures were greater than anticipated for the policy period. "However, a conservative financial approach was adopted from its inception, and never in the entire course of its history did the Exchange need to assess more premium," says Schultz. "Early in the organization's life, strong emphasis was placed on risk management within insured facilities and the prevention of incidents which could have led to claims. The Exchange flourished, adding new policyholders as well as additional types of property/liability coverage to meet their needs," says Schultz.
In 1982, a subsidiary, the Princeton Insurance Company, was formed to insure New Jersey physicians and other health care professionals. Princeton, too, was well received by the medical and health care communities, attracting approximately 40% of the state's physician market in early years. The company opened an office in Hunt Valley, Maryland, in 1988, then another in Camp Hill, Pennsylvania, in 1990. Princeton now writes a variety of insurance products in 15 states.
In 1991, a new corporate structure was adopted. The insurance reciprocal was succeeded by a stock company, the Health Care Insurance Company, and a holding company was included to lend flexibility, says Schultz. "Nassau Holding Company, its name inspired by the central business artery (Nassau Street) through Princeton, is the parent of subsidiaries focused on supportive endeavors. These subsidiaries strengthen the unique organization known collectively as The Princeton Insurance Companies," he says.
Schultz says that following the reorganization, Princeton Insurance embarked upon a plan of expansion--both geographically and in terms of product line--that spanned the decade. In 1994, Princeton Risk Protection, Inc., began servicing the Hospital Trust for Workers Compensation, providing risk management and other essential services to Trust members. That same year, Princeton wrote its first hospital in Delaware.
In 1996, a workers compensation insurance product was introduced for small businesses in New Jersey. A year later, Princeton began offering medical professional liability coverage for physicians in Virginia and diversified to offer professional liability coverage to accountants in Pennsylvania. The Companies received approval to write property and liability insurance in Michigan and provided reinsurance to a carrier there. It also began providing reinsurance as a member of the Health Care Insurance Facility, a consortium of medical malpractice insurers and international reinsurers. That same year, Princeton launched a new product called Managed Care Four-In-One for managed care organizations.
The company launched its property insurance program for New Jersey restaurants in 1996 and, in that same year, began offering workers compensation insurance to Pennsylvania hospitals. A three-tiered approach to rating New Jersey individual physicians was introduced, and The Princeton Agency began offering workers compensation insurance to owners of small businesses in New Jersey and Pennsylvania. A year later, the three-tiered approach was expanded to Maryland and Pennsylvania, and podiatrists were added to its list of insureds. Also, in 1997, professional liability coverage was offered to chiropractors in New York and Virginia, and coverage was written for two of the largest health systems in New Jersey. In 1997, Princeton Cayman Liability, a captive insurer, was established. The Princeton Agency, Inc., expanded its small business workers compensation program to Maryland, Delaware, Georgia and New York.
"Our game plan is to continue the positive growth through more effective utilization of our marketing staff by giving our people more responsibilities and opportunities for growth."
--Jeffrey Leo
In 1998, North Carolina and Connecticut chiropractors were added to the Companies' diversified book of business, and The Princeton Agency, Inc., began marketing the workers compensation program for small businesses in North Carolina, Connecticut, Virginia, Illinois and Indiana. A year later, filings were approved for Princeton to write dentists in North Carolina, Indiana, Michigan and Ohio and to write workers compensation coverage for small businesses in Arizona.
The 1990s were busy for Princeton, but its strategy has changed a bit for this millennium. Changes can be traced back to 1995. "That was a poor year for us, relatively speaking, compared to the '80s when were we were experiencing double-digit rates of return on equity.", says Schultze. When we saw our results deteriorating, we went back and looked at our expenses as they related to premium writings. We went through some downsizing and established a firm strategic plan. We knew we needed to diversify more if we wanted to change our profit picture. At that time we were writing business at a ratio of 75% medical malpractice to 25% non-medical. Today, that ratio is more like 60% to 40%.
"Also, in 1996," continues Schultz, "we began looking at business that was in state workers compensation plans, and we noticed that there was some good business in those plans, but that companies in the regular market just thought the business was too small for their books. We began to take some of that business out of the plans. We received credits for depopulating the plans, which virtually zeroed out our residual charges. Now we are a more diversified firm."
The Princeton Insurance Company was initially formed to insure physicians in New Jersey. The company now provides a variety of insurance products and writes business in 15 states.
Schultz says that Princeton Insurance does business primarily through independent agents. "We always felt that agents should be our main distribution system. Unfortunately, we also found that it limited the way that potential insureds could come to us. When a potential insured came to us, our policy was to recommend an independent agent. However, a lot of doctors were approaching us from direct writers and wanted to keep working on a direct basis. Therefore, we decided to put the decision into the hands of the insureds and launched Princeton easy accessSM (www.princetoneasyaccess.com), an extended-hours call center and interactive Web site that can accommodate requests to come direct. Because a strong relationship with agents is important to us, we offer all potential insureds the services of an independent insurance agent at no additional cost.
"We enhanced our Web site so that we could better interact with our insureds. They can log on with full security and obtain specific information on their account, policy and premium history. They can download a hard copy of any application, request changes to their policies and interact in any number of ways. We have e-mail, fax facilities and a 12-hour, five-day-a-week call center."
Schultz says that the company also established a special secure section of the Web site for agents to interact with it and make their lives easier. Online commission and production reports, account balances, applications, underwriting guidelines and rates help agents improve efficiency in their offices. "Our slogan is 'We're there,'" says Schultz.
The Princeton Agency is a marketing arm for Princeton Insurance. Jeff Leo says that it operates like a limited general agent who markets to independent agencies. "We're dealing with more than 6,000 producers in 14 states, and we have topped more than $46 million in premiums, with the average premium being about $1,000," he says. "Our Preferred Small Risk Program for workers compensation targets small businesses. The business we take on must be clean with good loss histories. We have tight underwriting requirements. The program is easy to use, and we pay healthy commissions to the brokers."
Leo says that the business the agency writes is business that large companies don't want to write because the premiums are too small. They are not interested in paying commissions on them.
"We give brokers a manual that's easy to work with," Leo says. "And once the business has entered into our system, there's no reason to touch it, unless changes need to be made. Renewals are done automatically. The program is so efficient, it requires little effort on the broker's part. We started the program four years ago, and we have had success in every state we write the business. We want to continue to expand to other states and take advantage of our broker network to start adding new products.
"Right now, geographically, we start in Connecticut and move south to Georgia, then west to Indiana, Illinois, Michigan and Arizona. We just added South Carolina a few months ago. We plan on adding more states through the end of next year. Our game plan is to continue the positive growth through more effective utilization of our marketing staff by giving our people more responsibilities and opportunities for growth. Electronically we are moving ahead with a Web site that gives agents immediate access about their agency or their accounts."
And that's the Princeton Insurance story. It is a group of companies that has grown into a major force in a variety of insurance coverages in a variety of states. And it all started in New Jersey. *