Long known as the top specialty mobile home and RV carrier,
Foremost Insurance powers up for growth in new markets
By Elisabeth Boone, CPCU
Jack Hannigan, chief marketing officer, and Robert Woudstra, chief operating officer, head Foremost Insurance Company.
What do you get when you combine the leading mobile home and RV specialist with a giant personal lines insurer?
How about exciting new markets, powerful distribution channels, and enhanced balance sheet strength?
Those are just some of the advantages being enjoyed by Foremost Insurance Company since its 1999 acquisition by Farmers Insurance Group. With the support of its new parent, Foremost is bringing its specialty lines expertise from land to water as it moves into the personal marine market, insuring boats, personal watercraft, and yachts--and takes on new recreational risks like motorcycles, snowmobiles, off-road vehicles, and antique automobiles. If it's fun and it's in motion, chances are Foremost insures it.
Established in Grand Rapids, Michigan, in 1952, Foremost was the right insurer at the right time. When World War II ended in 1945, hundreds of thousands of veterans began returning home, and the baby boom generation was launched. With housing in short supply, many families found an affordable solution in purchasing mobile homes. At that time, however, no companies insured these "homes on wheels." Enter Foremost Insurance, which perceived a new market need and developed policies to meet it. When America began to take to the road for vacation adventures, Foremost in 1961 introduced the first policy designed specifically for travel trailers. Next the insurer began to expand its insurance programs for recreational vehicles, and in 1982 it started to insure site-built homes and automobiles for the 50-plus age group. In 1993 Foremost developed a dwelling fire insurance program for landlords and owners of older homes, and in 1999 it created a service program for luxury motor coach owners who insure with the company.
From a three-person staff in a one-room office, Foremost has grown into a nationwide specialty personal lines insurer whose products are distributed by more than 25,000 independent agents. Foremost today ranks among the nation's top 100 property/casualty insurers and carries an A+ rating from Best's. Foremost is the #1 writer of manufactured homes in the United States. It's also a top player in recreational markets, including travel trailers, motor homes, motorcycles, and personal marine risks. Under an agreement with the American Association of Retired Persons, Foremost offers mobile home policies to AARP members on a direct basis.
Jack Hannigan has been with Foremost since 1983.
"We market ourselves as a specialty carrier with what we call our three pillars of strength."
-- Jack Hannigan
Pillars of strength
Heading up the Foremost executive team are Robert Woudstra, chief operating officer, and Jack Hannigan, chief marketing officer. Both are veterans of the insurer--Woudstra since 1973 and Hannigan since 1983. Asked how Foremost seeks to position itself in its markets, Hannigan responds: "We market ourselves as a specialty carrier with what we call our three pillars of strength. The first is our product expertise, which is based on our knowledge of the marketplace and our understanding of manufacturing processes." Using this expertise, he says, "We're able to develop products that satisfy the needs of our customers, to make those products as complete and as broad as possible, and, when necessary, to make our products unique in the marketplace." Hannigan offers an example: "We were the first company to offer a full-timers coverage nationwide to motor home owners."
Foremost's second pillar of strength is ease of doing business. "Most agents don't focus on our specialty markets, so we use technology to make it as easy as possible for agents to do business with us," Hannigan explains.
Third is Foremost's claims expertise. "We understand how the risks we insure differ from those in the general marketplace, and we use that knowledge to handle claims quickly and efficiently," Hannigan remarks. "We're able to give losses a higher degree of priority than they would receive from a non-specialist insurer."
Gearing up for growth
Clearly Foremost has a lot going for it: stability, market expertise, mastery of technology. What factors, then, motivated this successful specialty insurer to become part of Farmers Insurance Group?
"Back in 1999, when we were still an independent entity, our greatest challenge was figuring out how to grow without compromising our operating margin," Bob Woudstra replies. "We have very favorable combined ratios and margins in our specialty products, and at that time we were looking for more distribution points through which we could market our products without compromising on price. When Jack talked about our positioning and our three strengths, you notice that he didn't talk about price. In most of our product lines, we're not the low-price player. We're really selling value, and because most agents' livelihood isn't dependent on our specialty products, we have an easier time selling our value proposition than most standard auto and homeowners carriers."
Capacity also was an issue from an exposure standpoint, Woudstra observes. "A lot of manufactured homes are located in coastal areas where hurricanes are prevalent, and in earthquake-prone parts of California," he notes. "By 1999, we had assumed all the risk we wanted to carry based on our balance sheet alone. We wanted to partner with an organization that could bring us more balance sheet strength as well as new distribution opportunities."
Robert Woudstra has been with Foremost since 1973.
Teaming up with Farmers brought Foremost what it had been seeking--and more. "They not only gave us the balance sheet and distribution pieces, but also gave us entrée into specialty markets we hadn't previously pursued," Woudstra says. After the acquisition, Foremost took over responsibility for these lines, which previously had been written within the Farmers and Zurich organizations: personal marine coverages for virtually everything from personal watercraft to oceangoing yachts; plus motorcycle, snowmobile, off-road vehicle, and antique auto risks. What's more, Foremost now distributes all of its products through Farmers' vast network of exclusive agents, as well as through the former Zurich personal lines independent agency force in the eastern states. "Now we have new products to offer our independent agents, as well as additional distribution points for our whole portfolio," Woudstra comments. "The Farmers acquisition has created a great growth opportunity for us, and we haven't had to compromise our margin."
High marks from agents
With a field force that comprises some 25,000 independent agents, Foremost clearly understands the needs and concerns of these key distributors of its products. "A Conning study done in the mid-1990s said, 'As a regional carrier, Foremost was ranked #1 in service and ease of doing business,'" Hannigan points out. "Our own surveys show that agents have a high level of satisfaction with us, that they consider us a professional organization that's easy to do business with, and that our claims handling is outstanding."
As mentioned earlier, one of Foremost's three pillars of strength is its commitment to ease of doing business through technological initiatives. "One of the things that has helped us, both as an independent entity and now as we move forward as part of Farmers, is that we've probably made a bigger investment in technology, relative to our size, than any other carrier," Woudstra says. "Because of the product lines we write, our average premium per policy is low. For instance, an annual mobile home premium might be $320. Our cost to process that business can be pretty high. We keep our costs in line by using technology that moves the business through untouched by human hands to the greatest extent possible."
At the beginning of this year, Foremost rolled out ForemostSTAR, which allows agents to handle all their mobile home transactions via the Internet. ForemostSTAR soon will be expanded to encompass Foremost's specialty dwelling products. "This makes us a lot more accessible to a lot more agents, and that's the key motivation for our technological initiatives," Hannigan says. Adds Woudstra: "Our investment in technology has gone a long way toward enhancing agents' perception of the quality company we are and how easy we are to do business with."
Another reason agents have confidence in Foremost, Woudstra points out, is its stability in the marketplace. "We've always been in the market, and although we've sometimes had to cap the amount of business we could take in one area, we've not been in and out of the market," he asserts. "I think that's been a real strength, and I think agents look at us favorably because of our stability and our consistent pricing."
Market outlook
Conventional wisdom says that when the general property/casualty market begins to tighten, the winners are likely to be the specialty carriers that never ran off the rails into the thicket of competitive excess. That's certainly proving to be the case for Foremost, which for 50 years has focused on a handful of carefully defined markets. Woudstra and Hannigan offer some commentary on conditions in those markets and how Foremost is responding to them.
"In the mobile home market, we're the #1 writer," Woudstra says. "This is a marketplace where we think the key is being able to take business away from other carriers. After several years in which shipments of manufactured homes increased steadily, the economic slowdown is causing a decline in shipment levels." Bad news? Anything but. "Because of our marketing focus and our additional distribution points, we've seen no slowdown in our business," Woudstra remarks. "Also, we don't have any pricing issues."
That's a big plus in a market in flux, where both insurers and reinsurers are retrenching in the wake of the September 11 terrorist attacks. "The major carriers are starting to take a serious look at the significant problems in their homeowners business. Mobile homes represent a small piece of their book, and as they focus on their homeowners results, we're benefiting from an increased flow of business," Woudstra observes.
The outlook is just as bright for Foremost on the recreational vehicle side, which encompasses motor homes, travel trailers, and motorcycles. "Premium growth in these markets has been pretty positive as the economy has grown," Hannigan comments. "Also, the baby boom generation has a great deal of discretionary income, so all of our RV markets have continued to do well." Despite the economic slowdown and the impact of the terrorist attacks, "The future outlook for these markets is still strong," Hannigan asserts. "We think we're positioned much like our mobile home sector in terms of our pricing and our profitability outlook."
At Foremost, he continues, "We continue to sell our value proposition. There will always be competitors who try to buy market share, but that never has been and never will be our strategy. We have stiff competition from specialty competitors like Progressive, but we believe we'll continue to be a leader in our markets. We know carriers are taking rate increases in some of these product lines that we had priced appropriately, so we're confident that we're priced right and the other companies are trying to catch up."
Challenges ahead
Even for a carrier that's making all the right moves, there are bound to be challenges because of the slowing economy and the uneasy post-September 11 mood of both insurers and reinsurers. How does Foremost's executive team assess the challenges it confronts as it moves forward?
"We see maintaining our underwriting profitability as a major challenge," Hannigan responds. "That's a challenge we've been meeting successfully for the last decade. It requires us to be a disciplined, stable market. We think that's the strength of our organization, and we also believe it's what agents want. Agents put a high value on working with a solid insurer that's consistent in the marketplace, and I think that describes Foremost."
Another challenge Hannigan points to is maintaining Foremost as a company with which it's easy to do business. "We need to continue being out in front with technology," he comments. "Developing new systems is a challenge that requires professional project management as well as systems expertise, and it's another challenge to introduce and promote our new systems to agents."
With increased capacity, new specialty markets, and additional distribution channels, Foremost seems poised to enter its second half-century with enviable power and reach. "Before our affiliation with Farmers, we positioned ourselves to be the #1 writer of manufactured homes and recreational vehicles," Hannigan says. "Now our mission is somewhat broader but just as exciting: to be the #1 specialty writer in the personal lines business." *
For more information:
Foremost Insurance Group
Phone: (800) 670-4666
Web site: www.ForemostSTAR.com