By Dennis H. Pillsbury
Richard J. Hoag is president and chief executive officer of Providence Washington Insurance Companies.
"Since we appointed the first independent agent in the United States," states Dick Hoag, president and CEO of Providence Washington Insurance Companies, "we have conducted business based on the notion that insurance is a relationship business. To accomplish our goal of building long-term, successful relationships with our independent agents, it is essential that our employees have a clear understanding of the importance we place on our customer, the agent."
Termed the "Cycle of Excellence," Hoag's philosophy is based on the belief that employee job satisfaction ensures customer satisfaction. Satisfied customers lead to long-term business success, which consequently leads to satisfied employees, which further enhances customer satisfaction. This continuing cycle strengthens each part to create higher and higher levels of satisfaction and, in turn, superior results.
Hoag continues: "In order to accomplish this result, we felt we needed to continue our nearly 200-year-old company commitment to independent agents. So, we enlisted our employees' assistance to refine our vision statement which states":
Providence Washington is the carrier of choice of agents seeking a special relationship with an insurance company exclusively committed to the American Agency System and to the growth and long-term business success of our customers, individual independent agents.
--Doug Dunwody, Dunwody Insurance Agency, Macon, Georgia
A little-known fact is that Providence Washington made the first agency appointment of an independent agent in the United States in 1803, just four years after the company's inception in 1799, making it not only the oldest public insurance company still using its original name, but also a pioneer of the independent agency system. The company proudly states that its commitment to the independent agency system remains unaltered, despite the recent trend of multi-distribution strategies endorsed by many companies. Instead, management invested their efforts into developing a customer strategy designed to promote the success of independent agents, called the "Pyramid of Value."
The Pyramid of Value
"We chose a pyramid for two reasons," explains Reg Stith, CPCU, CIC, senior vice president, field operations. "First, the pyramid structure dates back thousands of years. Its longevity is a tribute to its remarkably durable construction. Second, each level must be strong enough to support the levels above it. Naturally, our belief in promoting one distribution system, the independent agency system, provides the strong foundation to support the five additional levels in our 'Pyramid of Value' strategy. We believe this strategy communicates clearly to our agents that we are fully committed to helping them achieve long-term business success."
Personal Relationships
Technology
Niche Products
Broad Product Portfolio
Unique Contract & Compensation
Independent Insurance Agencies
Doug Dunwody of the Dunwody Insurance Agency in Macon, Georgia, says of Providence Washington, "What separates Providence Washington from other carriers is the way they conduct business. They believe in forming long-term relationships and supporting the independent agency system. While companies are compromising their support of the independent agency system through the use of multiple distribution systems, Providence Washington has dedicated itself to furthering the success of the Independent Agency System."
As executives at Providence Washington, Richard Hoag and Reg Stith (right) are part of a firm that appointed the first independent agent in the United States--in 1803. Providence Washington is the oldest insurance company in the United States still using its original name.
Rick Doherty of Doherty, Duggan and Rouse Insurors of Albany, Georgia, agrees. "PW wants to know what's important to us. They want to know how they can help. They want to know our clients," says Doherty. "You know exactly where Providence Washington stands when it comes to the independent agency system. They've made a commitment to us."
Building upon the independent agency system foundation, the "Pyramid of Value's" second level is the company's unique agency contract and compensation package. The contract is written as a guaranteed three-year business development contract with a non-cancelable clause. Each year that an agency fulfills the mutually agreed-upon business plan, the three-year provision is extended. To complement the contract, the company offers competitive commission rates, an all lines profit-sharing program starting at $150,000 of premium, and retention bonuses designed around national "Best Practices" data.
In addition, the company has developed a method to build agency value. "Based on an agency's commitment to Providence Washington, we will provide increased levels of financial assistance in each business development contract to facilitate such areas of value building as: agency automation, marketing support, sales training, continuing education, as well as producer subsidies and agency acquisitions," Stith says. "It is our contractual commitment of support that promotes long-term growth and development of the agency, providing the opportunity for our agents to be more successful, that sets us apart."
The third level is broad product offerings. Providence Washington believes it's important to be a generalist to meet the needs of its customers and provide the basis for relationship selling. Offering a broad product portfolio of both commercial and personal lines products, in combination with the agency compensation package, meets the existing needs of most agencies. Insuring this base of business with the company helps build a strong profitable book on which to expand.
Reg Stith, CPCU, CIC, is Providence Washington's senior vice president, field operations.
The fourth level of the pyramid is niche programs for agents who desire to expand their premium writings beyond their existing "sphere of influence." The company provides a series of custom programs and program-specific training to provide a competitive edge in the marketplace. The process is fueled by a product development unit, which, in conjunction with field personnel and their agents, determines which programs will afford agents with profitable growth opportunities. This has resulted in the development of more than a dozen niche programs, in the areas of: automotive sales and services, specialty contracting, eatery and dining establishments and light manufacturing.
David Andrade of Carey, Richmond & Viking in Portsmouth, Rhode Island, notes: "I like the fact that Providence Washington thinks outside of the box, as demonstrated with their individual risk underwriting approach and with the solid programs they've adopted. Prov Wash has attacked difficult classes of business with their custom programs, targeting non-traditional areas. That's important ... they give us a broad scope of products to write, which helps us grow beyond our base."
The fifth level is to offer practical technology solutions to increase their customers' efficiencies and effectiveness. "We consulted our agents and focused our technological resources on what they said they needed," says Stith. The result is fully functional online personal lines rating, with commercial lines rating looming on the horizon. Stith expects to have BOP, commercial auto, umbrella and workers comp rating by year-end, with the CPP line of business added by mid-2002. Today, agents and policyholders can access billing and claims information from Providence Washington's Web site 24x7. Stith notes, "Tremendous efficiencies at the agency level can be gained through accessing information from us over the Internet, and often the simple items most frequently asked, like billing information, gain the agency the greatest efficiency."
The first five levels in the pyramid actually lead to its peak--personal relationships. Naturally, the company's belief that insurance is a relationship business makes the development of special relationships paramount to the company's success. "We have given our field underwriting/marketing staff broad decision-making and pricing authority so they can write business in an agent's office. Furthermore, their face-to-face activity is complemented by our dedicated regional underwriting support teams located in our five field offices who help process our business," says Stith.
Furthering the trust aspect of personal relationship building, the company has also implemented two programs where the company's senior executives can interact with key agents to better understand their needs--an Account Executive program and The President's Club. This enables key producers ready access to top management. Additionally, the company is involved with a series of state agent councils that meet regularly throughout the calendar year.
Hoag says, "Other companies may do some pieces of our pyramid, but no one does the whole package as well as we do." And it's been paying off. Last year alone the company grew 23% with premiums now exceeding $200 million. "We are positioned to consistently achieve double-digit growth now and in the future."
Hoag concludes, "Perhaps most important, this is quality business, as evidenced by our industry-beating combined ratio. That's proof how well the strategy is working for us. Independent agents produce the most profitable business, and our results are a reflection of our commitment to our customers and, in turn, their commitment to Providence Washington. When you can consistently outgrow the industry at better than industry combined ratios, you have established successful, sustainable relationships built upon consistency and trust with your customers."
Providence Washington actively writes in the states of Connecticut, Delaware, Georgia, Idaho, Illinois, Maine, Massachusetts, New Hampshire, New Jersey, New York, North Carolina, Ohio, Pennsylvania, Rhode Island, Tennessee, Utah, and Virginia. *