By Elisabeth Boone, CPCU
F.W. "Bill" Purmort is chairman of the board and president of Central Insurance Companies.
"He's so responsible." "She's so grown-up." Remember gritting your teeth when your parents sang the praises of some impossibly well-behaved classmate or neighbor? You didn't have to be what used to be called a juvenile delinquent to find such child paragons unendurably dull. Maturity and responsibility somehow just didn't seem like important qualities when you had games to play, dares to take, worlds to explore.
Maturity and responsibility likewise don't seem all that important during soft cycles in the property/casualty business, when cash flow trumps underwriting judgment and dangerous risks are written at dimes on the dollar. It's only when the red ink becomes a river that the old virtues begin to take on a new shine, and yesterday's cutthroat competitors become today's somber pontificators.
After 15 years of riotous excess, the long soft market is clearly partied out, leaving in its wake the dull agony of a monster hangover. Not everyone is bleary-eyed and cotton-mouthed, however, because not everyone went to the party. Fresh, alert, and focused, yesterday's stay-at-homes are today's go-to gurus, and a sterling example is Central Insurance of Van Wert, Ohio.
Established in 1876 as the Van Wert County Mutual Fire Insurance Company, Central Insurance this year is celebrating its 125th anniversary. Much has changed since the insurer's founding--but the small-town values of cooperation, trust, security, and stability remain firmly in place. "The decisions we make affect a lot of people--agents, policyholders, employees--so we can't steer the ship right one day and left the next," says Bill Purmort, chairman and president. Purmort represents the fifth generation of his family to take the helm of Central Insurance. "We're as proud of our past as we are excited about the future."
Diversified group
Central Mutual Insurance Company writes standard risks and is the parent company of the Central Insurance Companies. Another member of the group is All America Insurance Company, a preferred-risk stock insurer that was formed in 1961 to compete with State Farm and Allstate. A third company, CMI Lloyd's, is located in Dallas. The group also includes Central Insurex, an excess and surplus lines agency formed in 1978. The Central group's combined assets exceed $623 million, and it is rated A+ by Best's.
Of the group's $291 million in direct written premium, 45% is commercial lines and 55% is personal lines. "Because of rate increases, our proportion of commercial business is inching up," Purmort observes. "We're comfortable with a 50-50 split." Adds Edd Buhl, senior vice president and secretary, "Our production is driven by profitability. If we see a better opportunity to make money in personal lines than in commercial, that's where we put our focus."
Central has special programs for light industry, wholesalers, retailers, contractors, offices, service businesses, auto service and repair shops, restaurants, and building owners. Another niche market is professional liability for barbers, beauticians, clergy, dog groomers, funeral directors, opticians, printers, and veterinarians.
Operating through a network of 500 independent agents, Central does business in 15 states: Arizona, Connecticut, Georgia, Illinois, Indiana, Massachusetts, New Jersey, New Mexico, New York, North Carolina, Ohio, Oklahoma, Tennessee, Texas, and Virginia. Regional offices are located in the metropolitan areas of Atlanta, Boston, Dallas, and Van Wert.
Marketing game plan
"Our game plan is to write a lot of business with a small number of agents," Buhl says. "We're not looking to have 1,000 agents. It's less expensive to do business with a small number of agents, and it allows us to develop personal relationships with them. Having a large volume of business with an agency gives us a highly leveraged position in that agency."
Central's marketing philosophy, Buhl explains is, "to allocate premium growth to these states and lines that will produce the greatest return and allow us to achieve the most favorable ratio of premiums to surplus."
"In each of the years between 1990 and 1998, we grew our book consistently in the 10% to 14% range ... Agents looked at us and saw consistency, stability, and the opportunity to make money."
--Bill Purmort, Chairman and President, Central Insurance Companies
Bill Purmort appears with one of the centerpiece collectibles in Central's Fire Museum which houses an extensive collection of fire memorabilia. The privately owned collection was started by Bill's father, F.W. Purmort, Jr., who served as president of Central from 1964 to 1994.
Asked to characterize the Central Insurance "advantage" in the marketplace with respect to competitors, Buhl offers a single-word response: "Consistency. Being a mutual, and being a smaller regional carrier, we're very stable in our rate makeup, and we're conservative and consistent in our underwriting. We're highly focused; we don't try to be all things to all people." This philosophy, Buhl points out, is very attractive to independent agents. "The agents who represent us make more money in our company than with any other carrier. We offer competitive commissions and excellent contingencies. We provide training, support, and access to a wide array of technology tools."
On the automation front, Central provides interface, upload, and download with all the major agency system vendors. Agents can quote and issue personal lines policies and some commercial policies via Central's Web site, and they also can initiate claims and billing inquiries. Because of its commitment to maximizing Internet technologies, Purmort observes, Central is able to achieve expense reductions that benefit its agents.
Another area where Central scores high vis a vis competitors, Purmort notes, is claims service. "We stress the importance of the performance of our product--a promise to pay claims fairly and promptly," he says. "Our previous service standard required us to contact the policyholder within four hours of receiving a notice of loss. We met this standard 91.5% of the time. In 2000, we introduced a new two-hour contact standard and have been able to meet this standard 71.6% of the time. For the consumer, this is 'crunch time'--performance when they need it most, after a loss."
Committed to agents
When it comes to distribution systems, there's no question where Central's loyalties lie. "We're 100% dedicated to the independent agency system," Purmort declares. "When we look at developing new products, services, or strategies, the first question we ask is, 'What do our agents think?' If what we're proposing will benefit them, we proceed. If not, we don't do it."
Central regularly conducts focus groups among its agents. "At a group last year, agents told us that their customers wanted to be able to do business 24x7," Buhl says. "We asked, 'How can we do it?' The answer was to allow insureds to access us via their agent's Web site, using a link. The insureds don't know it's Central's Web site; they think it's their agent."
This approach delivers on Central's commitment to its agents. "As a client, you know your agent, not your insurance company," Purmort observes. "We want the agent to be known as the provider of services. This makes the agent more valuable to the insured than an agent whose company doesn't put him or her first."
Edward R. Buhl, CPCU, senior vice president and secretary, notes that Central regularly conducts focus groups among its agents to be sure that new products, services or strategies that the company is considering will benefit agents.
What qualities does Central Insurance seek in agents? Buhl responds: "Are the principals or owners active in the business? Do they value personal relationships? Size doesn't matter so much if the owners are involved in the agency." Other key factors, he says, are financial strength and quality of business. Adds Purmort: "We support the Big I's Best Practices and criteria for top agents."
A port in the storm
Amid the competitive frenzy of recent years, how does a small regional mutual manage to build volume and profits? For Central Insurance, the answer once again is the "C" word: consistency. "In each of the years between 1990 and 1998, we grew our book consistently in the 10% to 14% range," Purmort says. "Most of our growth came as the result of all the turmoil and anxiety at the big companies: mergers and acquisitions, changes in leadership, selling of entire books, joint ventures. We don't do those things. We're the 'plain Jane'--boring, reliable, disciplined. Agents looked at us and saw consistency, stability, and the opportunity to make money. We took advantage of market conditions to solidify our position and make our agent partners happy."
Hitting the bull's eye
If making its agents happy is Central's aim, it seems to be hitting the bull's eye. One agent who's singing the insurer's praises is Bob Bramlett, owner of The Bramlett Agency in Ardmore, Oklahoma. Started by his parents in 1948, the agency has property/casualty premium volume of $6.5 million and writes business throughout Oklahoma and in some parts of Texas and Arkansas. "We represent 13 companies, including seven regionals," Bramlett says. "Central is our largest market of all. We've represented them since 1987 for personal lines and small commercial accounts."
Where Central really shines, Bramlett observes, is on accounts with which the agency has a long-term relationship. "Central is a relationship company," he observes. "They're great about writing the entire account; they're very competitive, and they have excellent loss control. They're also ahead of the curve on technology."
Bramlett also values Central for its stability. "For example, workers compensation is crazy in our area, and companies are withdrawing from the market. Central is stable. As national carriers have withdrawn from less populated areas, we've needed to develop stronger relationships with our regional companies. When we have a need, Central responds. Ardmore's population is 25,000. We understand how small communities work, and so does Central. They hear our heartbeat; they provide the products and services to get the job done. Central is our lifeblood."
A big agency grows with Central
Another satisfied Central agent is Tim Brady of Brady, Chapman, Holland & Associates in Houston. The agency's book is 80% commercial lines, with the remainder in personal lines, employee benefits, and life, health, and financial services. Annual revenue is $9 million. Although the agency is a generalist, it has special expertise in construction and architects and engineers risks.
"Except for Central, most of our markets are national stock companies," Brady says. "Although we don't place a high percentage of business with Central, our personal lines volume with them is growing rapidly."
What can a small company offer a big agency? "We have an excellent relationship with Central," Brady replies. "It's becoming more and more difficult to be considered a true partner with the national stock companies--they're so big and have so many changes in management and culture. Central is not like that at all. In the next five to 10 years, we'll be dealing with the same people we worked with over the last five years. It's much easier to be a Central partner, as opposed to being a vendor or supplier. Why? Because they have competent people, competitive products and commissions, good profit sharing, and they're easy to work with."
Surrounded by vestiges of the past, Bill Purmort is confident about Central's future, in spite of the hardening market. "We anticipate that over the next four years, we'll achieve a combined ratio of under 100, growth between 8% and 12%, and return on surplus between 12% and 15%."
This is not to say, Brady notes, that Central is not a disciplined underwriter. "They have a better combined ratio than most companies, and they're not an easy underwriter," he says. "Our regional manager, Chuck Wassberg, is very selective. He doesn't have a lot of agents, but the agents he chooses give him good business. We know we'll continue to grow with Central."
Another area where Central excels, Brady comments, is listening. "They have regular meetings throughout their territory and in Texas to get input from agents. They always ask, 'How can we help?' One agent said he needed help with management training. Central invited him and its other agents to participate in the same in-house management training program the company's executives attend."
As the property/casualty market continues to harden, what does Brady see as the advantages of doing business with a regional mutual like Central Insurance? "First, they tend to be more profitable, so they're not as likely to have fluctuations in culture and appetite as larger carriers do. Second, Central has no shareholders to answer to. This gives management the ability to increase surplus, and to do what they must do to continue profitable growth. Finally, Central is very loyal to its agents. If an agent isn't performing as agreed, Central will work with him or her to make changes. They're totally committed to the independent agency system and make their capacity available exclusively to independent agents."
What's ahead?
Looking into a hardening market, what does Central see for the industry and for itself? "The market is definitely in flux," Purmort says. "Industry numbers are worsening, and companies are taking a new look at their overall strategies. A small group of companies are doing well, including us, in spite of the market upheaval. Year to date, our premium writings are up 12%; of that, 5 points represent rate increases and the rest is new business growth. We have the discipline to stick with our strategy--dealing with the agents, states, and lines of business that have made us money. If we can't handle a line profitably, we turn away the business. We anticipate that over the next four years, we'll achieve a combined ratio of under 100, growth between 8% and 12%, and return on surplus between 12% and 15%."
Impressive numbers--and there's little doubt Central Insurance will achieve them. This venerable regional mutual may be the "plain Jane" of the market--but these days, plenty of people are asking her to dance. *
For more information:
Central Insurance Companies
800 S. Washington St., P.O. Box 351
Van Wert, OH 45891-0351
Phone: (419) 238-1010
Web site: www.central-insurance.com