With seasoned management and a strong new brand,
EMC Insurance Companies faces the market head on
By Elisabeth Boone, CPCU
EMC Insurance Companies executives (from left) Ronald Jean, executive vice president for corporate development; Bruce Kelley, president and chief executive officer; Kevin Hovick, vice president for business development; Bill Murray, executive vice president and chief operating officer; and Beecher Turner, director of marketing.
"May you live in interesting times," says an old Chinese blessing, and today's property/casualty market is nothing if not interesting. The stakes are high and getting higher every day as insurers struggle to cope with mounting catastrophe losses while engineering their recovery from the punishing soft market. Continuing growth in the alternative market ... quantum leaps in information technology ... sophisticated buyers with complex needs and distinct buying preferences ... these are just a few of the challenges that make for interesting times in the new millennium.
Beset by this formidable array of forces, insurers are acutely aware of the need to define themselves--to employees, agents, policyholders, stockholders--and to project a clear vision of where they stand, what they offer, and, equally important, what they don't want.
One organization that has been seriously engaged in this demanding endeavor is EMC Insurance Companies of Des Moines, Iowa, which this month launches its new branding initiative, "Count on EMC." Top executives of the group, whose lead carrier is the venerable Employers Mutual Casualty Company, are enthusiastic about their new brand and excited about the opportunities they see in the marketplace. With its management structure realigned after the retirement last January of Executive Vice President and Chief Operating Officer Fred Schiek, a 41-year veteran, EMC Insurance Companies is ready for action.
Strong and diversified
With assets of over $1.8 billion, the EMC Insurance Companies market property, casualty, and life insurance products throughout the country, with emphasis on the Midwest. Reinsurance contracts are written worldwide. In 2000, written premium for the property/casualty companies and the reinsurer were nearly $857 million. Of the companies' volume, approximately 75% is commercial lines, with the remaining 25% in personal lines.
Bruce Kelley, president and chief executive officer, stands before the portrait of John A. Gunn, founder of Employers Mutual Casualty Company, who served as president from 1911 until 1940.
In addition to Employers Mutual Casualty Company, formed in 1911 and licensed in all 50 states and the District of Columbia, EMC's property/casualty carriers are EMCASCO Insurance Company, Illinois EMCASCO Insurance Company, Dakota Fire Insurance Company, Union Insurance Company of Providence, EMC Property & Casualty Insurance Company, Hamilton Mutual Insurance Company, and Farm and City Insurance Company, a nonstandard auto insurer. Other companies in the group are Employers Modern Life Company; EMC Underwriters LLC, an excess-surplus lines insurer and broker; EMC Reinsurance Company; and EMC Risk Services, Inc., a third-party administrator.
The eight property/casualty insurers are rated A- (Excellent) by Best's; the life insurer also carries an A- rating. The group employs some 2,000 persons countrywide.
Shared ownership
Right from the start, there's something unusual about the companies' publicly traded downstream holding company, EMC Insurance Group, Inc.: it has not one but two sets of owners. The group is approximately 80% owned by Employers Mutual Casualty Company and approximately 20% owned by public stockholders. How does this shared ownership work in practice, and how does it benefit the EMC Insurance Companies and their policyholders?
Very well, responds President and Chief Executive Officer Bruce Kelley. "EMC Insurance Group, Inc., has provided EMC Insurance Companies with access to capital markets without sacrificing the long-term perspective of a mutual insurer," he explains. "The ability to raise capital has been important at various times, especially in the mid-1980s when we were able to keep all branch offices open for our independent agency force. We have not withdrawn from underwriting in any territory since 1964, and part of the credit for this stability goes to our public company. Adding to surplus through capital offerings, as well as internal growth, allows EMC Insurance Companies to have a solid capital base."
As vice president for business development, Kevin Hovick oversees the marketing and underwriting functions.
The interests of stockholders are not always synonymous with those of policyholders, Kelley notes. "We have successfully managed the conflicts of interest inherent in this relationship with separate boards of directors. One represents the policyholders and one represents the stockholders. Over time, EMC has provided stockholders with a stable return and policyholders with a strong capital base." Summing up, Kelley declares, "We have the best of both worlds: the stability of a policyholder-focused mutual insurer and the capital-raising ability of a stock insurer."
Gaining an edge
In a property/casualty market that seems to be dominated by giant stock insurers, some of which belong to vast financial services conglomerates, how does a mutual insurer like Employers Mutual Casualty Company differentiate itself and gain a competitive advantage?
"EMC uniquely differentiates itself through its 17 multi-regional, full-service branch offices and the localized service they are able to provide," responds Bill Murray, executive vice president and chief operating officer. "This largely decentralized approach allows for very 'close to the customer' services in the areas of loss control, claims, and underwriting, among others. This local presence gives us a unique ability to identify and respond in a timely manner to opportunities that arise in the marketplace, primarily the commercial marketplace that is our primary focus," Murray explains. "We also believe that because insurance is our only business, we are better able to focus on the core competencies relating to our company operations."
EMC's full-service branch offices are located in Birmingham, Bismarck, Charlotte, Chicago, Cincinnati, Denver, Des Moines, Jackson, Kansas City, Lansing, Los Angeles, Milwaukee, Minneapolis, Omaha, Phoenix, Providence, and Wichita. Service offices also are located in Dallas, Davenport, Little Rock, St. Louis, and Valley Forge.
Regional decision making
Each branch office is headed by a resident vice president who has a significant amount of autonomy in establishing and pursuing objectives. These executives' responsibilities encompass a wide range of operations.
Planning/goal setting. "Corpor-ately, we have established key strategic goals and objectives that we believe will continue to move EMC forward in the years to come," Murray says. "Under our largely decentralized approach, each RVP is responsible for establishing premium growth estimates based on local market conditions; at the same time, they must consider our corporate goals. While the RVPs do have some latitude in regional planning and goal setting, it is critical that their goals and objectives mesh well with the overall strategic goals of the company."
Sales/marketing. "In the area of marketing, the RVPs have latitude in marketing certain products and services to meet the needs of the independent agencies in their territory," Murray says. "For example, we have several regional safety group and target market programs. The safety group programs are contractually eligible for a dividend based on profitability, whereas the target market business is not subject to a dividend. There are obvious economies of scale when multiple regional offices offer the same or similar programs, and we encourage that wherever possible and where it makes good business sense. However, some programs are created to meet the needs of a market segment in only one region where there is good market potential: acceptable underwriting results, reasonable claim and legal environments, and so on."
Underwriting. "The same limited autonomy holds true with regard to underwriting in the branch offices, and each office is fully staffed with line underwriters for both commercial and personal lines," Murray explains. "Our home office underwriting department is staffed with research and product development underwriters who support and provide technical guidance to the line underwriting staff, as well as creating and maintaining policy forms and programs."
Claims handling. "The situation here is really a "ditto" of underwriting," Murray says. "The localized claim service that EMC is able to provide through its 17 branch and five service offices is something we are very proud of: local reporting and the fair and timely local settlement of claims. Again, the home office claims staff of superintendents, coverage counsel analysts and other attorneys, and medical management and technical employees provides the necessary support for branch claim operations."
Agency relations. "The resident vice presidents are primarily responsible for the appointment, maintenance, and termination of all agency relationships," Murray says. "All periodic agency reviews are handled at the branch level, and successful actions taken to improve an agent's performance often are the result of their efforts to arrive at mutually agreeable solutions to challenges." Challenges may involve individual risks, the composition or diversification of a book of business, or improved personal relationships. "Home office involvement in agency relations is usually in the 'big picture' realm, working on projects like contingency agreements, incentive travel programs, and setting criteria for agency reviews," Murray continues. "The home office also provides information that enables branch management to make better decisions."
"Our corporate goals currently concentrate on three areas: profitability, effective staff, and superior service."
Business development is key
A central feature of EMC's market strategy is the concept of business development. "Recognizing the interdependencies between underwriting and marketing, we saw a unique opportunity to create the position of vice president of business development," says Kevin Hovick, vice president of business development. "This position oversees the company's underwriting and marketing functions. With ongoing market changes, this gives us an opportunity to greatly enhance the coordination and communication between underwriting and marketing."
In practice, Hovick observes, "It is often difficult to separate the underwriting and marketing functions. Underwriters must take a marketing approach in their selection process and in their dealings with agents. By the same token, marketing people must take an underwriting approach in their communications and interactions with the agency force."
EMC's business development approach allows for flexibility in responding to current market conditions, Hovick points out. "Although both underwriting and marketing are always of critical importance, there may be times when we place more emphasis on one than on the other," he comments. "In today's market the emphasis is on underwriting; however, there is a strong need for marketing communication to 'sell' our position to agents. The market will change again, and our agents will remember that we treated them fairly."
EMC's business development coordinating committee consists of Bill Murray as chief operating officer; Kevin Hovick, vice president of business development; Jeff Dahms, vice president of commercial lines underwriting; and Beech Turner, director of marketing. The committee has oversight responsibility for the development of new products, enhancement of existing products, and review of programs. The committee also sets the direction for EMC's underwriting and marketing philosophy, with input from members of both departments.
Beecher Turner, director of marketing, says: "Our branding campaign will 'raise the bar' of both our agents' and our policyholders' expectations of us."
"Our marketing department works in conjunction with the underwriting department on product development," Hovick says. "Products are not developed by marketing and handed off to underwriting. Development is a cooperative effort to achieve the maximum benefit."
The marketing and underwriting departments also work together in evaluating branch offices' use of and need for products, as well as reviewing branches' success in meeting underwriting and marketing goals.
Commitment to agents
With an agency force that numbers 3,100 countrywide, EMC is strongly committed to the independent agency system. With the preponderance of its volume in commercial lines, Hovick observes, EMC places strong reliance on the services of independent agents. Asked what qualities the company values in an agent, Hovick responds: "We want agents who can deliver the best results for the mutual benefit of themselves and EMC." Not all agents fit with the way EMC does business, he notes. "Recognizing this, we need to find agents who fit our business model."
EMC wants to be a significant presence in each agent's office, Hovick emphasizes. "We conduct regular agency reviews to make sure the qualifications and standards we have set for our agents are producing the desired results. The marketing and underwriting departments provide significant input into these reviews." EMC's communication with agents is by no means a one-way street, Hovick points out. "We conducted an agency survey to determine whether we are meeting our agents' needs and how we can make improvements. We also maintain regular communication with our agents to inform them of opportunities with our companies."
The key advantages EMC offers independent agents, Hovick remarks, are its regional operating structure and its consistency and stability in the market. "Our local branch offices are our marketing advantage," he says. "This gives our agents immediate access to the company." What's more: "We maintain a consistent approach to marketing and underwriting. This allows our agents to plan for long-term growth."
Brand new brand
As noted earlier, EMC has been devoting significant time and resources to developing a brand identity that will set it apart in the market. Using the theme "Count on EMC" to convey stability and consistency, EMC this month rolls out its new branding campaign to all employees; rollouts to agents and consumers will follow. Beecher Turner, director of marketing, explains how the company decided on this theme and what it hopes to accomplish with the campaign.
"Developing the 'Count on EMC' theme has been an evolutionary process that began approximately three years ago when we hosted several agency focus groups in select cities around the country," Turner says. "The independent agents involved may or may not have represented EMC, and they were not told what company the focus group was being held for. The main points of discussion in these focus groups were what the agents appreciated about the various insurers they represented. What did they like or dislike about each company's services?"
The second step was to solicit input from insurance buyers. "In the summer of 2000, we assembled focus groups of insurance buying consumers, mostly personal lines and small commercial buyers. Again, the discussions focused on what the consumers appreciated about the insurers they were with and the thought process they followed to choose their current insurers. Not all of the focus group members were independent agency customers; many currently had their insurance with direct writers," Turner observes.
Finally, EMC's marketing communications firm facilitated discussions with the home office marketing department and then with company executives to identify the most critical issues facing the company. "Using the input from these discussions, coupled with the input from our agent and consumer focus groups, we were able to determine that our branding theme, 'Count on EMC,' has as much relevance internally to our employees as it does to all of our external stakeholders," Turner says.
A public promise
Bill Murray, executive vice president and chief operating officer.
In seeking to establish a meaningful brand identity, EMC was well aware of the hype and hullabaloo that surround branding efforts in today's business climate. "The concept of branding has become a big buzzword," Turner remarks. "We see branding as a mechanism for companies, including EMC, to connect with existing or potential customers. While we have done some advertising to the general public, our main emphasis has been directed toward our independent agency force. Our branding campaign will 'raise the bar' of both our agents' and our policyholders' expectations of us. Equally important, in establishing our brand we're making a public promise, through advertising, that we must deliver on in every contact a stakeholder has with EMC. The brand promise, if well executed, will outlive all of us and will define the EMC 'experience' far into the future," Turner says.
"What we ultimately hope to accomplish is heightened awareness, accountability, and an increase in the level of customer service that all employees provide, whether it's to an internal customer in another department or to an external stakeholder like a customer or an agent," Turner continues. "We believe service is a key component of all that EMC has done with its regional offices and its overall structure. To further differentiate ourselves, we will be reinforcing our commitment to customer service with more consumer advertising, and thereby increasing the public's expectation of what should happen when they work with EMC."
Linked to corporate planning
Directing the corporate planning process is one of the responsibilities of Ron Jean, executive vice president for corporate development. According to Jean: "Our corporate goals currently concentrate on three key areas: (1) profitability, (2) effective staff, and (3) superior service. As you can see from the comments of the other executives, those areas are the focus of much of our activity and are being allocated a large share of our resources."
Also reporting to Jean are the actuarial, data processing, and human resources functions, and these operations, he says, "play a key role in supporting the underwriting, marketing, and claims functions and in bringing appropriate resources to bear on these important issues." Jean notes that "the 'Count on EMC' branding theme is closely tied to the corporate planning process because one of the objectives of the process is to get all employees on the same page and keep everyone focused on the same priorities. Profitability, effective staff, and superior service are essential ingredients if we are to make good on the promise that our various stakeholders can, in fact, 'Count on EMC'."
Challenges ahead
Like most major property/casualty insurers, EMC has sustained some serious losses over recent years. "The past three years have not been particularly kind to EMC from a profitability standpoint," Bill Murray observes. "Our number one priority must be to return EMC to acceptable underwriting results. With the changes that are now occurring in the marketplace, it is important that we work with our producing agents to take corrective action on accounts that have not performed well, and we must work to establish proper pricing, particularly on our commercial lines of business. The true challenge is to accomplish these objectives while maintaining the great agency relationships that have served us so well over the past 90 years." *
For more information:
EMC Insurance Companies
717 Mulberry Street
Des Moines, IA 50309
Phone: (800) 247-2128
Web site: www.emcinsurance.com