New unit already has more than $50 million in premium
By Phil Zinkewicz
AIG's Small Business Underwriting Center executives: Vincent C. Tizzio (seated), president/chief operating officer and Thomas A. Fioretti (standing), senior vice president/chief operations officer.
Small businesses in the United States have generally been the province of regional insurance companies rather than the large nationals. Moreover, the "mom and pop," Main Street type operations were usually serviced only by smaller agencies and insurance brokerage firms. But, as the songwriter wrote, "the times they are a changin'." Today, many large national insurance companies and large insurance brokerage houses are aggressively pursuing small business accounts.
One such insurance industry giant is American International Group (AIG). In June of last year, AIG started up its new Small Business Underwriting Center (SBUC), headed up by Vince Tizzio, president and chief operating officer. SBUC sells specialty coverages, such as employment practices liability insurance, excess liability insurance, fidelity bonds, private company directors and officers and others, which Tizzio says are just as important to small business owners as the property, liability and accident and health coverages that have long been considered essential. Since October of 2001, the center was fully operational and to date it has gross written premiums in excess of $50 million.
"It has become increasingly difficult for small business owners to manage risk," says Tizzio. "They must compete in the fastest growing segment of the U.S. economy, navigate the world's most litigious society and wrestle rapidly advancing technology. Every day they must come face to face with more and more complex risks, each poised to devastate a promising enterprise."
Tizzio says that SBUC has tailored specialty insurance coverages, along with property and casualty insurance, to meet the needs of small businesses that generate less than $10 million in annual sales. "We recognized that this segment of the U.S. business population has a need for specialty coverages. Sometimes they don't even realize they have a need or they don't understand the exposures. Other insurance companies that target this market segment do so primarily through the traditional business-owners policy. But we believe that the best way to service these exposures is by providing specialty products through one central point of contact. Located in Berkeley Heights, New Jersey, SBUC brings under one roof all of the necessary underwriting, claims, technology and customer services required to meet effectively the needs of the small business market."
The AIG executive says that small businesses face specialty exposures that can destroy an operation. "A single employment practices lawsuit could ruin a small business, just as an uninsured fire or liability lawsuit could," says Tizzio. "And just think of the legal fees that are generated merely because of allegations of discrimination by a client or customer. A dishonest employee or exorbitant jury award can bankrupt a small firm without proper insurance in place. Not only that, but in the final analysis the business owner's personal assets are at risk. Employment claims such as these are becoming commonplace."
Tizzio points out: "The number of employment practices liability claims have doubled in recent years. Employees and clients frequently sue when they are disappointed with professional services. The plaintiff's bar zealously pursues and wins large jury awards against businesses large and small. The tightening economy only adds fuel to the fire. For example, statistics show that fidelity and employment-related matters have increased dramatically."
In addition to specialty insurance products, risk management and loss prevention are part of SBUC's offerings to small businesses. In the past, risk management techniques were thought to be available primarily to the large corporate risks. But Tizzio maintains that smaller exposures need loss control services just as much, if not more, than the larger risks. "Helping businesses to prevent and mitigate losses has long been central to AIG's approach to property, casualty and specialty exposures. In the specialty area, for example, smaller customers--just like AIG's largest insureds--will now automatically have available to them the expertise of leading attorneys to defend employment practices and fiduciary lawsuits. In addition to our internal legal staff," says Tizzio, "small business owners will also have access to the panel counsel approach. Under that approach, we have contracted with independent attorneys around the country to assist our insureds in their legal problems."
In addition to that, SBUC insureds will also have access to premier public relations firms to help control a large-scale crisis, such as major employment practice or product contamination incidents. "These specialty loss prevention services are especially valuable to smaller businesses that might not otherwise have such resources at their disposal," says Tizzio.
The AIG executive says also that the unit supports insureds' day-to-day specialty loss prevention operations by assisting business proprietors in ensuring proper employment practices. "There are myriad discrimination laws out there on the books," he says. "We employ numerous state-of-the-art tools that are automatically provided to our employment practices liability insurance policyholders. These include Title VII Plus, a Web-enabled training program insureds can use to sensitize employees to important issues
under the title and other major discrimination laws that could affect their operations. The training leaves employees with documented proof that they took reasonable care to 'prevent and correct' discriminatory conduct. This type of proof is essential to avoid large-scale punitive damages in certain claims."
In addition to employment practices, SBUC offers a whole range of products for professionals, including errors and omissions insurance, school leader errors and omissions, and third-party administrators liability. Tizzio explains that as small companies grow their businesses, their need to rely on a wide range of professionals to provide various business, financial and personal services will intensify. The rapid growth in these areas has led to the increased potential of these small companies facing a potentially devastating professional liability lawsuit. "All it takes is one unhappy customer to place the business owner's career and personal assets at risk. We offer a comprehensive, cost-effective program that can be easily tailored to cover litigation brought against these companies." Coverage for defense costs, charges and expenses incurred in conjunction with a claim or suit filed against an insured is included in the limits of liability.
Miscellaneous Professional Liability insurance is a good example of how flexible SBUC's product offerings can be. According to Tizzio, "It's a streamlined form that is simple to understand and easily customized to accommodate both typical and complex professional liability risks. "We constantly address the ever-changing exposures of a wide range of professions--to provide companies with professional liability solutions that enable them to operate with confidence."
SBUC also specializes in Directors and Officers Liability insurance for private companies and not-for-profit organizations. Management liability claims affect all companies, large and small. And, in fact, it is the directors and officers of private companies who can be most vulnerable to these claims. Tizzio remarks: "Because they are often involved in day-to-day operations and are the decision makers, in most circumstances, private company directors and officers are more likely to be named in lawsuits. Moreover, in closely held private companies, the owner's personal net worth may be tied to the financial health of the company."
But Tizzio insists that it is the structure of SBUC that makes the difference in terms of efficiency of operations and in terms of making it easier for brokers to service the accounts. SBUC consists of a president (Tizzio), with profit center managers responsible for the various product lines and operations reporting directly to him. Profit center underwriters of product lines report to the profit center managers.
In order to maintain new and existing local broker relationships, SBUC has created a geographical team structure. Underwriters from each profit center have been assigned to regional territories. "By adapting this localized concept on a national scale, we can service every broker like we are sitting in their same town," Tizzio explains. "We understand how they like to do business. This allows us the ability to effectively manage their expectations." All employees are based at the Berkeley Heights location.
"By handling a policyholder's business from the quote through policy issuance, we believe that the SBUC staff is able to assist the client at every point in the process, providing the policyholder with top customer service," says Tizzio.
As for who will determine which accounts are underwritten at the Small Business Underwriting Center, Tizzio says that all American Home Excess Casualty and National Union accounts with revenues under the $10 million market are automatically forwarded to SBUC. "For renewal business, we will be pulling all accounts and making this determination on the application we have on file," says Tizzio. "For new business, the agent or broker makes the determination by identifying each account's total revenues and forwarding eligible accounts to SBUC."
Tizzio says that brokers who submit business to SBUC get full credit for premiums booked in the region in which it was developed. They will also deal with dedicated specialty lines underwriters, some of whom have multi-line training. Files and all related information will be electronically transmitted to appropriate regional offices. All brokers who are licensed to do business with AIG on a local level are able to utilize the center. Current billing arrangements that brokers have with AIG will remain in place. *
"They (small businesses) must compete in the fastest growing segment of the U.S. economy, navigate the world's most litigious society and wrestle rapidly advancing technology. Every day, they must come face to face with more and more complex risks, each poised to devastate a promising enterprise."
---Vince Tizzio
For more information:
Web site: www.aigsmallbusiness.com