Liberty Mutual's Regional Agency Markets
opens doors for independent agents
By Elisabeth Boone, CPCU
Liberty Mutual RAM (Regional Agency Markets) executives visit The Rowley Agency in Concord, New Hampshire. Left to right: Michael Christiansen, Executive Vice President of Insurance Operations, Liberty Mutual RAM; Roger Jean, President, Liberty Mutual RAM; and The Rowley Agency executives Daniel Church, CEO and Gary Stevens, President.
When you think of Liberty Mutual, three words probably come to mind: giant direct writer. Long the country's leading provider of workers compensation insurance, the company also offers a range of other property/casualty products, including personal auto, homeowners, commercial multiple peril, commercial auto, general liability, global specialty, group disability, assumed reinsurance, fire, and surety.
As one of the largest direct writing insurers in the United States, Liberty Mutual appears to have covered all the bases. In recent years, the company has broadened both its product portfolio and its marketing reach. In 1997, Liberty Mutual launched its plan to support the independent agency distribution channel and established its Regional Agency Markets (RAM) business unit. Today, RAM distributes personal lines and small to mid-sized commercial lines products in 44 states exclusively through independent agents and brokers.
RAM consists of seven locally branded carriers and two specialty insurers (see the map on page 190). Each RAM company is led by its own local management team and focuses on meeting the product and service needs of the independent agents in its region. At the end of 2003, the RAM companies had revenue of more than $3.4 billion and relationships with some 5,000 independent agencies and brokerages nationwide.
Why did the management team of this successful direct writer decide to move into the regional independent agency distribution system? Playing key roles in this momentous undertaking are two top executives of RAM: Roger Jean, president of RAM and executive vice president of Liberty Mutual; and Michael Christiansen, RAM's executive vice president of insurance operations. Jean, a 34-year industry veteran, formerly was president and chief operating officer of the GRE/Netherlands Insurance organizations of Keene, New Hampshire, and joined Liberty Mutual when it acquired that organization in 1999. Christiansen, whose insurance career spans 30 years, came to RAM in 2003 from Peerless Insurance, where he served as president and chief executive officer. Christiansen has a broad portfolio at RAM; his responsibilities encompass underwriting, claims, marketing, agency management, information technology, and human resources.
RAM is launched
"The concept of RAM originated in 1997," Jean says. "Liberty Mutual historically had been involved in large commercial accounts and personal lines, but it never had significant penetration in the small commercial market. At that time, Liberty Mutual was very interested in making a commitment to a multiple distribution model. The small commercial segment is roughly a $60 billion to $65 billion market and, of that, approximately 70% is controlled by independent agents."
The desire to penetrate that market drove the creation of RAM, Jean says. Golden Eagle Insurance, a California company, and Montgomery Insurance, headquartered in Sandy Spring, Maryland, became affiliated with Liberty Mutual in 1997. Colorado Casualty, located outside Denver, and Summit Holding Southeast, a workers compensation carrier based in Lakeland, Florida, were acquired by Liberty Mutual in 1998. Peerless Insurance, Indiana Insurance, and GoAmerica Auto Insurance were acquired in 1999 from the GRE/Netherlands Insurance organization.
"The transaction that really gave RAM scale took place in 2001 when we assumed the renewal rights to the OneBeacon business from the White Mountains organization," Jean says. The agreement encompassed business in 42 states outside of New England, New York, and New Jersey. "That transaction enabled us to add significant premium to the organizations we already had on board," Jean comments. "In addition, the OneBeacon agreement allowed us to establish two regional companies: America First Insurance in Dallas, which serves four states in the Gulf region, and Hawkeye-Security Insurance of Des Moines, which serves an eight-state territory in the north central region." Consequently, Jean declares, "Today, we're truly a national organization of regional companies."
Company of choice
Describing the mission of Regional Agency Markets, Jean says, "We want to be the company of choice for our agents, our policyholders, and our employees. Our structure allows us to provide, through our individual regional companies, the attributes that agents would typically expect from their best regional company: stability in the marketplace, quality products and services that are delivered at the local level, ease of doing business, and quick local decision making by people in the field who know the territory. A concern many agents have in dealing with a large organization is bureaucracy," Jean observes. "Part of our mission is to eliminate that bureaucracy by means of our regional structure."
At RAM, the flexibility and responsiveness of regional operations are supported by some key big-company attributes. "By being a strategic business unit within Liberty Mutual," Jean explains, "we can offer the advantages agents would expect from a large national carrier, such as financial strength and stability." What's more, he notes, "we can bring efficiencies to the field by consolidating support functions. Anything that touches the customer, whether it's marketing, underwriting, or claims, is done at the local level through our individual regional companies. In essence, what we're trying to do is offer independent agents and their clients the best of both worlds."
Each of the seven regional RAM companies offers products for small and medium-sized commercial risks, but not all of the companies write personal lines. For those that do, Christiansen says, "Our target market is a package account where we write the auto and homeowners policies at discounted pricing. We can also include personal umbrella, watercraft insurance, and other coverages." On the commercial side, he says, "We are characterized as a generalist in the marketplace. The average policy premium in commercial lines is around $5,000.
"We also have the ability to write larger accounts. As a generalist," Christiansen continues, "we offer a broad range of insurance products and services. For example, we have a businessowners policy and a commercial package policy for larger accounts, and we also have a very good commercial inland marine facility." The risks RAM companies write range from Main Street accounts to the larger end of the small commercial market. Target classes include retailers, office complexes, light manufacturers, service firms, and artisan contractors.
Because the RAM organization has evolved over the last several years, Christiansen explains, the various companies are at different levels of development with respect to product portfolio and capacity. "Our most senior company, Peerless Insurance, can write commercial accounts with premiums up to $150,000," he says. "For other companies, the limit is typically in the $75,000 range."
RAM, Jean points out, is one of four strategic business units (SBUs) within the Liberty Mutual organization. The others are Personal Market, a direct writing entity; Commercial Markets, whose various divisions write large national accounts and mid-market accounts on a direct basis and through brokers; and Liberty International, which serves the personal lines, small commercial, and specialty markets in 17 countries. "RAM's function within the Liberty commercial lines portfolio is to pick up where the Commercial Markets SBU leaves off," Jean observes.
Value proposition
How does Regional Agency Markets seek to differentiate its companies from competitors in the marketplace? "The value proposition we have at RAM reaffirms our commitment to the independent agency distribution system," Jean says. "Each RAM company seeks to appoint the best agents within a given market and territory. We want to position ourselves as the leading regional carrier within those agencies. Within each agency we appoint, we like to position ourselves as the number one, two, or three carrier. We're ranked in the top three in 70% of the agencies that represent us. For some of the more mature companies within the RAM organization, like Peerless and Indiana Insurance, those numbers go into the 80s. We have good positioning within the agencies that represent us in the marketplace. That's a big plus, because we believe it gives us access to the best business these agencies write."
For these high-performing agencies, Jean continues, "We strive to provide the regional attributes we mentioned earlier: ease of doing business, local decision making, consistency in the marketplace, and strong relationships. Those advantages, along with the stability agents value in an industry that sometimes is anything but stable, are what we offer as our value proposition to independent agents. We place strong emphasis on relationships. When we talk to agents about what's important to them and who they have the strongest relationships with in our companies, they always point to the underwriter as their number one contact and the one they have the best relationship with," Jean explains.
"We try to establish relationships at every level within each agency, so an agent will feel comfortable calling the company president or me as the head of RAM. We'll answer the phone; we'll deal with their issues quickly, efficiently, and, we hope, to the agent's satisfaction. I think most of our agents will say that our service is very good, that they have a clear understanding of what we're looking for in the marketplace, and that the underwriters really take care of their needs."
Awarding RAM an "A" in each of these categories is Gary Stevens, president of The Rowley Agency, Inc., in Concord, New Hampshire, which represents Peerless Insurance. Established in 1966, the agency employs 15 producers and 27 support staff and has sales offices in Portland, Maine, and Bennington, Vermont. Property/casualty premium volume totals $62 million, of which 95% is commercial accounts and the remainder is personal lines. Rowley's niche markets are construction, hospitality, wholesale distributors, and manufacturers. The agency represents 15 carriers and also works with a number of excess-surplus facilities.
"We've represented Peerless for more than 20 years," Stevens says, "and over the last five to seven years we've grown a lot with them. We've grown from a million-dollar agency to $5 million in volume at the end of the 2003 production year. Peerless is definitely a growth company for us. They're our second largest carrier." Except for heavy construction, The Rowley Agency places a significant volume of its niche market business with Peerless. "They write artisan contractors for us and do a great job," Stevens says. "They also can handle our distributing and light manufacturing risks."
As noted earlier, a key objective of the RAM organization is to make it easy for independent agents to do business with its companies. Is that what's happening for The Rowley Agency? "Absolutely," Stevens declares. "Their Web site is awesome. It's so easy for our account managers to go in and get loss runs. Most of our accounts are $25,000 to $300,000 in premium. Say we write a large hospitality account and the owner's wife plans to open a boutique. We can use the RAM Web site to get a quick quote without filling out all the boxes so we can give the prospect an idea of how much it will cost to write the account. RAM makes it very easy."
Stevens adds, "Peerless has been our most stable and profitable carrier during this hard market, which started in 2000 and continues today. They underwrite exceptionally well and do their best to solve problems. They're one of the top companies in our office for claims handling." The bottom line? "Peerless does a great job--they help keep us profitable," Stevens declares.
Challenges ahead
The market fluctuations that characterize the insurance business today are daunting even for an organization with as large a footprint as Liberty Mutual's Regional Agency Markets. RAM aims to succeed in a rapidly changing market simply by carrying out its mission. "Our first objective on a go-forward basis is to establish every one of our regional companies as the go-to market for our agents," Jean asserts. "When we say 'company of choice,' we really mean it. We want to emphasize in everything we do those things that are most important to us and our agents. We're looking for sustained profitable growth as an organization, and we want to make good on our value proposition.
"All of us at RAM, as a group of regional companies, really grew up in the independent agency system," Jean observes. "We have a lot of agency friends; we know what agents are looking for in their go-to companies. Ease of doing business is a critical factor. The easier it is for an agent to do business with a company, the more and better business the agent will bring to that company. A key objective for our organization is to make each and every one of our regional companies easier to do business with. We consider the independent agent our customer, and that value is embedded in each of our regional companies, certainly at the desk level in marketing, underwriting, and claims," Jean declares.
"We have to be able to run our business so that we have sustained profits and growth, and do it in a way that is very user friendly to our customer: the agent. We have to maintain as stable a presence as possible in a market that will continue to fluctuate on an ongoing basis. We have to use technology to enhance the ease of doing business, and we have to do it in such a way that we don't lose the close relationships we have with our agents," he emphasizes. "Technology is a great way to deliver service, but our agents should be able to talk with someone locally when the need arises. We're making a substantial investment in advanced technology to strengthen our ties with agents."
With its commitment to distributing quality products to independent agencies through stable regional carriers, Liberty Mutual's Regional Agency Markets clearly offers agents an appealing value proposition that combines the flexibility of local decision making with the strength of an industry leader. *