Public entity power

Fresh and focused, Professional Underwriters is a
go-to market for school and municipal risks

By Elisabeth Boone, CPCU

Professional Underwriters executives, from left: Bill Kronenberg, CEO; John Solari, President; and Tom Ruddy, Director of Marketing.

In the challenging market for specialty risks, players don’t have the luxury of indulging in cash flow underwriting or leaping blindly into the hot market du jour. Success demands knowledge, commitment, and strict adherence to underwriting principles—combined with the ability to take the long view and the flexibility to adapt to changing conditions.

For insurance program specialist Professional Underwriters, based outside Philadelphia, those ingredients are the key to success in its target market—public entity risks. Recently acquired by a group of investors led by William Kronenberg, III, a pioneer in environmental insurance, Professional Underwriters has set for itself an ambitious goal: “to become the premier public entity provider of underwriting and risk management services in America.” In that endeavor, it’s building on strengths it began to develop when it was established 22 years ago.

Drive to specialize

In the mid-1980s, says John Solari, president and chief executive officer, “the company began to evolve, and in addition to the general business we had started with, we wanted to move into the specialty program area. Based on our analysis of the market and on both our expertise and that of our retail agents and brokers, we strengthened and focused our commitment to the public entity arena, where we thought we could make a significant difference from both an underwriting and marketing standpoint.” Solari explains, “That marked the beginning of our drive to become what we are today—public entity specialists. We focus on two segments of that market—schools and municipalities.”

Public and private schools ranging from pre-kindergarten to 12th grade, and community colleges and graduate and vocational schools, constitute Professional Underwriters’ largest market segment, followed by municipal-related classes such as water, sewer, and parking authorities. The company’s programs for these two classes, Textbook and Community Works, are outlined in this article. Professional Underwriters maintains a book of general business that generates about 5% of its total premium.

Initially active in its home state of Pennsylvania, Professional Underwriters in the 1990s began to expand its geographic reach north and west. In 1997 the company acquired a book of school and municipality business that was written largely in New York state, and maintained the staff that had underwritten and managed that business. As a result of the acquisition, Professional Underwriters became the program manager for two workers compensation safety groups in the state of New York. One group is for school districts, and the other is for public entities; both are backed by the New York State Insurance Fund. “In the late 1990s, with the full support of our carriers, we were endorsed to take our programs countrywide,” Solari says. “Today we write business in more than 40 states.”

Braving the storm

Before it was acquired by Kronenberg last year, Professional Underwriters was affiliated with the Legion Insurance Company, a troubled carrier that in 2003 was placed into liquidation by the Pennsylvania insurance department.

In many ways, Solari observes, “The Legion demise did not affect what we were doing operationally. We didn’t miss a beat in our drive to become an expert in public entity business. We stayed true to our strategy and our mission, but we were stymied because we did not have a parent that could support us in our desire to grow and invest in our future. In addition, there was some reluctance on the part of carriers to do business with us because of our affiliation with Legion.” Subsequently, Solari continues, “Our carrier partners, as well as our retail agents and brokers, recognized that Legion’s problems had no effect whatsoever on our operation. Even during Legion’s demise, we grew as an organization,” he says proudly.

Throughout this challenging time, Professional Underwriters maintained its commitment to marketing its corporate brand as well as its Community Works and Textbook programs, says Tom Ruddy, director of marketing. “We were proactive and aggressive in expanding our brand awareness. At the same time we were promoting the values and benefits of working with Professional Underwriters and our programs. So if there was any question in the marketplace about how Legion had affected us from a marketing standpoint, we showed that we were solid and growing,” Ruddy says. “Despite being part of the Legion organization, we were able to continue growing toward our corporate, premium, and underwriting objectives,” he adds. “Our new owner recognizes the strength and success of our strategic marketing plan and is committed to taking us to new heights. The fact is, we consider Professional Underwriters to be an industry success story.”

One outsider who was impressed with Professional Underwriters’ drive and determination was its future owner, Bill Kronenberg. “I was aware of Professional Underwriters, although not directly involved with it,” he says. “When I became interested in it and began to perform my due diligence, I was very surprised at how well Professional Underwriters had kept its head above water throughout the Legion situation. They did a superb job of not allowing any of the Legion issues to impinge upon their operation or their success. It is clear to me, and possibly to others, that your skills show up best when you’re dealing with adversity. Certainly Professional Underwriters dealt with a fair amount of adversity, yet it was still providing valuable services for its clients and its carrier and broker partners,” Kronenberg says, “and to me the company was a very attractive acquisition target.”

Going to the next level

As a former owner and executive of specialty underwriter ECS Environmental, Kronenberg says another reason he found Professional Underwriters attractive is that it was clearly focused on one market—public entities. “ECS was well known for focusing its efforts in the area of environmental insurance,” Kronenberg explains. “It grew successfully from a 14-person, $5 million operation in 1985 to a 500-person and $300 million-plus environmental risk management firm by the time it was sold to XL Capital in 1999. Coming from that background, it’s been my observation that unless an insurance organization is a multi-billion-dollar global corporation, it’s tremendously difficult to focus on more than one, two, or three markets at the same time,” he says. “Looking at Professional Underwriters, I realized that it had come to the same position, moving from writing a broad range of business to focusing on two well-defined classes.”

When Kronenberg and some of his former ECS partners acquired Professional Underwriters in July 2004, he says, “Working with John, Tom, and others here, we created a mission to amplify that specialization to provide the resources, support, and education to make Professional Underwriters the preeminent public entity specialist nationwide.”

Stating a mission is one thing; achieving it is quite another. “If that’s our mission,” Kronenberg says, “how do we get there? How do we define ourselves as a preeminent specialist? Our view is that to be called a specialist, we must have an incredibly detailed and deep knowledge of our customers’ risk management needs. We can’t just decide that tomorrow we’re going to start marketing to schools and municipalities, and declare ourselves specialists in this business. Becoming a successful specialist is about gaining that in-depth knowledge, and we do that first and foremost by significant interaction with our customers. We identify who our customers are, and then we identify the various ways we can interact with them,” Kronenberg says.

“We talk to our clients and prospects about their risk management needs. We conduct focus groups with potential insureds; and we explore specific issues, like fleet safety, property exposures, mold, terrorism, and abuse. We join their associations and attend their conferences so we can learn about their significant issues of the day. Some of them might relate to insurance; some might not, but being there allows us to learn about our potential customers from a broader perspective than just issuing a policy. We challenge our leadership and our staff to gain as much knowledge about our target markets as they have attained about the workings of the insurance business in general.”

Professional Underwriters’ quest for knowledge doesn’t stop there. “We research past insurance issues related to our prospects,” Kronenberg says. “We look at claims history and loss control issues. We talk to law firms, accounting firms, and auditing firms that specialize in these markets. We look at regulatory issues that might be changing the composition of their insurance and risk management needs. We combine all of that knowledge to design a true risk management product for each prospect, as opposed to simply selling an insurance policy. Arranging insurance is part of our service, but we want our clients to see us as their risk management partner and consultant. When we achieve that status, we become a specialist in our field. At Professional Underwriters, we’re well on the road,” Kronenberg asserts.

“We’re in command of the insurance and risk management issues, and we’re significantly increasing our interaction with customers, loss control, claims, and regulatory authorities. We now underwrite in some 40 states, and we’re working toward becoming truly nationwide. We’re increasing our underwriting and loss control staff, and we’re expanding our marketing effort from a regional to a national operation.

“Today,” he continues, “we have some very good competitors who provide regionally oriented insurance products, but there’s no one delivering these products, or an effective risk management program, on a nationwide basis. We think that, while people buy insurance coverage locally, they look to their provider to have a nationwide base of operation, because what might be happening in one state today will be happening in another state tomorrow. The fact that we can address those issues on a nationwide basis, but are able to deliver the product on a regional and local basis, we think gives us a major advantage over the local and regional providers that are in the market today.”

The marketing piece

Professional Underwriters staff who have helped the firm grow: (from left) Bob Battaglia, Underwriting Manager; and Diann Zaneski, Operations Manager; with John Solari.

Key to Professional Underwriters’ success in its public entity specialty is a strong, well-organized marketing effort. “With a keen focus on achieving our short-term and long-term corporate goals, our marketing is driven by sound strategic analysis, planning, and the use of various media,” says Ruddy. “We are very successful in integrating the many elements of the marketing mix into strategies and tactics that achieve tremendous return on investment. These include corporate and program brand advertising, public relations, and direct marketing. We are also strongly committed to staying ahead of the technology curve of electronic media resources,” he declares.

“Establishing relationship-building strategies using permission-based e-mail and the full functionality of the Internet is paramount in communicating to our customers. To ensure that our customers get immediate attention, we employ a staff of marketing service representatives,” Ruddy notes. “On a daily basis we get calls from many agents and brokers in response to our communications. Our marketing representatives respond to their requests immediately.”

Adds Kronenberg, “It’s important to understand that Professional Underwriters couldn’t achieve marketing success without the support of our broker partners and our insurance carrier partners. In all cases we are working with them so they can share in the vision I’ve described. It’s essential for us, our agents and brokers, and our carriers all to be on the same page so we can deliver a superior product.”

As an MGA, Professional Underwriters places business through seven national carriers. “Our primary carrier is Zurich, and we access it through its middle market division,” Ruddy says. Zurich is the insurer of both the Community Works and Textbook programs.

To set itself apart from competitors in the school and municipality markets, Professional Underwriters has adopted an aggressive marketing strategy, Ruddy says. “We call this our ‘ramp-up’ strategy. We intensify our marketing efforts during the times when agents and brokers are ramping up their resources to meet renewal deadlines. On the municipality side, a great deal of business goes into effect on January 1. In the school segment, the vast majority of business is effective on July 1,” Ruddy explains.

Tom Ruddy confers with Customer Support Specialist Cheryl Smola.

“We make a strong effort to target those markets when they are looking for coverage: September through November for municipal business, and February through May for schools. Our advertisements in trade publications, as well as our direct marketing and e-mail marketing efforts, are focused on specific benefits we offer that are of value to agents: underwriting expertise, loss control consultation services, financial security of our carrier, breadth and availability of coverage, range of eligible classes, and so on. Once they become educated about the values we offer,” Ruddy says, “our agents and brokers in turn can educate their clients about the benefits of working with Professional Underwriters.”

In addition, he points out, “By reaching out well in advance, we can encourage agents to make their submissions in a timely manner, thereby ensuring that our underwriting and loss control departments have adequate time to prepare submissions for the carrier. This creates a win-win situation for us and our customers.”

Partners with agents

Professional Underwriters operates on an open brokerage business. “We maintain a database of more than 10,000 retail agents and brokers with whom we communicate on a monthly basis,” Ruddy says. “These are agents from whom we’ve received just one submission or as many as 20. In pursuit of our goal of becoming the premier public entity specialist, we’re continually striving to attract the best new agents.”

As noted earlier, Professional Underwriters is strongly committed to creating and maintaining strong relationships with retail agents and brokers. “We strive to be the experts in the public entity world and to bring value and expertise to retail agents and brokers around the country who by and large do not specialize in this area,” Solari says. Adds Kronenberg: “Because we understand the insurance and risk management issues that affect public entities, we can minimize the agent’s E&O risk. We’re continually working to refine our systems and capabilities to make it easy for agents to do business with us and to secure the right protection for their clients.” *

For more information:
Professional Underwriters
Web site: www.ProfessionalUnderwriters.com
Textbook program Web site: www.TextbookInsurance.com
Community Works Web site: www.CommunityWorksInsurance.com