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MARKETING
Personal lines, personal choices The Hartford expands and enhances its successful Dimensions program By Elisabeth Boone, CPCU The Hartford is staking its future in personal lines on the premise that customers want to understand and make choices about the products they buy. The company introduced its DimensionsSM personal auto insurance program in April 2003 (See “New Dimensions in Personal Lines” in the January 2004 issue of Rough Notes magazine) with a goal of tying rating data more closely to individual risk characteristics. Now, The Hartford is expanding the individual choices offered under Dimensions. “Since we launched Dimensions, our agency business has been very successful,” says Michael Concannon, senior vice president of The Hartford’s personal lines division. “For example, it grew about 17% in 2004, and has seen near double-digit growth since then.” Dimensions breaks with some long-standing traditions in the personal auto market. First, the program applies interactive rating factors to individual drivers in a family to produce a pinpoint rate for each driver. This means, for example, that spouses don’t pay higher rates based on their partner’s accidents. Age classes are narrowed, so a 17-year-old driver typically will pay less than a 16-year-old. Second, Dimensions uses more than 10 times the typical number of ranges for insurance score, and relates this factor to multiple variables rather than evaluating it on its own. Third, to simplify the agent’s job, the number of underwriting guidelines was decreased by half. Finally, the pot was sweetened with built-in policy discounts and credits. Also designed to make the agents’ job easier is the automated system that supports the Dimensions program. Called Quote to Issue (QTI), the system allows agents to quickly generate a quote on a policy that meets the insured’s specific needs. QTI integrates underwriting guidelines, CLUE report, MVR, and insurance score. Agents can use an electronic bridge to transfer customer data to QTI from comparative raters and agency management systems. A noteworthy feature of the Dimensions auto product is a “disappearing” collision deductible. If none of the drivers on the policy has had a traffic violation or accident within the last three to five years (depending on state regulation), the insured can “earn” an accumulated disappearance of any applicable collision deductible at the rate of $50 per year. The insured can apply those “earnings” to the first collision loss that occurs after three years with The Hartford and after three to five years of clean driving, depending on state laws. A package of four endorsements called Automatic AccessoriesSM is standard on the original Dimensions auto policy at no additional cost in most states. The endorsements are: new vehicle replacement cost; a deductible waiver on a collision loss for not-at-fault accidents; a reduced deductible for using an authorized repair shop after a collision loss; and a $10,000 supplemental death benefit. In response to feedback from a series of customer and agent focus groups, the company has refined and enhanced the Dimensions auto program to offer insureds a wider array of choices. Feedback from customers, Concannon says, identified some key preferences in the purchase of insurance. “Customers want to understand what is in the insurance product they’re buying. They also want to choose the features that make sense for them, and they want to get the benefit of a price difference for not purchasing features that they don’t value or that aren’t relevant to their situation,” Concannon explains. To meet those needs, he says, “We introduced four prepackaged options for the Dimensions auto product: Essential, Sentinel, Sentinel Gold, and Sentinel Platinum.” Each package is priced on the basis of the coverages and features it offers. The customer can choose the package that best addresses his or her needs and situation. For example, a two-income family with several vehicles and teenage drivers might choose Sentinel Gold, whereas Essential might be more suitable for a retiree with one older-model car who does little driving. To reflect these enhancements, the program is now called Dimensions with packages. Today, more than three years after its launch, the Dimensions program boasts some impressive stats. The plan is now available in 40 states through The Hartford’s network of independent agents. Over 300,000 customers are insured under the Dimensions auto program; this number represents more than half of the insurer’s agency book. The new package options are being introduced on a state-by-state basis and eventually will replace the current auto product in most states. In 2004, The Hartford launched a companion homeowners program with a range of coverage options. The packages are discounted and offer a selection of higher coverage limits. Package features include identity theft coverage, lock replacement, and increased limits for fine arts. Some 120,000 homes are insured under this program. Agents’ reaction When the Dimensions auto program was introduced in 2003, it got high marks from agents, who were pleased with both the product and the ease of using QTI. We asked Concannon what he expects agents will say about the enhanced Dimensions with packages program in terms of customer acceptance, ease of processing business, and quality of service. “We know that Dimensions has been a competitive program, and the flow that we’ve gotten from the original product has been excellent,” Concannon responds. “We expect that the flexibility of having four package options will now make it an even better choice for our agents and their customers.” Acknowledging that the personal lines market today is highly competitive, Concannon says his company is still aiming for double-digit growth in 2006. The new Dimensions with packages program, Concannon continues, “puts us in markets from both a competitive standpoint and from the standpoint that it allows us to quote the majority of the business we’re offered. This is a big step for us because it means we can broaden our appetite so we can partner better with our agents. “Another thing we hear from our agents is praise for our Quote to Issue system,” Concannon notes. “We realized at the time that if we put Dimensions up on our existing automated system, it would have been difficult to get the lift that was possible with the QTI technology,” Concannon comments. “On the flip side, if we’d had our pre-Dimensions products on a new QTI, I think we still would have struggled. By putting Dimensions up on the QTI platform, we’ve gotten excellent feedback on the power of the product and the ease of placing business with us through QTI. Agents will be able to continue leveraging this system with our new package options.” Eye on market segments In assessing results from the Dimensions program, Concannon explains, “We don’t just look at the Dimensions loss ratio and say, ‘Okay, the loss ratio is about where we thought it would be, and everything’s fine.’ We actually look at how the product is performing for different customer segments. We ask: ‘Is the product performing well for customers with young drivers who might have had an accident or two in the past and may have purchased minimum coverage?’ We also ask: ‘How is the product performing for a full-coverage customer with high limits?’ and so on.” On a segmented basis, Concannon remarks, the results for Dimensions have been excellent. “They’re right in line with our targets. That’s important because it allows us to stay wide open and aggressive in terms of our appetite for customers. We’re happy with how well Dimensions is performing, which speaks to the power of the segmentation of the product. It’s doing very well for a broad array of customers.” Building a high degree of choice and flexibility into a personal lines product runs counter to the conventional wisdom that says this business can be profitable only if it’s marketed and underwritten as a commodity. The Hartford was among the first insurers to introduce such products to the standard market, Concannon says, “looking closely at real data-driven, multivariate pricing. A lot of the techniques were born out of the nonstandard world, where the need to get the pricing right was more acute than in the standard market. In fact, there’s a lot about nonstandard pricing that makes sense in the standard market,” he says. “The degree to which you can be smarter than your competition in pricing business allows you to be more competitive, and it allows you to say, ‘I’m going to price my other business correctly, and if you’re going to price below me, chances are you don’t have it right.’” Concannon oversees The Hartford’s auto, homeowners, and specialty products that are distributed not only through independent agents but also directly to members of the American Association of Retired Persons (AARP). “There’s been a directional shift in the marketplace toward more segmented, sophisticated, multi-tiered pricing,” he observes. “We have seen a number of carriers move toward that. Everyone has their own flavor of that; as you might expect, we think Dimensions has a number of features and elements that go beyond just price sophistication.” What’s next? “We’ve introduced choice, and we’ve also introduced a move away from a ‘one size fits all’ personal lines product,” Concannon says. “Our product suite allows buyers to choose coverage based on their individual situation and what’s important to them, and to understand the tradeoffs. Also, we think we’ve enabled agents to do what they do well, which is to help customers understand what their needs are and counsel them on making the right choices to meet those needs. “We talk to a lot of customers,” Concannon says, “and we know that over 80% of the marketplace still buys personal lines insurance through an intermediary. We hear customers saying that they still value the expertise and advice they can get from an agent when they’re making this decision. We’ve helped to strengthen that interaction and to help the agent build rapport with the customer, and add value in the process,” Concannon remarks. “We’re really excited about Dimensions and the direction we’re taking it. We think it’s unique not only in approach, but in a number of features we’ve included that distinguish our product.” He adds that, “We’re to the point that we now have more Dimensions business than we have non-Dimensions business. As we grow, Dimensions with packages will become our only agency auto and homeowners products. They’re our engine going forward.” In the personal lines market, whose hallmark for decades has been cookie-cutter products and pricing, The Hartford’s Dimensions with packages program proves that choice can be profitable. * For more information: |
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