Brand-new brand

Foremost Insurance becomes Farmers' independent agency face

By Elisabeth Boone, CPCU

When you think of recreational vehicle insurance, one of the first names that likely comes to mind is Foremost. Established in 1952, the insurer has long dominated the RV field, offering coverage for everything from mobile homes and travel trailers to motorcycles, personal watercraft, and collectible autos.

In 2000, Foremost was acquired by Farmers Insurance Group, itself a subsidiary of Zurich Financial Services Group. A year earlier, Farmers had assumed management of the East Coast personal lines business of Zurich Insurance, giving it entrée into the independent agency system. The Foremost acquisition allowed Farmers to expand its presence on the eastern seaboard and to strengthen its ties to independent agents (see “Declaration of Independents” in the March 2005 issue of Rough Notes.) Since the acquisition, Farmers has been offering products to independent agents through both the Farmers and Foremost brands.

In January 2009, Farmers announced that it is rebranding its independent agency business under the Foremost Insurance Group and will make Foremost the company’s sole brand for independent agents.

In an exclusive interview with Rough Notes, Jack Hannigan, executive vice president and chief marketing officer of Foremost, explained, “Over the next several years, we will be moving all of our independent agency products—auto, homeowners, personal specialty, and small commercial—to Foremost underwriting companies.”

All products currently available to independent agents under the Farmers brand, including Foremost Insurance Group, Zurich Marine Specialty, and Zurich Small Business, will be consolidated into the Foremost brand. Also being consolidated are Foremost’s nonstandard auto insurer, Bristol West, and F.A.C.T. (Farmers Action for Communities of Tomorrow, which provides insurance products and services to underserved communities).

The decision to place all independent agency business under Foremost will benefit both the independent agency force and the customer, Hannigan explains.

For example, there will be a single agency portal and a single agency agreement rather than the multiple agreements that previously existed. The re-branding initiative also will allow for a profit-sharing program for qualified independent agents beginning in 2010.

“Our decision on distribution is all about the customer,” Hannigan asserts. “Over the last year we’ve done an extensive amount of customer research, internally and externally, as well as extensive research among agents. It’s clear that the customer profile is changing, and to grow, we as a company have to be responsive to what the customer wants. Our strategy will allow us to be where the customer wants to access the business, whether it be via exclusive agents or independents.”

What’s more, he adds, “It’s clear that the independent agency channel is a powerful channel in terms of both personal and commercial lines and that Farmers’ acquisitions of Foremost, Bristol West, and Zurich Small Business have positioned us to have strong representation in that channel. Because of these acquisitions and because of our various brands, we believe we need to consolidate our independent agency operation and bring it under Foremost, which is a well-known name that has been successful in that channel for almost 60 years,” Hannigan says.

The progression

Since acquiring Foremost in 2000, Farmers has been devoting significant resources to creating a strong identity within the independent agency system, with Foremost at the heart of those efforts. Hannigan describes the organization’s progress on a number of key fronts.

“In 2005, about 1,100 independent agents were selling Farmers’ personal auto and homeowners products in 12 East Coast states, while some 100 agents offered Farmers’ small commercial lines in those states,” he says. “Today we have about 4,000 independent agents in 12 eastern states who offer the Farmers auto and homeowners products.”

Hannigan continues, “We made substantial changes to our auto and home product offerings beginning in 2007, and 2008 turned out to be a great growth year for our auto product; it grew about 15%, which is substantially better than the rest of the marketplace. Our homeowners volume grew about 6%. Bringing the auto and home products to independent agents in those 12 states and making changes to our value proposition have turned out nicely for us.”

In 2008, Farmers launched DistinctChoice®, a suite of personal lines products that is available exclusively to independent agents and consists of auto, homeowners, and manufactured home policies. The auto product, Hannigan says, incorporates predictive modeling and contains substantially more rating cells. Coverage can be written on a standard, nonstandard, or preferred basis.

The homeowners program features a by-peril rating platform and offers a range of optional coverage enhancements.

The manufactured home program offers Plus and Platinum packages and incorporates expanded underwriting.

As good as it gets

Combining two organizations is a challenging endeavor. A marriage of titans like Farmers—among the nation’s top 10 insurers—and Foremost, a leading specialty carrier, is a herculean effort that affects thousands of employees and hundreds of thousands of customers. Add in the fact that Farmers historically has been an exclusive agency organization whereas Foremost has done business only through independent agents, and you begin to get some idea of the dimensions of this task.

Not surprisingly, Jack Hannigan has only positive things to say about both the process and the results of bringing these two very distinct entities together.

“The relationship and the acquisition were almost as good as it gets—almost a Harvard Business School case on how to do it,” he says. Despite having different distribution systems, he comments, “the organizations were complementary; they didn’t overlap in terms of strengths. In branding Foremost as our independent agency arm, we’re adding Farmers’ product expertise in auto and homeowners as well as small commercial,” Hannigan notes.

Foremost also is benefiting from its parent company’s marketing power. “Farmers is a great marketing company and is allowing us to strengthen our marketing organization overall,” Hannigan comments.

Another key Farmers capability, he says, is claims handling power. “Integrating the claims operations of the vast Farmers organization with our specialty claims expertise has created a strong claims unit,” Hannigan asserts. “We’ve created three mobile catastrophe units with state-of-the-art technology that go on-site when a disaster happens. These buses are used by both Farmers and Foremost personnel and are proving to be excellent additions to our overall claims organization.

“When you take the major components of our business—products, marketing expertise, and claims handling—Farmers has certainly brought those things to Foremost, and Foremost’s understanding of specialty markets and its underwriting and pricing expertise have added depth to the Farmers organization,” Hannigan says.

“The same is true of the Bristol West acquisition by Farmers,” he adds.

RV trends

For the almost 60 years of its existence, Foremost has specialized in providing coverages and services for recreational risks. Amid the current economic downturn, recreational vehicles aren’t at the top of most consumers’ shopping list. As sales of these products decline, so too does the demand for insurance.

“There’s a direct correlation between economic conditions and the sales of recreational vehicles,” Hannigan says. “Of course, you have to look at the products individually. For example, when energy prices rise, we see growth in the market for motorcycles and motor scooters.”

With ongoing job losses and credit problems, however, few people are buying recreational vehicles strictly for fun. “For the short term, the scenario is pretty obvious: we’re going to see new recreational vehicle production and shipments decline,” Hannigan remarks. “If energy prices go back up again, we might see the motorcycle market improve, but the other RV markets will fall off.”

For insurers like Foremost, Hannigan says, “This is certainly a challenging time. It’s also a good time for Foremost agents to be able to offer their clients a full range of products, including the expertise to help clients diversify their investment portfolios.

“Diversification is also appropriate for companies,” he continues. “We never know how economic conditions or other events are going to affect our business, and we want to have product portfolios that allow us to be successful even if some markets are not as strong as we would like them to be. That’s why we continually look for ways to diversify our product suite and offer our agents the opportunity to grow with us. We want to give them alternatives within our company so we can meet all their needs.”

For more information:
Foremost Insurance Group
Web site: www.foremost.com