It's good when a plan comes together

Safety National measures its progress in the large deductible general liability/auto liability market

By Michael J. Moody, MBA, ARM

Safety National has had a long and successful history of providing their self-insured customers with excess workers compensation coverage. According to Gus Aivaliotis, vice president of Large Casualty, Safety National has been providing excess workers compensation coverage since 1942. Over that time, they have been selective in terms of increasing their product portfolio.

One of the first areas of expansion was self-insured bonds, when the bond market hardened and abandoned many of Safety National's insureds. Since the bonds were required by the state insurance departments to maintain a corporation's self-insured status, the insurer realized that without the bonds, Safety National would lose business if this problem were not resolved. Accordingly, Safety National management soon announced they would be entering the bond market.

Further growth of their product line, notes Aivaliotis, occurred when they chose to enter the loss portfolio transfer (LPT) arena. Again, Safety National saw the advantage of providing LPT coverages to their current customer base, thus allowing their customers to free up some reserve dollars. Safety National also quickly found that, overall, this was an underserved market and began considering other accounts and lines of coverage as well.

More recently, maintaining the self-insured privilege for workers compensation has become some­what difficult. And being granted self-insured status has become a challenging proposition in many jurisdictions. Here again, Safety National realized the scope of this problem and looked for options for those accounts that were interested in a loss-sensitive approach. As a result, about 10 years ago, Safety National introduced their large deductible workers compensation product. Based in part on the success of this product, Safety National decided to take one further step towards broadening its product line.

Moving forward in a soft market

After due consideration, Safety National made an announcement at the 2010 RIMS annual conference that it would be entering the large deductible general liability/auto liability insurance market. On the surface, some questioned the move. The response of Peter Krause, managing director of J. Smith Lanier, a large Georgia-based regional broker, was typical: "I told them they were crazy for wanting to get into multi-lines of coverage today." He pointed out, "The market was already crowded with players, so it would be extremely difficult to make any type of penetration."

Aivaliotis says, "At the time, we were well aware that it was a highly competitive marketplace." However, he adds, "We were taking a deliberate, methodical approach to expanding our capabilities for our customers." In order to accomplish this, "We realized it was going to take time and patience in order to build a book of business in such a highly competitive marketplace.

"However, several factors were in our favor," says Aivaliotis. One of the factors was that Safety National knew that insurance buyers preferred to purchase their three large casualty lines (workers compensation, general liability and auto liability) from the same carrier. There are a number of reasons for this preference, but according to both Aivaliotis and Krause, today the primary reason revolves around the subject of collateral.

"For insurance buyers, in today's marketplace, the biggest challenge they face is financing the collateral," notes Krause. He points out that, typically, all things being equal, the amount of collateral required under a combined program will be less that on a monoline basis. Accordingly, Safety National made specific plans to provide a product that incorporated a very competitive collateral requirement, according to Aivaliotis.

While Safety National had designed a very competitive large deductible product, they realized that name recognition was going to be an issue. Krause points out that, for the most part, Safety National, being a monoline excess carrier, is not widely known in the middle market sector. To this point, Aivaliotis says, "We knew it would take years to be broadly recognized in the market." However, he adds, "By demonstrating our capabilities, one account at a time, we felt we would win business as we went."

Safety National has made up for this potential shortcoming, according to Krause, "in the way they handle business. Frequently, it comes down to a people issue and this is where Safety National shines." Despite the number of competitors, and the fact that Safety National had great financials and Best's ratings, according to Krause, "It was the hands-on approach of their people that ultimately made the difference." He says it was how "their people were able to put prospects immediately at ease." He also points to the fact that the long-term tenure of most of Safety National's key employees provided "a significant comfort level on the part of the prospect.

"Bottom line, it comes down to a couple of simple principles from the broker's standpoint," notes Krause. "First and foremost, Safety National is not trying to be all things to all people; rather they are selectively picking their spots." He also indicates that another extremely favorable aspect is Safety National's willingness to help with the sale. "They are very hands-on with both the prospects and the brokers." Rather than just saying, "Send us an application," Krause says, "They come in and really try to learn the prospect's business." He points out that Safety National's people have played a very important and instrumental role in his agency's getting the business. Aivaliotis adds that Safety National realizes that in order to develop a long-term approach to this business, "We must do it profitably for Safety National, but also competitively for our customers, while providing our brokerage partners with the best support possible." 

One other factor has figured into Safety National's success to this point. That is, as Krause indicates, "People are looking for something new." Aivaliotis says, "Many carriers have a history of changing their position from one renewal to the next." He points out that this action has caused much concern for buyers. He believes it is then "difficult for the insurance buyers since they are not comfortable in this type of relationship."

Conclusion

It is not easy to create expansion plans in the midst of a soft insurance market. However, that is exactly what Safety National has done. As Aivaliotis notes, "We very quickly transitioned from just being an outstanding specialty carrier with monoline workers compensation to entering into the mainstream and competing head-to-head with larger, more established carriers. We have made a lot of progress in a short amount of time."

While Safety National does not release results to the public on a per-line basis, Aivaliotis points out that the large deductible product line as a whole saw a significant increase last year. He also notes that, "Within the large deductible area, the liability lines accounted for about 50% of the new business growth." As for J. Smith Lanier, Krause says, "We wrote three new loss-sensitive programs last year; two of those were with Safety National and that is a big deal for us." He goes on to note, "It opened our eyes to what they are capable of doing." 

Many insurance carriers spend time and effort developing growth plans. Unfortunately, all too often they do not succeed—for a variety of reasons. Safety National also spent significant time and effort developing their expansion plans and reflecting on them. Aivaliotis says, "Our accomplishments have been pretty significant." Over the past year, "We refined both the product and the pricing. Now it is time we move on to developing more brand recognition within the market."

To be certain, Safety National did not have a crystal ball, but as Aivaliotis notes, "This certainly validates our approach; and it builds confidence, both internally and externally to stay true to our plan. Safety National has a good idea of the company we want to be in future years, and we are working towards making that a reality. Brick-by-brick, block-by-block, we are building a business that is going to be sustainable for the long term." Obviously, as Safety National can attest, it is good when a plan comes together.