Regional Carriers Zone In on Helping Agents

Article

When it comes to buying and selling insurance, there is a common thread intertwined in all transactions—service. Whether it be the consumer purchasing auto insurance, or the agent securing the coverage on behalf of the customer, when it comes down to it, everyone’s life is a little easier and a bit more pleasant when personalized service is involved.

Regional insurance carriers have the edge when it comes to making coverage available to agents and brokers for the consumer, as opposed to the larger, national carriers. Regional carriers are able to focus on the specific area they cater to—affording a better understanding of the coverage offered, with the ability to tailor it to the region’s specific needs.

It’s the regional focus that sets smaller insurance companies apart from each other—and from the big guys. While many of these companies cannot compete with national companies in terms of the number of programs offered, these companies instead specifically target the needs of the markets they serve.

Proximity is a crucial aspect to the success of regional carriers. Honing in on the regions they serve allows a company to develop a certain familiarity with the marketplace including an in-depth knowledge of local laws and marketplace conditions. All of this adds up to a quicker response to customer needs, according to Cary Cheldin, president of Woodland Hills, Calif.-based Crusader Insurance Company. He explained that regional carriers are able to respond more quickly to agent and customer needs because they don’t have a large internal bureaucracy to go through, as do the national companies.

“Being close to a market often allows a regional carrier to see certain risks differently and access to decision makers tends to lead to better service for agents over time,” Rob Kingsley, president & CEO of Sacramento-based Financial Pacific Insurance Company, said.

The benefits of market familiarity are two-fold, according to Kingsley. First, it enables carriers for “fine-tuning of risk selection/pricing decisions as opposed to broad generalizations often made by carriers further from the actual risks,” and it allows for “fast decisions and reactions due to the decision-maker’s proximity to the markets being served.”

Both Jim Hall, president of Austin-based Service Lloyds, and Larry Kufel, marketing manager of Dallas-based Unitrin Specialty Lines, emphasized the ability to respond quickly to changes in competition. “We are able to adjust to market conditions quicker than larger companies, and operate with a focus on customer satisfaction, leveraging technology and ensuring profitability,” Hall said. “The future outlook is not one of two to three years, rather one that encompasses a full market cycle (approximately 10 years).”

It’s the service that counts
While many national carriers also maintain a strong regional presence, as Crusader’s Cheldin observed, in most cases, the smaller the company, the more personalized the service. Just as customers purchase insurance through independent agents for the personalized service, agents utilize regional carriers in a similar fashion. Regional carriers have the distinct advantage of having the ability to better cater to their agents’ needs.

First and foremost, most regional carriers have the distinct advantage of being able to develop more personal relationships with the agents and brokers that work with them, according to Kufel. Because regional carriers maintain a small staff, agents can expect to develop a comfortable rapport with their point of contact within the company.

“Being a small regional carrier, we depend on a much smaller geographic area to produce our business,” John Moreland, marketing manager for Wichita Falls, Texas-based Beacon Insurance, said. “Because we operate in a smaller geographic area with a smaller number of agents than a national company, we feel that it is important to develop a relationship with our agents and their office staff.”

When it comes to comparing regional carriers versus their national counterparts, Cheldin focuses on the advantage of being a smaller carrier. “The smaller insurance companies tend to be more sensitive to providing good service. We take extra effort to do a good job in providing top-level service. I, for example, personally, go out of my way to make myself available to policyholders and to the independent agents and brokers so if anyone has any concerns or desire for something that we don’t ordinarily offer, I’ll talk to them.”

Cheldin’s accessibility is a key part of Crusader’s success. Below him, his staff follow his example, keeping standards high to provide agents and brokers with the best service possible. “We’re not allowed to let the phone ring more than three times,” Cheldin said. “We don’t use voicemail as a primary mechanism of answering the phone.”

Financial Pacific also attributes good service as part of the secret to their success. “[We] stand out because of the little things,” Kingsley said. “We are a throw back to the way companies used to treat their agents.” Financial Pacific’s underwriting team is equipped with individual 800 numbers to ensure easy access to human interaction—and, like Crusader, callers won’t be greeted with voicemail system.

Bottom line, regional carriers know that they have to stay competitive against the national carriers, and developing strong, personal relationships with the agents and brokers it serves is crucial to their success.

Staying competitive
The key to becoming a successful regional carrier is to stay ahead of the competition. Not only do regional carriers have to compete with their peers, but they also have to differentiate themselves from national carriers.

“We certainly look at the competition, like most companies, in developing programs,” Tim Summers, executive vice president at Menlo Park, Calif.—based Pacific Specialty Insurance Company, said. “We also try to separate ourselves from the rest of the marketplace and do things a little differently. If you do everything in the same fashion as the rest of the marketplace, you’re going to achieve the same results as the rest of the carriers.

“Our philosophy has been to try and do things differently—to look at programs and risks from a different perspective. We’ve also tried to be more creative in the coverages that we offer—the particular exclusions that we’ll write into a policy, for example,” he added.

William Guthrie, vice president at PSIC, said that PSIC has a specific mission for each new program developed and each new market entered: “To provide long-term security and stability for our customers, as well as our independent agents, through disciplined underwriting and risk-appropriate pricing.”

Summers said that PSIC considers themselves as an underwriting entity—not a financial services operation. “We want to make money underwriting insurance risks. We’re not trying to make money by holding assets for a period of time like most financial institutions. We feel we’re skilled on the underwriting side, and choose to make an underwriting profit.”

Service Lloyds’ Hall focuses on the relationships developed with agents and brokers as a significant aspect to staying competitive.

“We place a heavy emphasis on strategic partnerships,” Hall said. “In this case, it is with the independent insurance agents of Texas. We have focused our efforts to form strategic partners with several MGAs, as well as the Independent Insurance Agents of Texas. It is through those partnerships that Service Lloyds produces a large portion of its premium base. We choose to pay a competitive commis-sion, provide outstanding service, and leverage technology to provide our producers with the most up to date information as it pertains to their book of business.

“Service Lloyds built its back on small premium accounts, and that philosophy continues today,” Hall continued. “Don’t misunderstand me, we write the large ones too, but it is the small premium accounts that are our focus. Our key focus is working with independent insurance agents on this block of business.”
In it for the long haul

Regional carriers pride themselves on one thing that sets them apart from the competition—they’ll be around for their agents and brokers, tried and true. Unlike the national carriers, who oftentimes enter the market and then close shop as soon as the program deems unprofitable, regionals emphasize longevity with their programs.

“Agents know they can count on us to be here,” Financial Pacific’s Kingsley said.

“We find the larger carriers move in and out of the market, trying to time their entrance and exist in the market,” Hall added. “When the rates are favorable, we see competition enter the market. When the market begins to soften, the retraction begins. It is a cycle that continues to repeat itself.”

Most regional companies are privately owned, and therefore don’t have to answer to the call of shareholders, who place a strong emphasis on profitability. The president of a national carrier doesn’t always get to call the shots—whereas the president of a privately-held regional carrier usually oversees the majority of major decisions.

“We are here for the long haul. We made our home here and will always consider Texas to our core market, even as we grow beyond the state lines in the future,” Hall said.

“Regional insurance companies tend to be more dedicated to long-term commitment as opposed to national companies that tend to not have the same tenacity for writing certain programs or sticking with decisions,” Cheldin continued. “For example, Crusader has been writing our bar and tavern program now since we started operations in 1985. Sometimes we have a lot of losses, sometimes we make profits.

“Some of the national companies, on the other hand, discontinue programs when the loss experience gets bad,” Cheldin said. “I have found that regional companies, when the loss experience tends to get bad, instead of discontinuing the program, try to make it work. They seem to try harder at solving problems instead of moving on to other areas. We’ve not discontinued any program lines in California. Once we make a commitment, we want to maintain that.”

Cheldin’s philosophy towards commitment and longevity has paid off with expressions of appreciation from their clients. “Producers thank us for having stuck with them through thick and thin. It’s a lot easier for an independent agent and broker to have to contend with a rate increase instead of a non-renewal notice. Customers need insurance and sometimes it’s distasteful to get a rate increase, but that’s still a lot better than no insurance at all. When a company decides to get out of a program, they have to non-renew all of their customers, and then the customer has to worry about whether or not they’re going to be able to find insurance. That makes life difficult for independent agents and brokers.”

Successful relationships benefit all
Agents and brokers will always have the need for both regional and national carriers, and will recognize the importance of both, Kingsley said. But regional companies can more easily cater to their agents and brokers, and oftentimes do so to ensure successful relationships in the future.

PSIC’s Guthrie said their infrastructure is designed around the independent agents. “Part of the advantage of being the size that we are is our flexibility and our responsiveness to the independent agent.”

Beacon’s Moreland said the key to their agency’s relationships are solid partnerships in which both parties know each other’s expectations.

“We truly believe that for the agency/company relationship to be successful both parties must be satisfied,” Moreland added. “With that said from our perspective (company) we would expect to see a minimum of $150,000 in production within 2 years and that the business split between personal and commercial lines.”

“The key to any successful relationship is communication,” Kingsley added. “By clearly defining and applying our underwriting and pricing guidelines and spelling out what we expect from our agent/partners, we avoid unpleasant surprises. We must be able to agree and disagree about individual risks without offending each other; it takes a long time to develop the empathy for each other that’s required to understand each other’s points of view. A successful relationship will have the carriers interests aligned as closely as possible with the interests of the agents.”