Cautiously Optimistic

A recent development may have agents feeling cautiously optimistic that they will have an opportunity go after a larger slice of the mid-sized business pie as Boston-based Liberty Mutual Group shuttles direct distribution of property/casualty products to mid-sized companies in favor of marketing them through independent agents and brokers. As Insurance Journal Editor Andrew Simpson pointed out in an article that appeared on Insurance Journal‘s Web site on Jan. 22, “[S]ince it couldn’t beat independent agents and brokers — who dominate sales in this segment — Liberty Mutual has decided to join them.”

Liberty Mutual, the sixth largest property and casualty insurer in the United States, writes about $2.5 billion in this segment, which it defines as businesses with total account premium ranging from a low of about $150,000 up to about $1.5 million. The company is selling off the renewals on its direct middle market accounts to several large brokers: Arthur J. Gallagher & Co., Hub International and USI Holdings Corp. It is also creating a new commercial business unit, Liberty Mutual Middle Market, which will accept and serve middle market business only from agents and brokers going forward. Products available will remain workers’ compensation, general liability, commercial automobile, property, crime and umbrella for mid-sized companies.

The new Middle Market unit will be organized into three divisions, with headquarters in Boston (Eastern Division), Chicago (Central Division) and Dallas (Western Division). Agents and brokers will be aligned with dedicated distribution and underwriting resources.

The move recognizes that about 95 percent of middle market business insurance is sold by independent agents and brokers, not through direct distribution. The company acknowledged that by limiting itself to direct distribution in the middle market, it was missing out on opportunities to grow.

Liberty Mutual launched a Web site to answer questions about this new development. The Web site asks and answers definitively the following question:

“Is Liberty Mutual really exiting direct distribution for middle market companies?

“Yes. Liberty Mutual fully intends to exit direct distribution of its products to middle market businesses and focus solely on distribution through independent insurance agents and brokers. We made this decision to satisfy the requirements of the vast majority of middle market buyers, who typically value and seek the input of a trusted agent/broker.”

We remain cautiously optimistic that this is a good thing.

Topics Agencies