Fireman’s Fund: Focusing on Agents

CEO LaRocco, Exec Barnard Outline Insurer’s Renewed Strategy to Re-Engage Agents and Deliver Greater Value

Weathering today’s economic storm has not been easy for insurance companies. Consumers are more carefully scrutinizing their coverages, while the financial sector is taking a beating in the public, as the government has been forced to bailout large corporations. In light of these challenges, Fireman’s Fund is making a push to improve its products and distribution force.

The Novato, Calif.-based insurance company — which relies 100 percent on independent insurance agents to distribute its products — said it is re-engaging agents and delivering greater value to them, as well as to consumers. As part of this commitment to agents, Fireman’s Fund’s leaders just wrapped up a “road show,” in which they visited agents in 21 cities in nearly 10 days. On the last leg of the journey, Insurance Journal’s Patricia-Anne Tom sat down with Mike LaRocco, Fireman Fund’s CEO, and Eleanor Barnard, chief distribution, sales and marketing officer, to find out about the new product offerings and renewed relationships with agents.

Insurance Journal: These are challenging times for all businesses, insurance included. Given the volatility of some insurance carriers and the market uncertainty, how can Fireman’s Fund assure agents and the public of its financial security?
Mike LaRocco: Ultimately when you think about Fireman’s Fund and where we’re going, this is going to become a growing organization. We’ve always been solid. We’ve always been financially strong. We’re now positioning ourselves for some fairly significant growth as the market conditions improve and, obviously, the overall economy improves. We feel strongly that the way our products are designed and the markets that we’re in, that we have ample room to grow within the independent agency channel. We’re very bullish on the channel, and we’re really bullish on our opportunity to grow in that space.

IJ: Fireman’s Fund is owned by Allianz. If you look at the recent crisis with American International Group (AIG), that company also had a financial backing of a larger group. How do you reassure your agents and customers that your company won’t wind up in a similar situation, where the other areas of AIG hurt the insurance business?
LaRocco: That’s a great question. Simply because we’re the largest property/casualty company doesn’t make us financially strong. The size of the organization is an advantage, because when you have financial size in this manner you can leverage that size in effective ways. … The size and being the largest P/C company is an advantage, but there’s a huge difference [between us and AIG].

Allianz has a very long and proud record. We know what we are, and we know what we’re not. We are a P/C insurer, so the idea of finding the next clever financial derivative product or getting into a space that is complex has no interest to us. We’re a P/C company primarily. We really stick to our knitting. Some people may call that boring, but when we think about the P/C business, we know what we are.

Obviously, we have a life business and an investment business, but speaking specifically to the P/C side, we’ve really stuck to our knitting. That’s reason one that people should feel good.

The second reason [customers can be assured of Fireman Fund’s stability] is that the same approach really happens on the investment side of our business. Whether it’s a Fireman’s Fund company in the United States or Allianz on a global basis, we have a long, proud history of a very conservative balance sheet and a very conservative investment philosophy. Like every other company, we’ve certainly had some impairment because of the equity markets. … Today Allianz has a solvency ratio that is the envy of many of our competitors, because we have taken a very conservative approach from an investment standpoint and from a balance sheet standpoint.

I’m not suggesting we haven’t made our own set of mistakes, but proportionately or relative to what you’ve seen at other companies, we’ve been in a much better position. It’s a very different story than what you hear about at AIG, because we’re a very different company from that standpoint.

IJ: Are there any lessons that your company learned from the AIG crisis?
LaRocco: Absolutely. We’re [always] learn[ing], whether it’s from AIG or the overall economic downturn that we’ve seen. With the troubles in the equity marketplace, it validated the lesson that if you’re good at something, just keep doing it and doing it and doing it, and get better, and better and better at it. Don’t get so full of yourself that you want to get onto that next clever or creative product line. This is really about dotting the I’s and crossing the T’s, and providing outstanding customer service.

This crisis has really validated the Allianz approach to business, which I think is the right one.

IJ: How were you affected by the AIG crisis? Are you going after their customers, especially in the high net worth clientele area, which both companies insure?
Eleanor Barnard: We compete in the marketplace, regardless of the [similar coverages]. Nobody feels good to see any company going through what [AIG is] going through. They were our competitor long before this happened.

So, we go after the marketplace regardless of the competitive situation. We walk into any agency, and we say, “Who are the carriers you’re competing with and we’re competing with for these customers who look like this?” Regardless if it’s high net worth, regardless if it’s commercial, we’re in a competitive marketplace. [We want to know] what are the differentiators that you’re selling today? Where are we relative to the value proposition, the share of shelf? When do you think of us? Why do you not? It isn’t that we’re going after [AIG’s] customers. We go after every customer in a marketplace that we really want to target. We have very aggressive growth goals, and we are doing a lot of work internally to be able to remember that we are driving for accelerated profitable growth everywhere.

IJ: Talk to me about your company’s push to re-engage agents and deliver greater value to them.
Barnard: It starts with distribution. Everything begins with your distribution strategy. All the great work that’s done here in this building, all the incredible value we bring to the end policyholder, we choose to do that through independent agents and brokers. Therefore, that relationship is absolutely critical to how we go to market.

It goes from your distribution strategy to then aligning all of your marketing strategy and tools to driving profitable growth. We’re constantly striving to create an ease of doing business with independent agents. The agents that we write with vary from a smaller agent, independent agent, all the way up to a global broker. …

We’ve worked on segmentation. I don’t know any business that doesn’t segment their customers because every customer doesn’t need or value all the products you have or all the service that you provide. But we really put a lot of work in the past few months in segmenting our customers, understanding who’s very big with us today and why are they big with us? Who were the policyholders that they have that are Fireman’s Fund’s, because they represent many other companies? You think about it terms of a consumer; how much share of shelf do we have in that agency? Then we looked at who is selling our products today.

It fast forwards to all of the investments that we’re making today, and the investments Allianz is enabling us to make today, in technology and then ultimately in a new broader product offering in the market. …

Fireman’s Fund today is much heavier and stronger in the West than we are in the East. But we really looked at the entire geography to understand how we get deeper with our current product offerings and where. Where’s our biggest opportunity to focus today, and then where’s our opportunity more broadly with the whole new portfolio we’re going to be bringing to the marketplace in the next 18 months?

IJ: How are you reaching out to agents?
Barnard: In several ways. We communicate with our agents on our agent desktop. If they’re already contracted with Fireman’s Fund, we’re constantly communicating with them through that technology. We also produce an agent newsletter. We also have advisory councils and that’s something we’re looking at enhancing. We also have our salespeople out in the field … we align our resources with those agents that we can bring the greatest value to. We also provide direct access to our senior leadership team.

(That’s the reason for) the road show. Our CEO absolutely believes that you get out there and you listen to your customers, and so we just did. We had hundreds of agents that we, his entire senior team, got in front of.

It was very interesting format. Our CEO gets up and opens it with very few comments, and then we turn the meeting over to [agents]. Whatever is on their mind, they ask us questions, they give us comments. Then we stay at the end, and we interact with them. We give our e-mail address and contact information to every single one of them as part of their takeaway. We are absolutely, 100 percent accessible as a senior team. That’s the long way of saying there isn’t one single way we approach the agent.

IJ: Were there any themes that emerged from the road show?
Barnard: No. 1, agents were thrilled to have access to the senior team, being able to have us communicate directly with them and their ability to share with us. We openly acknowledge that our technology is difficult [to work with], and we shared with them that Allianz, our parent company, just made a $100 million investment in Fireman’s Fund to invest in technology, in process and in people to enable us to create that ease of doing business that enables the agency to work with us.

They were very excited about the enhanced products we’re going to be bringing to the market. And they were very excited to hear of the commitment that Allianz has to the U.S. marketplace. They were looking for some reassurances in an unstable marketplace of the financial strength of Fireman’s Fund.

IJ: Do you think agents would be wise to consider regional carriers as well as larger conglomerates?
Barnard: That’s up to an individual agency. I would say every agency is evaluating what carriers they need in order to meet their customers’ needs. … But today, given the instability that [agents] have been experiencing, I think there is a concern about the depletion of the carriers. So whether [an agency is] regional or national, [they should ask themselves whether] they can meet the opportunity they have in their marketplace to add to their growth strategy.

A lot of our [agency partners] are high-growth agencies, so they are concerned about their renewables and where they need to place that business, given the financial instability that they are facing in some cases. The fact that they have a national player like Fireman’s Fund is significant. That’s one of the reasons they were so excited about our investment in product development, in technology, because it takes a national player and opens us up even further.

IJ: Have you changed your underwriting standards or compensation as part of your renewed outreach to agents?
Barnard: We look at compensation on an annual basis. I have been in the midst of the rollout of revised compensation in some of our personal lines products, but those have been on the drawing board for more than a year. Compensation is such a core element of the relationship that it’s something we look at on an annual basis. We’ll continue to do that.

IJ: Your distribution strategy is solely through independent agents. Do feel that you’re missing out on customers that are looking to buy their insurance through the Internet, for example?
LaRocco: My counsel to agents … is the individuals who are choosing to purchase over the Internet aren’t necessarily choosing those companies, they are choosing that lifestyle of being on the Internet. Independent agents can just as well offer their products via their Web sites. And the benefit that the independent agent brings in that space is they can offer the same type of ability to access business through the Internet and they also have what I consider the safety net of providing the professional advice, should that consumer decide that they need that help.

As you really think about the turmoil and financial crisis, policyholder customers are more and more turning to their independent agents as the professionals they are for advice. They want to be sure that they are being placed with a solid company and that they can be counted on to be there in time of need should they have that claim. I think that independent agents are really, as always, in a very good position and have a great opportunity in front of them.

Barnard: The independent agent of the future has the opportunity to make investments that drive his relationships. The independent agent is the trusted advice and the trusted adviser, whether that be in personal or commercial. They don’t need to seed off that customer that chooses to use the Internet, but rather provide that customer a portal by which to come through them and get to the same information ….

That’s one of the reasons we’re making this investment in our technology. We’re not making the investment to enable us to go direct. We’re making it so that independent agents of the future can bring that technology down to the customer. [Customers that want to do everything on the Internet] can go through an independent agent portal and get the same choices, if not more choices …. It’s a real win-win for the policyholder, but we need to get that technology there for that.

We believe we have such huge opportunities, still, with independent agents and brokers. If we bring focus to that, we’re much better off than trying to compete in an arena where marketing dollars are really driving the behavior out there, not the total value proposition.

IJ: Mike, you used to work for a direct company, how does working for Fireman’s Fund compare?
LaRocco: I’ve been on both sides of the fence. First of all, I think there is a lot of business for all companies. There are a lot of terrific direct response companies. There are a lot of terrific independent agency companies, and I think the fallacy is that this is a marketplace where it’s kind of going to be an either or proposition. That just doesn’t make sense. The reality is that there are opportunities for all kinds of methods of distribution. Just because one is growing in a certain space doesn’t mean another one can’t grow as well. Consumers are going to want different opportunities to purchase their products, and I think there’s room for both to grow. They both have strength.

Our position and my position, having had the benefit of being on both sides, is that I see the real value in terms of the professional advice and counsel and choice that the independent agent brings to the consumer. Again, that’s always important, never more so than now. I think I bring a new perspective because I have been on both sides.

Topics Carriers Agencies Tech Property Casualty AIG Allianz